Minimum Instructional and Program-Specific Administrative Costs of Educating Residents in Internal Medicine

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Abstract
THE PAYMENT for costs associated with graduate medical education (GME) has historically been linked to payment for patient care. During the era of cost-based reimbursement, the allowable direct costs of GME were paid to institutions that sponsored GME programs. Methods for the identification and itemized reimbursement of direct costs of GME by Medicare were refined in the prospective payment system implemented in 1984. Reimbursement for the higher costs associated with care provided in teaching hospitals was provided in cost-based reimbursement systems, as well as in the prospective payment system, with the implementation of the indirect medical education payment method. This method, often interpreted as reimbursement for the inefficiencies of care provided in the teaching setting, reflects the higher technology mix, higher level of severity of illness, and higher level of uncompensated care seen in most major teaching institutions.1 During the past 10 years, teaching hospitals have seen erosion of the support for GME from all payers. In 1999, most explicit GME reimbursement for teaching hospitals was derived from the federal government, and the single largest component of that support derived from the traditional Medicare system.1 The Balanced Budget Act placed substantial limitations on expansion of resident numbers through funding caps and mandated a phased reduction in indirect medical education reimbursement over 5 years.1