Government and Health Care

A fall off fiscal cliff may reduce future supply of doctors

Federal government pays most of the cost of residency training for new doctors.

December 15, 2012
| By Pete Daly |
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If Congress and President Obama don’t reach an agreement on government financing before Jan. 1 — the infamous fiscal cliff — the budget for Medicare/Medicaid is slated to be reduced automatically, and that’s where most of the money comes from for the residency training medical school graduates must have in order to become licensed physicians.

The directors of both graduate medical education programs in Greater Grand Rapids fear the future supply of doctors would be reduced here even as the anticipated physician shortage in the U.S. gets worse.

A fiscal cliff scenario “could be quite serious,” said Dr. Peter Coggan, president/CEO of the Grand Rapids Medical Education Program, adding there has been speculation in his field that it could mean a 25 to 30 percent reduction of GME funding. GRMEP covers residents working at Spectrum Health and Saint Mary’s facilities, and is a partnership with Michigan State University and Grand Valley State University.

“The good news is, it wouldn’t occur immediately. It would phase in over a period of a couple years,” Coggan said. “We are sweating it out.”

“What happens to (GRMEP) happens to us,” said Dr. Susan Sevensma, director of medical education at Metro Health, which has its own residency program. It has residents at Spectrum and Saint Mary’s facilities, as well as Metro facilities, she said.

Since the Johnson Administration in the 1960s, the federal government has covered the cost of hospital residents, through the Centers for Medicare and Medicaid Services, including residents’ salaries and benefits and those of instructors who oversee their work, plus the costs incurred by the hospitals and clinics where the residents work, from the equipment they use down to the incidentals.

The total cost of each residency position is estimated at approximately $100,000 per year. They are paid an average ranging from $45,000 to $50,000 a year at the start, with increases each year. A residency can last from four to seven years.

“Not much money for an 80-hour work week,” said Coggan. “We work them very hard as part of their learning process, and they provide a lot of patient care in the process of their learning.”

In the late 1990s, the federal government decided there were plenty of new doctors in the residency pipeline and set caps on its funding of each GME program in the country. GRMEP’s cap is 277 residents; Metro Health’s program is capped at slightly over 47.

Both programs, however, have some residents above and beyond their federal funding caps. With a total of 310, GRMEP has 33 residents whose positions are funded by a combination of sources, including the employing hospital’s budget, grants and local philanthropy. Metro has a total of 84 house staff, according to Sevensma, with 32 funded by sources other than CMS.

Although CMS pays for residency training, the new doctors are not working only with Medicare patients; they work with all patients in the hospital, said Coggan.

“If we cut back the number of residents, it means there are fewer residents to provide care for patients, which somebody else has to provide. Hospitals would incur some increased expense because of that.”

Hospitals are already under intense budgetary pressure, he added. “Running a hospital is a very difficult business to be in.”

For the last six months, he said, GRMEP has been “preparing for some cuts,” looking at the efficiencies of its operations and “taking out cost wherever we can and looking at reorganizing to make ourselves more efficient.”

Sevensma noted that the Metro Health Community Clinic program, with multiple sites in the region, served 25,000 patients last year, and those clinics “are there for the underserved, the under-insured and the un-insured.”

Many of Metro’s residents work in the clinics, with the Community Clinic program costing Metro $2 million a year out-of-pocket — a loss, according to Sevensma.

“We are happy to do that for graduate medical education,” she said, but if things “start getting tight,” it may impact access to health care for everyone in the community.

As for “sequestered” cuts in government-funded health care programs, Sevensma said that “medical research is a big part of this, and certainly GME will be affected.”

“Certainly, it’s going to fly in the face of our physician shortage,” she added. Later, she mentioned that the shortage has already started.

About 20 years ago, there were research models in use for predicting future demand for doctors, but Coggan said those models really weren’t very good.

A new model was developed by a University of Wisconsin researcher and it “actually did stand up to analysis,” said Coggan. The new research predicts a shortfall in doctors, based on population growth and the aging population.

In 2005, according to Coggan, a study done in Michigan predicted that, in West Michigan alone, there would be 900 fewer physicians than needed by 2020. Statewide, it predicted a shortfall of 6,500 doctors.

Since then, Michigan has ramped up its medical school output. Ten years ago there were four schools producing roughly about 750 doctors a year. Now there are three more med schools established or in the works (Western Michigan University, Central Michigan University and Oakland University/Beaumont Hospital), but none have graduated any students yet.

“We know that even with expanding our programs to the maximum possible, we are not going to meet the shortfall that has been predicted in West Michigan,” said Coggan. “And now, as we have to consider reducing the number of residents, that shortfall is only going to become greater.”

The increased number of med schools in Michigan will approximately double the number of graduates in the state, he said, “and the problem that creates is that we don’t have a similar expansion in the number of residency positions.”

That means many med school grads will seek residencies in other states, and that, too, is a problem, because experience has shown that a wide majority of hospital residents remain permanently within 50 miles of the hospital where they did their residency.

If the so-called cliff is avoided by a deal between Obama and Speaker of the House John Boehner, Sevensma still worries: “What, then, is going to be on the table?”

“Any time there are budget talks, any time there are budget reductions, GME is always on the table,” at both the state and national levels, said Sevensma.

“The big message is that, if GME is cut — and that’s not just this time but ever in the future — we have to be careful to protect the access in this community that those residency clinics provide.” 

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