Post on 05-Jan-2016
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The history of GME financing: How did we get here?
James R Korndorffer Jr , MD FACSProfessor, Department of SurgeryProgram Director, Surgical ResidencyTulane University Health Sciences Center
Slept through by students worldwide
“Prehistoric” Times
Pre 1940’s– Little specialty training– Hospitals covered “costs”
Room, board, laundry Built into patient charges
1945-1965 (6 fold increase in residency positions)– Rise in specialization– GI bill
Qualified individuals – living allowance Hospitals – subsidies to offer positions to servicemen
– Costs Rise Added to insurance charges
Timeline
1965: Medicare Established 1982: TEFRA (Tax Equity Finance Reconciliation Act)
1983: PPS (Prospective Payment System) 1985: COBRA (Consolidated Omnibus Budget
Reconciliation Act) 1993: OBRA (Omnibus Budget Reconciliation Act) 1997: BBA (Balanced Budget Act) 1999: BBRA (Balanced Budget Refinement Act) 2003: MMA (Medicare Modernization Act)
Medicare Established(1965)
“…educational activities enhance the quality of care…it is intended, until the community undertakes to bear such education costs in some other way, that part of the net cost of such activities should be borne by the hospital insurance program.”
Medicare Established (1965)
Medicare– A portion of payments allotted to support
GME. – The percentage of GME costs reimbursed
same percent of Medicare days in the hospital 20% Medicare days = 20% GME costs reimbursed
Private payers – Paid usual and customary charges that
included GME costs (cost basis)
1965
TEFRA (Tax Equity Finance Reconciliation Act) 1965
1982
Recognized increased cost of patient care in teaching hospitals
Additional payments for GME allocated
Based on resident to bed ratios
PPS (Prospective Payment System)
PPS shifted Medicare payments for GME from cost-based (i.e., how much was spent on care) to diagnostic related groups (DRG’s).
GME allotment was split into two groups:– Direct Medical Expenditures (DME)– Indirect Medical Expenditures (IME)
1965
19821983
Direct Medical Expenditures
DME supports costs that can be directly allocated to education, including:– Salary and fringe benefits for residents– Salary and fringe benefits for supervisors– Administrative costs of GME programs– Allocated institutional overhead costs (library,
electricity, etc).
The allowable DME per resident amount (PRA) was locked-in based upon the 1983 fiscal year cost report (adjusted for inflation)
DME Payment Calculation
Based on – Per resident amount (1983 + inflation
adjustment)– # of residents– Percent medicare days
Example– $100,000 (PRA) x 118 (# residents) x .2
(Medicare days/total days) = 2,360,000– $20,000 per resident
Direct Medical Expenditures
DME supports resident salary/fringe, supervisors salary/fringe, administrative costs, allocated institutional overhead costs (library, electricity, etc).
Indirect Medical Expenditures
IME supports additional operating expenses of teaching hospitals– Higher indigent patient load– Clinical inefficiency of physicians-in-training– Increased utilization of resources– Additional support for the academic infrastructure– Higher patient severity of illness
IME – not a distinct payment, – an inflator of the clinical care DRG payments a
hospital bills Medicare– Calculated using resident to bed ratio– Formula is as follows:
Calculation of IME
IME = CF x [(1+IRB)0.405- 1]
CF= Correction Factor (The 2003 CF was 1.35)IRB= Institution’s Resident-to-Bed Ratio
Example: IME= 1.35 x [(1+0.50)0.405- 1]IME= 24.1% add onAverage DRG= $4,500 Number of DRG’s Medicare= 13,800PPS= est. $62,100,000Additional IME Funds= $62,100,000 x 24.1%= $14,904,000IME per resident (n= 150*) = $99,360 per resident
Common IME Reporting
Expressed as the average add-on per 0.1 resident-to-bed ratio
Originally 11.6% The cost of IME is controlled by
legislative manipulation of the Correction Factor.
Potential problems
Increase in the number of residents at a facility - increases the IRB - increases the IME add-on percentage
Increase in Medicare services - increases the PPS - increases the total IME
COBRA (Consolidated Omnibus Budget Reconciliation Act)
Mandated that all GME reimbursement (DME and IME) had to be based upon the inpatient setting. (This would be partially reversed in 2007).
Established COGME (Council on GME) to oversee GME expenditures and advise the DHHS.
Mandated that GME reimbursement would only be provided for the time required for a resident to complete his/her first certification* (maximum of 5 years). Thereafter, only 50% of reimbursable expenses would be provided.
(Exceptions= geriatrics and preventive medicine)
1965
19821983
1985
DSHDisproportionate Share Hospital
Payment adjustments for treating disproportionate share of indigent
IME reduced to 8.1 % (from 11.6%)
IME reduced to 7.7%
1965
19821983
19851986
1989
1965
19821983
1985
OBRA (Omnibus Budget Reconciliation Act)
Eliminated the yearly adjustments upon the consumer price index (as established in COBRA).
This would be reversed by later legislation.
1965
19821983
19851986
1989
1993
BBA (Balanced Budget Act)
Capped the number of resident positions per hospital – based on 1996 numbers
No additional DME or IME for residents that exceed their 1996 “cap.”
Established the “Three-year rolling average rule” to determine resident number
Cut IME to 5.5% (over 5 years)
1965
19821983
1985
1993
1997
BBRA (Balanced Budget Refinement Act)
Reduced the variability of DME PRA – PRA variability in 1995 $10,000 -240,000 per
resident– 70% to 140% of the mean PRA
Programs that had a PRA of less than 70% of the mean PRA were adjusted up to the 70th percentile
Programs that had a PRA greater than the 140th percentile were adjusted down to the 140%
Programs in the middle left alone
1965
19821983
1985
1993
19971999
MMA (Medicare Modernization Act)
The MMA increased (transiently) the average add-on for calculating IME to 6% (per .1 resident to bed ratio).
The average IME add-on per .1 resident to bed ratio was 5.5% in 2008 (with a declining scale for higher resident numbers).
1965
19821983
1985
1993
19971999
2003
Where does this leave us?
$20,000 DME $99,369 IME
– Not all IME applied to direct resident institutional costs – controlled by hospital
– IME is diverted to subsidize: Academic Affiliation Agreement with hospitals Clinic subsidies
So $70,000 IME Total $90,000 “income”
Institutional Cost
Salary $44,000 to 53,000
Benefits $7994
Malpractice
-Louisiana Compensation Fund $3,800 to 4,400- Tulane self-insurance fund & Zurich $4,921
Average $ 70,000
“leftover money”
$20,000/resident % to Dean, DIO FTE costs
– Coordinator– Administrative– PD– Teaching faculty
ABSITE, etc
What are we left with?
“…educational activities enhance the quality of care…it is intended, until the community undertakes to bear such education costs in some other way, that part of the net cost of such activities should be borne by the hospital insurance program.”
Dollars reimbursed for a given
DRG
Dollars reimbursed for a given
DRG
24% IME inflated cost due to IME
Adjustment
24% IME inflated cost due to IME
Adjustment
Support of Graduate Medical Education
Hospital Revenues
MEDICARE BILLING
THIRD PARTY INCOME FOR GME
Dollars reimbursed by Medicare for a given
DRG
Dollars reimbursed by Medicare for a given
DRG
24% IME inflated cost due to IME
Adjustment
24% IME inflated cost due to IME
Adjustment
Hospital Revenues
MEDICARE BILLING
Dollars reimbursed by the Third Party Payer for a given
DRG
Dollars reimbursed by the Third Party Payer for a given
DRG
The Medicare total expenditure per DRG(including the IME adjustment) is usedto determine the negotiated amount the third-party payer will pay for the same DRG.
$ 0 for GME
24% inflated cost due to IME
Adjustment
24% inflated cost due to IME
Adjustment