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Hospital Express Concern Over Further IME Cuts Malpractice Insurance Is a Growing Concern for Academic Medical Centers
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Hospitals Express Concern Over Further IME CutsUnless Congress acts this year, Medicare special payments to teaching hospitals will be reduced by 15 percent in FY 2003. Such reimbursements, known as Medicare Indirect Medical Education (IME) payments, are critical to teaching hospitals. They help pay for the myriad patient care missions of teaching hospitals, including the higher costs of providing care to Medicare beneficiaries who are sicker and have especially complicated illnesses or diseases. Under current law, teaching hospitals will lose a total of $794 million in IME payments in FY 2003, or $4.2 billion over five years. "The support teaching hospitals get from the Medicare program is critical in that it allows these institutions to serve populations all around the country," says Ralph Muller, chairman of the AAMC's Medicare Special Action Committee. "We need relief from the scheduled cuts in the Medicare program to enable us to do what we've done so well in the past. "Congress has been very supportive of teaching hospitals," Muller adds. "In both 1999 and 2000, it passed relief legislation, with the support of the [Clinton] administration, that helped teaching hospitals around the country. We're hopeful that the same relief will be granted this year, and see the early action from the House as indication that, with the expected support from the Senate, we will be well on the way toward securing the same relief this year." The typical teaching hospital could lose on average $789,000 in IME payments in FY 2003, while major teaching hospitals could lose on average $2 million. To avert this funding cut, the AAMC advocates passage of the American Hospital Preservation Act, sponsored by Sens. Kay Bailey Hutchison (R-Texas) and Evan Bayh (D-Ind.), and Reps. Mark Foley (R-Fla.) and Richard Neal (D-Mass.). This legislation would freeze IME payments at the current rate of 6.5 percent and grant full inflation updates for Medicare inpatient services. The AAMC sponsored a "Teaching Hospital Day" on Capitol Hill in May to shore up congressional support for the goal of keeping the IME adjustment at 6.5 percent and to create long-term, stable fixes for physician payments. More than 100 hospital and medical school representatives met in Washington, D.C., to express their concern to Congress that unless IME payments are maintained, the missions of teaching hospitals will be challenged substantially. At the end of May, two key House Republicans struck a deal with the hospital community on legislation that would increase Medicare payments and set IME payments to 6.0 percent in FY 2003 and 5.9 percent in FY 2004. The agreement was included in a bill developed by House Ways and Means Committee Chairman Bill Thomas (R-Calif.) and health subcommittee Chairwoman Nancy Johnson (R-Conn.). The committee passed the bill June 18. While the Thomas/Johnson agreement with the hospital community does not maintain the IME at 6.5 percent, the agreement is an improvement from previous legislative drafts, which cut the IME to 5.8 percent in FY 2003 before allowing it to be reduced to 5.5 percent in FY 2004 and beyond. The AAMC called the proposal a "workable beginning" and will continue to back an IME level of 6.5 percent. UPenn, UC-Davis would feel cutsTeaching hospitals receive IME payments as a percentage add-on to the basic price of each Medicare case paid under the inpatient prospective payment system. If a 15 percent IME reduction takes effect, the University of Pennsylvania Health System, which currently receives $64 million a year in IME payments, will lose approximately $10 million in reimbursement income. For an institution with a yearly profit margin of $25 million, a $10 million cut would make a significant difference, says Robert Martin, Ph.D., the system's CEO and COO. "In order for us to continue fulfilling our service and teaching missions, we have to do things such as reinvesting in our enterprise, and finding ways to improve performance," Dr. Martin says. "So the scheduled cuts would eventually bring about reduction of our medical education programs." Although teaching hospitals are known for offering some of the most advanced medical services and technology, many probably will have to sacrifice investment in new equipment as well as implementation of new programs and services to compensate for further reductions in reimbursement, he says. The University of California-Davis Health System will lose $1.1 million as a result of the scheduled cuts. The health system receives nearly $20 million a year to cover IME costs. "Reductions of that magnitude require that we economize in what we do," says William McGowan, CFO and associate director of hospitals and clinics for UC-Davis. "We haven't looked specifically at cutting the services we offer at this point, but when cuts of that magnitude take place, it causes us to reduce the number of full-time employees, which…makes our services suffer," he says. "We are trying to avoid cutting into medical education programs that are high cost, especially the ones that are crucially beneficial to our community," McGowan says. UC-Davis operates the only level-one trauma center for central California, the only burn unit in that area, and a large liver and lung transplant program, and also works as a tertiary-care referral center for most of Northern California. "If those crucial programs suffer, so does our ability to serve the health care needs of our community," he says. Potential shortages seenAnother aspect of the IME cuts is the possible effect they could have on the nursing shortage affecting most parts of the nation, including California. "It continues to be difficult for us to hire competent nurses," McGowan says. "And as any reimbursement cuts come about, there are fewer dollars we can spend on our nursing staff, making it difficult to pay the market rate for registered nurses' salaries." A similar problem that could be exacerbated by IME cuts is the nationwide rural physician shortage. "We're still suffering from the shortage of rural physicians in our area, and our family practice residency is an integral part of our strategy to serve the rural sections of the upper Midwest," says Frank Drew, senior vice president of public policy at Sioux Valley Hospitals and Health System, in Sioux Falls, S.D. Sioux Valley, the largest health care delivery system in a region that includes eastern South Dakota, southwestern Minnesota, and northwestern Iowa, will receive a $250,000 cut in IME reimbursement if the reductions take effect. |
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