Friday, August 31, 2007

The GME Scam

Graduate Medical Education (GME) involves the training of medical and surgical residents – often referred to as house officers. As medicine began to specialize many years ago, there was a need to provide more clinical training to fledgling physicians than they could get during their four years of medical school.

A happy bargain was worked out. In return for serving as physicians to poor people (then referred to as “indigent”), house officers would receive training at no cost to themselves. The practicing physicians were happy to provide the training in return for relief from what was then their obligation as professionals to care for the indigent. Hospitals served as institutional hosts for this arrangement, providing house officers with room, board and small stipends. When I began my career at the University of Chicago in the 1950s, interns were housed and fed within the hospital and paid a stipend of $50 per month. They were not allowed to be married. Residents were paid a little more, lived off-campus, and could marry (one supposes to wage-earning wives).

Private hospitals in those days had the practice of admitting indigent patients to what was called “the service,” which meant that they would be cared for by house officers. A common rule was that no private physician could charge a professional fee to a patient being cared for on the service. The intent was to prevent private physicians from collecting fees for work done by house officers who were being paid by the hospital.

Medicare changed all that. Prior to Medicare, the service was populated to a large extent by seniors. But Part B of Medicare paid professional fees, which effectively did away with the old service arrangement. In order to capture those fees, group practices of one form or another were formed. A consequence of that arrangement was to end the long standing practice of restricting the practice of house officers to the indigent (a term which then went out of use).

A practical consequence was that private physicians became able to collect professional fees for work done by house officers. Medicare made a number of efforts to stop that, but without much success. There has always been a way to satisfy the letter of the regulations while still achieving the result.

The attractiveness of this arrangement to private physicians is obvious, and hospitals have been under continuing pressure to hire more and more house officers. The intense demand thus created, together with other factors, gradually increased stipends until it can now be said that house officers are being paid a living wage – a marginal living, perhaps, but a living.

During the late sixties and the seventies, when pouring money into health care was politically popular, somebody got the idea that Medicare ought to reimburse hospitals for the cost of their GME programs, including the cost of paying house officers. The formula devised for doing so got to be so generous that at one time GME programs actually made a profit. At the same time, the private practitioners were raking it in from Part B, as well, but nobody bothered to pay attention to that.

The scam is that Medicare has been paying twice for the services of house officers – once by its GME payments to hospitals and the second time by professional fees to private physicians. To the extent that hospitals had built the cost of GME into their regular charges, it might be said that the services were being paid for three times.

Medicare is now proposing to bring at least part of this to a halt by discontinuing its program of GME payments. Hospitals and doctors are complaining bitterly, of course.

But all scams end eventually and perhaps those who have benefited from this one should be satisfied to be happy that it lasted as long as it did.

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