In 2019, the Hahnemann Medical Center, a safety net hospital in Philadelphia, declared bankruptcy and a consortium of hospitals submitted a winning bid of $55 million for 550 government-funded residency slots. The auction challenges the narrative of teaching hospitals that training residents is a money-losing proposition and provides an opportunity to rethink the role of public financing of graduate medical education (GME) and its nearly 4-decades-old funding formulas.
Since 1983, GME has been financed by 2 funding streams: direct GME and indirect graduate medical education (IME) payments. Direct GME payments are based on the hospitals’ cost structure in 1984, the number of full-time equivalent residents in 1996, and Medicare’s share of total inpatient days at that hospital during the current period. IME payments increase Medicare payments to teaching hospitals and are intended to cover additional costs hospitals may incur as a result of training physicians, such as additional diagnostic tests or procedures ordered by residents. IME payments depend on a ratio of the number of residents to hospital beds as a proxy for a hospital’s teaching intensity. Between 2000 and 2015, average GME payments per resident increased nearly 20%, from a mean of $117 323 to $138 938, driven mainly by increases in IME reimbursements, which represent nearly three-fourths of total Medicare GME payments.1,2 In 2015, federal and state support for GME reached $16.3 billion (nearly $18 billion in 2020 dollars), representing $14.5 billion from the federal government and $1.8 billion from state Medicaid agencies.2
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Grischkan JA, Friedman AB, Chandra A. Moving the Financing of Graduate Medical Education Into the 21st Century. JAMA. 2020;324(11):1035–1036. doi:10.1001/jama.2020.15480
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