COGME PHYSICIAN

WORKFORCE POLICIES:

Recent Developments

and Remaining

Challenges in Meeting

National Goals

COUNCIL ON GRADUATE MEDICAL EDUCATION

Fourteenth Report

M A R C H 1 9 9 9

COUNCIL ON GRADUATE MEDICAL EDUCATION

Fourteenth Report

COGME PHYSICIAN

WORKFORCE POLICIES:

Recent Developments and

Remaining Challenges in

Meeting National Goals

March 1999

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration
FOURTEENTH REPORT OF COGME ii

The views expressed in this document are solely those of the

Council on Graduate Medical Education and do not

necessarily represent the views of the

Health Resources and Services Administration

nor the U.S. Government.
FOURTEENTH REPORT OF COGME iii

Table of Content f Contents

List of Tables and Figures ................................................................................................... iv

The Council on Graduate Medical Education .................................................................. vii

Executive Summary ............................................................................................................ xiii

Key Findings ............................................................................................................................................ xiii

Recommendations ..................................................................................................................................... xv

Introduction and Background ............................................................................................ 1

Overview .................................................................................................................................................... 1

COGME Goals and Recommendations ..................................................................................................... 1

1. To Reduce the Rate of Growth in the Supply of Physicians in the U.S.

to Avoid a Surplus of Physicians ..................................................................................................... 1

2. To Increase the Number of Generalist Physicians ............................................................................. 2

3. To Increase the Number of Physicians Trained in Ambulatory Settings ........................................... 2

4. To Promote a Rational System for Physician Workforce Planning ................................................... 3

5. To Assure Adequate Funding to Support Needed Physician Training ............................................... 3

6. To Preserve Safety Net Providers ....................................................................................................... 3

Findings ................................................................................................................................ 5

Recent Developments ................................................................................................................................. 5

Assessing Trends: Through 1997-98 .......................................................................................................... 5

1. The Number of Physicians Being Trained ......................................................................................... 6

2. Specialty Mix ..................................................................................................................................... 7

3. Factors Influencing the Balance of Supply and Requirements for Physicians ..................................10

4. The Growth in the Supply of Non-Physician Clinicians....................................................................12

5. The Marketplace for GME .................................................................................................................13

Recent Developments: 1998 and Beyond ..................................................................................................14

1. The Marketplace .................................................................................................................................14

2. The Balanced Budget Act of 1997 .....................................................................................................15

3. Medicare Graduate Medical Education Downsizing Efforts .............................................................17

4. State Graduate Medical Education Activities ....................................................................................19

5. Testing Procedures Affecting IMGs ...................................................................................................22

6. Department of Veterans Affairs GME Policies ..................................................................................25

Implications of Recent Trends and Recent Developments for COGME Recommendations ....................25

Recommendations ................................................................................................................ 29

Physician Workforce Planning ...................................................................................................................29

Decreasing the Number of Physicians in Training and Increasing the Number of Generalists ................30

GME Financing ..........................................................................................................................................31

Encouraging Training in Ambulatory Care Settings ..................................................................................32

Concluding Comments ...............................................................................................................................32

References............................................................................................................................. 33

Appendix: Notes on the Mix of Generalists and Specialists ............................................. 37
FOURTEENTH REPORT OF COGME iv

LIST OF TABLES AND FIGURES

Table 1: Changes Required to Achieve 110 Percent Target as of 1997-98 ..................................... 6

Table 2: Total and PGY1 Allopathic Residents, 1985 - 1997 ......................................................... 7

Table 3: Current Entrants into Residency Training Compared to

COGME Target, 1997-98 .................................................................................................. 9

Table 4: Family Practice Residency Graduates ...............................................................................10

Table 5: Recent Policy Developments Expected to Impact The Physician

Workforce and Residency Training ...................................................................................15

Table 6: Medicare + Choice, Value of GME Carve Out .................................................................16

Table 7: Allopathic Residents and Medicaid GME Activity by State ............................................21

Table 8: State Health Workforce Goals ...........................................................................................23

Table 9: State GME Advisory Committees .....................................................................................24

Table 10: USMLE Steps 1, 2 and 3 Pass Rates: First-Time Takers, 1996-97 ...................................25

Table 11: Impact of Recent Developments on COGME Goals ........................................................26

Table A-1: Calculation of Percent and Number of Primary Care Physicians,

Three Scenarios, 1997-98 ..................................................................................................37

Figure 1: 1997-98 PGY1 Residents .................................................................................................. 6

Figure 2: Total and IMG Allopathic Residents, 1986 - 1997............................................................ 7

Figure 3: Total and IMG PGY1 Residents in Allopathic Residency Programs,

1986 - 1997 ........................................................................................................................ 8

Figure 4: Trends in DO Graduates, 1986 - 2002 ............................................................................... 8

Figure 5: Percent of Graduating Medical Students Planning a Generalist

Speciality, 1986-1997 ........................................................................................................ 9

Figure 6: Filled and Unfilled Positions in the Match in Generalist and

Non-Generalist Specialties ................................................................................................10

Figure 7: Total Family Practice Physicians Providing Patient Care,

1995 - 2015 ........................................................................................................................11

Figure 8: Percent of Total Active Physicians That Are Female,

United States, 1970 - 1995 ................................................................................................11

Figure 9: Percent of Graduates of U.S. Medical Schools That Are

Female, 1960 - 1996 ..........................................................................................................12

Figure 10: Mean Hours of Work per Week for All Physicians, 1985 - 1996 ......................................12

Figure 11: HMO Physician Use Comparison: Physicians per 100,000 Population ...........................13

Figure 12: Selected Non-Physician Clinician Graduates, United States,

1992 - 2001 ........................................................................................................................13

Figure 13: Projected Supply of Selected Non-Physician Clinicians,

United States, 1990 - 2015 ................................................................................................14
FOURTEENTH REPORT OF COGME v

Figure 14: Residents Completing Training in New York in 1997 Who Had to

Change Employment Plans Due to Limited Job Opportunities for U.S.

and International Medical School Graduates ....................................................................14

Figure 15: Plot of Percent of Resident Physicians Experiencing Difficulty Finding

Employment, by Percent Change in Number of PGY1 Specialty

Positions, 1995 ...................................................................................................................15

Figure 16: National Trend in Short Term Hospital Bed Days ............................................................16
FOURTEENTH REPORT OF COGME vi
FOURTEENTH REPORT OF COGME vii

The Council on Graduate Medical Education

(COGME) was authorized by Congress in

1986 to provide an ongoing assessment of

physician workforce trends, training issues and financing policies, and to recommend appropriate

Federal and private sector efforts to address identified needs. The legislation calls for COGME to advise and make recommendations to the Secretary

of the Department of Health and Human Services

(DHHS), the Senate Committee on Labor and Human Resources, and the House of Representatives

Committee on Commerce. The Health Professions

Education Partnerships Act of 1998 reauthorized the

Council through September 30, 2002.

The legislation specifies 17 members for the

Council. Appointed individuals are to include representatives of practicing primary care physicians,

national and specialty physician organizations, international medical graduates, medical student and

house staff associations, schools of medicine and

osteopathy, public and private teaching hospitals,

health insurers, business, and labor. Federal representation includes the Assistant Secretary for

Health, DHHS; the Administrator of the Health Care

Financing Administration, DHHS; and the Chief

Medical Director of the Veterans Administration.

Charge to the Council

The charge to COGME is broader than the name

would imply. Title VII of the Public Health Service

Act, as amended, requires COGME to provide advice and recommendations to the Secretary and

Congress on the following issues:

1. The supply and distribution of physicians in

the United States.

2. Current and future shortages or excesses of

physicians in medical and surgical specialties

and subspecialties.

3. Issues relating to international medical school

graduates.

4. Appropriate Federal policies with respect to the

matters specified in items 1-3, including policies concerning changes in the financing of undergraduate and graduate medical education

(GME) programs and changes in the types of

medical education training in GME programs.

5. Appropriate efforts to be carried out by hospitals, schools of medicine, schools of osteopathy,

The Council on Gr The Council on Graduate Medical Education aduate Medical Education

and accrediting bodies with respect to the matters specified in items 1-3, including efforts for

changes in undergraduate and GME programs.

6. Deficiencies and needs for improvements in

data bases concerning the supply and distribution of, and postgraduate training programs for,

physicians in the United States and steps that

should be taken to eliminate those deficiencies.

In addition, the Council is to encourage entities

providing graduate medical education to conduct

activities to voluntarily achieve the recommendations of the Council specified in item 5.

COGME Reports

Since its establishment, COGME has submitted the following reports to the DHHS Secretary

and Congress:

• First Report of the Council (1988)

• Second Report: The Financial Status of Teaching Hospitals and the Underrepresentation of

Minorities in Medicine (1990)

• Scholar in Residence Report: Reform in Medical Education and Medical Education in the

Ambulatory Setting (1991)

• Third Report: Improving Access to Health Care

Through Physician Workforce Reform: Directions for the 21st Century (1992)

• Fourth Report: Recommendations to Improve

Access to Health Care Through Physician

Workforce Reform (1994)

• Fifth Report: Women and Medicine (1995)

• Sixth Report: Managed Health Care: Implications for the Physician Workforce and Medical Education (1995)

• Seventh Report: Physician Workforce Funding

Recommendations for Department of Health

and Human Services’ Programs (1995)

• Eighth Report: Patient Care Physician Supply

and Requirements: Testing COGME Recommendations (1996)

• Ninth Report: Graduate Medical Education

Consortia: Changing the Governance of

Graduate Medical Education to Achieve Physician Workforce Objectives (1997)
FOURTEENTH REPORT OF COGME viii

• Tenth Report: Physician Distribution and

Health Care Challenges in Rural and

Inner-City Areas (1998)

• Eleventh Report: International Medical Graduates, The Physician Workforce and GME Payment Reform (1998)

• Twelfth Report: Minorities in Medicine (1998)

• Thirteenth Report: Physician Education for a

Changing Health Care Environment (1999)

COGME Resource Papers

• Preparing Learners for Practice in a Managed

Care Environment (1997)

• International Medical Graduates: Immigration

Law and Policy and the U.S. Physician

Workforce (1998)
FOURTEENTH REPORT OF COGME ix

Members, Council on Graduate Medical Education

Chair

David N. Sundwall, M.D.

President

American Clinical Laboratory Association

Washington, D.C.

Vice Chair

Lawrence U. Haspel, D.O.

Senior Vice-President

Metropolitan Chicago Health Care Council

Chicago, Illinois

Paul W. Ambrose, M.D., M.S.P.H.

Resident

Dartmouth Family Practice Program

Concord, New Hampshire

Macaran A. Baird, M.D., M.S.P.H.

Associate Medical Director for Primary Care

Health Partners

Bloomington, Minnesota

Regina M. Benjamin, M.D., M.B.A.

Family Practice

Bayou La Batre, Alabama

JudyAnn Bigby, M.D.

Division of General Medicine

Brigham and Women’s Hospital

Boston, Massachusetts

F. Marian Bishop, Ph.D., M.S.P.H.

Professor and Chairman Emerita

Department of Family and Preventive Medicine

University of Utah School of Medicine

Salt Lake City, Utah

Jo Ivey Boufford, M.D.

Dean

Robert F. Wagner Graduate School of Public

Service, New York University

New York, New York

Sergio A. Bustamante, M.D.

Neonatology Associates Limited

Phoenix, Arizona

Richard D. Cordova, M.B.A.

Senior Vice President

East Bay Service Area Manager

Kaiser Permanente Health Plan

Oakland, California

Ezra C. Davidson, Jr., M.D.

Professor

Department of Obstetrics & Gynecology

King/Drew Medical Center

Los Angeles, California

Carl J. Getto, M.D., M.P.H.

Dean and Provost

Southern Illinois University School of Medicine

Springfield, Illinois

Kylanne Green

Senior Consultant

Coopers and Lybrand

Washington, D.C.

Ann Kempski

Assistant Director Health Policy

American Federation of State, County and

Municipal Employees

Washington, D.C.

Designee of the Assistant Secretary for Health

Nicole Lurie, M.D., M.S.P.H.

Principal Deputy Assistant Secretary for Health

U.S. Department of Health and Human Services

Washington, D.C.

Designee of the Health Care Financing

Administration

Tzvi M. Hefter

Director

Division of Acute Care

Center for Health Plans and Providers

Health Care Financing Administration

Baltimore, Maryland

Designee of the Department of Veterans Affairs

David P. Stevens, M.D.

Chief Academic Affiliations Officer

Department of Veterans Affairs

Washington, D.C.

Statutory Members

David Satcher, M.D.

Assistant Secretary for Health and Surgeon

General

Department of Health and Human Services

Washington, D.C.
FOURTEENTH REPORT OF COGME x

Nancy-Ann Min DeParle

Administrator

Health Care Financing Administration

Department of Health and Human Services

Baltimore, Maryland

Kenneth Kizer, M.D., M.P.H.

Undersecretary for Health

Veterans Health Administration

Department of Veterans Affairs

Washington, D.C.

Former Members Contributing to the

Report

Robert Knouss, M.D.

Director

Office of Emergency Preparedness

Health Resources and Services Administration

Rockville, Maryland

Barbara Wynn

Former Director

Plan and Provider Purchasing Policy Group

Center for Health Plans and Providers

Health Care Financing Administration

Baltimore, Maryland

GME Financing and Policy Work Group

Members and Staff

COGME MEMBERS

Lawrence U. Haspel, D.O.

Work Group Chair

Senior Vice President

Metropolitan Chicago Health Care Council

Chicago, Illinois

Sergio A. Bustamante, M.D.

Neonatology Associates Limited

Phoenix, Arizona

Richard D. Cordova, M.B.A.

Senior Vice President

East Bay Service Area Manager

Kaiser Permanente Health Plan

Oakland, California

Barbara Wynn, M.S.

Former Director

Plan and Provider Purchasing Policy Group

Center for Health Plans and Providers

Health Care Financing Administration

Baltimore, Maryland

Carl J. Getto, M.D.

Dean and Provost

Southern Illinois University School of Medicine

Springfield, Illinois

OTHER MEMBERS

John J. Whyte, M.D., M.P.H.

Mountain View, California

STAFF

P. Hannah Davis, M.S.

Staff Liaison

Jerald M. Katzoff

Staff Liaison

COGME Staff

Carol Bazell, M.D., M.P.H.

Acting Director

Division of Medicine

Stanford M. Bastacky, D.M.D., M.H.S.A.

Acting Executive Secretary

Chief

Special Projects and Data Analysis Branch

Division of Medicine

F. Lawrence Clare, M.D., M.P.H.

Deputy Executive Secretary

Deputy Chief

Special Projects and Data Analysis Branch

Division of Medicine

P. Hannah Davis, M.S.

Staff Liaison

Graduate Medical Education Financing and

Policy

Minorities in Medicine Issues

C. Howard Davis, Ph.D.

Staff Liaison

Medical Credentialing and International Medical

Graduate Issues

Jerald M. Katzoff

Staff Liaison

Graduate Medical Education Financing and

Policy

Physician Workforce Issues

Helen K. Lotsikas, M.A.

Staff Liaison

Competencies for A New Environment
FOURTEENTH REPORT OF COGME xi

John Rodak, M.S. (Hyg.), M.S. (H.S.A.)

Staff Liaison

Geographic Distribution Issues

Eva M. Stone

Committee Management Assistant

Velma Proctor

Secretary
FOURTEENTH REPORT OF COGME xii

CONTRIBUTIONS

The Council gratefully acknowledges Lawrence

U. Haspel, D.O., Chair, COGME Work Group on

Graduate Medical Education Financing and Policy,

for his leadership in the preparation of this report,

and David N. Sundwall, M.D., Chair, COGME, for

his leadership, informative perspectives and insights. The Council is grateful to Jerald M. Katzoff

and P. Hannah Davis, M.S., of the Division of Medicine, Bureau of Health Professions, HRSA, for their

orchestration of the report’s preparation, and to F.

Lawrence Clare, M.D., M.P.H., of the Division of

Medicine for his guidance, insight and expert advice. The Council also wishes to acknowledge the

valued assistance of Edward Salsberg, M.P.A., of

the Center for Health Workforce Studies of

Rensaleaur, New York, who prepared the basis of

this report under contract.
FOURTEENTH REPORT OF COGME xiii

Executive Summary e Summary

The past decade has seen changes in the American health care system that have the poten

tial to significantly impact on the nation’s

physician supply and requirements. In addition, in

the past two years there have been a number of statutory and non-statutory policy changes related to

graduate medical education (GME), including the

passage of the Balanced Budget Act (BBA) in 1997

and an expansion of State GME activities.

This report assesses recent developments and

policies related to the physician workforce and

GME, and their potential impact on the supply, demand and training of physicians in the coming years.

Among the significant developments reviewed in

the report are: the increasingly competitive marketplace for health services; the 1997 Balanced Budget Act; expanded State GME financing activities;

the growth in the supply of non-physician clinicians;

and new GME policies at the Department of

Veterans Affairs. As part of this assessment, the

report calculates the progress that has been made

towards the goals of the Council on Graduate Medical Education (COGME) for decreasing the total

number of new physicians and increasing the percent in generalist specialties. Based on the assessment of recent developments, the report recommends a new framework for Federal GME policies

and programs.

KEY FINDINGS

FINDING 1: The rate of growth in the physician supply has moderated slightly but is still

likely to lead to a surplus of physicians. To

help avoid a surplus of physicians, particularly specialists, the Council previously recommended that

the number of new physicians entering training be

equal to 110 percent of the number of U.S. medical

school graduates in 1993 (COGME Fourth Report,

1994; Eighth Report, 1996). The Council finds that

only limited progress has been made to date in reducing the number of physicians in training and in

1997, 129 percent of the number of 1993 U.S. medical school graduates entered residency training. The

number of specialists being trained exceeds the target established by COGME by 41 percent, more than

4,000 physicians per year.

The number of physicians in training appears

to be leveling off and is likely to decrease for the

next few years. The number of new entrants, particularly international medical school graduates

(IMGs), has decreased moderately over the past five

years. The recent trends may reflect anticipation of

reduced support for GME in general, the growing

concern with surpluses in some specialties, and/or

declining hospital inpatient use. Many of the most

recent developments, particularly marketplace pressures, the Balanced Budget Act, and the Federal

Medicare resident reduction demonstration in New

York, encourage downsizing the number of residents. Despite these developments, it seems unlikely

that the 110 percent goal will be reached within the

next five years.

FINDING 2: The number of generalist physicians is increasing. Despite concern about a general oversupply of physicians, the Council has consistently recommended an increase in the number

of generalists being trained. This reflects concerns

about existing physician shortages, particularly in

underserved areas, and the expectation that the expansion of managed care would lead to an increase

in demand for generalists. The Council finds that

substantial progress has been made in increasing the

number of physicians entering or planning to enter

generalist specialties.

The Council’s goal for the number of generalists to be produced each year is usually expressed

as a percent of the goal for the total physician supply for each year: 50 percent (generalists) of 110

percent of the 1993 graduates of U.S. medical

schools. The Council concludes that 40 percent of

the current entering residents are likely to go into

generalist specialties. However, this is 40 percent

of the 129 percent of the 1993 graduates entering

training. In absolute numbers, this translates into a

modest under-production of generalists compared

to the COGME goals. The Council finds that the

nation is producing 9,217 generalists each year

compared to a goal of 9,879, a shortfall of 662,

or about 7 percent. This represents significant

progress from earlier years. Although the nation is

still falling short, the generalist goal appears to be

within reach and is likely to be achieved in the next

few years.

The marketplace, particularly a growing surplus

in some subspecialties, may be contributing to the

increase in interest of new physicians in generalist

specialties. State policies, private sector initiatives

and new VA policies also appear to be contributing. Recent surveys of medical students and the

results of the National Residency Match Program
FOURTEENTH REPORT OF COGME xiv

document the increased interest in generalist specialties by U.S. medical school students.

FINDING 3: Recent developments may support more training in ambulatory settings;

however, additional policy initiatives may be

needed. Medical schools, residency review committees, States and foundations are promoting increased training in ambulatory settings. The expansion of the settings and arrangements under which

Medicare will recognize the costs of training outside of the hospital authorized by the Balanced Budget Act should also help. However, there are concerns that the changes authorized by the BBA do

not adequately address the policy goal of optimal

use of ambulatory training and few, if any, non-public payers provide enhanced reimbursement for physician training in these settings. It remains to be seen

whether the recent pressures to shift training to ambulatory settings and the more supportive Medicare

payment policies will be sufficient to overcome numerous financial, logistical and other barriers impeding the expansion of quality ambulatory training

opportunities.

FINDING 4: There is no system for health

workforce planning and guidance. Although

the nation has made some progress towards specific

workforce goals, there has been very limited progress

on other goals. Furthermore, there is no system in

place to monitor progress and provide long-term

guidance to the health and education sectors. The

lack of firm data and information on supply and demand by specialty by region also makes it difficult

for medical educators and medical students to respond to the nation’s needs. Furthermore, while the

Council provides important guidance to the medical

education community, the recent sharp rise in the

number of new non-physician clinicians, whose

scopes of practice overlap with physicians, demonstrates the need for a planning system that includes

both physicians and non-physician clinicians.

There has been a significant increase over the

past few years in the numbers of nurse practitioners, physician assistants, chiropractors, and other

health professionals who provide extensive patient

care services. The number of these non-physician

clinicians will continue to grow in the foreseeable

future. This growth has major implications for physician workforce planning.

The Council finds that specialty selection by

medical students and the number of positions offered by residency programs are at least somewhat

responsive to supply and demand. The recent growth

in interest in generalist specialties and drop in interest by graduates of U.S. medical schools in

crowded specialties, such as anesthesiology, demonstrates their responsiveness to the market. When

supply exceeds demand and graduates encounter

difficulty finding a satisfactory position, some residency programs respond by downsizing positions.

FINDING 5: The dependence on hospital patient care payments to support the GME infrastructure in an increasingly competitive

environment poses a threat to the nation’s

physician training sites. The available data on

the financial health of the nation’s academic health

centers and other teaching hospitals do not indicate

a general fiscal crisis at the present time. However,

many of the recent developments raise serious concerns about their future fiscal viability. The competitive marketplace and the drive for payers to contain costs are likely to put increasing fiscal pressure

on most hospitals and ambulatory service sites as

managed care plans and other payers seek to limit

their expenses.

Health care is more costly in hospitals and ambulatory care sites that are engaged in residency

education. In addition, teaching hospitals, particularly academic medical centers, provide many related public goods that can add even more to costs,

including care for the uninsured, research, teaching

of medical students and other health professionals

and the development and testing of medical innovations. The reliance on add-ons to patient care services to support GME is unsound in a period of increasing competition and growing cost cutting

efforts.

FINDING 6: Recent developments do not bode

well for safety net providers that train physicians. Safety net providers face the same pressures

as other teaching hospitals and ambulatory care sites,

but they serve significant percentages of uninsured

patients and have less leverage negotiating with managed care plans and other payers. Physicians in training are important providers of care in these institutions. To the extent that GME reimbursement is

reduced through the competitive marketplace without an increase in funding for care for the uninsured,

services for the uninsured and the fiscal viability of

safety net teaching hospitals will be endangered.

FINDING 7: Recent developments have the potential to significantly impact the supply and

demand for physician services. There are several recent developments that have the potential to

significantly impact on the supply and demand for

physicians. They include: the changing marketplace;

the increasing percent of physicians that are female;

the 1997 Balanced Budget Act; changes in testing

procedures for international medical school graduates wanting to enter training; changes in VA training policies; and the Medicare GME downsizing
FOURTEENTH REPORT OF COGME xv

demonstration in New York. All of these need to be

considered when developing recommendations for

tomorrow’s physician workforce.

FINDING 8: Many States are developing new

GME financing policies and some are promoting health workforce goals. A survey of

State GME policies conducted for the Council revealed that over the past several years, many States

have developed new policies related to financing

GME. As of October 1998, nineteen States removed

GME from their Medicaid managed care payments

and channeled the money more directly to support

physician training. About half of these States distribute some portion of the GME funds to teaching

sites based on performance in achieving workforce

goals. These State workforce goals are consistent

with the COGME goals, particularly an increase in

generalist physicians.

RECOMMENDATIONS

OVERVIEW

These recommendations are designed to create

a new framework for health workforce planning in

America. This new system would be built on the

premise that the marketplace for the production of

physicians and non-physician clinicians will work

more effectively if better data and information on

supply, demand and needs are compiled and made

available to the education community and current

and prospective students. But the system would not

rely totally on the marketplace to meet all workforce

goals. This market-oriented approach would be

strengthened by an integrated planning system for

physicians and non-physicians and through collaboration with States. It would also include the development of financial incentives for priority health

workforce goals and the expansion of the National

Health Service Corps to help safety net hospitals

that reduce residents. In addition, the new system would

provide a more stable source of funding for GME.

RECOMMENDATION 1

ENCOURAGE A MORE EFFECTIVE MARKET FOR

PHYSICIAN SPECIALTY AND GEOGRAPHICAL LOCATION CHOICES. The Federal government, the medical education community and the States should foster a more effective marketplace for the training of

physicians by expanding the collection and dissemination of data on supply, need and demand for physicians by specialty and region. This information

should be shared in a systematic manner with medical schools, teaching hospitals, residency programs,

medical students, policy makers, States, payers, and

the general public.

Evidence suggests that U.S. medical students

and residency program directors respond to information on career opportunities and workforce needs.

Yet, in the absence of more accurate and more timely

information on the current and projected supply and

demand for physicians, it is difficult for the GME

marketplace to work effectively. The systematic

collection and dissemination of data on supply and

demand will promote the training of a physician

workforce more consistent with the needs of the

nation. Several recent developments increase the

likelihood that the marketplace for training physicians will work effectively to reduce the total number of physicians being trained. This includes the

BBA that reduces the financial incentives to hospitals to train more physicians, and new testing procedures for international medical school graduates

(IMGs) that may reduce the number of IMGs applying for and entering residency training. Better

information would also help address issues of specialty choice and geographic mal-distribution of

physicians.

As a first step in this direction, the Council will

reassess the appropriateness of the COGME goal

that the future number of physicians entering residency be 110 percent of the number of graduates of

allopathic and osteopathic medical schools in the

United States in 1993 and that the percentage of

those graduates who complete training and enter

practice as generalists should be 50 percent (herein

referred to as the 110/50-50 recommendation). This

report identifies several recent developments that

impact on supply and/or demand for physician services. They include: the evolving nature of managed

care, the growth in the supply of non-physician clinicians, and the growing percent of women in medicine. These developments may warrant a modification of the Council’s targets.

RECOMMENDATION 2

INTEGRATE WORKFORCE PLANNING FOR PHYSICIANS AND NON-PHYSICIAN CLINICIANS. A new national system for integrated health workforce planning should be established. This could include an

advisory committee or forum that encompasses a

wide variety of health professionals in a

collaborative planning process and expanded data

collection on all health professions. This could also

include a system to track and monitor the impact

on residency training of the Balanced Budget Act,

the marketplace, State GME policies and other recent developments.

Over the years, the Council has provided general guidance to the medical education community

and identified broad goals for the physician

workforce of the future. However, as documented
FOURTEENTH REPORT OF COGME xvi

in this report, the sharp growth in the number of

non-physician clinicians, supports the development

of a broader planning process that includes nonphysician clinicians as well as physicians. Non-physician clinicians have the potential to improve and

strengthen health care delivery through expanded

collaboration with physicians. On the other hand,

when combined with the growing supply of physicians, there is a real danger of growing surpluses

and wasteful competition for authority and control.

It is in the public interest to promote a national

health workforce planning process and collaboration among health professionals.

This process should provide a forum for discussion across major health professions and should

encourage expanded data collection and evaluation

of outcomes for all health professions. An advisory

committee, with representation from a wide array

of health professions, could be established to monitor trends in supply, demand and utilization, to promote collaboration among professions, and to promote

education and training to meet the health care needs

of the nation. Alternatively, existing national advisory

committees on the health professions workforce, such

as the COGME, and the National Advisory Council

on Nursing Education and Practice (NACNEP), could

coordinate to carry out integrated analyses and assessments of the health professions workforce supply.

RECOMMENDATION 3

PROVIDE FINANCIAL INCENTIVES FOR PRIORITY

NATIONAL WORKFORCE GOALS. A portion of the GME

carve out from the Medicare+Choice payments

should be distributed based on performance consistent with national physician workforce goals.

While progress is being made toward the

COGME workforce goals for the nation, progress

has been slow and there are some important gaps.

There is a continued need to ensure adequate support for quality training in ambulatory settings’,

there are still significant shortages in many rural

communities, and there has been little progress in

increasing the diversity of the physician workforce.

The implementation of the carve out of GME funds

from Medicare+Choice, payments authorized by the

1997 Balanced Budget Act, is an opportunity to

support these health workforce priorities using existing funding streams.

The BBA authorizes the phase in of the carve

out of GME dollars from the Medicare payments

for Medicare+Choice enrollees. The Health Care

Financing Administration (HCFA) estimates that the

dollar value of this carve out will reach $2.6 billion

for Federal fiscal year 2002. The carve out will be a

major source of Federal funding for GME. These

funds are to be distributed based on current Medicare GME reimbursement policies.

Several States that now carve out the GME portion of Medicaid managed care payments and distribute the funds to teaching hospitals, link the distribution of a portion of these funds to performance

in achieving State workforce policy goals. This includes such goals as increasing the number of generalists being trained and training in ambulatory

sites. These State strategies may be models for the

Medicare+Choice GME carve out.

Under the Balanced Budget Act, the amount of

funds to be carved out of the Medicare+Choice payments is based on historical rates of GME payments

and Medicare patients use of teaching hospitals.

Payments to teaching hospitals, however, will be

based on actual use of teaching hospitals by

Medicare+Choice enrollees. Because use of teaching hospitals by Medicare+Choice enrollees is likely

to decrease due to changes in patterns of use under

managed care, the amount carved out of the payments is likely to exceed the amount to be paid out

to teaching hospitals. This difference could form

the base for financial incentives to promote priority

national health care workforce goals. The implementation of the Medicare carve out is an opportunity to promote workforce goals without raising new

funds. The Council recommends legislation to authorize these changes.

RECOMMENDATION 4

PROMOTE FEDERAL-STATE PARTNERSHIPS FOR

HEALTH PROFESSIONS PLANNING. Federal policy

and programs should support and encourage the development of State GME policy-making structures

and effective workforce policies. The Federal government should explore approaches to collaboration and partnerships with States with workforce

planning systems.

Nineteen States now carve GME funds out of

Medicaid managed care payments. Many States are

using these funds and/or other State funds to promote and support specific health workforce goals.

States have a major interest in GME within their

boundaries. GME is a major determinant of the

supply and specialty mix of physicians in most

States, which directly affects the availability and

cost of services. As documented in this report, many

States have recently become involved with GME

financing and policies. This builds on traditional

State commitments to undergraduate medical education (74 of the nation’s 125 allopathic medical

schools are publicly supported), State supported

academic medical centers, and State efforts to address shortages in underserved rural and inner city
FOURTEENTH REPORT OF COGME xvii

communities. State GME policies are still in the

early stages of development.

A new Federal initiative to help States build the

expertise and capacity for workforce planning would

be very timely. This might include the expansion of

the Health Resources and Services Administration

(HRSA) cooperation agreements for State health

workforce distribution studies. Particularly important for States is the willingness of HCFA to support State innovations under the Medicaid program,

which is the major source of State GME funding.

Permitting the flow of Medicare GME funds consistent with approved State systems and priorities

is another option to be explored.

RECOMMENDATION 5

CONTINUE TO PROMOTE A REDUCTION IN THE

NUMBER OF PHYSICIANS IN TRAINING, PARTICULARLY SPECIALISTS. If there is not a significant decline in first year residency positions by the 2000-

01 academic year, additional incentives for

downsizing should be implemented.

While there are many encouraging signs, the

decrease in residency positions has been slow and

the number of specialists in training still significantly exceeds the COGME recommendations.

While some fine tuning of the COGME goals may

be appropriate, the current level of production of

specialists, as documented in this report, is significantly above the COGME targets. Nearly 14,000

physicians entering training in the 1997-98 academic year were expected to enter non-generalist

specialties. This was 41 percent more than the

COGME goal of 9,879 (50 percent of 110 percent

of the 1993 graduates.)

If new entrants into allopathic and osteopathic

residency positions do not drop to 20,655 (115 percent of the 1993 U.S. medical graduates) by the

2000-01 academic year (compared to the actual

23,143 in 1997-98), then additional downsizing

incentives should be implemented. This might include reduced Medicare funding for non-generalist

training.

RECOMMENDATION 6

PROVIDE ENHANCED TRANSITION SUPPORT FOR

SAFETY NET HOSPITALS THAT REDUCE THE NUMBER OF RESIDENTS IN TRAINING. This should include

the authorization of the use of National Health Service Corps to assist in the voluntary downsizing of

residents in safety net hospitals.

Hospitals that depend the most on residents for

service may be the least likely to voluntarily reduce

residents. Redesigning services and replacing residents can be difficult and costly—especially for

safety net hospitals in underserved areas. For example, several hospitals with high percentages of

uninsured patients in New York State decided

against entering the Medicare GME demonstration

due to the certain reduction of Medicare GME revenues and the expected cost of replacement staff.

The current support available through the Voluntary Resident Reduction Program authorized by the

Balanced Budget Act may be insufficient to assure

the fiscal stability of safety net hospitals that reduce residents. Additional transition funding targeted to support access to care for the uninsured is

needed and appropriate. Additional funding for the

National Health Service Corps and authorization to

place practitioners (generalists and specialists) at

safety net hospitals that reduce residents is also recommended.

RECOMMENDATION 7

RESTORE THE EXCHANGE VISITORS VISA PROGRAM TO ITS ORIGINAL INTENT. National policies

and administrative procedures related to physicians

with temporary visas should be revised consistent

with the original purpose of these visas.

The Council previously recommended a 4-year

phase out of the policy of granting waivers of the

requirement that physicians with J-1 visas return to

their country of origin after completion of their residency training. Ending waivers would help restore

the exchange visitor program to its original purpose

of helping other countries benefit from advances in

medical training in America. The Council also continues to recommend that the number of years that

J-1 visa physicians are required to live in their originating country after training (but before returning

to the U.S.) be increased from two years to five years

and that the use of H-1B visa for physician residency training be eliminated. These changes would

reduce the drain of physicians from other countries

and facilitate more rational physician workforce

policies in the United States.

RECOMMENDATION 8

ESTABLISH A STABLE AND EQUITABLE SOURCE

OF LONG TERM FINANCING FOR GME. Graduate

medical education is a public good that benefits

the whole nation. All payers should share the

costs of training. The Council, therefore, recommends the development of an all payer financing

system that would spread the costs of preparing a

well-qualified physician workforce equitably across

all payers.

Training the future physician workforce is a

service that teaching hospitals provide to the

benefit of the whole nation. However, the current
FOURTEENTH REPORT OF COGME xviii

marketplace orientation of the health care system

is not likely to provide sufficient funding to support a quality education for the nation’s future physician workforce. The responsibility for paying for

the training should not be the sole responsibility of

teaching hospitals nor of Medicare or Medicaid. It

is appropriate, therefore, that the cost of training be

supported by as broad a base of payers as possible.

The expansion of the competitive marketplace,

including managed care, may erode the financial

health of teaching hospitals. Many payers appear

to have reduced their payments for medical services

and do not explicitly pay for GME. This erosion in

GME payments is likely to increase as competition

increases in the health care industry. The BBA, by

reducing the rate in the growth of payments to teaching hospitals, may also contribute to reduced support for GME. Quality medical education and training is costly. If support for training is inadequate, it

will be difficult to assure the continuing supply of

high quality health professionals expected by both

policy makers and the public.

RECOMMENDATION 9

ASSURE ADEQUATE FUNDING FOR TRAINING IN

AMBULATORY SETTINGS. Policies related to financing GME in ambulatory sites should be reviewed

closely. If necessary, additional policies and programs should be developed to support quality training in ambulatory settings.

While a number of recent developments are

supportive of increased training in ambulatory settings, these may not be sufficient to encourage a

significant shift in training to these settings. This

should be monitored closely to determine if current

policies are sufficient to support the level of training in non-hospital settings necessary to prepare

physicians for a health care system that emphasizes

out of hospital care. The Federal government should

provide technical assistance and support the development of models for effective training in ambulatory settings. Further revisions in financing policies may be necessary.

In 1999, the Council plans to undertake a review of current policies related to GME financing,

including ambulatory care settings, and issue a report on the adequacy of current policies.

CONCLUDING COMMENTS

On a number of issues, such as further reducing

the number of residents in training and increasing

support for training in ambulatory settings, the

Council has recommended modest steps. While the

nation’s physician workforce goals have not yet been

met, as this report documents, there has been clear

progress. Recent developments provide support for

many of the COGME goals. The Council believes

that the strategy recommended in this report—to

promote a more effective marketplace, to develop a

more integrated planning process, to provide financial incentives for priority goals, to work with States,

and to advocate for more stable long term financing of GME—is an effective strategy. Given the

progress being made, recent developments and the

potential impact of the above recommendations, the

Council does not recommend major new Federal

authority for determining the physician workforce

or major new governmental expenditures. The

Council is hopeful that the recommendations above

will be sufficient to achieve the nation’s health

workforce goals.

While the Council believes that the recommendations will help bring the future supply of physicians into balance with the nation’s requirements,

these recommendations are not likely to address

other high priority goals of the Council, such as

increasing the diversity of the physician workforce and the maldistribution of physicians. These

goals continue to be a high priority of the Council and will require other actions to adequately

address.
FOURTEENTH REPORT OF COGME 1

Introduction and Back oduction and Background

OVERVIEW

The Council on Graduate Medical Education

was authorized by Congress in 1986 to provide an

ongoing assessment of physician workforce trends,

training issues and financing policies, and to recommend appropriate Federal and private sector efforts to address identified needs. Since its establishment, the Council has identified numerous

physician workforce goals and priorities for the

nation. These priorities have been embodied in a

series of reports issued by the Council. These reports have addressed such issues as: approaches to

longer term workforce planning for the nation

(COGME Third Report 1992); the number and specialty mix of physicians being trained in the United

States (COGME Fourth Report, 1994; COGME

Eighth Report, 1996); medical training organization and governance (COGME Ninth Report, 1997);

the geographical distribution of physicians

(COGME Tenth Report, 1998); international medical school graduates (COGME Eleventh Report,

1998); graduate medical education payment reform

(COGME Eleventh Report, 1998); and the racial/

ethnic makeup of the physician workforce (COGME

Twelfth Report, 1998).

Over the past several years, the health care system has changed significantly with an increase in

competition and a greater focus on cost containment.

In addition, there have been a number of statutory

and non-statutory policy changes related to graduate medical education (GME) in the past two years,

including the passage of the Balanced Budget Act

in 1997, new policies at the Department of Veterans Affairs, and an expansion of State GME activities. These recent developments have the potential

to significantly impact the physician supply and

requirements.

This report assesses recent trends related to the

physician workforce and GME, recent GME policies and their potential impact on the supply, demand and training of physicians in the coming years.

As part of this assessment, the report measures the

progress that has been made toward the Council’s

goals for decreasing the total number of new physicians and increasing the percent in generalist specialties. Based on a new study conducted for the

Council, this report presents a description of State

GME activities, including their relationship to physician workforce goals and their implications for

national GME policies. Based on these assessments,

the report recommends new policies to encourage a

physician workforce to meet the nation’s future

health care needs.

COGME GOALS AND

RECOMMENDATIONS

The general goals of the Council include:

• Promoting the education and training of a number and specialty mix of physicians consistent

with current and future national health care

needs; and

• Promoting the education and training of a physician workforce with the skills and knowledge

needed for high quality, effective and efficient

care.

In the context of these general goals, this report

assesses the implications of recent trends and policy

developments on six major operational goals of the

Council described below.

1. TO REDUCE THE RATE OF GROWTH IN THE

SUPPLY OF PHYSICIANS IN THE U.S. TO

AVOID A SURPLUS OF PHYSICIANS

The supply of physicians in the U.S. has grown

rapidly for several decades and will continue to grow

for at least the next 20 years at the rate that new

physicians are being trained. The rate of growth in

the supply of physicians has far outstripped the rate

of growth of the general population. Several reports

of the Council (Third, 1992; Fourth, 1994; and

Eighth, 1996), and numerous studies (Cooper, 1995;

Weiner, 1994; IOM, 1996; Pew Health Professions

Commission, 1995; Wennberg, et al., 1993), have

documented that the growing supply of physicians

will exceed the number required to serve the nation. For a variety of reasons, including the high

cost to the nation of training and maintaining a surplus of physicians, the Council has strongly recommended steps to reduce the rate of growth in the

supply.

The growth in the total supply of physicians has

been driven by the increase in the number of new

physicians entering medicine compared to earlier

periods. For example, from 1985 to 1995 the nation

added about 20,700 new physicians per year while

only about 9,200 left the practice of medicine each

year. This led to a net growth of more than 130,000
FOURTEENTH REPORT OF COGME 2

patient care physicians over the 10 year period

(Roback, et al., 1987; Randolph, et al., 1997). While

the vast majority of new physicians each year are

graduates of U.S. medical schools, a significant

number are educated outside of the U.S. and enter

the educational pipeline at the graduate level. In

order to reduce the rate of growth of new physicians,

the Council has recommended that the total number

of physicians entering training not exceed the number

of U.S. medical school graduates in 1993 plus 10 percent (COGME Fourth Report, 1994).

The Council has also been concerned with shortages of generalist physicians and growing numbers

of specialists. Many communities around the nation have too few generalist physicians to meet their

needs. In addition, numerous studies have documented that enrollees in managed care plans use

more generalists and fewer specialists than under

traditional fee-for-service systems (Gamliel, et

al.,1995; Weiner, 1994; Wennberg, et al., 1993).

Thus, as managed care enrollment increases there

will be a need for more generalists and fewer specialists. For these reasons, the Council has consistently recommended that the reductions in physician supply be achieved through reductions in the

production of specialists (COGME Third Report,

1992; Fourth Report, 1994; Sixth Report, 1995;

Eleventh Report, 1998).

For several years, the Council has also been

concerned with the large flow of international medical school graduates (IMGs) into residency training. In 1997-98 when there were 17,913 graduates

of U.S. allopathic and osteopathic schools entering

into residency, there were also 5,230 IMGs entering training (JAMA, 1998B; AACOM, 1998). Thus,

in 1997 IMGs added nearly 30 percent to the number of U.S. medical school graduates entering GME

for the first time.1

Over the past several years, the growth of IMGs

in training has been driven by an increase in IMGs

with temporary visas, such as exchange visitors

holding J-1 visas (COGME Eleventh Report, 1998).

These visas were intended to allow IMGs to train

in the U.S. to gain skills and knowledge to benefit

their native countries. As such, physicians with temporary visas are required to return to their native

country. However, large numbers have obtained

waivers of the requirement that they return to their

native country after training. In 1997, the Council

recommended that Medicare GME payments for

IMG residents with temporary visas be phased out

over a 4-year period (COGME Eleventh Report,

1998). In 1997, IMGs with temporary visas represented 44 percent of all IMGs in allopathic residency positions in the U.S. (JAMA, 1998B). Several COGME recommendations are designed to

restore the original intent of immigration policies

on temporary visas.

2. TO INCREASE THE NUMBER OF GENERALIST PHYSICIANS

In response to concerns that shortages of generalist physicians were limiting access to basic

medical services in many areas of the country, particularly rural and inner city communities, the Council has consistently recommended that the nation

increase the number of generalist physicians (Third

Report, 1992; Fourth Report, 1994; Eighth Report,

1996). The decrease in interest in generalist specialties throughout the early 1990s on the part of

U.S. medical school graduates at a time of growth

in managed care enrollment further contributed to

concerns about the low number of physicians entering generalist specialties. These specialties have

traditionally been defined as family medicine, internal medicine, pediatrics and the combined specialty of medicine and pediatrics.

Graduate medical education plays a central role

in determining the specialty mix of the nation’s

physicians. The Council has recommended that 50

percent of physicians entering practice choose generalist specialties (COGME Third Report, 1992;

Fourth Report, 1994). This has been combined with

the recommendation that the total number of residents be equal to the number of U.S. medical school

graduates plus 10 percent, expressed as 110/50-50

of the 1993 graduating class size. This target is based

on an analysis by the Health Resources and Services Administration (HRSA) and COGME of the

number of physicians that will be produced at this

rate, the impact of this rate on the total supply, and

the estimated number of physicians needed to serve

the nation. Since many physicians who enter residencies in internal medicine and pediatrics go on

to subspecialize after completing their basic training, increasing the percent of physicians entering

generalist practice can be achieved through an increase in the number entering internal medicine,

family practice and pediatrics training, and/or by

decreasing the percent going on to subspecialize.

3. TO INCREASE THE NUMBER OF PHYSICIANS TRAINED IN AMBULATORY SETTINGS

Historically, most physicians have been trained

in hospitals. This training has been supported by

the willingness of Medicare (and Medicaid in most

States) to pay for training in the hospital. (Plumb

1 These figures exclude first year residents who had prior training in the U.S., such as individuals who switched specialties

or completed a preliminary year of training prior to entering

a first year position.
FOURTEENTH REPORT OF COGME 3

and Henderson, 1995) As the health care system

evolves, care is shifting from inpatient to ambulatory

settings. In the future, most physicians will work

outside of the hospital; yet the vast majority are still

trained in the hospital. To better prepare physicians

for their future responsibilities, the Council has

recommended that more training be shifted to ambulatory care settings. Many residency review committees are also increasing requirements for training in ambulatory settings.

However, the major sources of funding for GME

(Medicare and Medicaid) have been tied to hospital reimbursement, and the funding for training outside of the hospital has been very limited. This has

discouraged the shift in training to ambulatory settings. For this reason, the Council has recommended

that Medicare GME funding be allowed to cover

more of the costs of training in non-hospital settings (COGME Eleventh Report, 1998).

4. TO PROMOTE A RATIONAL SYSTEM FOR

PHYSICIAN WORKFORCE PLANNING

The education and training of physicians involves many diverse interests, including medical

educators, hospitals, payers of care, residency review committees and others. Consistent with the

historical and political traditions of the nation, there

is no central system for workforce planning. However, unlike any other profession, the nation invests

an enormous amount of public funds for the education of physicians. A majority of the nation’s medical schools are public; and at the graduate level,

Medicare alone contributes more than $7 billion per

year in payments associated with GME (IOM,

1997). Medicaid is estimated to spend another $2

billion in public funds for GME (Salsberg, 1997).

The Council has made a number of recommendations over the years to promote a process that

would encourage the production of the numbers and

mix of specialists required to serve the nation. In

1994, the Council recommended a national system

for allocating residency positions among specialties and programs as part of the proposal for national health care reform (COGME Fourth Report,

1994). More recently, the Council has recommended

the development of regional GME consortia to bring

together the key parties in local communities with

an interest in medical education (COGME, Ninth

Report, 1997).

5. TO ASSURE ADEQUATE FUNDING TO SUPPORT NEEDED PHYSICIAN TRAINING

The major changes in the health care system

have raised concerns about the fiscal health of the

institutions that train the nation’s physician

workforce. Factors such as increased competition

at all levels of health care, the expansion of managed care, and the increased effort to constrain

health care costs may put health facilities that train

physicians at a competitive disadvantage in the new

marketplace. Although training future physicians

benefits the entire nation, the costs of training are

the responsibility of the institutions that do the training. In the competitive marketplace, payers of health

care services have few, if any, incentives to pay

higher costs to sites that train health professionals.

Teaching hospitals face a number of dangers.

First, in the competitive marketplace, they are likely

to receive less reimbursement per admission from

private payers. Second, admissions are likely to decrease under managed care as patients are encouraged to use ambulatory settings as well as lower

cost hospitals in an effort to lower costs.

Under the current system of financing GME,

only Medicare and Medicaid explicitly include the

costs of GME in the payment rates they set for teaching hospitals. (This does not mean that insurers,

managed care organizations and other payers do not

pay anything for GME, but rather that they do not

explicitly identify the costs of GME in the rates they

negotiate with hospitals.) As the health care marketplace has become more competitive, many payers are

reluctant to pay higher rates to teaching sites to cover

the costs of training physicians. One recent study

found that managed care organizations believe they

pay 5 to 10 percent more for care at teaching hospitals (Gold, 1996). Teaching hospitals are believed to

cost 20 to 40 percent more per discharge than nonteaching hospitals (Dobson, et al, 1994).

To assure the financial stability of teaching sites,

the Council has supported the development of an

all payer financing system that would require that

all payers of care contribute to the training of physicians (COGME Third Report, 1992; Fourth Report, 1994). Since training of the future physician

workforce benefits the whole community, a strong

case can be made for supporting GME as a public

good. This would level the playing field for teaching hospitals. In 1995, Congress supported a bill

that would have established a national trust fund

for GME supported by general revenues and Medicare. However, the bill was not passed.

6. TO PRESERVE SAFETY NET PROVIDERS

While the primary purpose of GME is the education of physicians, residents also provide extensive services in conjunction with their training. Often these services are provided to the poor and

uninsured who use teaching hospitals for their primary care (Green and Johnson, 1995). The care for
FOURTEENTH REPORT OF COGME 4

the poor and the public financial support for GME,

has led to a reliance by many hospitals on the services of residents, particularly hospitals that would

be considered part of the health care safety net for

the poor (Foreman, 1998). The Council has recommended that steps be taken to assure that the safety

net capabilities of these facilities and their patients

are not harmed for reducing residents. (COGME Eleventh Report, 1998). The Council has recommended

that savings from other actions that reduce Medicare

GME expenditures be used to support expansion of

such programs as the National Health Service Corps,

and that these new resources be targeted to fill service gaps created by reductions in residents (COGME

Eleventh Report, 1998).

The Council has recently issued reports and

developed recommendations related to other

workforce issues, regarding the geographical distribution of physicians (COGME Tenth Report,

1998) and the racial and ethnic composition of the

workforce (COGME Twelfth Report, 1998). These

issues are not reviewed in this paper but are relevant to the safety net needs of the country.
FOURTEENTH REPORT OF COGME 5

Findings Findings

RECENT DEVELOPMENTS

This report reviews the previous COGME recommendations in light of recent trends in the supply and training of physicians and a series of newer

developments that have the potential to further impact the supply, demand, distribution and training

of physicians. The key developments considered

include:

• The changing health care system with its emphasis on market forces

• The 1997 Balanced Budget Act

• The Medicare voluntary downsizing demonstration in New York

• The development of new GME policies by

States

• New procedures affecting IMG residents

• The growth in the supply of non-physician clinicians

• New GME Policies at the Department of Veterans Affairs

ASSESSING TRENDS: THROUGH

1997-98

To help assess whether new policies are needed

to achieve the COGME workforce goals described

previously, this section reviews:

• The extent of progress toward the 110/50-50

goal

• Other factors that may influence the total supply of physicians

• Factors that may influence the demand or requirements for physicians, including the

growth of non-physician clinicians

• Indicators of the effectiveness of the marketplace for GME

Key findings include:

• The number of U.S. medical school graduates

in the aggregate has been relatively level over

the past fifteen years; this reflects a slight decrease in allopathic medical school graduates

and an increase in osteopathic graduates.

• The number of osteopathic graduates will increase over the next decade, adding to the supply of new physicians that graduate from U.S.

medical schools.

• The number of residents increased substantially over the past decade due to a large increase in the number of IMGs entering training and an increase in the average number of

years of training for IMGs.

• Recently, the numbers of new IMG physicians

entering training have leveled off and declined

slightly.

• In assessing progress toward the goal of 110

percent of 1993 graduates, counting only residents in first year positions with no prior residency training—rather than all residents in first

year positions—leads to the finding that 129

percent of 1993 USMG graduates entered training in 1997-98. This is slightly lower than calculations done in earlier studies; however, this

reflects the different methodology rather than

substantial progress toward achieving

COGME’s goal. (The methodology is discussed further in the next section, “The Number of Physicians Being Trained,” and in the

Appendix.)

• IMG residents with J-1 visas have increased

over the past several years; however, the recent growth reflects a longer average number

of years in training for J-1 visa residents compared to other residents.

• The numbers of PGY1 residents choosing generalist specialties has increased significantly

over the past several years.

• The number of USMG internal medicine residents going on to subspecialize appears to have

decreased significantly over the past several

years. This will likely result in an increase in

the number of physicians entering primary care

specialties.

• The full impact of the growth in the total supply of physicians may be moderated in the future by the increasing percent of women in

medicine and possible earlier retirements.

• The demand for physician services may decrease less sharply under managed care than

previously thought due to the evolution of

managed care, including the growth of pointof-service plans and the expansion of patient

rights.
FOURTEENTH REPORT OF COGME 6

• The growth in the supply of non-physician clinicians has been very significant. In fact the

rate of growth and the number of new non-physician clinicians is expected to exceed the

growth for physicians over the next decade.

• The demand for physicians in some specialties appears to be limited.

• The number of residency positions offered in

specialties appears to be sensitive to the perception of an oversupply in the specialty.

• Medical student and resident specialty choice

appears to be responsive to the practice opportunities in a specialty to the extent such information is available.

1. THE NUMBER OF PHYSICIANS BEING

TRAINED

The Council’s targets for the number and mix

of residents (110/50-50) are designed to lead to the

number and mix of practicing physicians needed to

serve the public in the future. The overall process

requires an assessment of future needs and an understanding of the relationship between today’s

training and tomorrow’s supply. However, translating long-term workforce targets into short-term

adjustments in the number and mix of residents,

involves a number of assumptions about the training and practice patterns. Furthermore, as noted by

Kindig and Libby (1996), changes in the annual

inflow and departures of physicians only marginally impact the total supply in the short run.

In calculating the base for the target for physician production, COGME used the estimate of

17,961 allopathic and osteopathic medical school

graduates in 1993; 110 percent of this figure is

19,757. This is the numerical target historically established by COGME for the desired inflow into

residency training.

According to the American Medical Association (AMA) and the American Association College

of Osteopathic Medicine (AACOM), in 1997-98

there were 23,143 PGY1 positions filled by individuals with no prior U.S. postgraduate training

(Table 1). Approximately 12 percent of first year

residents have some prior U.S. GME training. This

includes residents who were previously counted as

first year residents in preliminary and transition programs, or in specialties other than their current specialty. Based on the number of PGY1s with no prior

training, the nation’s PGY1 residents are at 129 percent of the target established by COGME. It would

be necessary to reduce by 3,386 the number of PGY1

residents who have had no prior U.S. GME training

to reach the 110 percent goal.

These numbers are somewhat different from

those in previous COGME reports (Fourth Report,

1994; Eighth Report, 1996) because these PGY1

counts include only residents with no prior residency training, while figures in earlier reports included PGY1 residents who had prior residency

training. The difference between the 110 percent

target and new PGY1 residents in 1997-98 is illustrated in Figure 1.

The total number of allopathic residents has

leveled off. As indicated in Figure 2 and Table 2,

after growing by more than 20,000 from 1986-87 to

1993-94, the total number of residents, including

IMG residents, has leveled off since 1993-94. Based

on the decline in entering residents, it is likely that

the total number of residents will decrease in the

future.

The number of PGY1 positions has leveled

off and declined slightly. From 1993-94 to 1997-

98, the number of new allopathic PGY1 residents

TABLE 1

Changes Required to Achieve 110 Percent Target

as of 1997-98

Number Percent

1993 U.S. MD & DO Graduates ........................... 17,961 100%

COGME 110 Percent target .................................. 19,757 110%

PGY1 Residents, 1997-98.................................... 23,143 129%

Change to Attain 110% Reduction ........................ (3,386) -15%

Source: JAMA, 1998B; AACOM, 1998

FIGURE 1

1997-98 PGY1 Residents

(No Previous Training)

110% Target

19,757

25,000

20,000

15,000

10,000

5,000

0

1997-98

USMG Allopathic Residents

and Osteopathic Interns

= 17,913

IMG Allopathic Residents

= 5,230

23,143 (129%)
FOURTEENTH REPORT OF COGME 7

total IMG residents far exceeded the growth of total residents from 1985-86 to 1993-94. The decline

in new entrants has not yet led to a decline in total

residents; this may reflect an increase in the percentage of IMG residents continuing their training beyond their basic specialty training (Mullen,

Politzer and Davis, 1995).

Figures 2 and 3 also show that

while the numbers of total residents, PGY1s and IMGs have leveled off, they are at levels significantly higher than in the years

before 1993.

The number of PGY1 positions filled by IMGs declined 15

percent from 7,382 in 1993-94 to

6,257 in 1997-98 (JAMA, 1998B).

From 1985-86 to 1993-94 the number of PGY1 positions (including

those with prior U.S. GME training) grew rapidly. This growth was

primarily due to the sharp increase

in IMG PGY1s. Since 1993-94 the

number of PGY1 positions has

dropped slightly again reflecting

the decrease in IMG PGY1s.

A decline in allopathic graduates has been

offset in recent years by growth in the numbers

of osteopathic graduates. Figure 4 documents this

growth, and shows that additional significant expansion is expected over the next several years

(AACOM, 1998). Osteopathic physicians have longstanding commitments to generalist care and to serving rural communities. Historically, 60 percent of

osteopathic physicians have selected generalist specialties.

2. SPECIALTY MIX

CALCULATING PROGRESS TOWARDS THE

COGME GOAL

In 1994, after a review of the available studies

and data on the use of patient care physicians, the

Council calculated how many generalists and nongeneralist physicians were required to best serve the

patient care needs of America (Fourth Report, 1994;

Eighth Report, 1996). Based on the assessment of

the number of physicians that would be needed, the

Council calculated the number of physicians that

would need to enter practice each year in generalist

and non-generalist specialties to reach the recommended number and mix of physicians. As noted

declined about 6 percent. As seen in Figure 3, the

number of allopathic PGY1 positions rose consistently from 1988-89 until 1993-94 when it began to

decline. Table 2 documents that the growth rate in

TABLE 2

Total and PGY1* Allopathic Residents, 1985-1997

Year Total IMG PGY1 IMG PGY1

Residents Residents Residents Residents

1985-86 ......................... 74,514 12,509 19,168 2,673

1986-87 ......................... 76,815 12,207 18,183 2,381

1987-88 ......................... 81,410 12,712 18,067 2,407

1988-89 ......................... 81,093 12,433 17,941 2,541

1989-90 ......................... 85,330 12,259 18,131 2,689

1990-91 ......................... 82,902 14,914 18,753 3,540

1991-92 ......................... 86,217 17,279 20,685 4,692

1992-93 ......................... 89,368 19,264 22,667 4,870

1993-94 ......................... 97,370 22,721 26,033 7,382

1994-95 ......................... 97,832 23,499 25,992 7,148

1995-96 ......................... 98,035 24,982 24,170 6,233

1996-97 ......................... 98,076 24,703 24,608 6,105

1997-98 ......................... 98,143 25,531 24,516 6,257

Percent Change

1985-86 - 1993-94 ........... 31% 82% 36% 176%

Percent Change

1993-94 - 1997-98 ............ 1% 12% -6% -15%

*Includes PGY1 Residents with Prior U.S. Training.

Source: JAMA, Annual Medical Education Issues, 1987-1998

120,000

100,000

80,000

60,000

40,000

20,000

0

1986

FIGURE 2

Total and IMG Allopathic Residents, 1986-1997

Source: JAMA, Annual Medical Education Issues, 1987-1998

Total Residents

IMG Residents

Number of Residents

❖

1987 1988 1989 1991 1992 1993 1994 1995 1996 1997

❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖

Year

1990
FOURTEENTH REPORT OF COGME 8

While the number of generalists completing

training has increased from earlier studies, the nation is still training too few generalists and far too

many specialists. As indicated in Table 3, the nation is producing 662 too few generalists per year

(7 percent below the target) and 4,047 too many

specialists per year (41 percent above the target)

based on the existing COGME goals. However, in

terms of generalists, as indicated below, there are

some encouraging signs.

These calculations are based

on several assumptions. First, they

assume that 50 percent of internal medicine first year residents

(PGY1s)—excluding preliminary

positions—will go on to subspecialize. This reflects a significant shift from the 60 percent used

in earlier calculations. This revised estimate reflects the results

of two recent surveys which found

that only 40 percent of new graduates were going on to subspecialize (Miller, et al. 1998;

Salsberg, et al., 1998). However,

the calculations in this report use

a 50 percent subspecialization

rate for several reasons. First,

some of those going into generalist practice immediately after

completion of three years of training may return for additional

training in future years. Second,

the current interest in primary care

may wane in the coming years.

Because internal medicine is by

far the largest specialty, the percent of internal medicine residents that go on to subspecialize

has a major impact on the nation’s

production of generalists. (See the

Appendix for a further discussion

of the methodology and the impact of alternative assumptions for

the rate of internal medicine subspecialization.)

A second assumption is that

78 percent of pediatric PGY1s

will eventually choose generalist

practice and will not subspecialize. This is consistent with

earlier subspecialization rates and

the experience of physicians completing pediatric programs in New

York in 1997 (Salsberg, et al.

1998).

earlier, they concluded that 50 percent of the recommended number of physicians completing training (110 percent of the number of 1993 allopathic

and osteopathic medical school graduates) should

enter generalist specialties and 50 percent should

enter other specialties. This translates into a numerical target of 9,879 physicians entering generalist specialties and 9,879 entering other specialties each year.

30,000

25,000

20,000

15,000

10,000

5,000

0

1986

FIGURE 3

Total and IMG PGY1 Residents in Allopathic

Residency Programs, 1986-1997

Source: JAMA, Annual Medical Education Issues, 1987-1998

Total PGY1 Residents

IMG PGY1 Residents

Number of Residents

❖

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

❖ ❖ ❖ ❖ ❖ ❖ ❖

❖ ❖ ❖ ❖ ❖

Year

❖

3,000

2,500

2,000

1,500

1,000

500

0

FIGURE 4

Trends in DO Graduates, 1986-2002

Source: AACOM, 1998

❖

Year

❖ ❖ ❖ ❖ ❖ ❖

❖

1560

1593

1572

1609

1529

1534

1532

1606

1762

1843

1932

2020

2187

2227

2428

2436

2426

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
FOURTEENTH REPORT OF COGME 9

THE GROWTH IN GENERALIST PHYSICIANS

While the nation is still training too few generalists, significant progress has been made and there

are a number of encouraging signs. For the past several years, many groups and organizations have advocated an increase in generalist practitioners.

Medical schools across the country have modified

their curriculum to increase the primary care content and to provide earlier and/or more consistent

exposure to primary care. The changes have been

encouraged by public support, such as through Title

VII, as well as private foundation grants, such as

the Generalist Initiative supported by the Robert

Wood Johnson Foundation.

An encouraging indicator is the growing interest in generalist careers as expressed by U.S. senior

medical students. As indicated in Figure 5, the percent of U.S. medical school senior students planning to enter a generalist specialty bottomed out at

14.6 percent in 1992 and has more than doubled in

the past four years, reaching 39.6 percent in 1997

(AAMC, 1998).

Consistent with the growth of medical student

interest in generalist careers are the results of the

National Residency Match Program (NRMP). As

indicated in Figure 6, the number and percent of

applicants matching in generalist specialties has increased significantly from 1990 to 1998. The total

filled generalist positions grew from 7,794 in 1990

to 10,347 in 1998, while filled non-generalist

matches decreased from 1994 to 1998 (NRMP,

1998). Also encouraging is the increase in the percent of U.S. medical school graduates in the match

selecting generalist specialties. This increased from

44 percent in 1991 to 56 percent in both 1997 and

1998 (NRMP, 1998).

As noted above, another encouraging indication

of the progress being made to increase the number

of physicians in generalist specialties, is the decreasing rate of

subspecialization by internal

medicine residents. As indicated

in the Appendix, a change in the

Internal Medicine subspecialization rate will significantly impact

the number of generalists being

produced.

Another significant indicator

of the progress being made to increase the number of primary

care physicians is the growth in

family practice residents, as historically more than 90 percent

have remained in primary care.

Since 1992, there has been a

sharp increase in family practice

residency program graduates.

Between 1992 and 1999, the total number of allopathic and osteopathic residents completing

family practice residency training will have increased by 55 percent (Table 4). This growth in

family practice residents will

TABLE 3

Current Entrants into Residency Training

Compared to COGME Target

1997-98

Generalist Physicians

Positions Required ............................... 9,879

Current Positions .................................. 9,217

Difference Between

Target and Current ................................... 662 7 Percent Below Target

Specialty Physicians

Positions Required ............................... 9,879

Current Positions ................................ 13,926

Difference Between

Target and Current ...............................(4,047) 41 Percent Above Target

50

40

30

20

10

0

FIGURE 5

Percent of Graduating Medical Students Planning a

Generalist Specialty*, 1986-1997

Percent

1986 1987 1988 1989 1991 1992 1993 1994 1995 1996 1997

Source: AAMC, 1998

Note: Data beginning in 1991 are based on a new question format.

Data are not available for 1990.

*General family practice, general internal medicine and general pediatrics
FOURTEENTH REPORT OF COGME 10

INCREASED NUMBER OF

FEMALE PHYSICIANS

The percent of active physicians that are female has increased

steadily over the past 25 years from

7 percent in 1970 to 19 percent in

1995 (Figure 8). As indicated in

Figure 9, this trend will continue

as the percent of female medical

students continues to rise, reaching 42 percent of medical school

graduates in 1996-97 (AAMC,

1998). A number of recent studies

has found that female physicians

work about 10 percent fewer hours

per week on average than male

physicians (Hadley and Mitchell,

1997). This will moderate the impact of the growth in the total supply of physician services.

MANAGED CARE AND THE

CHANGING HEALTH CARE

SYSTEM

The availability of physician

services depends not only on the number of physicians entering the health care system but also how

many years physicians continue to practice medicine, how they practice and how many patients they

see when they practice. For example, a change in

practice patterns or productivity that increases by 5

percent the number of patients served by a physician would be equal to a 5 percent increase in the

supply.

Changes in the health care system can impact

the supply of practitioners and physician services

in a number of ways. If the expansion of managed

care and increased competition lead to greater productivity, this would increase the potential oversupply of physicians. On the other hand, the changes

could have the reverse effect if physicians react

negatively and their productivity decreases, or they

work fewer hours or retire earlier. As seen in Figure

10, over the past decade mean work hours per week

have not changed significantly (Gonzalez, 1997).

While many physicians have expressed dissatisfaction with the changes in the health care system, there

is no indication that physicians are working fewer

weeks or hours per year.

In regard to age at retirement, a recent analysis

of AMA data over time concluded that physicians

appear more likely to retire at an earlier age than in

the past (Kletke, 1998). If physicians on average

were to retire earlier, this could have a significant

impact on the total physician supply.

lead to a substantial increase in the total supply of

practitioners. As seen in figure 7, the number of family practitioners could almost double over the next

20 years if the number of program graduates continues to increase.

3. FACTORS INFLUENCING THE BALANCE OF

SUPPLY AND REQUIREMENTS FOR PHYSICIANS

The total future supply of practicing physicians

will reflect both the number of new physicians entering the system and the practice patterns of the

existing supply. Although the supply of physicians

will grow over the next 20 years, some basic changes

are taking place in the workforce and practice environment that may moderate the rate of growth in

the total physician resources available to the nation.

FIGURE 6

Filled and Unfilled Positions in the Match in Generalist and

Non-Generalist Specialties

12,000

10,000

8,000

6,000

4,000

2,000

0

Positions

GENERALIST

1990

7,794

2,056

(21%)

1994

9,076

1,333

(13%)

1998

10,347

841 (8%)

NON-GENERALIST

Year

Source: National Residency Match Program, 1998

8,118

2,056

(20%)

8,329

2,034

(20%)

7,850

1,261 (14%)

1990 1994 1998

Positions Filled Positions Unfilled

TABLE 4

Family Practice Residency Graduates

1992 1999* Increase Percent

Increase

Allopathic ........................ 2,385 3,624 1,239 52%

Osteopathic ........................ 237 448 211 89%

Total ................................ 2,622 4,072 1,450 55%

*Projection based on 1996 residents.

Source: Colwill, 1998
FOURTEENTH REPORT OF COGME 11

DEMAND FOR PHYSICIANS

Demand for physician services

may also be changing. The evolution of managed care makes it difficult to predict the impact of its

expansion on the demand for physicians. In recent years, some of the

concern about a potential oversupply reflected the relatively low physician-to-population ratios reported

in a number of studies of Health

Maintenance Organization (HMO)

physician staffing (Weiner, 1994).

However, these early studies may

not be representative of future practice patterns and policies. A recent

study by L. Gary Hart and his colleagues assessed physician use

rates in two mature HMOs (Hart,

et al., 1997). Their study measured

in-plan and out-of-plan use and

found a much higher rate of use of

physicians than reported in the earlier studies (Figure 11). However,

even this most recent study does not

fully account for a number of significant changes in many managed

care policies that allow enrollees

greater access to specialists. In addition, the Hart study did not adjust for self selection on the part of

managed care enrollees; thus, it

may be that high need populations,

such as the elderly, the chronically

ill and the Medicaid population,

will require greater physician resources than reported by prior

studies.

The recent efforts across the

country to pass legislation related

to managed care and patient rights

may impact the demand for physicians. Many of the bills and proposals would limit the ability of

managed care plans to restrict access to service and physicians.

Many health plans have already

modified their policies to permit

greater access to specialists than

under the traditional health maintenance organization models,

which were used as the basis for

predicting utilization of physicians

for the future. The current evolution

of managed care may lead to a greater

use of non-generalist physicians

FIGURE 8

Percent of Total Active Physicians That Are Female

United States, 1970-1995

25

20

15

10

5

0

Percent

Source: Physician Characteristics and Distribution, 1997, AMA

7%

1970 1975 1980 1985 1990 1995

Year

8%

10%

13%

15%

19%

140,000

130,000

120,000

110,000

100,000

90,000

80,000

70,000

1995

FIGURE 7

Total Family Practice Physicians (Allopathic and Osteopathic)

Providing Patient Care*, 1995-2015

Source: Colwill, 1998

Year

2005 2010 2015

Assumes continued growth in number of graduates from

projected 1999 number of 4,072 to 5,000 per Year by 2004.

Assumes graduation rate equal to projected number of family

physicians completing training in 1999.

▲

▲

▲

▲

▲

2000

*Excludes resident physicians and includes general practice physicians.
FOURTEENTH REPORT OF COGME 12

For example, the expansion of the availability of

child health insurance should lead to an increase

in demand and use of pediatric services. On the

other hand, the growing number of uninsured

adults is likely to dampen demand, at least in the

short run.

4. THE GROWTH IN THE SUPPLY OF NONPHYSICIAN CLINICIANS

The nation is in the midst of a

sharp increase in the number of

non-physician clinicians. These

are practitioners whose scope of

practice overlaps in varying degrees with physicians. This includes practitioners traditionally

used as physician extenders, such

as physician assistants; and professions that practice more independently and may even compete

with physicians, such as optometrists, podiatrists and chiropractors. The growth in the number of

non-physician clinicians may

dampen the demand for physician

services.

As well documented by

Richard Cooper and his colleagues (Cooper, et al., 1998A),

there has been a significant recent

increase in the number of students, graduates and practitioners

in these professions (Figure 12).

The growth in educational capacity and enrollment indicates

clearly that the total supply of

non-physician clinicians will increase rapidly over the next decade (Figure 13). Projections of demand and requirements for

physicians need to take these clinicians into account.

In addition to an increase in

the number of non-physician clinicians, many of these professions

have obtained authority for an expanded scope of practice through

State statutory and regulatory

changes (Cooper, et al., 1998 B).

While the sharp increase in the

supply and scope of practice of

non-physician clinicians presents

an opportunity for increased collaboration and inter-disciplinary

practice which would benefit

than anticipated in earlier forecasts of requirements.

The emerging use of some specialists to manage the

care for patients with chronic conditions falling under

their specialty (Stevens, 1997), may also dampen demand for generalists compared to earlier projections.

In addition, there are a number of other factors

that could increase the demand for physicians. Particularly important is the increased availability

of health insurance coverage for the population.

65

60

55

50

45

40

FIGURE 10

Mean Hours of Work per Week for All Physicians, 1985-1996

Hours per Week

Year

1985

Source: Gonzalez, 1997

❖

51.3

1986 1990 1991 1992 1993 1994 1995 1996

❖ ❖ ❖ ❖ ❖ ❖ ❖ ❖

52.2 ❖

53.3 53.3 53.3 52.9 52.9 52.1 51.3

53.4

57.1 57.7

58.8 58.8 59.1 58.9 58.8 58.3

56.7

58.5

1989

HOURS IN PATIENT CARE

HOURS IN PROFESSIONAL ACTIVITIES

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

1960-61

FIGURE 9

Percent of Graduates of U.S. Medical Schools

That Are Female, 1960-1996

Source: AAMC, 1998

Percent of Total Graduates

❖

Year

1965-66 1970-71 1975-76 1980-81 1985-86 1990-91 1996-97

❖

❖

❖

❖

❖

❖

❖

5.1%

6.9%

9.2%

16.2%

24.9%

30.8%

36.0%

41.5%
FOURTEENTH REPORT OF COGME 13

the supply and demand for physicians. Is there a

marketplace for physician training, and if so, can it

be influenced or encouraged to train physicians consistent with future health care needs? If the GME

marketplace is relatively responsive, then less government action will be needed to adjust production

to match physician requirements.

There are also some encouraging signs that the

specialty mix of physicians being trained responds

to the marketplace. As noted earlier, there has been an increase in

the number and percent of new

physicians selecting primary care

specialties. This appears to reflect

the impact of the marketplace

more than government policy

(Jacoby and Meyer, 1998). The

Balanced Budget Act includes a

number of provisions designed to

reduce or eliminate the incentives

for hospitals to increase the number of residents as previously encouraged by the Medicare GME financing system. In certain parts of

the country, demand (practice

opportunities) is already limited in

many specialties. For example, in

1997, the Center for Health

Workforce Studies (SUNY, Albany) surveyed physicians completing training in New York State

to determine their practice plans,

experiences and perspective. As indicated in Figure 14, many physicians completing training had to

change their plans due to limited

practice opportunities. The figure

also shows that non-generalists

had to change their plans more frequently than generalists. Perhaps,

most striking, IMGs in New York

had much more difficulty finding

practice opportunities than

USMGs; and IMGs with temporary visas fared even worse in the

marketplace than other IMGs

(Salsberg, et al., 1998).

Figure 15 presents a scatter

plot of the rate of decline in positions in a specialty between 1994

and 1996 compared to the extent

to which the residency directors indicated that graduates in the specialty were encountering significant difficulty finding employment

in 1995 (Dunn and Miller, et al.,

patients, there is also a potential for an oversupply

of practitioners and increased competition with physicians, which could be costly and not in the best

interest of patient care.

5. THE MARKETPLACE FOR GME

A critical question for health policy makers is

the extent to which the production of physicians,

both the number and mix, responds to changes in

FIGURE 11

HMO Physician Use Comparison:

Physicians per 100,000 Population

200

150

100

50

0

Physicians per 100,000 Population

Seven

Kaiser Plans

(1989)

Source: Eighth Report, COGME 1996, and Hart, et al., 1997

54

58

Kaiser

Portland

(1993)

GHA Seattle

(1993)

GHAA

Industry

Profile (1993)

Kindig/

Rentmeester

Study (1993)

Tarlov (1996) L. Gary Hart

(1997)

Generalists Specialists

56

81

57

65

71

61

62

73

66

54

78

102

HMO Study

▲❖ ❖

▲

FIGURE 12

Selected Non-Physician Clinician Graduates

United States, 1992-2001

8,000

6,000

4,000

2,000

0

Number of Graduates

Source: Cooper, et al., 1998A

1992

Year

1993 1994 1995 1996 1997 1998 1999 2000 2001

Nurse Practitioners

Chiropracters

Physician Assistants

Acupuncturists

▲

❖

▲ ▲

▲

▲ ▲

▲ ▲ ▲

❖

❖

❖

❖ ❖ ❖ ❖ ❖
FOURTEENTH REPORT OF COGME 14

1996). There is a strong negative correlation (-0.53)

between perceived difficulty and decreased positions. From these data alone we cannot determine

how all specialties in all regions will respond to a

crowded market. However, it does appear that low

demand in medical specialties is associated with

declines in residency positions.

RECENT DEVELOPMENTS:

1998 AND BEYOND

This section reviews recent policy developments that are likely to affect the physician workforce and residency training in the

future. As indicated in Table 5, all of these

developments are still in the process of implementation. While it is possible to quantify

the impact of some of the newer developments—such as the New York State Medicare demonstration and the new VA policies—it is not possible to develop precise

estimates of all these developments on

physician supply and demand. An assessment

of the general impact of these developments

is provided below.

1. THE MARKETPLACE

The health care system in the United

States is evolving rapidly: managed care enrollment is increasing; competition and costcutting efforts are becoming more intense and

pervasive; integrated systems, mergers, consolidations and networks are transforming the delivery system; more providers are at risk for the costs

of care; and the supply of physicians and other clinicians is growing rapidly. Many of these changes

will have a significant impact on the supply, demand, and use of physicians and the institutions that

train them. For example, as a result of these developments there has been a decrease in hospital use,

a shift of services to ambulatory care settings, and

an increase in the demand for primary care practitioners. The decrease in hospital use has already

been significant: the number of bed days in short

term hospitals decreased by nearly a third from 1980

to 1995 (Figure 16). This decline is expected to

continue. The changing marketplace will affect

teaching hospitals as well, as the number, specialties and needed skills of physicians change in the

future.

As noted earlier, the changing marketplace also

has major implications for the fiscal viability of the

nation’s academic health centers and other teaching hospitals responsible for training the nation’s

physician workforce. Fiscal pressures and the loss

of patients to other settings and competitors could

lead some teaching institutions to reduce residency

positions. The competitive marketplace could also

discourage ambulatory care facilities and managed

100

90

80

70

60

50

40

30

20

10

0

FIGURE 14

Residents Completing Training in New York in

1997 Who Had to Change Employment Plans

Due to Limited Job Opportunities for U.S. and

International Medical School Graduates

Source: Center for Health Workforce Studies, 1998

Percent Finding it Necessary to Change Plans

Due to Limited Job Opportunities

Specialty Grouping

Generalists Non-Generalists

USMGs

13%

17%

IMGs-Perm

Res/Citizens

28%

34%

IMGs-Temporary

Visa Holders

46%

52%

FIGURE 13

Projected Supply of Selected Non-Physician Clinicians

United States, 1990-2015

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

Number of Clinicians

Source: Cooper, et al., 1998A

Year

▲

❖

1990 1995 2005 2015

Nurse Practitioners

Chiropracters

Physician Assistants

Acupuncturists

▲

❖

▲❖

▲

❖

▲

❖
FOURTEENTH REPORT OF COGME 15

care organizations from getting more involved with

training physicians.

Particularly significant to teaching hospitals, is

the growth of managed care enrollment. The number of insured individuals enrolled in managed care

has been increasing steadily for many years. Recently, there has also been a sharp increase in Medicaid managed care enrollment. In fact, many States

have moved to require a large portion of the Medicaid population to enroll in managed care plans. This

has been facilitated by recent Federal legislation that

removed the requirement that States obtain specific

Federal approval for mandatory enrollment. The

Balanced Budget Act also includes provisions to

facilitate enrollment in managed care by Medicare

beneficiaries. The Health Care Financing Administration estimates that 28 percent of the Medicare

population will be enrolled in “Medicare+Choice”

programs by fiscal year 2001, up from 12 percent

in fiscal year 1997 (HCFA, 1998).

The increased enrollment by the Medicare and

Medicaid populations in managed care plans is

likely to have a major impact on teaching hospitals, many of which previously served high percentages of these patients. For many

of these hospitals, Medicare and

Medicaid GME dollars are critical sources of funding. The expansion of managed care and

competition may also lead to a

shift of patients to lower cost settings away from teaching hospitals.

One positive impact of the

marketplace has been the increased interest and opportunities for generalist physicians

(Jacoby and Meyer, 1998). While

salaries for specialists on average

still exceed generalist physician

salaries, there appear to be

greater practice opportunities for

generalist physicians (Salsberg,

et al. 1998). As seen in Figure 14,

fewer physicians completing

training in New York in 1997 in

generalist specialties reported

having to change their plans due

to limited practice opportunities

compared to non-generalist specialties.

2. THE BALANCED BUDGET ACT (BBA) OF

1997

This legislation includes a number of significant changes in Medicare GME payment policies

which may affect the number and mix of residents

trained in the future. Many of the new policies have

been recommended by the Council on Graduate

Medical Education. Specific provisions include:

• A cap on total residents and a cap on the ratio

of interns and residents to beds: These caps

will prevent an increase in the number of residents for which Medicare GME payment will

be available. While this does not prevent a facility from adding or expanding a residency

50

40

30

20

10

0

-10

-20

-30

-40

-50

FIGURE 15

Plot of Percent of Resident Physicians Experiencing Difficulty

Finding Employment, by Percent Change in Number of

PGY1 Specialty Positions, 1995

Source: Miller, Dunn and Whitcome, 1997

Percent Change in Number of PGY1

Specialty Positions, 1994-1996

Percent of Resident Physicians Experiencing Difficulty Finding

Employment (Residency Director’s Assesment)

0 5 10 15 20 25

TABLE 5

Recent Policy Developments Expected to Impact the

Physician Workforce and Residency Training

Development Effective Date/Phase In

Marketplace Changes ................................. On-going

The Balanced Budget Act ............................ 1997-2002

GME Downsizing Demos ............................ 1997-2002

State GME Activities ................................... 1997-1999

VA GME Policies ......................................... 1997-2001

New IMG Policies ....................................... 1998-1999
FOURTEENTH REPORT OF COGME 16

program, the lack of funding by Medicare is

expected to discourage increases in residents.

• A reduction in Indirect Medical Education

(IME) Funding: The Medicare adjustment factor for IME will be reduced in stages over a

five year period. This reduction began in October 1997 when the adjustment decreased

from 7.7 percent to 7.0 percent, and will decrease annually until it reaches 5.5 percent in

2002. This will lead to a decrease of nearly 30

percent in Medicare IME funding. The Congressional Budget Office has estimated that this

provision will decrease Medicare GME funding by more than $5 billion over the five years

covered by the Balanced Budget Act (CBO,

1997).

• Use of a three year rolling average for calculating the number of residents for Direct Medical Education (DME) and IME payment: In

calculating hospital reimbursement, Medicare

will use an average number of residents over

the current and prior two years (except in the

first year of implementation, when a two year

average is being used). This will soften the fiscal impact of a reduction in residents. While a

hospital will still receive less reimbursement

from Medicare if it reduces residents, this provision provides higher payments to a hospital

than it would otherwise receive for two years

after a reduction in residency positions.

• Medicare+Choice GME Carve out: Over the

next five years, the GME funds that Medicare

would have included in its payments to managed care organizations will gradually be excluded

from those payments to the HMOs

and held for distribution directly to

the teaching hospitals, which will

collect those funds to the extent that

they treat Medicare managed care

enrollees. From fiscal year 1998 to

fiscal year 2002, the share of GME

funds “carved out” will grow from

20 percent to 100 percent of the

funds related to GME. This provision secures a major source of

GME funding for teaching facilities. In the absence of this provision, the increase in Medicare +

Choice enrollment would probably

have led to a significant decrease

in Medicare funds related to GME

flowing to hospitals (Table 6).

HCFA has estimated that approximately $6.5 billion dollars will be

carved out over the five years of

the Balanced Budget Act, with $2.6 billion

being carved out in 2002 alone (HCFA,

1998).

The amount of funds to be carved out of the

payments reflects historical levels of Medicare

use of teaching hospitals. Since the GME payments to hospitals are still tied to Medicare

patient use of teaching hospitals, a shift of patients to ambulatory settings and non-teaching

hospitals, would lead to more funds being

carved out than actually being paid to teaching hospitals.

• Financing for training in non-hospital settings:

Under the BBA, free-standing ambulatory care

sites are now eligible for Medicare DME

350

300

250

200

150

100

50

0

FIGURE 16

National Trend in Short Term Hospital Bed Days (in millions)

Source: AHA Guide to the Health Care Field as cited in the Area Resource File, 1997

1970 1975 1980 1985 1990 1995

Bed Days (in millions)

262

280

293

253

239

206

TABLE 6

Medicare + Choice

Value of GME Carve Out (in millions of dollars)

IME DME Total

FY 1998 .............................. $150 $60 $210

FY 1999 ................................ 410 180 590

FY 2000 ................................ 840 440 1,280

FY 2001 ............................. 1,150 670 1,820

FY 2002 ............................. 1,680 970 2,650

IME = Indirect Medical Education

DME = Direct Medical Eduction

Source: Health Care Financing Administration, June 1998
FOURTEENTH REPORT OF COGME 17

funding. In addition, hospitals had not previously been eligible to receive IME payment

for the time that their residents trained at nonhospital ambulatory care sites, such as health

centers, HMOs, and private physician offices.

They will now be able to receive payment for

IME as well as DME. These changes will improve funding for training in ambulatory settings.

• Voluntary Resident Reduction Program: Hospitals across the nation that voluntarily agree

to reduce residents by at least 20 percent over

five years and to increase the number of residents in generalist specialties will be eligible

for transition funding. Similar to the New York

Medicare GME downsizing demonstration, as

participating hospitals reduce residents, their

Medicare funding will also be reduced, but

more slowly than it would be in the absence of

the Voluntary Reduction Program. This allows

hospitals to hire replacement staff or redesign

services. No additional funding will be available for the transitions at the end of the five

years.

• Federal study of hospital overhead and supervisory components of DME: At present, the

amount of DME per resident varies significantly by facility and region. A new study by

the Department of Health and Human Services may include recommendations to reduce

“inappropriate” variation in DME payment

levels.

In summary, many of the provisions of the Balanced Budget Act support the goals of the Council,

including: downsizing; encouraging generalist physicians; encouraging training in ambulatory settings;

and providing a more secure funding stream for

GME as managed care expands.

While the Act removes financial incentives under Medicare to increase the number of residents in

training, it is less clear whether the changes designed to encourage ambulatory training and GME

downsizing will be sufficient to achieve these goals.

Another important consideration is the overall financial implications of the BBA. If hospitals, particularly teaching hospitals, lose significant funding under the BBA, including from the GME related

provisions, then their ability and willingness to continue training physicians could be jeopardized. The

Congressional Budget Office has estimated that the

decrease in the adjustment factor for IME alone will

lead to a reduction of $5.6 billion in Medicare payments to teaching hospitals between 1997 and 2002

(CBO, 1997), and the Association of American

Medical Colleges (AAMC) has estimated that teaching hospital operating margins will drop significantly due to the BBA (AAMC, 1997). However,

HCFA estimates that combined IME and DME payments over the five years of the BBA will steadily

increase (HCFA, 1998). This reflects, in part, the

greater payments through the Medicare + Choice

GME carve out and the expansion of eligibility for

funding for training in ambulatory settings.

3. MEDICARE GRADUATE MEDICAL EDUCATION DOWNSIZING EFFORTS

Two major Medicare efforts to encourage

downsizing the number of residents are the New

York Medicare GME Demonstration and the Voluntary Resident Reduction Program aimed at the

rest of the country. Both efforts are similar.

In 1997, 42 hospitals in New York State entered

into an agreement with Health Care Financing Administration to voluntarily reduce the number of

residents training at their hospitals. As of December 1998, ten of the initial hospitals have withdrawn

from the demonstration; however, one other hospital joined in the second round in 1998 for a total of

33 participating hospitals. As noted in the paragraph

on the Voluntary Resident Reduction Program in

the previous section, the BBA includes a provision

to allow teaching hospitals across the nation to participate voluntarily in a similar program.

Under the provisions of the New York demonstration, hospitals agreeing to a reduction of at least

20 percent of their residents are eligible to receive

transition payments over a six year period. (Five

years for hospitals entering in the second year of

the demonstration.) This allows them to hire staff

to replace residents and to cover other costs associated with the loss of residents. This can be critical

to assuring access to services for the patients previously served by the residents. The transition payments are tied to the number of residency positions

reduced and the level of prior Medicare reimbursement. The share of the GME payments covered by

transition funding declines each year. (The BBA

provisions for the national demonstration are very

similar; however under the BBA, hospitals will not

receive transition payments for the first 5 percent

of the residency positions they eliminate.) By the

end of the demonstration, none of the hospitals will

receive support for the transition or the loss of residents.

The demonstrations require hospitals to make a

firm commitment to reduce positions or face severe

penalties. In New York, participating hospitals must

agree to reduce total residency positions by 20
FOURTEENTH REPORT OF COGME 18

percent over the course of the demonstration if they

are part of a GME consortia or commit to a 20 percent increase in the percent of their residents in primary care, obstetrics and/or geriatrics residency

positions. Other New York hospitals entering the

demonstration must agree to at least a 25 percent

cut in positions. (In the BBA demonstrations, dental and podiatric residents are exempt; this is not

the case in the New York demonstration.)

In New York State, the goals of the demonstration are further supported by a change in New York

State GME financing policies. The New York State

Health Care Reform Act, effective January 1997,

includes a Professional Education Fund for GME

of $554 million from assessments on private payers

of hospital care. Ninety percent of the Fund is distributed based on historical resident counts and

costs. The funding for a teaching hospital is unaffected by increases or decreases in residents during

the period of the New York legislation (1997-1999).

This provides an incentive to downsize residency

positions. However, there is no certainty that this

Fund will continue after 1999.

The remaining ten percent of the funding is

for a GME Reform Incentive Pool which provides

an explicit incentive to support workforce goals,

with the distribution of a majority of funds tied

to a reduction in total residents and an increase

in primary care residents. (New York has its own

criteria for defining primary care programs; this

includes a minimum percent of graduates actually going into primary care practice after training.) Many New York hospitals not in the Medicare GME demonstration are also reducing positions

although to a lesser extent than those in the demonstration.

Since New York State residency programs train

15 percent of all allopathic residents in the nation

and 30 percent of all IMGs residents (JAMA,

1998B), the potential impact of the demonstration

program is significant. Hospitals participating in the

New York Medicare demonstration have approximately 5,300 residents. Since all participants are

committed to a reduction of either 20 percent or 25

percent, depending on a number of variables, the

demonstration is expected to lead to a reduction of

between 1,000 and 1,300 residents by the year 2002.

This represents approximately 1 percent of the

nation’s residents. HCFA has estimated that Medicare will save $400 million in reduced hospital payments due to the demonstration over the six years

of the project. Savings after the end of the project

will be even more significant as all transition payments will be ended and Medicare payments will

continue at lower levels.

An analysis of AMA GME data for New York

for July 1996 and July 1997 (the residency years

just before and after the Medicare GME demonstration and the New York State GME reforms)

found that Medicare GME demonstration hospitals

had reduced their residents by five percent, while

the other teaching hospitals in the State had reduced

their residents by two percent over the period. (Center for Health Workforce Studies, 1998 B).

Many hospitals in New York were interested in

decreasing residents but decided not to participate

in the Medicare demonstration. Several reasons have

been cited by these hospitals: the minimum 20 percent reduction in residents is a significant cut; the

penalties for failure to reach the minimum reductions is severe; the costs of replacing the residents

is high; and Medicare GME payments decline

steadily after the first year. Many hospitals, therefore, decided to reduce residency positions and seek

State funding for their reductions but not enter the

Medicare demonstration. In its first year, 1997, 31

hospitals not in the Medicare demonstration received funding from New York’s GME Reform Incentive Pool for reducing residents. This will significantly add to the total decrease in residents in

New York.

Hospitals in the New York Medicare demonstration have also committed to either maintaining or

increasing by 20 percent the percent of residents in

generalist specialties over the course of the demonstration. Therefore, the net result will be an overall

increase in the percent in generalist specialties. The

New York State GME Reform Incentive Pool also

provides incentive payments for increases in generalist training positions. The preliminary analysis

of the AMA GME data confirmed that the majority

of reductions in New York were in non-generalist

positions (Center for Health Workforce Studies,

1998B).

The number of hospitals that are likely to take

advantage of the BBA Voluntary Resident Reduction Program is difficult to predict. As noted, many

hospitals in New York were concerned with provisions of the demonstration, including the requirement to commit to a reduction of at least 20 percent. Furthermore, hospitals that agree to reduce

residents under the BBA provisions would not receive transition funding for the first five percent of

their reductions.

The Congressional Budget Office has estimated

that the Voluntary Resident Reduction Program will

save Medicare $900 million between 1998 and 2002

(CBO, 1997). This would imply reductions in residency

positions substantially greater than in New York, where

the six-year savings were estimated at $400 million.
FOURTEENTH REPORT OF COGME 19

4. STATE GRADUATE MEDICAL EDUCATION

ACTIVITIES

Historically, most States have supported State

medical schools as well as initiatives to address

specific concerns, such as shortages of physicians

in rural and urban areas. Very recently, States have

become involved with graduate medical education

financing and policies. Over the past several years,

17 States passed GME related legislation and as of

October 1998, 19 States have decided to “carve out”

GME associated funding from Medicaid managed

care payments, and some have linked the distribution of their Medicaid GME funds (or other State

funds) to State workforce goals. In addition, many

States have set up committees and task forces to

advise State leaders on GME financing polices.

These developments are significant and may

represent a potential new locus of responsibility for

physician workforce policy development. This section reviews recent State activities, the relationship

to the Council’s goals, and the potential for States

to assume greater responsibility for physician

workforce policies and/or to partner with the Federal government. In order to assess the extent and

nature of State GME financing, a survey of State

GME activities was conducted for the Council (Center for Health Workforce Studies 1998A).1

STATE SUPPORT FOR MEDICAL EDUCATION

AND PHYSICIAN REDISTRIBUTION EFFORTS

Traditionally, States have been very involved

in financing medical education. Unlike most professions, the majority of the nation’s medical

schools are publicly supported. Seventy-four of the

125 allopathic medical schools are publicly sponsored (JAMA, 1998A); many others receive State

financial support. The extensiveness of State support most likely reflects a desire to meet the health

care needs of State residents and a desire to assure

access to medical school for individuals living in

the State; the vast majority of students at State medical schools are from within the State.

In response to concerns about shortages of physicians and limited access to services, many States

have developed programs to encourage physicians

to practice in underserved areas, particularly rural

and inner city communities. For example, many

States have established grants to family practice

residency programs, scholarships for service, loan

forgiveness and practice development grants. In

some cases, States have mandated that State supported medical schools and their affiliated training

programs have a family practice residency program

or train physicians in rural communities and/or produce a minimum percent of generalists. Some States

also directly or indirectly support residency training through their funding of public hospitals or clinics, some of which are at publicly sponsored academic medical centers. Most of these State activities

are funded by State tax levies.

TRADITIONAL STATE MEDICAID FUNDING FOR

GRADUATE MEDICAL EDUCATION

The major source of State funds for GME is the

Medicaid program. While most of the myriad of

State programs for undergraduate medical education and physician redistribution have involved State

legislation and/or a specific item in a State budget,

State funding for GME has generally escaped public review. Traditionally, State GME funding has

been part of the State’s inpatient rates for Medicaid. While there are no Federal statutes or regulations specific to GME reimbursement in the Medicaid program, general payment policies do apply.

Most States have modeled their Medicaid GME

payment policies on the Medicare methodology,

with components for direct graduate medical education (DME) and indirect medical education (IME)

calculated similar to Medicare. Because GME related costs were embedded in the Medicaid inpatient reimbursement on a formula basis, there was

no requirement for executive or legislative review

and approval; in fact, the actual amount of payment

associated with Medicaid was not (and is still not

fully) known to the public or State policy makers in

most States. The survey of States revealed that States

provide nearly $2 billion per year for GME through

the Medicaid program for the GME related expenses.

Until recently most States had few caps on GME

related costs and no limits on the number of residents for which a hospital could claim payment.

Hence, similar to Medicare, the Medicaid program

may have provided an incentive for hospitals to add

residents.

NEW STATE GME FINANCING POLICIES

Recently, there has been a major increase in

State interest in GME financing and policies. This

appears to be driven by the expansion of Medicaid

managed care and the uncertain financial status of

teaching hospitals. As States move aggressively to

enroll their Medicaid population in managed care,

the traditional Medicaid GME funding stream to

teaching hospitals is disrupted. Instead of the State

Medicaid program reimbursing hospitals for each

Medicaid patient in the hospital, hospitals must

1 The Center also received partial funding for the state GME

survey from the Commonwealth Fund.
FOURTEENTH REPORT OF COGME 20

negotiate with each managed care plan. Managed

care plans have a strong incentive to minimize their

expenses; they negotiate rates as low as possible.

In general, they pay hospitals less than the previous

Medicaid rates; managed care may also direct patients to less costly hospitals or avoid hospital use

whenever possible. This comes at a time when the

market has become more competitive and cost conscious and as Congress has sought to limit Medicare GME expenditures.

A major concern of teaching hospitals is that

they will be at a disadvantage in the competitive

marketplace if they have to cover the costs of teaching in their negotiated rates. Training future physicians, they argue, is a benefit to the public; but it is

a cost borne only by the teaching hospital. Thus,

providing funds for GME apart from the negotiated

rates, “levels the playing field” for teaching hospitals, allowing them to compete with non-teaching

hospitals. This is very important as managed care

plans encourage patients to use lower cost hospitals.

Finally, GME funding helps to support care for

the uninsured and medically indigent, research and

development, and education of medical students and

other health professionals. There has been concern

that if hospitals are forced to compete in the open

market without external support for GME, other

activities in the public interest might suffer.

As a consequence of these developments, teaching hospitals have become more aware of, and concerned with maintaining their State Medicaid GME

funding. The Medicaid GME carve out is similar to

the provisions in the BBA that authorize a carve

out of the GME related components of Medicare+

Choice payments and pay these dollars directly to

the teaching hospitals for services rendered. As of

October 1998, 19 States have authorized such a

carve out of the Medicaid GME funds from managed care payments (Table 7). The recent State activity is summarized as follows:

LEGISLATION: During the past two years there

has been a sharp increase in legislative activity

at the State level. Table 7 presents a summary

of the survey of State activities.

Seventeen of the States passed legislation in the

past three years. Much of this legislation was

to establish a commission or task force to advise the State on GME financing and reform.

Some of the other State legislation was to authorize the carve out of GME funds from the

Medicaid managed care payment and some authorized direct State funding for GME and in

one case, private payer support for GME (New

York).

While the list of State level activity is impressive, there have been a number of efforts that

have failed to lead to new funding or a “carve

out” for GME. For example, in 1995 the Governor of Ohio vetoed legislation to provide additional

funding for teaching hospitals. In fact, in many

States, the establishment of task forces to review

GME issues and options reflects a lack of consensus on the problem and/or what needs to be done.

MEDICAID MANAGED CARE GME “CARVE

OUTS”: As indicated in Table 7, 10 of the 18

States with the most allopathic residents, have

now authorized the carve out of GME funds

from Medicaid managed care payments, as have

nine of the other States in the survey. The table

also lists the effective date of the carve out, demonstrating the significant level of activity in the

past three years. Table 7 also indicates the States

in which there is some discussion or exploration of a Medicaid managed care carve out; in

some cases these are part of the mandate of advisory groups; in others the approach is being

discussed by hospital committees or task forces.

It is important to note that States do not necessarily need legislation to authorize the carve out

of GME funds from Medicaid managed care

payments. Depending on how funds are to be

distributed, it is possible to obtain a Medicaid

State Plan amendment or a 1115 waiver from

HCFA. In many States this does not require legislation. In general, if the GME carve-out funds

are going only to teaching hospitals based on

the volume of Medicaid managed care patients

at the hospital, then a Medicaid State Plan

amendment is sufficient. However, if funds are

to flow elsewhere or if new or different criteria

for allocation are to be used, then a waiver may

be necessary, as was the case in Tennessee.

THE LINK TO POLICY GOALS: A critical question for national policy makers is whether this

new level of activity will promote national

workforce goals. While States are becoming

more involved in explicit GME financing policies, this does not imply automatic linkages with

workforce goals or that the workforce goals will

be consistent with national goals. In fact, a

majority of States that carve out GME from

Medicaid managed care payments, flow the

funds directly to teaching hospitals consistent

with traditional reimbursement practices in the

State. Nevertheless, once the amount of funds

devoted to GME is discussed publicly, which is

more likely with a carve out, many State officials and others are likely to consider the benefits to the State and whether to link the funding to State workforce goals.
FOURTEENTH REPORT OF COGME 21

TABLE 7

Allopathic Residents and Medicaid GME Activity by State

State Allopathic Percent Recent Medicaid Medicaid Direct State

Residents of All Legislation Managed Care Fee for Subsidies

August 1997 Residents Carve-Out Service for GME

Effective Date Carve-Out

New York ............................ 14,841 15% 1996 1996 - -

California .............................. 8,431 9% 1997✰ D - Yes

Pennsylvania ........................ 6,484 7% - 1997 Yes Yes

Texas ..................................... 6,025 6% 1997 1997 Yes Yes

Illinois ................................... 5,549 6% 1996✰ D - Yes

Ohio ...................................... 4,725 5% - D - -

Massachusetts ..................... 4,264 4% - D - -

Michigan ............................... 4,185 4% - 1997 Yes -

Florida ................................... 2,646 3% 1997 - - Yes

New Jersey ........................... 2,507 3% - D Yes Yes

North Carolina ...................... 2,393 3% - D - Yes

Maryland .............................. 2,286 2% 1997✰ 1998 - -

Missouri ............................... 2,282 2% - 1995 - -

Minnesota ............................. 2,045 2% 1998 1999 - Yes

District Of Columbia ............. 1,902 2% - - Yes Yes

Virginia ................................. 1,889 2% 1996 1996 - Yes

Georgia ................................. 1,852 2% 1997✰ 1997 - Yes

Tennessee ............................. 1,830 2% - 1996 - -

Connecticut .......................... 1,801 2% 1998✰ ---

Louisiana .............................. 1,709 2% 1997✰ ---

Wisconsin ............................. 1,520 2% - - Yes Yes

Washington .......................... 1,458 2% - - - -

Indiana .................................. 1,228 1% - ‡ - ‡

Alabama ................................ 1,050 1% - - - -

Arizona ................................. 1,032 1% 1997 1997 Yes -

Kentucky .................................. 982 1% 1998 - - Yes

Colorado .................................. 960 1% 1997 1997 Yes Yes

South Carolina ......................... 942 1% - 1996 - Yes

Iowa ......................................... 774 0.8% 1997 1997 Yes -

Kansas ..................................... 694 0.7% - - - -

Rhode Island ........................... 678 0.7% ‡ ‡ ‡ ‡

Oklahoma ................................ 666 0.7% - 1995 - -

Oregon ..................................... 626 0.6% - D Yes Yes

Arkansas .................................. 620 0.6% - - Yes -

West Virginia ........................... 601 0.6% ‡ 1996 Yes ‡

Nebraska ................................. 523 0.5% - - - Yes

Utah ......................................... 522 0.5% 1997 1998 - -

Mississippi .............................. 461 0.5% - 1996 - -

New Mexico ............................. 434 0.5% - 1997 Yes -

Hawaii ...................................... 432 0.4% - - - -

New Hampshire ....................... 264 0.3% - - - -

Maine ....................................... 250 0.3% ‡ ‡ - ‡

Vermont ................................... 226 0.2% - - - -

Delaware .................................. 222 0.2% - - - -

Nevada ..................................... 169 0.2% - - - Yes

North Dakota ........................... 126 0.10% - - - Yes

South Dakota ........................... 104 0.10% - - - Yes

Wyoming ................................... 42 0.04% - - - Yes

Idaho ......................................... 41 0.04% 1998 - - Yes

Montana .................................... 10 0.01% ‡ ‡ ‡ ‡

Alaska .......................................... 8 0.01% ‡ ‡ ‡ ‡

ALL STATES ........................ 97,311 100.0%

‡ Data not available

✰ Legislation for the study of GME

- No or None

Sources: JAMA, September 2, 1998, Appendix II, and Center for Health Workforce Studies, 1998

D Formal and informal discussions of Medicaid

Managed Care Carve-Out in progress
FOURTEENTH REPORT OF COGME 22

Many States are actively promoting workforce

goals, particularly an increase in the number of

residents in generalist specialties (Table 8).

However, States are still more likely to use nonMedicaid State funded initiatives independent

of GME payments to try to address specific

workforce goals. This is usually in the form of

grants or loan forgiveness. In terms of the use

of GME funding streams, nine States are using

their funds to promote additional primary care

physicians. The funds are distributed in a number of ways: several have set aside a share of

the funds for specific initiatives; while others

have conditioned some of the basic fund distribution on performance; others are simply providing a higher payment for primary care residents.

After primary care, the second most common

State workforce goal is the redistribution of physicians to underserved areas, particularly rural

areas. However, as with encouraging primary

care physicians, most States use State grants

rather than GME funding streams to promote

physician redistribution. Support for training in

ambulatory settings is another important goal

for States. More States support ambulatory

training through GME funding links than

through State grants.

Two States (Michigan and Maryland) are using

a small percent of their GME carve out funds to

support innovations in training. Only New York

has identified decreasing residents as a priority

and linked a portion of GME funding to this

goal. This is also a priority of many teaching

hospitals in New Jersey, although it is not currently tied to a formal State policy or funding

mechanism. The most comprehensive State initiative is in Utah where legislation has passed

authorizing an all payer health professions education training fund. Medicaid, Medicare and

private payers would all contribute to the fund

which would be distributed based on the priority workforce needs of the State. While legislation has been passed, there are still many implementation issues to be worked out including

obtaining approval from HCFA for the pooling

and distribution of Medicaid and Medicare

GME dollars.

EVOLUTION OF STATE POLICY MAKING

STRUCTURES: An important policy question is

whether these new State activities include the

development of decision-making structures with

the authority and expertise to assume responsibility for physician workforce planning for their

State. Numerous States have established commissions, task forces or committees related to

GME (Table 9). Twelve of the 20 States with

the most allopathic residents have either temporary or permanent groups and seven have industry groups involved in reviewing GME policies. Some of these groups are short term,

established to make recommendations on GME

financing, and policies. In some States, a Medicaid advisory committee with limited expertise on medical education or workforce needs

has been asked to review and recommend Medicaid GME financing policies. An analysis by

the Center for Health Workforce Studies found

that seven States have workforce planning potential because they have committees or task

forces with all of the following characteristics:

some GME expertise; some permanence; and

some authority for advising on GME policies

(Center for Health Workforce Studies, 1998A).

These committees/task forces could be the foundation for physician workforce policy making

in the future.

The new State GME activities create an opportunity for designing a Federal and State partnership for physician workforce planning. It also

appears that additional Federal guidance and

technical assistance to States could help

strengthen their efforts to identify workforce

needs and to distribute available dollars in a

manner that addresses State needs.

5. TESTING PROCEDURES AFFECTING IMGS

The Educational Commission for Foreign Medical Graduates (ECFMG) evaluates graduates of foreign medical schools for entry into graduate medical education programs in the United States and

provides certificates to international medical graduates who meet minimum standards of eligibility

(ECFMG, 1997). Graduates of foreign medical

schools are required to have a valid ECFMG certificate to enter an allopathic residency program in

the United States accredited by the Accreditation

Council for Graduate Medical Education

(ACGME). (Only graduates of osteopathic schools

can enter a osteopathic residency program. Osteopathic medical education is limited to the United

States; as such there are no IMGs in osteopathic

residency programs.)

To be eligible to enter residency training, IMGs

and graduates of U.S. medical schools must pass

Steps 1 and 2 of the three-step United States Medical Licensing Examination (USMLE), established

by the National Board of Medical Examiners and

the Federation of State Medical Boards. Passage of

all three parts is required for licensure for U.S.

medical school graduates and IMGs (ECFMG,

1997).
FOURTEENTH REPORT OF COGME 23

TABLE 8

State Health Workforce Goals

(in decreasing order of number of resident physicians)

State MMC Encourage Downsizing Increase Redistribute to Other

Carve-Out Primary Care Training in Underserved Workforce

Ambulatory Urban/Rural Goals

Setting

New York .................................✓✓ ✓ ✓ ✓ ✓

California ..................................- S - - S -

Pennsylvania ...........................✓ S- -S -

Texas ........................................ ✓ ✓S- S S S

Illinois ....................................... - S - - - -

Ohio ..........................................- - - - - -

Massachusetts ......................... - ✓ - SSS

Michigan .................................. ✓ ✓ - SS ✓

Florida ....................................... - S - - - -

New Jersey ............................... - - - - - -

North Carolina ..........................- S - S S -

Maryland .................................✓ ✓ - -- ✓

Missouri .................................. ✓ -- ---

Minnesota ................................ ✓ S- -S -

District Of Columbia ................. - - - - - -

Virginia .................................... ✓ -- ---

Georgia .................................... ✓ S- -SS

Tennessee ................................ ✓ ✓ - ✓ ✓ -

Connecticut ..............................- - - - - -

Louisiana ..................................- - - - - -

Wisconsin ................................. - S - - S -

Washington ..............................- - - - - -

Indiana ..................................... ‡ S - - S -

Alabama ....................................- - - - - -

Arizona .................................... ✓ -- ---

Kentucky ................................... - - - - S -

Colorado .................................. ✓ S- -S -

South Carolina .........................✓ -- ---

Iowa .........................................✓ -- ---

Kansas ......................................- - - - - -

Rhode Island ........................... ‡ ‡ ‡ ‡ ‡ ‡

Oklahoma ................................ ✓ ✓ - ---

Oregon ......................................- - - ✓ - -

Arkansas ................................... - - - ✓ - -

West Virginia ...........................✓ ‡‡ ‡‡‡

Nebraska ..................................- ✓ - - ✓ ✓

Utah .........................................✓ ✓ - ✓ S ✓

Mississippi .............................. ✓ -- ---

New Mexico .............................✓ ✓ - - ✓ -

Hawaii ....................................... - - - - - -

New Hampshire ........................- - - ✓ - -

Maine ....................................... ‡ ‡ ‡ ‡ ‡ ‡

Vermont ....................................- - - - - -

Delaware ................................... - - - - - -

Nevada ......................................- - - - - -

North Dakota ............................- - - - - -

South Dakota ............................- S - - - -

Wyoming ..................................- S - - - -

Idaho ........................................- - - - - -

Montana .................................. ‡ ‡ ‡ ‡ ‡ ‡

Alaska ...................................... ‡ ‡ ‡ ‡ ‡ ‡

MMC = Medicaid Managed Care

‡ Data not available

✓ Linked to GME funding - None

S State grants

Source: Center for Health Workforce Studies, 1998
FOURTEENTH REPORT OF COGME 24

Effective July 1998, an IMG seeking to obtain

an ECFMG certificate to enter residency training,

will also be required to pass the Clinical Skills Assessment examination (CSA). This is a one-day

examination that tests both clinical proficiency and

spoken English language proficiency. Passage of

Steps 1 and 2 of the USMLE and the English

language proficiency exam are a prerequisite to taking the CSA (ECFMG, 1997). Unlike Steps 1 and 2

of the USMLE which are offered around the world,

the CSA will be offered only in Philadelphia and

only in English (National Board Examiner, 1998).

In addition to the new examination, another

major change in testing procedures will be implemented in 1999 when all three parts of the USMLE

will be converted from a paper examination to computerized examination. Testing centers will be established around the world. (National Board Examiner, 1998)

It is not possible at this time to evaluate the

impact of the new clinical skills assessment exam,

and the computerization of the USMLE. However,

the changes in the examination process are likely

to reduce the number of IMGs applying for and

becoming eligible to enter residency training. The

CSA represents a brand new test and it is very unlikely that all applicants will pass. A significant

percent of IMGs do not pass the USMLE steps on

their first try (Table 10). In addition, some IMGs

may not be able or willing to travel to Philadelphia

to take the exam. The computerization of the

USMLE may also represent a new hurdle for individuals not accustomed to this type of examination.

The new test and procedures could reduce the number of new IMGs seeking and obtaining ECFMG

certificates. On the other hand, even if this were the

case, it could be several years before residency programs feel the full impact of the change as there are

many IMGs with ECFMG certificates that have not

yet been accepted into residency programs; these

ECFMG certificates are still valid. This pool could

lessen the immediate impact of the new testing

policies.

On another IMG related issue, COGME has

recommended that the U.S. policies for physicians

with temporary visas be revised to restore the original intent of the temporary visa program. In 1997-

98, 9.4 percent of all allopathic residents had J-1

and J-2 exchange visitor visas and another 2.7 percent had temporary worker (H series) visas (JAMA,

1998B). If the recommendations of the Council regarding these visa categories are implemented, there

would probably be a reduction in residents seeking

and entering training and remaining in the United

States. The survey of residents completing training

in New York in 1998 found that only 24 percent of

TABLE 9

State GME Advisory Committees

(in decreasing order of number of resident physicians)

State Temporary Permanent Voluntary Workforce

Commission Advisory Industry Planning

Group Advisory Group Potential 1

New York ...................... - Yes - Yes

California ...................... - Yes✰ - -

Pennsylvania ................ - - Yes -

Texas ............................. - Yes - -

Illinois ........................... - Yes✰ Yes Yes -

Ohio .............................. - - Yes -

Massachusetts ............. - - - -

Michigan ....................... - - Yes -

Florida ........................... - Yes Yes -

New Jersey ................... - Yes✰ Yes Yes

North Carolina .............. - - - -

Maryland ...................... Yes✰ - --

Missouri ....................... - - - -

Minnesota ..................... - Yes Yes Yes

District Of Columbia ..... - - - -

Virginia ......................... Yes✰ - --

Georgia ......................... Yes✰ - --

Tennessee ..................... - - - -

Connecticut .................. Yes✰ - --

Louisiana ...................... - Yes✰ Yes Yes

Wisconsin ..................... - - Yes -

Washington .................. - - - -

Indiana .......................... ‡ ‡ ‡ ‡

Alabama ........................ - - - -

Arizona ......................... - - Yes Yes

Kentucky ....................... - - - -

Colorado ....................... - Yes Yes -

South Carolina .............. - - - -

Iowa .............................. - - - -

Kansas .......................... - - - -

Rhode Island ................ ‡ ‡ ‡ ‡

Oklahoma ..................... - - - -

Oregon .......................... - - - -

Arkansas ....................... - - - -

West Virginia ................ ‡ ‡ ‡ ‡

Nebraska ...................... - - - -

Utah .............................. - Yes✰ - Yes

Mississippi ................... - - - -

New Mexico .................. - - Yes -

Hawaii ........................... - - - -

New Hampshire ............ - - Yes -

Maine ............................ ‡ ‡ ‡ ‡

Vermont ........................ - - - -

Delaware ....................... - - - -

Nevada .......................... - - Yes -

North Dakota ................ - - Yes -

South Dakota ................ - - - -

Wyoming ...................... - - - -

Idaho ............................ - - - -

Montana ....................... ‡ ‡ ‡ ‡

Alaska ........................... ‡ ‡ ‡ ‡

‡ Data not available

✰ Legislative mandate for the

study of GME financing

- No

1 As assessed by Center for Health Workforce

Studies

Source: Center for Health Workforce Studies, 1998
FOURTEENTH REPORT OF COGME 25

generalist physicians to coordinate

and manage care for patients with

diagnosis/conditions for which the

specialist has the greatest expertise. Finally, the whole system will

have a more patient-oriented focus

(Stevens, 1997; National Health

Policy Forum, 1998). These

changes are consistent with the

recommendations of COGME,

particularly the reorientation to

generalism and the reduction in

specialty training positions.

IMPLICATIONS OF RECENT

TRENDS AND RECENT

DEVELOPMENTS FOR COGME

RECOMMENDATIONS

The recent developments and initiatives are reviewed for their impact on COGME goals. Table

11 summarizes the general directions of the influence on each goal.

1. LIMIT GROWTH IN PHYSICIAN SUPPLY: The

number of physicians in training has leveled

off and is likely to decrease for the next few

years. The number of international medical

school graduates entering training has decreased over the past 5 years. The recent trends

may reflect anticipation of changes in Medicare payment, increased competition among

hospitals and reduced support for GME, the

growing concern with surpluses in some specialties, and/or declining hospital use. Many

of the most recent developments, particularly

marketplace pressures, the Balanced Budget

Act, and the Federal Medicare reduction demonstration in New York, encourage downsizing

the number of residents. However, it is unlikely

that the 110 percent goal will be reached within

the next five years.

2. INCREASE THE PERCENT OF PHYSICIANS IN

GENERALIST SPECIALTIES: The marketplace,

State GME initiatives, private sector initiatives

and new VA policies are all contributing to an

increase in the percent of residency positions

in generalist specialties. However, the number

of non-generalist specialists being trained still

significantly exceeds the target recommended

by the Council. To achieve the Council target

for specialists, the number of physicians entering specialist residency positions would need

to decrease by approximately 4,000 per year.

On the other hand, the growing surplus in some

subspecialties appears to be contributing to an

the J-1 and J-2 visa doctors who were completing a

residency training program were returning to their

country of origin. The majority went on to

subspecialize. Of those going into patient care practice, the vast majority were going into Federally designated Health Professions Shortage Areas.

Excluding those residents who were going on to

subspecialize (since some of these physicians will

return to their native country after completing their

subspecialty training), 32 percent of those completing their training were leaving the U.S. (Center for

Health Workforce Studies, 1998A). A return to the

original intent of the temporary visa programs could

reduce the number of physicians entering residence

training and practice in the U.S.

6. DEPARTMENT OF VETERANS AFFAIRS

GME POLICIES

The Department of Veterans Affair trains more

physicians than any other single organization in the

country. The VA has formal affiliations with 107 of

the nation’s medical schools and trains nearly 10

percent of the nation’s residents. The Department

of Veterans Affairs supports 8,900 residents nationally. In addition, thousands of other residents rotate

through the VA for some of their training. In total,

34,000 residents receive some or all of their training at the VA each year (Stevens, 1997). Thus, VA

policies have a very significant impact on the

nation’s future physician workforce.

The VA is in the process of a major reorganization of its very large service delivery network. The

VA system is being reoriented towards more primary care, coordination of care, and patient satisfaction. The implications for physician training are

significant. First, the VA is in the process of eliminating 1,000 specialty positions between the 1997-

98 academic year and 1999-2000 academic year.

Second, the VA will add 750 generalist positions,

for a net reduction of 250 positions. Third, the VA

will establish a “primary specialist” to allow nonTABLE 10

USMLE Steps 1, 2 and 3

PASS RATES: FIRST-TIME TAKERS, 1996-97

STEP 1 STEP 2 STEP 3

Total 1997 1996-97 Cohort Total Total 1997

# TESTED % PASSING # TESTED % PASSING # TESTED % PASSING

Allopathic Students ............. 16,719 95% 16,441 94% 16,440 94%

Osteopathic Students .......... 271 78% 110 83% 47 92%

IMG Registrants .................. 19,087 58% 14,913 52% 7,030 63%

Source: The National Board Examiner, 1998
FOURTEENTH REPORT OF COGME 26

increased interest in generalist residency positions. The expanded eligibility for funding

for training in ambulatory sites authorized by

the Balanced Budget Act and some States, may

also encourage more generalist training. Recent surveys of medical students and the results of the National Residency Match Program

have documented the increased interest in primary care specialties by U.S. medical school

students. While the nation has not yet reached

the COGME target for generalist physician

production, it is getting close and recent trends

are very encouraging. The nation is likely to

reach its target for the production of generalists within the next few years.

3. TRAIN IN AMBULATORY SETTINGS: Medical

schools, residency review committees and

some States have promoted additional training in ambulatory settings and cooperation with

managed care organizations. The expansion of

the settings and arrangements under which

Medicare will recognize the costs of training

in ambulatory care settings should also facilitate training in ambulatory settings. Nevertheless, it remains to be determined

whether the recent pressures to

shift training to ambulatory settings and the more supportive payment policies will be sufficient to

overcome the significant financial, logistical and other barriers

to ambulatory training.

4. ESTABLISH A HEALTH WORKFORCE PLANNING SYSTEM:

The marketplace, the Balanced

Budget Act, State actions and

other recent developments are

moving the physician workforce toward the COGME 110/

50-50 goals, albeit slowly to

date. The Balanced Budget Act

has taken an important step by

reducing the financial incentives to train more residents. It

also appears that residency

programs do respond by

downsizing when supply exceeds demand and graduates

encounter difficulty in the job

market. While the Federal government can and should play

an important role in promoting

a workforce consistent with

health care needs, this can be

done in several ways. Potential

Federal roles in support of the

marketplace include: the collection and dissemination of findings on the physician marketplace; support for new training and organizational models and demonstrations; and

design of financing systems that encourage a

workforce consistent with needs. The recent

increase in State activities offers additional opportunities to support education and training

consistent with local and regional needs

through Federal-State collaboration.

5. PROVIDEADEQUATE FINANCING FOR TRAINING: The data available on the financial health

of the nation’s academic health centers and

other teaching hospitals do not indicate a general fiscal crisis at the present time. However,

many of the recent developments raise serious

concerns about their future fiscal viability. The

competitive marketplace and the drive to constrain costs are likely to put increasing fiscal

pressure on most hospitals as well as ambulatory service sites. Training physicians can add

significantly to the cost of care; furthermore,

teaching hospitals, particularly academic

medical centers, provide many related public

TABLE 11

Impact of Recent Developments on COGME Goals

RECENT DEVELOPMENTS

COGME Goals BBA Marketplace State Medicare VA IMG

Actions Downsizing Policies Exam

Demos

Limit Growth of Physician

Supply ................................... + ++ +/– +++

Increase Percent Generalist

Care ...................................... + ++ ++ + ++ N/A

Train in Ambulatory

Settings................................. + + + N/A + N/A

Establish a Health Workforce

Planning Process .................. +/– –– + N/A N/A N/A

Provide an Adequate

Financing for Training ........... +/– –– +/– N/A N/A N/A

Presere Safety-Net

Providers .............................. –– –– N/A N/A N/A ––

Increase Diversity ................... N/A N/A +/– N/A N/A ––

“+” Indicates a moderate influence consistent with COGME goals

“++” Indicates a strong influence consistent with COGME goals

“– –” Indicates a moderate influence not supportive of COGME goals

“+/–” Indicates a mixed influence

N/A Not Applicable
FOURTEENTH REPORT OF COGME 27

services that can add to costs. The competitive

marketplace and the lack of a system to fund

physician training independent of funding for

patient care services pose a threat to the

nation’s GME infrastructure.

While managed care plans may be willing to

pay slightly higher rates to have a teaching hospital in their network, they are also likely to

resist paying the full cost of teaching. Furthermore, given the competition between

plans and pressure from employers, managed

care plans are likely to move patients away

from high cost providers whenever possible.

Thus, teaching hospitals could find themselves with lower payment levels and fewer

patients.

A strong case can be made that training the

future physician workforce is a “public good”.

Teaching hospitals and other sites incur the

costs of training new physicians but the whole

community benefits. This issue may be even

more serious for ambulatory sites where payment is very limited and training can be disruptive to patient flow and productivity. Unfortunately, the competitive marketplace leaves

little room for voluntary support of these kinds

of public goods.

6. PRESERVE SAFETY NET PROVIDERS: Recent

developments do not offer much support for

safety net providers that train physicians. They

face the same pressures as all teaching hospitals, but they serve significant percentages of

uninsured patients and have less leverage in

negotiating with managed care plans and other

payers. In addition, physicians in training are

important providers of care in these institutions. To the extent that GME payment is reduced through the competitive marketplace

without an increase in funding for care for the

uninsured, services for the uninsured and the

fiscal viability of safety net teaching hospitals

will be endangered.

7. INCREASE DIVERSITY: Recent developments

appear to do little to support the Council’s goal

of increasing the diversity of the physician

workforce. There are no specific provisions in

the BBA that would directly affect efforts to

increase underrepresented minorities in medicine. While some States have established specific initiatives or policies to increase diversity in medicine, there have been a number of

major setbacks to State policies in this area. In

general, increasing competition in health care,

the fiscal concerns of academic medical centers and efforts to decrease the total number of

residents could weaken the already limited efforts by academic medical centers to address

the historical shortages of underrepresented

minorities in medicine.
FOURTEENTH REPORT OF COGME 28
FOURTEENTH REPORT OF COGME 29

Recommendations Recommendations

PHYSICIAN WORKFORCE

PLANNING

The available evidence suggests that progress

is being made toward the physician workforce goals

identified by the Council on Graduate Medical Education. Yet there are a number of steps the Federal

government can undertake to more effectively promote a physician workforce consistent with the

health care needs of Americans. These recommendations are designed to reinforce prior COGME recommendations, to support the workings of the marketplace, and to encourage effective State decision

making.

RECOMMENDATION 1

ENCOURAGE A MORE EFFECTIVE MARKET FOR

PHYSICIAN SPECIALTY AND GEOGRAPHICAL LOCATION CHOICES. The Federal government, the medical education community and the States should foster a more effective marketplace for the training of

physicians by expanding the collection and dissemination of data on supply, need and demand for physicians by specialty and region. This information

should be shared in a systematic manner with medical schools, teaching hospitals, residency programs,

medical students, policy makers, States, payers, and

the general public.

Evidence suggests that U.S. medical students

and residency program directors are responsive to

information on career opportunities and workforce

needs. Yet, in the absence of more accurate and more

timely information on the current and projected

supply, demand and distribution of physicians, it is

difficult for the marketplace for GME to work effectively. Recent developments, such as the Balanced Budget Act, which reduce the financial incentives to hospitals to train more physicians, and

new testing policies for international medical school

graduates (IMGs), which may reduce the number

of IMGs entering training, increase the likelihood

that the marketplace for training physicians can

work effectively. The timely and systematic collection and dissemination of data on supply, demand

and distribution will promote the training of a physician workforce consistent with the needs of the

nation. This should build on the existing data collection activists of such organizations as the AMA,

AAMC and the AHA.

Promoting a physician workforce that meets

future health care needs of Americans will be also

be facilitated through expanded research on a wide

range of issues related to the physician workforce

and practice patterns. Particularly important is a

better understanding of the impact of changes in

the marketplace, technology, and the aging of the

general population and physicians on the supply,

demand and use of physicians and the competencies that physicians will need in the future.

RECOMMENDATION 2

INTEGRATE WORKFORCE PLANNING FOR PHYSICIANS AND NON-PHYSICIAN CLINICIANS. A new national system for integrated health workforce planning should be established. This could include an

advisory committee or forum that encompasses a

variety of health professionals in a collaborative

planning process and expanded data collection on

all health professions. This could also include a system to track and monitor the impact on residency

training of the Balanced Budget Act, the marketplace,

State GME policies and other recent developments.

The growth in the number and types of physicians, non-physician clinicians and other health

personnel being trained, the increasing need for

collaboration among health professionals, and the

need for basic data to help formulate public and

private policies and programs, all support the need

for a national health workforce planning process.

This process should allow for the diversity of

programs and approaches and should stress expanded data collection for all health professions,

an integration of planning across professions and a

forum for a dialogue involving numerous professions. An advisory committee with representation

from a wide array of health professions, could be

established to promote collaboration among professions to monitor trends in supply, demand and utilization, and to promote education and training to

meet the health care needs of the nation. Alternatively, existing national advisory committees on the

health professions workforce, such as the COGME,

and the National Advisory Council on Nursing Education and Practice (NACNEP) could coordinate to

carry out integrated analyses and assessments of the

health professions workforce supply.

RECOMMENDATION 3

PROVIDE FINANCIAL INCENTIVES FOR PRIORITY

NATIONAL WORKFORCE GOALS. A portion of the GME

carve out from the Medicare+Choice payments
FOURTEENTH REPORT OF COGME 30

should be distributed based on performance consistent with national physician workforce goals.

The Balanced Budget Act authorizes the “carve

out” of GME dollars from the Medicare payments

for Medicare+Choice enrollees. The carve out is

being phased in over five years. The Health Care

Financing Administration estimates that the dollar

value of this carve out will reach $2.6 billion by

Federal fiscal year 2002. This will be a very visible

Federal Medicare contribution for GME. These

funds are to be distributed based on current Medicare GME payment policies. While progress is being made toward the COGME workforce goals for

the nation, progress has been slow and there are

some important gaps.

Several States that now carve out the GME portion of Medicaid managed care payments and distribute the funds to teaching hospitals, link the distribution of a portion of these funds to performance

in achieving State GME policy goals. This includes

such goals as increasing the number of generalists

being trained and increasing training in ambulatory

sites. These may be models for the Medicare+Choice GME carve out.

Under the Balanced Budget Act, the amount of

funds to be carved out of the Medicare+Choice payments is based on historical rates of GME payments

and Medicare patients use of teaching hospitals.

Payments to teaching hospitals, however, will be

based on actual use of teaching hospitals by

Medicare+Choice enrollees. Because use of teaching hospitals by Medicare+Choice enrollees may

be less than in the past due to changes in patterns of

use under managed care, the amount carved out of

the payments is likely to exceed the amount to be

paid out to teaching hospitals. This difference could

form the base for financial incentives to promote

national physician workforce goals. The implementation of the Medicare carve out is an opportunity

to promote workforce goals without raising new

funds. The Council recommends legislation to authorize these changes.

RECOMMENDATION 4

PROMOTE FEDERAL-STATE PARTNERSHIPS FOR

HEALTH PROFESSIONS PLANNING. Federal policy

and programs should support and encourage the

development of State GME policy-making structures

and effective workforce policies. The Federal government should explore approaches to collaboration and partnerships with States with workforce

planning systems.

States have a major interest in GME within their

boundaries. GME is a major determinant of the supply and specialty mix of physicians in States, which

directly affects the availability and cost of medical

services. As indicated in this report, many States

have recently become involved with GME financing and policies. This builds on traditional State

commitments to undergraduate medical education,

State supported academic medical centers, and State

efforts to address shortages in underserved rural and

inner city communities. While some States have

linked their new authority over GME financing with

their workforce needs, this effort is still in the early

stages of development. A new Federal initiative to

help States build the expertise and capacity for

workforce planning would be very timely. Particularly important for States, will be the willingness

of the Health Care Financing Administration

(HCFA) to support State innovations under the

Medicaid program, which is the major source of

State GME funding.

Because of the newness of State activities in

this area, it is not yet known whether regulatory or

statutory changes will be necessary to allow States

the flexibility to target their Medicaid GME dollars to their workforce needs. This should be monitored closely.

Congress has indicated its willingness to explore

flexibility with Medicare GME funds to encourage

rational workforce planning through the authority

in the Balanced Budget Act for demonstrations with

GME consortia. This might be a vehicle for demonstrations with States. The demonstration authority could permit Medicare GME funds to be distributed based on a State GME priorities.

DECREASING THE NUMBER OF

PHYSICIANS IN TRAINING AND

INCREASING THE NUMBER OF

GENERALISTS

As documented in this report, there are a number of forces encouraging a decrease in the number

of residents being trained in the U.S. Yet it is unlikely that the new developments will be sufficient

to reach the goals of COGME for downsizing. The

number of residents should be monitored closely

and consideration should be given to additional incentives for downsizing.

RECOMMENDATION 5

CONTINUE TO PROMOTE A REDUCTION IN THE

NUMBER OF PHYSICIANS IN TRAINING, PARTICULARLY SPECIALISTS. If there is not a significant decline in first year residency positions by the 2000-01

academic year, additional incentives for downsizing

should be implemented.
FOURTEENTH REPORT OF COGME 31

It is difficult to predict with specificity the impact of all of the recent developments with any confidence. It is important, therefore, to monitor closely

the number of new entrants entering training each

year. If new entrants into allopathic and osteopathic

residency positions do not drop to 115 percent of

the 1993 U.S. medical school graduates by the 2000-

01 academic year, then additional downsizing incentives should be implemented.

It appears that the marketplace and many of the

previous efforts to increase the number of generalist physicians have been effective and that the nation is making good progress toward its target for

the production of generalists. Additional policies

to increase physicians training in generalist specialties do not appear to be needed at this time

RECOMMENDATION 6

PROVIDE ENHANCED TRANSITION SUPPORT FOR

SAFETY NET HOSPITALS THAT REDUCE THE NUMBER OF RESIDENTS IN TRAINING. This should include

the authorization of the use of National Health Service Corps to assist in the voluntary downsizing of

residents in safety net hospitals.

Hospitals that depend the most on residents for

service are least likely to voluntarily reduce residents. Redesigning services and replacing residents

can be difficult and costly—especially for safety

net hospitals in underserved areas. For example,

several hospitals with a high percent of uninsured

patients in New York State decided against entering the Medicare GME demonstration due to the

certain loss of Medicare GME revenues as the demonstration progresses and the anticipated cost of

replacement staff. The current support available

through the Medicare GME downsizing demonstrations authorized by the Balanced Budget Act appears insufficient to assure the fiscal health of safety

net hospitals that reduce residents.

Additional financial support for safety net hospitals from Medicare targeted to support access to

care for the uninsured and technical assistance from

HRSA on the redesign of services and recruitment

of alternatives to residents, would help support a

voluntary reduction and the preservation of essential services. Expanding the National Health Service Corps to include placement at safety net hospitals, as previously recommended by the Council,

could also help assure essential services by safety

net hospitals as they reduce residents.

RECOMMENDATION 7

RESTORE THE EXCHANGE VISITORS VISA PROGRAM TO ITS ORIGINAL INTENT. National policies

and administrative procedures related to physicians

with temporary visas should be revised consistent

with the original purpose of these visas.

In June of 1997, the Council recommended a 4-

year phase out of the policy of granting waivers for

service reasons of the requirement that physicians

with J-1 visas return to their country of origin after

completion of their residency training. This would

help restore the exchange visitor program to its

original purpose of assisting other countries to benefit from advances in medical training in America.

The Council has also recommended that the requirement that J-1 visa physicians return to their originating country for at least two years before returning to the U.S. be increased to five years and that

the use of H-1B visa for physician residency training be eliminated. These policies would help reduce the number of new physicians in the U.S. and

prevent a drain of physicians from other countries.

Most observers believe that the reduction in residency positions that is occurring will lead to a reduction in IMGs, reflecting a preference by residency programs for U.S. medical school graduates.

Since a high percent of IMGs with J-1 visas who

stay in the U.S. go into practice in underserved areas, a decrease in residents with temporary visas

may require an expansion of the National Health

Service Corps and/or other initiatives to assure access in areas now served by IMG physicians with

temporary visas.

GME FINANCING

RECOMMENDATION 8

ESTABLISH A STABLE AND EQUITABLE SOURCE

OF LONG TERM FINANCING FOR GME. Graduate

medical education is a public good that benefits the

whole nation. All payers should share the costs of

training. The Council, therefore, recommends the

development of an all payer financing system that

would spread the costs of preparing a well-qualified physician workforce equitably across all payers.

As the health care marketplace becomes more

competitive and GME financing decreases, the fiscal health of the nation’s teaching hospitals may be

threatened. While the authorization for carve outs

of GME funds from Medicare and Medicaid managed care payments should help preserve a flow of

Medicare and Medicaid dollars to teaching hospitals, the basic framework of the competitive marketplace may create serious problems for teaching

sites.

Training the future physician workforce is a

public service that teaching hospitals provide for
FOURTEENTH REPORT OF COGME 32

the benefit of the whole nation; however, the current marketplace approaches to health care financing are not likely to create sufficient funding for a

quality education for the nation’s future physician

workforce. The responsibility for paying for the

training should not be the sole responsibility of

teaching hospitals nor of Medicare and Medicaid.

It is appropriate, therefore, that the cost of training

be supported by as broad a base of payers as possible.

The erosion in GME payments is likely to increase as competition increases in the health care

industry. The Balanced Budget Act, by reducing the

rate in the growth of payments to teaching hospitals, may also reduce funding for GME. Quality

medical training is costly. Yet, if support for training is inadequate, it will be difficult to provide the

high quality training expected by both policy makers and the public. The Council, therefore, recommends the development of an all payer financing

system that would spread the costs of preparing a

well-qualified physician workforce equitably across

all payers.

There are many benefits of a competitive marketplace; but it does not appear that support for services for the public good are among them. In the competitive environment, payers and purchasers have a

very strong incentive to control costs. Long term

support for public goods, such as physician training, is unlikely in this environment.

This is not to suggest that all teaching hospitals

should receive unrestricted funding regardless of the

nation’s needs for additional physicians. If an all

payer system were established, it would be important to build in mechanisms for public accountability to assure that the funds are spent wisely and carefully to support the workforce needs of the nation.

ENCOURAGING TRAINING IN

AMBULATORY CARE SETTINGS

RECOMMENDATION 9

ASSURE ADEQUATE FUNDING FOR TRAINING IN

AMBULATORY SETTINGS. Policies related to financing GME in ambulatory sites should be reviewed

closely. If necessary, additional policies and programs should be developed to support quality training in ambulatory settings.

While a number of recent developments support increased training in ambulatory care settings,

these may not be sufficient to encourage a significant shift in training to ambulatory care settings.

This should be monitored closely. The Federal government should provide technical assistance and

support the development of models for effective

training in ambulatory settings. Further revisions

in financing policies may be necessary to support

training in ambulatory settings.

In 1999, the Council plans to undertake a review of current policies related to GME financing,

including ambulatory care settings and issue a report on the adequacy of current policies.

CONCLUDING COMMENTS

On a number of issues, such as further reducing

the number of residents in training and increasing

support for training in ambulatory settings, the

Council has recommended modest steps. While

the nation’s physician workforce goals have not

yet been met, as this report documents there has

been clear progress and recent developments provide support for many of the COGME goals. The

Council believes that the strategy recommended in

this report—to promote a more effective marketplace, to develop a more integrated planning process, to provide financial incentives for priority

goals, to work with States, and to advocate for more

stable, long term financing of GME—is an effective strategy. Given the progress being made, recent developments and the potential impact of the

above recommendations, the Council does not recommend a major new Federal authority for determining the physician workforce or major new

governmental expenditures. The Council is hopeful that the recommendations above will be sufficient to achieve the nation’s health workforce

goals.

While the Council believes that the recommendations will help bring the future supply of physicians into balance with the nation’s requirements,

these recommendations are not likely to address

other high priority goals of the Council, such as increasing the diversity of the physician workforce

and the maldistribution of physicians. These goals

continue to be a high priority of the Council and will

require other actions to adequately address them.
FOURTEENTH REPORT OF COGME 33

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FOURTEENTH REPORT OF COGME 37

A critical factor in assessing the proportions of

residents who ultimately become generalists or specialists is the subspecialization rate of primary care

residents, especially those in Internal Medicine.

Table A-1 provides estimates of the distribution of

Appendix: Notes on the Mix of Gener f Generalists

and Specialist and Specialists

residents between primary care and non-primary

care specialties for 1997-98.

The three estimates presented in Table A-1 are

based on several assumptions. All of the scenarios

assume that 78 percent of Pediatrics PGY1s, 95 percent of Family Practice PGY1s, and

78 percent of Med-Ped PGY1s will

eventually choose primary care specialties. These estimates come from

the Bureau of Health Professions

(Politzer, 1998). The Center for

Health Workforce Studies has further assumed that of the 1,589 Preliminary PGY1s included in the Internal Medicine total, none enter

primary care.

The ultimate physician specialty mix is very sensitive to the

percentage of Internal Medicine

PGY1s who ultimately choose primary care. Estimates are provided

in Table A-1 based on assumptions

that 40 percent, 50 percent or 60

percent of Internal Medicine PGY1s

ultimately choose primary care.

These result in estimates of the

change in primary care PGY1 slots

required to achieve the 110/50-50.

Depending on the rate of

subspecialization, the annual production of generalist ranges from

8,605 (40 percent enter primary

care) to 9,830 (60 percent enter primary care). While historically it was

estimated that 60 percent or more

internal medicine residents went on

to subspecialize, recent data from

the Center for Health Workforce

Studies indicate that in New York

State in 1997, only 40 percent were

going on to subspecialize. This

study uses the mid range estimate

of 50 percent for the Internal Medicine subspecialization rate, but the

sensitivity to variations shown in

Table A-1 suggests that policy analysts follow this factor closely in the

future.

TABLE A-1

Calculation of Percent and Number of Primary Care Physicians

THREE SCENARIOS, 1997-98

Percent to PERCENT INT MED TO PRI CARE, 1997-98

Specialty Number Specialty PGY1s* 40% 50% 60% Category

Family Practice ................... 3.260 95% 3.079 3,079 3,097

Pediatrics ............................ 2,458 78% 1,917 1,917 1,917

IM General .......................... 6,126 ** 2,450 3,063 3,675

Preliminary ..................... 1,589 0% 0 0 0

Med-Ped ............................. 435 78% 339 339 339

Osteo Intern PC (60%) ....... 1,335 60% 801 801 801

PRIMARY CARE 8,605 9,217 9,830

Family Practice ................... 3,260 5% 163 163 163

Pediatrics ............................ 2,458 22% 541 541 541

Internal Medicine ................ 6,126 *** 3,675 3,063 2,450

Preliminary ..................... 1,589 100% 1,589 1,589 1,589

Med-Ped ............................. 435 22% 96 96 96

Osteo Intern NPC (40%) ..... 1,335 40% 534 534 534

Other Non-Primary Care ..... 7,940 100% 7,940 7,940 7,940

NON-PRIMARY CARE 14,538 13,926 13,313

TOTAL (ALLOPATHIC + OSTEOPATHIC) 23,143 23,143 23,143

Percent PGY1s Estimated to Enter Primary Care ................... 37% 40% 42%

Total PGY1s Needed to Achieve 110% .................................. 19,757 19,757 19,757

Generalist/Specialist Target ................................................... 9,879 9,879 9,879

Change in Generalist PGY1s to attain 110/50-50 ................... +1,274 +662 +49

Change in Specialist PGY1s to attain 110/50-50 ................... -4,659 -4,047 -3,434

* Actual number of PGY1s in specialty with no prior US graduate training

** Percentage varies by column and is either 40%, 50% or 60%.

***Percentage varies by column and is the complement of either 40%, 50% or 60%.

Center for Health Workforce Studies, 1998
FOURTEENTH REPORT OF COGME 38

HRSA-98-11