Barach P. Teaching Hospitals in Trouble: Defining the Problem. JAMA. 1999;282(16):1592A. doi:10.1001/jama.282.16.1592
Prepared by Ashish Bajaj, Department of Resident
and Fellow Services, American Medical Association.
The nation's teaching hospitals are facing financial shortfalls brought
on by the growth of managed care and government efforts to cut costs in its
health care programs. As many as 100 teaching hospitals could be in the red
by 2002.1 Others face a bleak and uncertain
future. Congress can help by restoring some of the cuts made to Medicare in
the Balanced Budget Act of 1997. But the long-term financial health of teaching
hospitals will depend on finding new ways to finance their special missions
and requiring that they operate under reasonable cost controls.
All hospitals are facing the same pressures—cuts in government
payments and managed care's demand for lower hospital fees and shorter hospital
stays. Many have responded by reducing staff and merging with other institutions.
Some teaching hospitals have taken these steps, but their problems are
compounded by the extra obligations that they have long assumed, which include
training new physicians and other health care personnel, conducting medical
research, and providing free care for the poor. Teaching hospitals shape the
future of medicine by providing most of the clinical research in new procedures,
technology, treatments, and medications. They are the major providers of indigent
care in the United States. Managed care has changed that by making it much
more difficult for hospitals to cover the costs of charity care and medical
education by charging higher fees. At the same time, these hospitals have
been especially hard hit by government cuts because they derive much of their
revenues from Medicaid and Medicare patients. These pressures are especially
severe in large cities such as New York, NY and Los Angeles, Calif, which
have the nation's largest concentrations of teaching hospitals.
Many government funding cuts to hospitals came from the Balanced Budget
Act of 1997. While the Act had the welcome result of cutting Medicare expenditures
in the first half of this fiscal year, it also had a disproportionate impact
on teaching hospitals. Among other cost controls, the law sharply cut the
Direct Medical Education payment, the federal subsidy for graduate medical
education that is financed as part of Medicare. The law also froze the number
of funded residency and fellowship positions at the 1996 level. Some Medicare
patients were encouraged to switch to Medicare health maintenance organizations,
which have paid hospitals significantly less than normal Medicare providers
pay for the same services.
In the public's mind, no clear distinction exists between academic medical
centers and community hospitals. We need to promote the message that academic
medical centers are different and a national resource. Next week's Resident
Forum column will explore some of the suggestions for protecting this resource.