Congress Asks Obama to Withdraw Indirect Medical Education Funding Cuts

John Commins, for HealthLeaders Media , May 26, 2009

A bipartisan group of Congressmen wants President Barack Obama to withdraw the Oct. 1 phase out of indirect medical education reimbursement for teaching hospitals under the capital prospective payment system.

"Eliminating the IME adjustment to the capital PPS would result in nearly $375 million in aggregate annual losses and threatens the financial viability of teaching hospitals, which serve a high volume of Medicare beneficiaries and provide critical services unavailable elsewhere in communities across the country," states the May 22 letter. It was signed by more than 200 Democratic and Republican representatives.

"Given that the Medicare Payment Advisory Commission found that major teaching hospitals in 2007 faced very low overall Medicare margins of 1.1%, and that other teaching hospitals had even lower margins of negative 6.4%, it is clear that further unwarranted reductions in payments to these hospitals would have devastating consequences on the patients and communities they serve," the letter states.

CMS last year promulgated a rule that permanently phased out over fiscal years 2009 and 2010 the IME adjustment paid to teaching hospitals for their capital expenditures. The policy was to be fully phased in on Oct. 1, the start of the federal fiscal year.

However, Congress eliminated the first year of the cuts in the stimulus act. Now, the Congressmen want Obama to withdraw the remaining portion of the policy in this year's rule for the inpatient prospective payment system.

The letter notes that while the inpatient PPS is the only payment system in Medicare that does not provide a single payment for total cost, hospitals have used these payments as if they were a single, combined payment ever since capital cost-based reimbursement ended. "As such, hospitals have appropriately made decisions to efficiently deploy their financial resources to meet their most urgent needs, as is the intent of the PPS," the letter states.

The Congressmen charge that CMS based its decision to eliminate capital IME payments on a capital margin analysis, and ignored the capital expenditure cycle by which hospitals plan and make capital investments.

"CMS should instead have examined Medicare margins across both capital and operating payment systems," the letter states.

The letter notes that teaching hospitals have higher capital costs because of the need for classroom space, extra training equipment for medical residents, as well as advanced environmental electrical, heating, and cooling systems to support the technology.

"As in the operating PPS, the capital IME adjustment recognizes that teaching hospitals must meet the demand of treating sicker patients, as well as meet the financial demands of operating emergency and trauma care, providing highly specialized services, and treating uninsured patients," the letter states.

John Commins is a senior editor with HealthLeaders Media.

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