Pa. teaching hospitals brace for possible cuts

All eyes are on Washington as dueling budget proposals face gridlock in Congress and the days until the Aug. 2 deadline dwindle.

Representatives of the 64 teaching hospitals in Pennsylvania are watching closely to see how their institutions will fare. Potentially on the chopping block are billions of dollars dedicated to graduate medical education. Cuts proposed last winter would cost Pennsylvania teaching hospitals almost half a billion dollars next year. Though the number has been less drastic in more recent talks, hospital administrators remain worried.

The funds come through Medicare, the federally funded program best known for providing insurance for adults 65 and older. A fraction of Medicare money goes to teaching hospitals to fund training programs for doctors. The money pays residents’ salaries and benefits, and helps fund intensive and specialized units such as trauma and cancer centers.

“Part of the reason we have such a breadth of programs is we have all these people to train,” said Ralph Muller, CEO of the University of Pennsylvania Health System.

They “need to have access to the young and the old, to imaging and to surgery, to the emergency room as well as the operating room,” he said. “If we didn’t have those young trainees in our midst, we probably wouldn’t have the same breadth of programs.”

The Penn system would be among the hardest hit in the country if cuts materialize. It gets about $100 million a year from Medicare to train the next generation of physicians. If there are significant, sustained cuts, Muller said Penn may have to reduce the number of residents it trains every year.

“It would have a big effect with how many doctors we produce a couple years down the road,” Muller said.

A frequent target

Graduate medical education funding has been a frequent target of budget-slashing legislators. Critics see the funds as a hidden subsidy to large teaching hospitals.

“The basic reason is that the analysis of what it costs the big teaching hospitals to train physician interns and residents is less than the amount that Medicare now includes in its payment system,” said Brian Biles, a health policy professor at George Washington University.

A recent report from MedPAC, a commission that advises Congress on Medicare, found taxpayers paid out $9.5 billion in graduate funds in 2009. The commission could not find evidence that about a third of that was necessary to cover the cost of training residents.

The hospitals say they do need the funds. In fact, a Penn representative says it is already losing money training nearly 900 residents.

If proposed cuts materialize this budget cycle, Pennsylvania and New York would be hit the hardest. Losses would be felt especially hard in Philadelphia, says Mike Strazzella, a lobbyist with the Hospital and Healthsystem Association of Pennsylvania.

“We know that people from around the country, from around the world, come to Philadelphia for care, and that’s because they also train the best physicians,” Strazzella said. Cutting graduate education funding would have a huge impact, he said.

The size of any potential cuts is very much in flux.

A White House finance report released last December called for a 60 percent cut in graduate funding. According to the Association of American Medical Colleges, that would translate into almost half a billion in cuts per year for Pennsylvania hospitals.

More recent conversations in Washington have suggested cutting funding by about 20 percent. Neither of the proposals from House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry M. Reid, D-Nev., explicitly addresses graduate medical education funding, so health-care professionals will have to wait a little longer to see how they fare.