July 29—Medicare’s $9.7 billion graduate medical education (GME) system needs reforms that reflect changes in healthcare delivery since the financing began in 1965, the Institute of Medicine (IOM) concluded this week.

Medicare’s financing system for physician training dates back 50 years to when hospitals were the central, if not exclusive, site for physician training. Although hospital services remain key, the IOM report stated, a growing share of healthcare services is moving to community settings and integrated care models.

“Yet, the Medicare GME payment system discourages physician training outside the hospital, where most health care is delivered,” the report concluded.

The system needs several changes to effectively train physicians to provide better individual care, better population health, and lower-cost care, according to the report. The 21-member IOM panel, which was convened to review the governance and financing of Medicare GME, concluded that a new performance-based payment system would provide incentives for content innovation in accordance with local healthcare workforce priorities. The panel recommendations also included creation of a high-level GME policy and financing infrastructure within the U.S. Department of Health and Human Services and the Centers for Medicare & Medicaid Services to develop and test new payment methods.  

Payment Changes

Changes in the existing payment model would include basing funding on a national per resident amount (geographically adjusted) and delinking Medicare GME payments from a teaching institution’s Medicare patient volume.

The proposed changes drew strong concerns from the largest advocacy group for GME facilities, the Association of American Medical Colleges (AAMC). For instance, the IOM’s proposed changes would cut teaching hospitals’ payments by up to 35 percent and result in the loss of “vital care and services available almost exclusively at teaching hospitals, including Level 1 trauma centers, pediatric intensive care units, and burn centers,” Darrell G. Kirch, MD, president and CEO of AAMC, said in a written statement.

“While the current system can be and is being improved to train more doctors in nonhospital settings, these immediate cuts will destabilize a system that has produced high-quality doctors and other health professionals for more than 50 years and is widely regarded as the best in the world,” Kirch said.

The IOM also sought to improve transparency in the primary source of public GME funding by requiring standardized reports from sponsoring organizations as a condition for receiving Medicare GME funding, among other measures. Such reports would be publicly available. 

Publication Date: Tuesday, July 29, 2014