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AAMC Supports New Bill to Bolster Teaching
Hospital Finances

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Washington, D.C., April 14, 2000 -- The Association of American Medical Colleges (AAMC) applauds Sens. Daniel Patrick Moynihan (D-N.Y.) and Edward Kennedy (D-Mass.), and Rep. Charles Rangel (D-N.Y.) for their recent introduction of "The Teaching Hospital Preservation Act of 2000" (S.2394/H.R.4239). The legislation proposes to freeze the Medicare Indirect Medical Education (IME) payment to teaching hospitals at its present rate of 6.5 percent.

"IME payments are absolutely critical for teaching hospitals to be able to appropriately care for the sickest patients, provide an environment in which clinical research can flourish, and train new physicians," said AAMC President Jordan J. Cohen, M.D. "We are exceedingly grateful to Sens. Moynihan and Kennedy and Rep. Rangel for their continued support and leadership on key issues affecting teaching hospitals."

The new legislation would eliminate the Medicare IME cuts required by the Balanced Budget Refinement Act of 1999 (BBRA). Under the BBRA, IME payments will be reduced from their current level of 6.5 percent to 6.25 percent for FY 2001 and 5.5 percent in FY 2002 and subsequent years.

The BBRA attempted to ameliorate the unintended consequences associated with the Balanced Budget Act of 1997 (BBA), which was scheduled to reduce IME payments by 29 percent over four years for a total of $5.6 billion. Despite the BBRA's good intentions, the IME reduction still represents the second largest inpatient payment cut for teaching hospitals, after the reduction in inflation updates to patient service rates. The typical teaching hospital will lose over $40 million between 1998-2002. The financial troubles facing these institutions were recently illustrated when the Medicare Payment Advisory Committee reported that the total margins of major teaching hospitals dropped from 5.1 percent in 1997 to 2.3 percent in 1998.

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The Association of American Medical Colleges represents the 125 accredited U.S. medical schools; the 16 accredited Canadian medical schools; some 400 major teaching hospitals, including 74 Veterans Administration medical centers; 91 academic and professional societies representing nearly 88,000 faculty members; and the nation's 67,000 medical students and 102,000 residents.