Joanne Conroy, MD


Impact of New Payment Methodologies on Support for Graduate Medical Education

With Coleen Kivlahan, MD

Many of our nation’s academic medical centers (AMCs) are experimenting with care redesign by participating in risk-based payment strategies, such as ACOs, bundled payments, and capitated payments for specific populations. However, little attention has been given to how payments for societal goods such as teaching and care of the uninsured will be calculated in these new payment models. An optimal approach would be to protect payments to ensure adequate funding for medical education. However, that outcome is not guaranteed as we move through the current fiscal debate.

Current methodologies for calculating bundled payments, ACOs, and capitated payments do not include Direct and Indirect Medical Education (DGME/ IME) payments or Disproportionate Share (DSH) payments. An unintended consequence, however, is the decrease in support for care of the uninsured, training costs, and essential services/standby capacity that result when hospital admissions are avoided. All of these payments are currently tied to inpatient utilization by Medicare or Medicaid patients.

One of the most important areas of focus in managing patients is decreasing unnecessary readmissions. Under the newly designed payment systems, when AMCs decrease readmissions, they lose the patient care and medical education payments associated with those hospital stays, although educational and mission-related costs remain. For those participating in bundled payment programs, this may represent a reduction of up to half of the support of these missions depending on the teaching intensity and Medicare/ Medicaid share. The impact will be most significant for hospitals serving the poor, delivering services unavailable elsewhere, or those operating large medical training programs. AMCs should be centers of innovation for the reform of health system reimbursement. But the loss of payments for advanced clinical care, care to the underserved, and medical education may constrain broad participation in these new models.

In our analysis, these policy payment losses tend to be higher when chronic illness readmissions are avoided. This could dissuade teaching hospitals from focusing on chronic illness bundles, such as those for CHF and COPD, as compared with procedural bundles, such as those for joint and spine surgery. Patients with chronic illnesses tend to have longer lengths of stay, higher severity of illness, and higher rates of hospital readmission. Dissuading teaching hospitals from care redesign for this important population would be unfortunate, given that more than 750,000 chronic illness beneficiaries account for $10 billion in Medicare claims, while 480,000 beneficiaries with musculoskeletal conditions account for claims of approximately $5 billion. (Source: Prevalence and Medicare reimbursement by recurrent International Classification of Diseases categories, 2006-2009)

Behind every challenge lies an opportunity. In order to effectively reduce readmissions, a redesign in how we promote the development of and payment for education in the ambulatory care setting is overdue. Why not create new policy payments – outpatient medical education payments – that are supported with these unspent dollars? Why not promote unique clinical services and the training of health professionals in alternative sites to provide team education in hospice, community health centers, home- and community-based care? Thoughtful policies could emphasize and reward training and education in ambulatory care and ultimately result in more effective, comprehensive care.

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