GME Benefits & Return on Investment

1. GME Benefits & Return on Investment Margaret J. Hardy, JD March 2009

2. Trends Affecting Hospitals ▪ Physician workforce shortages ▪ New colleges of osteopathic medicine & medical schools ▪ Increasing number of medical graduates ▪ Financial uncertainties = New Hospital Challenges & Opportunities

3. What Keeps CEOs Up at Night ▪ Competition for well-reimbursed patient services ▪ Increased cost of physician services ▪ Emphasis on cost containment ▪ Quality/ties to payment ▪ Shortage of skilled healthcare workers ▪ Shortage of physicians – especially primary care physicians

4. Benefits of GME ▪ Hospital Benefits ▪ Medical Staff Benefits ▪ Recruiting Benefits ▪ Patient Care Benefits ▪ Bottom Line Benefits

5. Hospital Benefits ▪ Physician recruitment ▪ Culture of education ▪ In-house physician coverage ▪ Educational & technical expertise ▪ Enhanced service to the community ▪ Competitive advantage ▪ Revenue stream

6. Medical Staff Benefits ▪ Environment of life-long learning ▪ Expanded referral network ▪ Prestige in the community ▪ Tighter bonds among medical staff & among attendings, house staff & nursing ▪ Enhanced CME opportunities ▪ Succession planning ▪ Mentoring & molding future physicians

7. Recruiting Benefits ▪ Ability to “grow your own” medical staff ▪ Reduced physician recruiting expenses ▪ Caliber of training is a known quantity ▪ Trainees are already known & at home in the community ▪ Interns & residents tend to remain in the area where they train

8. Patient Care Benefits ▪ Access to care ▪ Enhanced coverage & quality ▪ Enhanced ability to meet community needs ▪ Expanded scope of services ▪ Presence of residents 24/7 ▪ More patient contact with physicians ▪ Increased comfort level for nursing ▪ Opportunity for clinical trials & research

9. Bottom Line Benefits ▪ Medicare Direct & Indirect GME payments ▪ Reduced medical staff coverage expenses ▪ Increase in physician referral base ▪ Financial support also may be available from Medicaid, the Veterans Administration and other federal or state programs

10. A Word about Costs GME costs include: ▪ Resident salaries & benefits ▪ Faculty salaries  DME & program director(s)  Inpatient & ambulatory teaching faculty  Support staff ▪ Certain capital & equipment costs (call rooms, library, computers, intern/resident lounge)

11. Medicare GME Payment Medicare Pays Teaching Hospitals - ▪ Direct Graduate Medical Education (DGME) payments ▪ Indirect Medical Education (IME) adjustment Based on formulas, statutory factors & certain hospital-specific data

12. DGME Payment ▪ Payment for Medicare’s share of the costs of training interns & residents  Resident salaries & benefits  Faculty compensation  Program administration & overhead costs ▪ Product of hospital’s per resident amount, Medicare utilization & number of full time equivalent (FTE) residents

13. IME Adjustment ▪ Recognizes teaching hospitals have higher patient care costs due to presence of trainees  Treat sicker patients  Offer more services, tests & technology ▪ Product of hospital’s teaching intensity (ratio of residents to beds), DRG payments and IME adjustment for the current year

14. FTE Cap ▪ Cap establishes a limit on the number of residents Medicare will pay for ▪ Generally based on resident counts in the hospital’s 1996 cost reporting year ▪ Cap for a “new” teaching hospital = product of highest number of residents in any program year in program’s 3rd year and the initial residency periods (IRPs) of the residents’ specialties

15. FTE Cap While hospitals can train as many interns & residents as they are approved for, once caps are set – ▪ Urban hospitals can’t add Medicare-funded positions ▪ Rural hospitals can add new specialties but can’t add residents to existing programs

16. Per Resident Amount ▪ Hospital-specific amount used in calculating DGME payments ▪ Is multiplied by the number of FTE residents and the hospital’s Medicare utilization rate ▪ For most hospitals, based on costs in hospital’s 1984 base year ▪ For “new” teaching hospitals, lower of hospital’s costs or locality-adjusted national average

17. Initial Residency Period ▪ Is the minimum number of years required for board eligibility in the resident’s specialty ▪ Separate IRP (1 year) for osteopathic internship ▪ Residents are counted as 1.0 FTE during IRP up to 5 years & 0.5 FTE thereafter ▪ If resident changes specialty, IRP will be the minimum number of years required for the 1st specialty

18. Medicare Affiliation Agreements ▪ Allow hospitals that share resident rotations to aggregate FTE resident caps ▪ Provides a measure of flexibility in an inflexible system ▪ Used to temporarily move FTEs from one hospital to another per resident rotations ▪ Aggregate cap can’t exceed the sum of the caps of all hospitals in the affiliated group

19. Nonhospital Rules ▪ Hospital can count residents training in nonhospital settings if  the residents spend their time in patient care activities  the hospital pays “all or substantially all” the costs of the training program in that setting

20. 3-Year Rolling Average ▪ Reduces the FTE cap over time if a hospital fails to fill its Medicare-funded positions ▪ Interacts with the cap to limit the number of residents Medicare will pay for ▪ Is the average of the hospital’s FTE resident count in its current cost reporting period & the 2 preceding periods

21. Strategic Framework Helps You Determine How Your GME Program Fits with Your Hospital’s -

22. Strategic Framework ▪ Mission: Why Does the Hospital Exist?  Patient care & physician services?  Service to the community?  Quality & safety?  Education?  Research?

23. Strategic Framework ▪ Vision: What Image does Your Hospital Want to Portray as it Works to Accomplish its Mission?

24. Strategic Framework ▪ Values: What Guiding Principles Drive the Hospital?  Moral values?  Improving community health?  Providing care for those in need?  Providing a resource for physicians?

25. SWOT Analysis A Strategic Framework Helps You - ▪ Analyze how GME fits in your hospital by examining –  Internal strengths  Internal weaknesses  External opportunities  External threats

26. Contact Information Margaret J. Hardy, JD Director, Hospital & Medical Educator Affairs American Osteopathic Association 1090 Vermont Avenue, NW, Suite 510 Washington, DC 20005 Phone: (800) 621-1773, ext. 8655 Phone: 202-414-0155 E-mail: mhardy@osteopathic.org