Teaching hospitals decry budgetary cutbacks

Research, service cuts feared

The cuts enacted by the Balanced Budget Act of 1997 have gone too far and are threatening the long-term financial stability of U.S. teaching hospitals, asserts the Association of American Medical Colleges (AAMC) in Washington, DC.

The AAMC has launched a lobbying campaign to undo the Medicare-related payment cuts. As part of this effort, the group has released a detailed analysis of the budget act’s current and projected impact on teaching hospitals.

"Left unchecked, the . . . cuts could force some of the nation’s major teaching hospitals to reduce the scope of their special and unique community services such as burn, cardiac and trauma care centers, as well as care for the uninsured," says AAMC president Jordan J. Cohen, MD.

"At a time when the health care marketplace is driven by the goal of cost containment, the BBA imposed reductions that are making a tough financial situation even tougher for teaching hospitals. Federal policy-makers need to make immediate and substantive corrections to the BBA before it is too late and the damage is done," Cohen said in a statement.

Teaching hospitals provide 44% of all indigent care in the country, train 75% of all residents, and conduct most of the clinical medical research. All of that is threatened by the financial instability caused by the budget cuts, says the AAMC.

"Teaching hospitals across the country are being squeezed from all sides. Our institutions play a unique role in America’s health care system. We cannot continue to provide critical patient care, teach the next generation of physicians, and conduct the research that will lead to new treatments and cures without the continued commitment of the federal government," Jeffrey Otten, president of Boston’s Brigham and Women’s Hospital, said in a statement.

The AAMC wants to eliminate any further cuts to the indirect medical education (IME) and disproportionate share (DSH) payments as a result of the act.

In particular, the AAMC is lobbying for the IME and DSH payments to return to their former levels. It also says direct medical education and IME payments associated with Medicare managed care enrollees, which are being paid in 20% increments over the life of the act (1998-2002), should be paid at 100% beginning in fiscal year 2000.

An AAMC analysis of the act’s potential impact claims that:

    — Medicare reductions resulting from the act could cut the total financial/profit margin for a typical teaching hospital by half or more by 2002.
    — Thirty-eight percent of teaching hospitals could be losing money by 2002.
    — Projected Medicare payments will be $45.8 million less for a typical general, acute, nonfederal teaching hospital by 2002 than under the previous totals. The cumulative losses for all related hospitals are estimated at $14.7 billion.
    — Margins for institutions with a substantial number of residents could fall from an average of 3% in 1996 to an average of 0.3% in 2002. Forty-seven percent or more of these hospitals could be losing money by 2002 or sooner.