Legislation May Ensure Fairness for Texas Teaching Hospitals

Medicare reform legislation (H.R. 3075) to be considered by the U.S. House of Representatives contains a critically important provision that would benefit teaching hospitals nationwide, including those located at the Texas Medical Center. The benefit comes from a change in how the formula for medical education funding is determined at the federal level.

"This change would ensure that Texas hospitals receive an equitable reimbursement formula based upon a national per residency formula," U.S. Representative Ken Bentsen (D-TX) says. "No longer would Hermann Hospital receive $6,924 per resident while Beth Israel Medical Hospital in New York City receives $57,000 annually for the same medical student. This disparity would be eliminated," the Congressman states.

The provision containing this change is based on legislation (H.R. 1224) Bentsen has introduced with Congressman Ben Cardin (D-MD) to correct the current funding disparity nationwide. "This provision replaces the existing system with a more equitable one based upon actual resident salaries and fringe benefits while adjusting them for area wage indices in addition to changes in the consumer price index," the Congressman says.

Should the underlying legislation containing this change be enacted into law, the new formula would be phased in beginning January, 2001. The provision requires all hospitals to use this new national formula by 2004. During this transition period, hospitals could elect to use either the greater of the new national formula or a blended formula (75 percent hospital-specific/25 percent national average in 2001; 50 percent hospital-specific/50 percent national average in 2002; and 25 percent hospital-specific/75 percent national average in 2004). This new formula also includes important language ensuring that 1997 cost reports would be the basis for the determining the funding level rather than the outdated 1984 figures currently used by the law. This formula further requires that this new national average be annually updated to reflect the true cost of medical education.

"Teaching hospitals are the lynchpin of our health care system," declares Congressman Bentsen. "They train physicians, they conduct cutting-edge research on new procedures and therapies, and they serve a disproportionate share of uninsured patients. In our current managed care health system, private health plans are no longer willing to pay higher prices to subsidize these services. Without these subsidies, teaching hospitals are facing increasing financial pressures."

Today's disparities in Medicare reimbursements was created in 1984 when Congress passed legislation to reform the Graduate Medical Education portion of Medicare. This formula includes a reimbursement for a hospital's specific costs. "When this formula was implemented, certain hospitals were able to include specific costs, such as faculty supervision, while others were not," Congressman Bentsen explained. "This resulted in dramatic disparities."

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©2006 Texas Medical Center

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