Mar 12, 2019 A 2011 study in Health Affairs found American doctors, who make an average salary of almost $300,000, are paid around twice as much as doctors in other rich countries. Baker says 'doctors are. Medicare covers the majority of the cost teaching hospitals spend on training medical residents, but the Balanced Budget Act of 1997 capped the number of residency slots the federal government. Redistribution of Unused Residency Slots (DGME and IME) The law requires the Centers for Medicare and Medicaid Services (CMS) to take 65 percent of the DGME and IME residency slots that have gone unused by a hospital for the past three years and to redistribute them according to certain criteria. I hear residents get the short end of the stick inasmuch as hospitals make money off of certain programs at the expense of residents working hours doing tasks that may not all have been relevant to their training. 85,712 - 87,980 FTE (DGME) slots 85,578 - 88,416 FTE (IME) slots FY2015 (est. Average): $112,000 - 129,000 per FTE Medicaid GME Payment States are permitted to make these payments using their own criteria to determine which providers are eligible for payments. N/A The Medicaid program does not require states to report these data.

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The funding of residency programs is poorly understood by residents, and even residency program faculty and staff. The public, which itself is the primary funder of Graduate Medical Education (GME) at approx $15B per year, has no understanding whatsoever. Neither do our elected representatives, who also lack any power of oversight, instead relying on private organizations to regulate the non-transparent system. (Medicare covers almost $10B, Medicaid almost $4B, with a few other tax-funded sources. Private sources, like hospitals themselves, provide some GME funds for their own residents and service provision at an unknown amount.) This page will be an ongoing project for a while as we decipher some of the mysteries ourselves.

For a quick overview, please review the GMECP original article U.S. Physician Residency Funding: Unravel the Mystery, Participate in the Conversation.

The Association of American Medical Colleges (AAMC) is a good source of information, including a GME “advocacy” homepage, pages describing the allocation of Direct (DGME) and Indirect (IME) funding, among others.

Additionally, the AAMC has created four short video “primers” which address aspects of Medicare-funded GME.

Points from Video Primer Part 1: GME Overview

Direct GME payments include monies for directly training residents, like their stipends/benefits. DME totals about $3B/yr.
Indirect GME payments are related to supplementing patient care in a teaching environment. IME totals about $7B/yr.
The Centers for Medicare and Medicaid Services (CMS, a branch of the Dept of Health and Human Services) makes the rules about GME payments. These can be found in the Social Security Act of 1965 and in the Code of Federal Regulations.

From Primer Part 2: DGME, direct payments

DGME provides funds for Medicare’s share of the cost directly related to educating residents. Specifically: resident stipends and benefits, salaries/benefits of resident faculty, accreditation fees, GME office support,…
For Non-Medicare related costs, funds may be acquired from teaching hospital revenue, private payers, Medicaid, Children’s GME, VA GME, … (these are all minor contributors in comparison to Medicare).
Payments are only provided for residents who are in “approved” programs, essentially those accredited by the ACGME. There are programs that are not approved (un-accredited) and do not receive Medicare GME funds, like transplant surgery fellowships, for which there is no official ABMS board exam.
The payment system was started and is based on 1984 numbers. It uses the amount of money that hospitals claim to have spent per resident (the Per Resident Amount – PRA) on that base year. There are adjustments for inflation, for the number of full-time equivalent (FTE) residents, and for the number of Medicare inpatient days (Medicare’s share of total inpatients).
For example, a hospital’s PRA is $100K x 100 FTEs x 35% Medicare patients share of beds = $3.5M DGME payment to the teaching hospital
Medicare will pay for the minimum accredited length of the first residency program (the Initial Residency Period – IRP). If a resident matches into Family Practice right out of medical school, she’ll get 3 years of funding for that anticipated training period. If general surgery, then 5 years of funding. That initial funding duration is fixed, even if one changes residencies or repeats a year. However, additional years or fellowship years will still be covered, but at a 50% DGME funding amount (IME is covered in full).

From Primer, Part 3: IME, indirect payments

IME covers costs of caring for Medicare patients in teaching hospitals to offset teaching inefficiencies and the expenses of higher acuity services and patients.
Medicare pays for the basic health care services of its patients (per the Medicare Severity Diagnosis Related Group: MS-DRG). IME is an added payment to hospitals and varies as a percentage of the MS-DRG service provided to a patient.
The IME adjustment is based on the Intern and Resident to Bed ratio (IRB – usually 0.25 or greater for a teaching hospital) and a multiplier set by Congress (currently 1.35).
Adjusted ratio = IME multiplier x ((1 + IRB) ^0.405 – 1). The IME adjustment = Adjusted ratio x (%Medicare pts)(DRG payment) (Case mix ratio)
An IME adjustment might be 13%. As an example, a patient having a pacer/defibrillator implanted would elicit the MS-DRG 227 payment of $29,748 to the hospital, Because it is a teaching hospital with residents, the IME adjustment of 13% would be added on to that payment, for an additional payment of $3,867 to the hospital. (It seems like those additional IME payments could add up pretty quickly, perhaps even making residents a steady revenue stream, if not a cash cow, for teaching hospitals?)

From Primer, Part 4:

The Balanced Budget Act of 1997 capped the number of residents for which a hospital can receive GME funding. “The Cap.”
There are some exceptions to the existing caps on resident numbers: rural hospitals, critical access hospitals, non-teaching hospitals starting new programs, slots that become available from a closed program,….
About 2/3 of hospitals are currently training MORE residents than those for which they receive Medicare GME funding. They are ABOVE CAP. There are approximately 11,000 FTEs above cap nationally. (Where are those funds coming from? Mostly from the hospitals themselves, it appears. And if that is the case, then certainly hospitals are not LOSING money by training residents. Perhaps they are even making money by using cheap labor? If the economics didn’t work out, they wouldn’t be doing it.)

The Institute of Medicine’s (IOM) study, Graduate Medical Education That Meets the Nation’s Health Needs, published in 2014 (a free .pdf download) is an insightful report. The US Senate charged the IOM with helping the government understand the financials and details of GME. While the study is broad, particularly looking at recommendations for future policy and direction, it offers good information and analysis of funding and accountability issues for physician resident training.

Some relevant points from the study:

Pg 8: The financials of GME are complex, largely undocumented. There is little data, it is opaque, incomplete, not standardized or audited.
Pg 9: The Medicare funding (~65% of GME money) is provided in Direct Graduate Medical Education (DGME) funds which cover resident (and partial faculty) salaries and benefits, and in Indirect Medical Education (IME) funds which cover the assumed additional costs of sponsoring residents (inefficiencies in time, procedure, testing,..). DGME makes up about $3B (30%) and IME $7B (70%) of Medicare GME funding. The IME is determined by complex formula but is derived from inpatient numbers and complexity.
Pg 15-16: there

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