The survival of these entities is clearly in everyone s interest. Yet the financial support of teaching hospitals is a patchwork affair, loose in some places, worn through in others. Some support comes through patient care. Through Medicare, Medicaid, private insurance, or other programs, most patients furnish some payment for their own care. In addition, hospitals receive some subsidies for the care of low-income patients, and physicians who coordinate their practices through hospital facilities contribute toward common hospital expenses.
Teaching hospitals are major medical resources for their regions.
Ideally, all parts of the health-care industry would contribute proportionately to these special costs, because all sectors benefit. Since the inception of Medicare, the federal government has committed to carrying its share of these extra costs. Through three sets of formulas, the federal government directs additional funds to the ledgers of teaching hospitals. The IME adjustment, which addresses the higher cost of patient care in teaching hospitals, has also been on a downward slide since 1986. The Balanced Budget Act of 1997 included a plan to further reduce the adjustment by 29 percent between 1998 and 2001.