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Hospitals fear graduate medical education funds could fall off cliff

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New Jersey graduate medical education funding could see a $67 million budget cut if politicians in Washington drive over the so-called “fiscal cliff” in January, threatening the state's ability to train new physicians at a time when it needs them urgently.

That cut, which would be triggered if Washington is unable to agree on a deficit reduction plan, would come out of Medicare funding to the state in the form of indirect medical education funding. In 2012, New Jersey received more than $250 million from Medicare for indirect medical education — the largest source of funding for residency slots.

In total, New Jersey receives $526 million annually to fund residencies from Medicare, Medicaid, charity care and other sources. Training the state's 3,000-plus residents costs about $1.2 billion annually, according to the New Jersey Council of Teaching Hospitals.

Deborah Briggs, president of the council, said she is just starting to hear ideas being put on the table in Washington to prevent such a large cut from occurring, whether through a short-term agreement before the end of the year or longer-term negotiations that may occur earlier in 2013, when "all the details will get hammered out. That's what we're being told is likely to occur," Briggs said.

She said there are various scenarios being discussed, including parts of the Simpson-Bowles plan and President Barack Obama's budget, and the size of the cut to indirect funding — which goes toward things like infrastructure, operations and other necessities for a hospital to be able to teach residents — could range from as painful as 60 percent to 3 percent.

"Unfortunately, the one that seems to be the most debated by both sides is the Simpson-Bowles, which is the 60 percent cut in indirect medical education payments," Briggs said. "That will have a pretty remarkable (effect) … in New Jersey, that means an annual cut of $66 (million) to $67 million."

For Meridian Health, a 60 percent drop would mean about $2.8 million in indirect medical education funds lost, and would "impact on our ability to provide the most contemporary technology and scope of services we're proud to provide today," said Dr. David Kountz, senior vice president of academic and medical affairs for Jersey Shore Medical Center, a Meridian hospital.

Kountz said, in addition to being trained at the hospitals, residents provide the "backbone of community care" through supervised work in the system's family health center, which provides care for patients unable to pay.

The cut comes as the need for new physicians grows dramatically; the Association of American Medical Colleges estimates in just eight years, the United States will have a shortage of 95,000 physicians, despite ongoing expansions of medical schools.

Dr. Paul Katz, dean of Cooper Medical School at Rowan University, said if more residency slots are not created, a potential disaster for the health care industry looms.

"I think GME in this country is on the 'critical list' right now, and I think sequestration is going to not help with the outcome," Katz said. Funding for graduate medical education, he added, "has largely been through Medicare, and even though we have a projected physician shortage, Medicare funding has not increased since 1997."

"The number of graduates in this country is going to increase by 30 percent by 2020, unfortunately, we're still going to be short with that," Katz said. "More and more institutions, such as Cooper (University Hospital), have had to rely on other funds to support the educational mission."

"We haven't changed our educational curriculum to be training the future physicians," Briggs said. "What new practice models need to be put into place in the training process so that we are creating very effective physician leaders for the future?"

Briggs said the council has been working on analyzing and planning how the state's hospitals can "be more cost effective as we produce that physician."

Katz said schools are focusing on making primary care a more attractive career path for new physicians as an attempt to meet the demand created through the Affordable Care Act, which emphasizes primary care.

"We all want, as potential patients, to have the next-generation doctors learn in complex hospitals with sick patients, so they are very comfortable dealing with the full spectrum of who they will treat independently in the future," Kountz said. He added that, since a specific percentage has yet to be decided, Meridian has yet to formulate a specific plan for teaching residents without that money.

A small victory for graduate medical education occurred in September, when the Centers for Medicare and Medicaid Services initially approved the state's comprehensive Medicaid waiver. In that waiver, the state requested $90 million in GME funding from Medicaid be preserved when many of the state's recipients switch from traditional fee-for-service Medicaid to managed care plans. Briggs said that funding was at risk, because CMS looks at historical fee-for-service funding when determining GME allocation.

E-mail to: melindac@njbiz.com

On Twitter: @mcaliendo33

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