Report focuses on Medicare payments

A recent report published in the July 22 issue of The New England Journal of Medicine shows a wide disparity in the payments that different academic teaching hospitals receive from the federal Medicare program for their medical education services. The report, written by John Iglehart, said that the Hospital of the University of Pennsylvania received $103,391 per resident trainee in Fiscal Year 1996. The figure represents the amount that hospitals would receive if private, third-party insurers paid the direct costs of graduate medical education. Although HUP received substantially larger direct Medicare payments for medical education than many other teaching hospitals did -- the University of Minnesota Hospital in Minneapolis, for instance, received a total of $33,739 per resident -- it still received less federal payments than those earned by several of New York's major academic hospitals. The report predicts that these disparities in federal payments -- primarily caused by differences in the wyas in which hospitals have accounted for their respective costs of residence training -- could "complicate the efforts" of medical centers to loosen Congress's restrictive spending caps. Typically, third-party insurers have made significantly higher payments to health-care providers than have Medicare and Medicaid. Some teaching hospitals suggest that Medicare establish a national average payment, which could ostensibly compensate those medical centers that receive less payment per resident. Medicare payments have indeed been a subject of debate on Capitol Hill in the last several years. The Balanced Budget Act of 1997, which had the ultimate goal of eliminating the federal deficit, called in part for steep reductions in Medicare expenditures and significantly less financial support for hospitals that receive and treat a large number of indigent patients. The report notes that teaching hospitals, which are generally located in urban areas and provide large support for uncompensated care, "were particularly affected by the 1997 budget law" by having their subsidies and federal payments reduced. "On the one hand, we are these wonderful institutions. On the other hand, we're also available to everybody, and it's very expensive to operate as a result of that," said Russ Molloy, the associate executive vice president for government relations for Penn's Health System. The Balanced Budget Act is expected to save the federal budget $119 million over five years, according to the report. It is expected to cost HUP about $175 million over the next five fiscal years, Molloy said. "Teaching hospitals cannot afford to let Congress or any other entity decide their fate without first making a more vigorous effort to define the value of academic medicine to society," Iglehart's report says. According to the report, several interest groups, like the Association of American Medical Colleges, have been encouraging Congress to increase payments to teaching hospitals. But some say that the active reaction against the legislation began a little too late. "When the Balanced Budget Act was enacted, the AAMC, reflecting the attitudes of its members, registered only mild complaints about the Medicare provisions," wrote Iglehart in the report. "Someone at the major teaching hospitals was asleep at the switch," by waiting too long to voice frustration with the Balanced Budget Act, said Health Care Systems Professor Mark Pauly.