Academic medical centers: lean times ahead.

• Author: Gottleib, Scott

Congress is proposing that the government should reduce its role in financing medical education and that a greater part of the burden should be bourne by private health care companies which benefit fron such training.

Since the demise of Pres. Clinton's health care reform plan, the industry has entered a new paradigm. Many of the excesses that made calls for national health reform so pervasive have been reined in by private industry and individual consumers exercising vigilance over rising costs. HMOs can be credited with cutting the price of providing health care, and more people than ever are enrolled in such thrifty plans. States have gotten better at policing public health care costs and, as a result, the growth in Medicaid and Medicare has slowed dramatically. The result is that many of the problems that were so apparent five years ago are less so, and calls for sweeping reform have been muted.

The same phenomena that have cut health care inflation rates almost in half have left many academic medical centers under intense pressure. Bloated by the expense of training the nation's physicians, they are not designed to compete with thrifty managed care plans. Yet, that is precisely what the academic medical centers are finding they must do in order to stay solvent in the new marketplace. The risk is that they will not be able to continue to underwrite research and physician training in an environment where they must outbid barebones HMO plans to attract and keep patients. Moreover, efforts to reduce the size and scope of the Federal government have brought into scrutiny the subsidies academic medical centers are paid in order to compensate them for their diverse mission and the public good they provide. With marketplace pressures mounting and the likelihood that there will be a sharp reduction in Federal grants, academic medical centers are on the cusp of a severe fiscal squeeze.

A large part of the problem lies in the awkward and indirect way in which the government attempts to subsidize the nation's 125 academic medical centers for the training they provide. Presently, the Federal government pays teaching hospitals upwards of $100,000 a year in Medicare funds for each of the medical residents they train. These encompass direct payments, for residents' salaries and overhead, and indirect payments that cover the added costs of training doctors in a hospital setting. The Congressional Budget Office (CBO) estimates that Medicare paid teaching hospitals more than $6,000,000,000 in education costs in Fiscal Year 1996. However, these payments have been cut in recent years and probably will decline further.

When Medicare spending grew sharply during the Reagan Administration, the White House imposed caps on what hospitals and physicians could charge Medicare patients...