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SUMMARY
This report is the result of a study by a committee of the Institute of
Medicine charged with developing strategies to overcome barriers to financing
graduate medical education (GME) for primary care practitioners in ambulatory
settings. Current systems of financing make it difficult to prepare physicians
adequately for the special demands of primary care practice. Such physicians
must be prepared to confront a wide array of problems, provide coordination of
health care services, respond to community health needs, and perform many other
functions that may take place in settings ranging from solo practice to health
maintenance organizations. Because of recent changes in the health care system,
the hospital is a less suitable principal focus for the GME experience of primary
care physicians than the ambulatory setting in which most of the physician's
career will be spent. However, because payments for health services and for GME
are skewed to favor inpatient and specialty education it is hard for educators to
increase the time that residents spend in primal care outpatient settings.
Although there are signs that primary care education programs are
responding to changes in the location of medical care and in the nature of hospital
care by increasing the emphasis on outpatient experience, such adaptation has
been slow. One of the reasons posed for the failure of the programs to initiate
the needed move to primary care outpatient settings is the difficulty in financing
such training. The committee interpreted its charge as generating
recommendations that would immediately start to diminish existing financial
ba~Tiers.i
The centerpiece of this study was a workshop, held in Washington D.C., April
18 and 19, 1989, to which were invited leaders in the three primary care
specialties of general internal medicine, general pediatrics and family medicine.
Experts in medical education financing, hospital administration, academic
administration, policy analysis, and the insurance industry were also invited. The
presentations and discussion at the workshop, together with four papers
commissioned by the committee formed the basis of the committee's deliberations.
1 For the purposes of this study general internal medicine, general
pediatrics, and family practice are the primary care specialties. The
committee's recommendations are intended to encourage programs that emphasize
primary care and ambulatory training. Unfortunately, not all programs fit
this description.
1
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Because the charge to the committee was to try to lower financial barriers,
and because of severe time constraints, the committee did not conduct independent
evaluations of some important financial and non-financial issues that play a major
role in shaping the training of primary care physicians. These include the role of
Residency Review Committees in shaping the residency training experience, the
extent to which the process of accreditation of education programs assures that
"essentials" (the educational requirements for accredited residency training
programs that are approved by a Residency Review Committee of the specialty)
are fulfilled, the problems residency programs confront as they seek to implement
changes in essentials, what needs to be done to enhance the quality of the
training experience in different ambulatory settings, and to what extent, if any,
residency programs may be closing because of fiscal problems. In addition, the
committee did not address in depth ways of reducing teaching costs and increasing
resident's practice revenues. A number of questions have been raised about the
quality and content of ambulatory training and the funding of specific elements of
education such as the teaching of behavioral sciences and epidemiology. These
important questions, which bear on the development of quality education programs
in primary care, are subjects worthy of investigation which could not be
undertaken by the committee. Moreover, the committee did not undertake an
investigation of the organizational structure of medical schools and hospitals. An
attempt to initiate long term, radical change in the way in which GME is
conducted and financed would require fundamental reorganization of these
institutions. However, the concern of the committee was to initiate immediate
movement in constructive directions.
Problems in Financing GME for Primary Care Physicians
in Ambulatory Settings
The committee reviewed the literature and available data about the costs of
training in ambulatory settings and the revenues available to those trying to
ensure appropriate ambulatory training experiences for primary care residents.
Two major questions arise when considering the costs of shifting residency
training to ambulatory settings. First, what is the cost of training in ambulatory
settings compared with the cost of training in inpatient settings? Second, what, if
anything, is the net cost to the site or program? Few attempts have been made
to answer the first question. There are, however, indications that teaching in
ambulatory settings is less efficient than in inpatient settings.- For example, in
hospitals it is possible to schedule rounds to bring faculty and residents together.
In ambulatory care the teacher cannot bring large groups of residents to a patient,
and the patient cannot be asked to wait for the convenience of the teaching
experience. Another factor thought to contribute to higher costs in ambulatory
c'
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settings is the need for additional space to accommodate teaching in a facility that
is usually designed for economical use of space for patient care only. In a hospital
residents are more easily accommodated without additional or dedicated space.
On the second question--whether the training site or program will experience
net costs as a result of the ambulatory training--there is some evidence that
revenues will not cover costs of first-year residents, but may do so for second and
third-year residents. Finally, there are indications that both ambulatory training
sites and inpatient training sites experience increased indirect costs from providing
the training experience. For instance, the test-orderin~ h~h~vior of r~irl~nt.~ it:
more costly than that of other physicians.
O -~ ,
Patient care revenue is today the major source of support for graduate
medical education. Support that is specifically tied to GME comes from several
sources. A principal payer is Medicare, which pays approximately $1 billion
annually to hospitals for the direct costs of resident and faculty salaries and
benefits, and approximately $2 billion for the indirect education adjustment which
pays for costs associated with teaching activities. States play a major but uneven
role in financing GME. For example, states sometimes support private medical
schools, state-owned hospitals and certain residencies--most often in family
medicine in states that perceive a need to enhance their~supply of those
practitioners. Special federal funds for GME in primary care are also available
from Title VII of the Public Health Service Act. These are grants to primary care
training programs--family practice, general internal medicine, and general
pediatrics--that require residents to spend at least 25 percent of their time in
continuity practice in ambulatory settings.
Revenues for GME for primary care physicians in ambulatory settings suffer
from several disadvantages compared with revenues for inpatient training and
training for other specialties: third-party coverage is more constrained, outpatient
payment levels are lower, and copayments and deductibles are higher. Thus it is
harder to offset the costs of teaching through patient care income. Although
Medicare has reduced the differential between inpatient and outpatient training in
its GME payments, a discrepancy still exists: residents in clinics that the hospital
does not itself operate are excluded from the calculation for the indirect medical
education adjustment.
3
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Additional Benefits from Improving Support
for Primary Care GME
Two important aspects of primary care that are affected by GIVE financing
are the supply of primary care physician manpower and care for medically
indigent populations. The manpower issue focuses on whether the future supply
of primary care physicians will be sufficient to meet the nation's requirements, or
whether efforts should be made to increase the number of medical school
graduates choosing careers in primary care. The committee reviewed attempts to
estimate the adequacy of the future supply of primary care physicians, and
indicators of change in the supply of primary care physicians such as the number
of medical school graduates selecting primary care specialties. Although
projections of both the supply of and need for medical manpower contain much
uncertainty, the committee concluded that if measures to improve support of GME
in primary care settings would at the same time increase the number of
individuals going into primary care, a double benefit would accrue: training would
be improved and there would be some correction in the current imbalance between
oversupplied specialties and the primary care specialties for which there are
possibilities of undersupply.
The issue of care for medically indigent people converges with issues in
financing GME for primary care in several ways. Teaching hospitals provide a
disproportionate amount of uncompensated care. Often the presence of residents
in those hospitals is essential if the provision of such care is to continue. In
addition, some of those hospitals are experiencing serious erosion of their margins.
Changes in payments for medical education that reduce revenues of teaching
hospitals could diminish the provision of uncompensated care. However, primary
care training in ambulatory sites, which also provide substantial amounts of
uncompensated care, can help lighten the burden on hospitals by providing timely
preventive care. In addition, there are examples of arrangements between local or
state agencies and primary care training sites whereby an agency has funded care
for medically indigent people at the site and thus at the same time helped support
. .
. ;ralnlng.
Committee Conclusions and Recommendations
It is the committee's judgement that the care provided by future generations
of primary care physicians would be enhanced if the GME experience placed
greater emphasis on training in primary care outpatient settings. Current
payment systems make it difficult to accomplish the needed shift. The committee
also concluded that the wide variety of primary care teaching programs and of
4
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existing and potential sites for outpatient training means that no single approach
to overcoming financial barriers will solve the financing problems of all primary
care programs. The committee developed recommendations for improving the
ability of education programs and health care providers to support GME for
primary care physicians in ambulatory settings. These recommendations are
intended to encourage several different entities to act decisively and expeditiously.
Entities to whom the committee addresses recommendations include federal, state,
and local governments, hospitals, and private foundations. This dispersion of
responsibility for making needed changes reflects the committee's belief that GME
is of benefit to, and is correctly the concern of, numerous participants in the
health care system.
The committee developed its recommendations bearing in mind four major
considerations. First, the goal is to improve the quality of primary care GME
both by increasing the time spent in ambulatory setting and increasing the
number of sites that closely resemble primary care practice conditions. Second,
the recommendations should immediately start to move the policy process in
appropriate directions, acknowledging that GME financing issues will not be
completely solved without more radical restructuring of revenue flows and hospital
financial incentives. Third, two secondary goals should be fostered: expanding
the primary care physician workforce and sustaining or enhancing access to care
for medically indigent people. Fourth, the recommendations are made in the
expectation that no major new federal financing for GME will soon be available.
Physician Payment Reform
The committee noted that increasing payment for primary care services would
have the mutually reinforcing effect of enhancing the revenues of primary care
training sites and making a career in primary care more attractive by increasing
its earning potential.
A resource-based relative value scale (RBRVS) has been proposed as the basis
for Medicare physician payment. Under this system payment is based on the
costs of the resources (including time) used to provide a unit of service. RBRVS
payment would redistribute income among physicians so that primary care
specialists would increase their income; surgical and more procedurally oriented
specialists would experience reduced income.
The committee supports the proposal that Medicare adopt a
resource-based relative value scale method of payment for physicians,
and recommends that all payers adopt such a payment method.
5
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Under RBRVS payment the financing of primary care GME in ambulatory
settings would be facilitated by an increase in patient care revenues; the improved
earnings ability of primary care faculty would increase the ability of faculty
practice plans to support teaching physicians; and the economic incentives that
deter some physicians from entering primary care would be diminished.
Medicare Direct Graduate Medical Education Payment
Proposed rules for Medicare payment for the direct costs of graduate medical
education introduce a weighting factor that diminishes payments for residents who
have passed the initial residency period (board eligibility plus one year, the total
not to exceed five years). The committee suggests building on this precedent by
which Medicare GME payment can influence physician supply.
The committee recommends an adjustment to the Medicare payment
for the direct costs of GME that would create an incentive to establish
residencies in primary care and to place those residents in primary care
ambulatory settings. The mechanism should be a differential in the fulZ-
time equivalent calcuZation between primary care residents and other
residents. Residents in genera! internal medicine, general pediatrics,
and family medicine should receive a higher weighting factor than other
residents. Primary care residents who spend 25 percent or more of their
time in a primary care ambulatory setting (not including specialty
clinicsJ should receive a larger weighting factor.
The suggested incentive both would make the provision of primary care
residencies more attractive to hospitals, and generate revenues needed for the
development of quality training programs in community practice sites. It is
reasonable to offer extra support to needed specialties by directing small amounts
of resources away from those that are better financed and for which the supply is
considered to be more than adequate.
Medicare Indirect Graduate Medical Education Adjustment
Evidence suggests that the outpatient sites of residency training have costs
associated with teaching activities similar to those recognized by the Medicare
indirect medical education teaching adjustment.
The committee recommends that Medicare include in the calculation
of the indireof medical education adjustment time spent by primary care
residents in all primary care ambulatory settings.
6
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By extending the Medicare indirect medical education payment to all primary
care sites additional money will become available to help support the costs of
training in primary care outpatient sites.
Since Medicare's indirect GME payment is a recognition of the costs of
education it is appropriate that hospitals use some of this revenue to support the
primary care ambulatory services that are an essential cost of training primary
· ~
care p nyslclans.
The committee urges hospitals to commit a portion of the revenue
from the Medicare indirect GME adjustment to direct financing of
services at community-based ambulatory sites used for training primary
. · -
care pnyslczans.
State and Local Roles
Case studies indicate that state capitation payments contribute significantly
to the ability of funded primary care residencies to support primary care
ambulatory residencies. States should continue this important role, especially
where significant shortages of primary care practitioners are predicted.
The committee recommends that states assess their need for primary
care physicians, bearing in mind the special roles of these physicians.
States that determine that an increased supply of primary care
physicians would benefit their citizens, and states that find a potential
shortage of primary care practitioners, should increase their financial
support of GME and widen their support to include general internal
medicine and general pediatrics as well as family medicine.
States making judgments about the need for primary care physicians should
be cognizant of the differences in care provided by primary care specialists and
other physicians--noting the potential for the provision of cost-effective care that
these physicians represent.
Medicaid programs can also help enable primary care ambulatory training to
remain financially sound. The committee encourages Medicaid programs
that do no! now support GME to follow Medicare GME payment policies.
Primary care sites of residency training can sometimes help state and local
governments solve problems of health care for medically indigent populations by
7
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providing cost-effective, appropriate services. The training sites benefit from the
additional revenues generated by state or local support of this activity.
The committee recommends that primary care GME programs
assume the responsibility for informing legislators and agencies of ways
in which primary care ambulatory GME could provide services that
would benefit needy populations as we!! as the education programs. The
programs should aisro make efforts to ensure continued stupor! by
maintaining contact with the relevant agencies and legislators through
such means as new~Zetters.
Grants
Because of insecure funding, grants should not be regarded as a source of
protracted operating support. However, grants can have an important catalytic
role in the initial development of ambulatory sites, supporting irlnovative
educational arrangements, enabling creative financial arrangements to be
developed, and helping develop the faculty needed to initiate a quality program.
The committee recommends that the funds available through Title
VI! of the Public Health Service Act be directed to the development of
innovative mode! programs and demonstration sites from which others
can learn of new ways of arranging and supporting quality primary care
ambulatory training programs,. IEn addition these grant programs can
continue to play a role in faculty development during the early years of
programs. Private foundations, both local and national, interested in
medical education and the provision of health services, should add their
support to such activities thus multiplying the benefit of the limited
federal grants funds that are available.
Academic Leadership
The success of committed leaders in overcoming financial barriers and
establishing innovative arrangements for training primary care residents in
ambulatory settings underscores the importance of academic leadership. These
leaders also have a key part to play in developing the professional values that will
encourage young physicians to enter primary care specialties. The committee
encourages deans and faculty members to emphasize the importance of
ambulatory training, and urges the implementation of academic systems
that reward those who provide role models for future generations of
primary care physicians and devote time to developing the curricula and
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teaching skills needed to make training in ambulatory settings a useful
and positive experience.
Efficient Use of Training Resources
The committee was convinced that the efficiency with which training sites are
operated makes a significant difference in the financial health of the training
program. The committee believes that budgeting and planning for
primary care ambulatory training sites should take into account the
need to develop effective clinic management. In addition, to the extent
that economies of scale can be achieved by the use across specialty lines
of facilities and other resources, these cost savings should be sought and
interspecialty barriers lowered.
The committee believes that budgeting and Planning for
In conclusion, believing that quick action is needed to ensure the future
supply of appropriately trained primary care nhvsicinns ' ~ ' ~
1 1 ~. · ~
- =~ , one committee developed
one Ioregolng recommendations tor ways of improving the ability of education
programs and health care Droviders to sunnort (IMP. for nrim~r~r rare nh~r~i~iane
in ambulatory settings.
_ 1 ~_ · ~ ~ . ~
_ ~= ~ ~ ~ ~ ~ ~^ A -~^ ~ ~ J
The committee's recommendations address numerous
par~lclpanls in one nealtn care system. However, the recommendations are not
addressed to all those whose influence could appropriately be brought to bear on
the problem, nor do the recommendations cover all possible solutions. Rather, the
recommendations are intended as first, immediate, steps in a direction that the
committee believes must be pursued.
9
Representative terms from entire chapter:
care physicians
