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Utah Links Federal Funding for Graduate Medical Education to Powered By Docstoc
					Utah Links Federal Funding for Graduate Medical Education
            to State’s Physician Workforce Needs
          This publication was produced for
    U.S. Department of Health and Human Services
     Health Resources & Services Administration
            Office of Rural Health Policy

by Pat Taylor, Ph.D. under Contract # HHSH250200416005P




                           i
                                                                          Contents

Contents ........................................................................................................................................................ ii

Executive Summary ...................................................................................................................................... 1

Introduction ................................................................................................................................................... 3

Chapter 1. Introduction to the Funding of the Graduate Medical Education of Physicians ......................... 4
        Graduate medical education and the training of rural physicians. .................................................... 6
        The urban concentration of Medicare graduate medical education payments .................................. 7

Chapter 2. Start of the Utah Initiative to Align Graduate Medical Education and Statewide Physician
   Need........................................................................................................................................................ 7
   A. State health policy commission foresees health workforce crisis ....................................................... 7
        Determining the costs and revenues of advanced clinical education in Utah ................................... 8
   B. Utah seeks Medicare graduate medical education demonstration project ........................................ 9
   C. The Utah Medical Education Council is born .................................................................................. 10
        Quasi-governmental public commission ........................................................................................ 10
        Council membership and structure ................................................................................................. 11
        Committees .................................................................................................................................... 12
        Broadened perspective of GME stakeholders................................................................................. 12
        Experience in collaborating ............................................................................................................ 13
        Utah culture .................................................................................................................................... 13
        Council staff ................................................................................................................................... 13
        Staff contributions .......................................................................................................................... 14

Chapter 3. The Early Years of the Utah Medical Education Council ........................................................ 15
   A. Building the data bases for health workforce planning and policymaking ..................................... 15
        Healthcare workforce databases ..................................................................................................... 16
   B. Setting Workforce Goals: the Utah Medical Education Year 2000 Report .................................... 17

Chapter 4. Increase in Utah‟s Federal Graduate Medical Education Revenues ........................................ 18
   A. Council financial officer discovers $2 million annually in earned but unclaimed Medicare GME
        payments ........................................................................................................................................ 18
        Teaching hospitals surprised and appreciative ............................................................................... 19
    B. Council facilitates annual multi million dollar increase in Medicaid GME monies........................ 20

Chapter 5. Utah Gets Medicare Graduate Medical Education Demonstration .......................................... 20
   A. Demonstration Design ................................................................................................................... 21
        DME and IME to flow directly to UMEC ...................................................................................... 21
        DME to be paid directly to residency programs ............................................................................. 21
        Aggregate Statewide pool of resident slots..................................................................................... 21
        Council control of number of publicly funded residency slots ....................................................... 22
        Medicaid GME ............................................................................................................................... 22
        Funding pool .................................................................................................................................. 22
        Clinical training in outpatient settings and in care of rural and underserved populations .............. 22


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         Interdisciplinary training ................................................................................................................ 22
         Budget neutral ................................................................................................................................ 22
      B. Implementation of the demonstration ............................................................................................. 22
         Modifying existing residency programs ......................................................................................... 23
         Stabilizing, expanding and adding residency programs ................................................................. 24
         Building health workforce data bases and conducting workforce analyses .................................... 27
         Increasing residents‟ rural training experiences ............................................................................. 27

Chapter 6. Lessons for Other States .......................................................................................................... 30

Chapter 7. Conclusions ............................................................................................................................. 31

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

Appendices .................................................................................................................................................. 35
   Appendix I. Utah Statute Creating the Medical Education Council
   Appendix II          Utah‟s Clinical Healthcare Workforce: Achieving Balance Through 2020
   Appendix III. Centers for Medicare and Medicaid Services - Special Terms and Conditions: Utah
      Graduate Medical Education Demonstration
   Appendix IV Utah Graduate Medical Education Demonstration Waivers




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                                      Executive Summary

        Several National commissions have recommended greater public involvement in
Graduate Medical Education (GME) policy to improve the specialty and geographic distribution
of the future physician workforce. A few States are using the leverage of public GME funding
to achieve some public accountability for the public monies supporting graduate medical
education. The State of Utah‟s involvement in GME policy making is the most far reaching.

        Utah is engaged in an experiment to infuse public priorities into funding decisions on the
education of advanced health care professionals. A state-chartered commission is linking Utah‟s
graduate medical education funding and statewide physician workforce needs. A central element
of this experiment is Utah‟s groundbreaking Medicare Graduate Medical Education
demonstration. The state-chartered Medical Education Council now receives and disburses all
Utah Medicare Direct Medical Education payments. The Council also has authority within the
demonstration to receive all Medicare Indirect Medical Education payments and Medicaid
Graduate Medical Education payments. One goal of the demonstration is to use a portion of
graduate medical education monies for the public goal of increasing the number of graduating
physicians who choose to practice in rural areas.

       Traditionally, graduate medical education funds, including Medicare and Medicaid
monies, have been paid to teaching hospitals and it was they who then decided on the number
and specialties of residency training programs. As nearly all teaching hospitals are located in


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cities, only a very small fraction of Medicare GME payments go to rural hospitals. There has
been no Medicare or Medicaid requirement on teaching hospitals to take account of State or
National physician workforce needs in their decisions on how many GME programs to support
and in which specialties. Utah‟s Medical Education Council is changing this. Council efforts
are focused on expanding physician residency programs in specialties in shortage, increasing the
percent of graduating residents who stay in Utah to practice and increasing the number of
graduating residents who locate in rural areas to practice.

        The Council staff has been successful in substantially increasing Federal GME revenues
flowing to Utah to fund graduate medical education. In the course of its search for additional
Medicare GME revenues, the Council financial officer discovered that the GME section of
teaching hospitals‟ Medicare cost reports is more accurate when compiled using a regional
resident database rather than the resident records of individual teaching hospitals. It was found
that in 1996 Utah‟s teaching hospitals had underreported GME FTEs by approximately 10
percent on their cost reports amounting to $2 million in Medicare GME earned but not claimed.
Also the staff have developed reliable data on the current health professions workforce supply
and projections for workforce need through 2020.

       Utah‟s GME planning initiative may be a model for other States, especially those with
only one or two medical schools and a small number of teaching hospitals. Nevada and Hawaii
have begun to emulate the model. The avenues used by Utah to increase its Federal Medicare
and Medicaid GME payments are worthy of consideration by other States.

        In less than a decade, Utah has created a well-functioning structure and process for
linking the funding of graduate medical education to rational planning to meet Utah‟s future
physician workforce needs. The Council is managing all Medicare DME payments to Utah as
well as additional monies provided by the State‟s teaching hospitals, being used to increase the
number of residents in training. The Council is holding residency programs accountable for
achieving public goals. The Council‟s achievements are remarkable in today‟s health policy
environment in which health planning is in disfavor and competition is widely promoted as the
means for solving problems of the health care system.




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                                                Introduction
          There is growing concern among health policy experts that the Nation needs more effective means
 to assure the training of an appropriate complement of physicians. There is a chronic maldistribution of
 physicians across the Nation, an oversupply and concentration of specialists and a shortage of primary care
 physicians. Several government and foundation commissions have considered means by which to address
 these problems. (COGME, 1997, 1999, 2000a; Commonwealth, 1997; Pew, 1998). Their
 recommendations consistently include a larger role for government in the policy decisions shaping the
 graduate training of physicians. At present Federal and State governments bear a large part of the cost of
 graduate physician training, but have little input into decisions affecting the specialty mix of physicians to
 be trained or their practice locations upon completion of training. However, a few States are using the
 leverage of public funding for graduate medical education (GME) to further public physician workforce
 goals. (Henderson, 1998). The State of Utah‟s involvement in GME policy making is the most far
 reaching.

          Utah is seven years into a bold experiment to infuse public priorities into decisions on the shape of
 graduate medical education in Utah – how many physician residents will be trained, in which practice
 settings, and in which specialities. A state-chartered commission is charged with linking the funding of
 graduate medical education to Utah‟s statewide physician workforce needs. A key element of this State
 experiment in physician workforce planning is Utah‟s groundbreaking Medicare GME demonstration. In
 this demonstration, the state-chartered Medical Education Council is now receiving and disbursing all Utah
 Medicare Direct Medical Education payments. The Council also has authority within the demonstration to
 receive all Medicare Indirect Medical Education payments and Medicaid Graduate Medical Education
 payments. One of the goals of this demonstration is to use graduate medical education monies to increase
 the number of graduating physicians who choose to practice in rural areas.

        In order that the reader may understand the innovative character of this Utah experiment, we first
describe the traditional method by which graduate medical education has been funded in the United States

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and, especially, how Medicare GME monies have been distributed. The traditional method of financing
physician residency training programs, described below, evolved independently of any deliberate linking of
the size and specialty of residency programs to community or regional physician workforce needs. This
funding arrangement continues to the present in spite of the fact that Federal and State governments pay a
substantial proportion of the costs of physician resident education. It has contributed to the long-standing
shortage of generalist physicians, particularly in rural and inner city communities.




Chapter 1. Introduction to the Funding of the Graduate Medical Education of Physicians 1

         The clinical training of a physician in a field of specialization occurs in a residency training
program. This level of physician education follows completion of medical school; it is termed graduate
medical education (GME). The individual training programs are called residency programs or residency
training programs and their graduate students are termed residents. First-year residents are often called
interns. Graduate medical education has largely been funded from the patient care revenues of teaching
hospitals and other clinical training sites. Historically, teaching hospitals treated GME costs as just another
of the costs of “doing business,” and included them in all patient care bills, including bills for Medicare and
Medicaid insured patients. In the 1980s, Medicare and Medicaid changed from this indirect method of
supporting graduate medical education to the method of making explicit payments for GME costs.
Medicare makes the largest explicit payment for graduate medical education in the form of GME add-ons to
hospitals‟ bills for Medicare inpatients. Medicaid makes the second largest explicit payment for GME
costs, with most States making some explicit per patient payment for graduate medical education. Many
State Medicaid agencies use a GME add-on payment method much like Medicare‟s. A minority of States
make a separate direct payment to teaching hospitals for GME (Henderson, 2000). Private insurance
companies also pay some of the costs of graduate medical education, indirectly rather than explicitly.
GME costs are wrapped into the hospital bills of some privately insured patients treated at teaching
hospitals. The government proportion of GME financing is estimated at 40 percent by Medicare, 10
percent by Medicaid and one percent by the Health Resources & Services Administration (HRSA), Bureau
of Health Professions. The balance is funded by hospitals‟ patient care revenues from private insurers and
faculty practice plan revenues. (Bivano, 2001).

        The Medicare GME payments to teaching hospitals have two components: Direct Medical
Education payments (DME) and Indirect Medical Education payments (IME). DME payments are
designed to reimburse teaching hospitals for Medicare‟s share of the costs of salaries and fringe benefits
paid to medical residents, interns and supervising faculty, malpractice insurance for residents and
administrative expenses. These expenses are typically borne by the teaching hospital utilizing the resident.

 1.  An introduction to the basics and issues in graduate medical education funding is Graduate Medical
 Education and Public Policy: A Primer, a publication of the Bureau of Health Professions, HRSA, DHHS
 –. December 2000. Rockville, MD.


                                                       4
 A hospital‟s Medicare DME add-on to each inpatient bill is a fixed amount per resident based on its
reported GME costs in 1984 adjusted for inflation and Medicare‟s share of inpatient days at the hospital.

         Indirect Medical Education costs (IME) are a substantial, but difficult to define, element of the
hospital costs of resident training. These expenses are related to the higher costs associated with training,
such as additional diagnostic tests ordered by residents learning how to make diagnoses, higher staffing
ratios, and the higher percentage of patients in teaching hospitals with complex conditions that necessitate
costly treatment (U.S. Congress, 1999, 106). Medicare IME is paid as an add-on to a teaching hospital‟s
diagnosis-related payment (DRG) for care of Medicare inpatients. The greater the number of residents
training in a teaching hospital, the larger the IME add-on to the basic DRG price. The formula for the
add-on amount is principally a function of three factors: the basic payment for the patient‟s diagnosis times,
the Congressionally-set IME adjustment percentage times, and the hospital‟s ratio of residents to beds.
However the Congress has always set the IME adjustment percentage much higher than the actual indirect
teaching costs of teaching hospitals – initially at double the empirical costs and currently at more than
double the empirical costs (MedPAC, 2003, 56). For teaching hospitals with a high IRB ratio, the IME
add-on can be very substantial. In FY 1999, 10 percent of hospitals received IME add-ons to their DRG
payments of more than 29 percent (MedPAC, 1999, 7).

        Medicare‟s annual expenditure for graduate medical education amounts to a great deal of money; in
FY 2002 it totaled more than $9 billion, with 30 percent for DME and 70 percent for IME (CMS, 2002, 5).
Historically there was no limit on the number of residents for which a teaching hospital could receive
Medicare GME payments. The Medicare IME add-on was a powerful incentive to teaching hospitals to
increase the number of residents training in their hospitals, irrespective of regional or national workforce
need. This incentive was ended by Congress in 1997 in the Balanced Budget Act (BBA) which capped the
number of residents eligible for GME payments at each teaching hospital. The BBA halted the unlimited,
continuous increase in the number of residents, but this did not reduce teaching hospitals‟ interest in
maintaining their Medicare IME revenues. As noted above, these revenues are approximately twice as
much as their actual indirect teaching costs for care of Medicare-insured patients. Also, and importantly,
residents are inexpensive healthcare practitioners for teaching hospitals. Their salaries are paid in part by
Medicare and they are less expensive and more flexible than full-priced physicians and nurses.

         Because GME monies have been paid to teaching hospitals, it is teaching hospitals and/or their
health system owners that have decided on the number, size and specialties of residency training programs,
subject to some accreditation constraints. Understandably, these decisions have been made in terms of
what is best for the hospital. Most teaching hospitals are urban, tertiary care hospitals which provide
complex treatments by highly specialized physicians. This specialized role of teaching hospitals has
fostered a bias away from training generalist physicians and toward training specialists and sub-specialists.
Also, in making GME program decisions in difficult financial times, a hospital may consider which
physician specialties will most increase admissions, which types of admissions are most profitable for the
hospital and which specialties are key providers of expensive inpatient care. These bottom-line
considerations reinforce the bias toward training speciality physicians. The Medicare GME payment rules
have further biased graduate medical education toward the training of hospital-based physician specialists

                                                      5
and away from office-based generalist physicians. This is because the IME payments to teaching hospitals
are tied largely to inpatient counts.

         In Medicare payments to teaching hospitals, the DME and IME add-ons are not separately
identified, but rather are bundled with the inpatient DRG payments. Although hospitals could calculate and
separately track the GME payments in their books, few if any do. Rather the total payments from Medicare
(DRG + DME + IME) are entered as general operating revenues and the hospitals are under no obligation to
use the GME payments for medical education.

          This payment arrangement is problematic for residency training programs which are usually
operated by medical school departments, for example, departments of general internal medicine, obstetrics
and gynecology, and cardiology. As the residency programs do not directly receive the Medicare DME
payments, they must negotiate with the teaching hospitals for funding. The hospitals can allocate more or
less to the residencies than the DME monies paid to them by Medicare. This arrangement puts residency
programs in a vulnerable position vis-a-vis the teaching hospitals. This is especially the case for residency
programs in the less profitable specialties such as family medicine.

         The historically-based pattern of linking GME payments to inpatient care has been problematic for
the financing of programs to train the office-based generalists who supply most rural health care – especially
family practice physicians and, to a lesser extent, general internal medicine physicians. Only a very small
proportion of Medicare GME monies are paid for resident training in ambulatory clinic sites, and this only
since the 1997 Balanced Budget Act.

        After Medicare, Medicaid is next largest public payer of graduate medical education. A few States
– most notably Michigan, Minnesota and Tennessee – have Medicaid GME initiatives that require residency
programs to have accountability to public need (Henderson, 1998).

         There has been no Federal requirement on teaching hospitals to take account of State or National
physician workforce needs in their decisions on how many residents to support and in which specialties. It
is this decision-making calculus which Utah is changing – by shifting decision-making about GME
programs from teaching hospitals and health systems to a State commission which can base these decisions
in some part on Utah‟s current and future physician workforce needs.

        Graduate medical education and the training of rural physicians.2               Primary care physicians
predominate in rural practice, especially in small towns. Family practice is the most common specialty for
the physician workforce of rural areas: it comprises 41 percent of the physicians practicing in small rural
towns of less than 10,000 people, the places in which physicians are in shortest supply (Larson, 2003). The
decision of family practice physicians to practice in rural places is positively related to the curriculum and
location of their residency training. A survey of 96 percent of all family practice residency programs
suggests that a program being located in a more rural State, being located in a smaller population center,


 2. The Summer 2000 issue of The Journal of Rural Health is devoted to rural-based graduate medical
    education.


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having an explicit mission for rural health and having a required rural rotation all increase the likelihood
that graduates of a program would locate in a rural area. The larger a program‟s number of required rural
months, the greater the likelihood of the graduates choosing rural practice. Nineteen family practice
residencies with three to six months of required rural training responded to the survey; they reported
approximately 50 percent of their graduates chose rural practice, compared to 25 percent of family practice
residency graduates who had no required months of rural training (Bowman, 1998). A promising strategy
for expanding the months of rural training was developed in family practice graduate medical education in
the late 1980s – the rural training track (RTT). In these tracks, the residents spend their first year in a large
urban teaching center and their second and third years in a family practice in a small, remote rural
community with a community hospital. The subsequent practice locations of RTT graduates have been
studied by Rosenthal and others who found 76 percent of RTT graduates were practicing in rural towns of
less than 25,000 and 65 percent were providing obstetrical services. (Rosenthal, 2000). This is a very high
yield of rural physicians. Unfortunately there are fewer than fifty RTT programs and many of them have
had difficulty filling their resident openings.

         The urban concentration of Medicare GME payments. A teaching hospital is a hospital which
provides clinical medical training to residents. Because nearly all teaching hospitals are located in cities,
only a very small fraction of Medicare GME payments go to rural hospitals – in FY 1995, one percent went
to rural hospitals and 99 percent to urban hospitals. Only $70.5 million of roughly $6.4 billion was paid
to hospitals in nonmetropolitan counties, and only 1.5 percent of all residents trained in these hospitals
(Slifkin, 1999). This rural-urban imbalance in GME programs and payments has policy significance
because physicians trained in rural places are more likely to practice in rural places than those trained in
cities.



 Chapter 2.        Start of the Utah Initiative to Align Graduate Medical Education and
                                  Statewide Physician Need

A. State health policy commission foresees health workforce crisis.

         In the early 1990s, the Governor of Utah created a health policy commission in order to focus
attention on statewide healthcare problems and options for addressing them. The commission members,
appointed by the Governor, included State legislators, business leaders and health care industry leaders.
Each year the commission identified two statewide health care problems it would examine in depth. The
Utah experiment described in this report grew out of the commission‟s 1995 decision to look into (1) the
financial threats to the survival of Utah‟s only academic health center – the University of Utah Health
Sciences Center which includes the University Hospital and the University Medical School‟s many
residency training programs and (2) the adequacy of Utah‟s health care workforce.

         At that time, the rapid spread of managed care in Utah for both privately and publicly insured
patients, was having an adverse financial impact on Utah‟s leading hospitals, which also were its teaching
hospitals, especially the tertiary care University Hospital and Intermountain Health Care‟s (IMH) teaching

                                                       7
hospitals. Managed care plans were under no obligation to support graduate medical education costs in
their payments to teaching hospitals for patient care. Rather, University Hospital and other Utah teaching
hospitals received only the payment amounts they could negotiate with these managed care plans. The
teaching hospitals‟ costs made them uncompetitive with non-teaching hospitals: graduate medical education
added about $600 per discharge to their costs. When the Governor‟s health policy commission challenged
Utah HMOs to support graduate medical education through their payments to hospitals, they declined.
This response from the HMOs was an impetus for the creation of the Utah Medical Education Council and
its pursuit of a Medicare GME demonstration. A second impetus was the potential growth of Medicare
managed care at-risk plans. In the mid-1990s, GME add-on payments were not carved out of Medicare
payments to risk plans. (This was changed in the 1997 Balanced Budget Act.) Rather, Medicare‟s
payments to risk plans included the GME monies, which the risk plans were under no obligation to pass on
to teaching institutions as part of their payments for inpatient care of their Medicare-insured patients. In
addition, Congress seemed likely to reduce Medicare IME payments in the near future. In 1996, the
Congress was considering a proposal to reduce the IME adjustment from 7.7 percent to 5.0 percent, which
change would reduce total IME payments to Utah by 35 percent (Osborn, 1996, 12) Loss of graduate
medical education payments threatened Utah‟s teaching hospitals and its physician residency training
programs. Any decrease in resident numbers would likely decrease the State‟s physician numbers.

         The health policy commission was also concerned about the lack of any system-wide planning for
the State‟s future physician workforce needs. Because of Utah‟s high birthrate, the State‟s population was
increasing much faster than the Nation‟s population. It seemed likely Utah hospitals and communities
would experience increasing difficulty in recruiting enough physicians, and there was already a shortage of
physicians in rural areas and inner cities.

          Determining the costs and revenues of advanced clinical education in Utah. The Governor‟s
health policy commission was concerned with issues involving the education of health care professionals,
but no one in Utah had any idea of how much money was being spent on health professions education. In
1996, the commission contracted with the Deloitte and Touche consulting group to determine both the cost
and the revenue that was supporting graduate medical education, medical student education, nursing
education, pharmacy education and physician assistant education in Utah. Deloitte and Touche found the
total annual cost of these programs to be more than $130 million in 1998 dollars. Of the total amount, 66
percent was spent for graduate medical education, 14 percent for medical student education, 14 percent for
nursing education, five percent for pharmacy education and one percent for physician assistant education.
The annual training cost per physician resident was $215,000. This compared to per resident National
average costs for family practice and pediatrics of $ 330,000 (Elison, 2003). Of Utah‟s per resident
annual cost of $215,000 in 1996, $100,000 was funded by Medicare GME, $30,000 by Medicaid (with a 3
to 1 Federal / State match ratio) and the balance of $85,000 was absorbed by Utah‟s hospitals and
institutions of higher learning (Elison, 2003).

B. Utah seeks Medicare GME demonstration project.




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        As the study of Utah costs and revenues for health professions education was getting underway, the
health policy commission developed a plan for rationalizing graduate clinical education in Utah. This plan
was fleshed out in a concept paper written by Dr. Lucy Osborn, Health Policy Commission member and
Associate Vice President for Health Sciences at the University of Utah, and was endorsed by the Governor
and the University of Utah (Osborn, 1996).

         The plan‟s central idea was that all funding in Utah for graduate clinical education would ultimately
be controlled by a statewide health professions education consortium. Initially, the consortium would focus
on graduate medical education since the Federal government, through Medicare, was the largest single
funder of the largest cost item in health professions education, namely physician residency training.
Consortium goals were to implement a State workforce policy so that an appropriate number and mix of
physicians receive training, create an organization to accomplish this, and ensure appropriate preparation for
future practice by shifting more training from inpatient to outpatient settings and to rural and inner-city
training sites. The consortium members would represent all vested parties, including State government,
educational institutions and health systems with physician residency training programs, community
representatives and funders. The consortium, in conjunction with the State, would “determine the total
number of graduate medical education positions available within the State, determine the mix of positions
by specialty, and allocate resident positions to specific programs. The consortium would be responsible for
funding all residency positions and for reimbursing health systems and facilities for the indirect costs
associated with training” (Osborn, 1996). The initial funding would be all Medicare IME and DME
payments to Utah institutions.

         In Spring 1996 Dr. Osborn began efforts to enlist CMS‟s, formerly HCFA, support for a five year
demonstration to link Medicare GME funding with Utah‟s future physician workforce needs. In the
proposed demonstration, all Medicare GME payments to Utah organizations would be paid directly to a
Utah educational consortium. These payments would include all Medicare GME monies currently being
paid to Utah teaching institutions as well as all GME monies currently included in payments to Medicare
risk plans for Utah Medicare beneficiaries enrolled in such plans. CMS staff were interested in the
proposal because it brought to their attention for the first time the large decrease in Medicare funding of
graduate medical education programs nationwide which would be an unintended consequence of major
proportion of a substantial increase in Medicare enrollments in managed care at-risk plans.

         CMS advised Dr. Osborn that, for the agency to entertain the concept of a demonstration of the
carve-out of Medicare GME monies from teaching hospital and HMO payments and their redirection to a
State graduate medical education consortium, the proposal would have to come to CMS in the form of an
unsolicited demonstration proposal. Through the winter of 1996-97, members and staff of the Utah Health
Policy Commission worked on a demonstration proposal. During this time period, a team from CMS
headquarters visited Utah to learn more about the proposal. This team suggested the demonstration be
carried out in a step-by-step fashion, and this suggestion was incorporated in the demonstration application
submitted in April 1997.




                                                     9
         During the years, 1997 to 2000, Utah‟s experiment in shifting control over graduate medical
education funding to a statewide organization moved ahead on other fronts. Certainly the decision and
efforts to obtain a Medicare GME demonstration were influential in energizing important stakeholders to
work toward systematic statewide planning and funding of graduate medical education. But a good deal
was accomplished to strengthen graduate medical education planning in the years before the demonstration
finally got under way. One accomplishment was the creation of a state organization to take charge of
rationalizing graduate medical education in Utah. The Governor‟s health policy commission worked with
the State legislature on this.



C. The Utah Medical Education Council is born.

         In 1997, the State legislature created the Utah Medical Education Council (Appendix I). The
Governor appointed the first members of the Council in Summer 1997, and the Council was formally in
business although it would not have any paid staff until mid-2000. The Council‟s responsibilities were to:
protect current funding of graduate medical education and seek additional revenue streams; obtain and
manage Federal Medicare and Medicaid waivers so that these Federal graduate medical education funds are
linked to addressing Utah‟s physician workforce requirements; build sound databases on Utah‟s current
health care workforce; develop projections of future workforce needs; and develop strategies to ensure Utah
has the needed number and mix of healthcare professionals.

        Quasi-governmental public commission. With forethought, the legislature created the Council
as a quasi-governmental entity, under a special section of the Utah code. This status has been critical to the
successful functioning of the Council. For example, the GME payments to the Council are exempt from
appropriation by the State, to protect the Council‟s revenue stream. Otherwise, the legislature would have
been able to re-appropriate GME monies for another purpose it might deem of higher importance. This
exemption would enable the Council to guarantee to CMS that all Medicare GME monies which it received
would be used only for graduate medical education and to ensure that none of these funds could be directed
elsewhere by the State legislature.

         Additionally, the Council is exempt from the State pay scale, and so is able to pay market rates to
hire expert staff. For contracting purposes, the Council does not have to operate using the State‟s bidding
process, which enables the Council to act quickly when this is important. Finally, the Council was given
clear statutory authority to collect data and handle proprietary and confidential information. This enables
the Council to use governmental authority to collect data, some of which is proprietary and confidential,
without being in violation of antitrust law.

         Council membership and structure. The Medical Education Council‟s structure and processes
are typical of public commissions. The Governor-appointed Council is the decision-making body.
Council actions are based largely upon the recommendations developed by its standing committees which
are supported by the professional staff. All the key organizational stakeholders are represented on the



                                                     10
Council and on the standing committees. At each level, any differences among stakeholders are identified
early and so are understood by all, which has facilitated the development of a consensus.

        The Council is appointed by and answers to the Governor. Its permanent chair is the dean of the
University of Utah‟s School of Medicine and its nine voting members are appointed by the Governor. All
the key stakeholders in Utah graduate medical education policy have a seat on the Council. The voting
members include one representative from each of the four institutions that sponsor an accredited graduate
medical education program, a representative of Utah‟s health care insurance industry and four
representatives of the general public. Any additional institution sponsoring a new residency program will
automatically be given a seat on the Council and an additional representative of the general public will be
appointed. Three of the sponsoring institutions also have teaching hospitals: the University of Utah and the
Veterans Administration (VA) Salt Lake City Health System have one each; Intermountain Health Care has
four. The VA receives separate funding for its residency training programs and is not a recipient of Medicare or Medicaid GME funds.
(UMEC, 2000, 24).

          The Council‟s composition is central to its ability to make changes in the allocation of graduate
medical education funds. Because all the key institutional players in graduate medical education in Utah
have seats on the Council and committees, their concerns are addressed as policies are being developed.
This feature of its membership has been important to the Council‟s success in making decisions which have
put statewide interests and concerns above those of individual institutions. It may also have limited the
options considered by the Council, because the Council seeks solutions that will not have negative impacts
on any sponsoring institution. This has proven positive as members have voluntarily offered multiple ways
of addressing the overall statewide requirements even when this required some compromise by their
institutions. With unanimity on the solutions, there has been good follow through in the implementation
phase.

         Committees. The Council‟s committees are appointed to serve until their charge has been
accomplished. Committees bring together experts with those who have a vested interest in the committees‟
areas of responsibility.

         The Finance Committee has been in place since the Council‟s beginning. Its members include
second-level finance executives from the large teaching hospitals who answer directly to the chief financial
officers, as well as a representative of the State‟s Medicaid agency. This committee was established to
recommend policies and procedures for financing graduate medical education in Utah. It reviews all matters
which make any changes to the process, amount or methods for transferring funds for GME.
           The Workforce Committees are appointed by profession to oversee the surveys and produce reports with projections of workforce
requirements and the mix between professions.        Once these reports are completed, implementation committees are appointed by
profession to develop strategies to achieve the projected workforce requirements. The Physician Workforce Committee, the Advanced Practice
Nurse Committee, and Physician Assistant Committee produced the Council„s Year 2000 report, discussed below.      With their charges
completed, these committees were dissolved.        A PharmD. Workforce Committee produced a separate report which addressed pharmacy
requirements at the retail level and at the hospital level.


                                                                     11
        The Physician Implementation Advisory Committee (PIAC) was formed when the report on the
physician survey was completed. PIAC‟s responsibility is to recommend by specialty the number of
physicians needed, allocate training slots supported by funds controlled by the Medical Education Council,
and suggest graduate medical education program changes according to changing statewide needs. As
discussed below, this committee has been actively involved in the implementation of the Medicare GME
demonstration.

         In 2004, a new group of committees was appointed to analyze the results from a second round of
surveys conducted in 2003 for physicians, nurse practitioners, and physician assistants. These committees
will look at the change during the four years in such areas as retention and recruiting by specialty, urban and
rural requirements, and future capacity in areas of high population growth.

         Broadened perspective of GME stakeholders. It is worth remembering that, in 1997 when the
Council was created, few of the stakeholders in graduate medical education in Utah or in the Nation were
viewing their GME interests and concerns in the light of their responsibilities toward meeting regional
health workforce needs. Many of the Council and committee members have now been thinking and
working on GME funding and supply issues from a statewide perspective for more than five years. From
the content of the Council‟s discussions and decisions, it can be seen that many members now have a
statewide perspective on these matters. At the same time, they continue to be concerned to protect the
interests of their institutions as they weigh institutional concerns against statewide concerns. Their public
support as Council members for Utahns‟ legitimate interest in these issues has also likely influenced their
own thinking and perspectives.

         Transparent decision-making process. The existence of the Council has brought a much more
open process to decision-making on graduate medical education programs, with the decisions being made
explicitly to address statewide physician workforce needs. This replaces the previously closed processes
for each teaching hospital in which residency programs were established or expanded.

          Experience in collaborating. The membership of the Council and its committees has been highly
stable. Most of the Council members have now been working together for more than five years. Over
these years, they have formed new working relationships in the course of doing council work, which seem
likely to facilitate future joint efforts. They have experienced the benefits for Utah and their own
institutions which can come from cooperating with traditional competitors. In group interviews, they
enunciated their positive feelings about the successes of their collaborative efforts.

        Council staff. Staffing of the Council had a slow start-up. For its first three years, 1997 to
2000, the Council had no paid staff of its own. Its Executive Director was on loan from the State Health
Department and its finance expert was a full-time employee of the University of Utah Academic Health
Center. It was mid-2000 before the Council was able to employ these two people – as its first two full time
professional employees: Gar Elison, Executive Director, and David Squire, financial officer. The
experience and training which they brought to the Council and their deep personal commitments to the
Council‟s goals have been critical in important achievements of the Council. Both are familiar with all the
geographic reaches of this large state. Both have worked in health care policy in the State capital for a

                                                     12
number of years and have a wide circle of professional acquaintances in State government, academic health
care organizations, health care insurers and hospital management in Utah. The Council staff remains small.
 In summer 2004, the Council had only five full-time professional employees and an administrative
assistant. It also had several part time interns from University of Utah and Brigham Young University
graduate programs.

        Despite it‟s size, the staff has made a number of important contributions to the strengthening of
graduate medical education in Utah. One major contribution has been providing assistance to the Council
and committees in developing work agendas and decision-making processes. Other contributions stem
from the very fact of having expert staff working full time on the Council‟s mission. Staff are alert to
opportunities for expanding residency programs and funding and to threats to existing residency programs.

         One example is the “rescue” of the St. Mark‟s family medicine residency which has 15 percent of
Utah‟s family practice training capacity. In the late 1990s, a national for-profit hospital chain decided to
end the sponsorship of all residency training programs by its hospitals, including the one at Salt Lake City‟s
St. Mark‟s Hospital. Council staff assisted this residency program in moving to its own nonprofit
foundation. When the residency was later threatened with a crushing financial deficit, Council members
and staff convinced State legislators to appropriate $500,000 to stabilize the residency on the basis it was in
the State‟s interest to have a well-trained workforce. Without these funds, the program would likely have
closed. The Council‟s financial officer has been alert to other revenue sources for this residency program.
(UMEC, 2000b) For example, he suggested that Veterans Administration podiatry residents could do
rotations in St. Mark‟s model family practice clinic. This would give the podiatry residents experience with
a wider range of pathologies, and would financially benefit the family medicine residency program by virtue
of VA GME payments for the training provided to its residents.

        A second example is their assistance to the small graduate dental residency program at the
University of Utah academic health center. The Council financial officer recognized that this program had
financial support for expanding. Because dental residencies were not included in the 1997 BBA cap on
residency positions, the dental program would be eligible for additional Medicare and Medicaid GME
payments if it were to add residents. This one-year program has expanded from six to 10 residents. It was
encouraged by the Council to have its residents do a rural rotation and, with its added revenues, the program
could afford to do this. It added a required one-month rotation to a very rural clinic serving American
Indians. This collaboration between the Council staff and the University Hospital‟s dental training
programs has also led to discussions within the „world of dentists‟ in Utah about starting a dental school in
Utah to alleviate the shortage of dentists, especially in rural areas and inner cities.



              Chapter 3. The Early Years of the Utah Medical Education Council

A. Building the databases for health workforce planning and policymaking

        From the outset, as the Governor‟s health policy commission was developing the concept of a State
Council in charge of linking the planning and funding of health workforce education in Utah, it intended for

                                                     13
the Council‟s decisions to be based on sound empirical data. The new Council would start its work by
determining the characteristics of the present health workforce. This information would be used to develop
projections of the State‟s future workforce needs, and then the Council would assess Utah‟s training capacity
for meeting these needs. The health policy commission and the legislature wanted special attention paid to
the adequacy of the physician workforce for rural areas, both in the present and the future.

         In 1997, the Council executive director, aided by University of Utah public administration interns,
began by tracking down existing data on the physician workforce in Utah, and found that several Utah State
agencies and national organizations had data on Utah‟s health workforce. However, when the data from
these several sources were compared, they were found to vary over a wide range, as has been found by others
making similar comparisons (Ricketts, 2000). The American Medical Association reported 4,190 patient
care physicians practicing in Utah in 1998, the U.S. Department of Health and Human Services, Health
Resources and Services Administration, reported 3,280 and the Utah Department of Workforce Services
reported 7,680. The Council members understood the importance of having trustworthy data for their work,
and when they learned of these widely differing estimates, they realized the Council would need to do its own
data collection.

         During 1998 and 1999, Council staff worked with other State officials and hundreds of health care
leaders in Utah to complete surveys of Utah‟s licensed physicians, advanced practice nurses, physician
assistants and doctors of pharmacy. These surveys established the number of FTEs in each of the
professions, their age distribution, their geographic distribution, their years and types of education and the
location of educational institutions attended, years of active work remaining before likely retirement age,
specialty, among others. Once the survey data were in hand, the Council staff worked on the large and
complex task of assessing the adequacy of the current workforce and projecting the State‟s future workforce
requirements for these professions.3 They found the current clinical workforce in Utah to be marginally
adequate in comparison with national ratios of these practitioners to population. The rural supply of primary
care practitioners was difficult to quantify. With 96 percent of Utah‟s land mass and 24 percent of its
population in rural counties, some rural communities had sufficient practitioners while others had a critical
shortage.

         Population growth in Utah was found to be the major determining factor in the State‟s future clinical
workforce requirements. Utah‟s population growth rate was well above that of the Nation, and the State‟s
population was expected to increase by 48 percent between 2000 and 2020. Holding other factors constant,
the total workforce increase needed to serve these additional millions of Utahns was projected to be a 50
percent increase in the number of physicians (an additional 1,800), advanced practice nurses (an additional
342) and physician assistants (an additional 124). Providing care for the large increase by 2020 in


      3. Projections of clinical workforce requirements and findings of the UMEC surveys of Utah‟s
         present clinical workforce are compiled in the UMEC report, Utah’s Clinical Healthcare
         Workforce: Achieving Balance Through 2020, dated December 2000. The executive summary of
         the report is Appendix II of this report. The full UMEC report can be viewed at
         www.utahmec.org.


                                                    14
dependent populations – the 0-14 age population and the population 65 and older – would require similar
numbers of additional physicians, advanced practice nurses and physician assistants. On top of the effect of
these factors on the need for health care practitioners, projected retirement rates in the next 20 years would
require the recruitment of as many physicians as were now in practice in Utah and 80 percent as many
advanced nurse practitioners and physician assistants.

         Health care workforce databases. As a result of these data collection efforts, Utah started the 21st
century with an accurate, detailed picture of its health care workforce. The Council currently has workforce
databases for the following health professions in Utah: physicians, advanced practice nurses, registered
nurses, licensed practical nurses, physician assistants, pharmacists and podiatrists. These health care
workforce databases are available for analysis to other organizations interested in the characteristics of Utah's
health care workforce.

B. Setting Workforce Goals: the Utah Medical Education Year 2000 Report

         With information in hand on Utah‟s present clinical workforce of physicians, advanced practice
nurses, physician assistants and pharmacists, future clinical workforce requirements and the State‟s clinical
training capacity, the Council was in a position to weigh policy options for meeting the State‟s projected
clinical workforce requirements through 2020. Their deliberations had an urgency driven by projections
showing Utah was on the verge of a crisis in its health care workforce.

The Council decided to concentrate most of its energies on options for increasing the physician
workforce. One option was to expand the training capacity of the University of Utah School of
Medicine, which had remained constant since 1972 with a yearly enrollment of 100 students. Analysis
showed that, just to meet Utah‟s current physician workforce need, the medical school‟s capacity would
have to be doubled. Even then, the State would be slipping behind the population growth curve. Both
financially and clinically, a doubling of the medical school‟s capacity would be difficult, requiring
sustained funding for faculty and support staff, capital funds for construction of training space, and
locating the necessary number and variety of patients for its training programs. The other options
considered by the Council were maintaining and increasing the size of Utah‟s existing residency training
programs, facilitating the start of new residency programs in needed specialties which had no residency
program, and retaining in Utah a higher proportion of residents graduating from the State‟s residency
training programs. The choice of these options was influenced by the Council‟s survey findings that
completion of residency training in a Utah program was the single most important determinant of
choosing to practice in Utah. The Council‟s executive director stated, “If we expand our residency
programs and can retain 60 to 70 percent of graduating residents, we can meet our workforce
requirements in a number of specialties.” These strategies made economic sense in light of the relative
cost of training residents in Utah and, postgraduate retention to practice in Utah.

         To address Utah‟s chronic shortage of physicians and other health care professions in rural areas,
in particular, the Council decided to increase the amount of training underway in rural places, focusing on
ambulatory sites and hospitals. Council activities to increase the amount of training taking place in rural
locations include The Utah Medical Education Council‟s goals, objectives and action plans are detailed in

                                                      15
its 2000 report: Utah’s Clinical Healthcare Workforce: Achieving Balance Through 2020 4 and the
development of the healthcare workforce databases. These activities were essential groundwork for the
Utah Medicare Graduate Medical Education Demonstration which began in July 2003.

      Chapter 4. Increase in Utah’s Federal Graduate Medical Education Revenues

          A core purpose for which the Medical Education Council was created was to increase the monies
for GME. Through efforts by the Council staff, Utah‟s Medicare cap on resident numbers and the
resulting Medicare and Medicaid GME payments to Utah‟s teaching hospitals were increased
substantially, both retroactively and into the future. By these very early achievements, the Council‟s
professional staff was able to demonstrate its usefulness to the teaching hospitals.

A. Council financial officer discovers $2 million annually in earned but unclaimed Medicare
GME payments

          David Squire, the Council‟s financial officer, came to the Council with the question of whether
Utah teaching institutions had been collecting all the Medicare GME funds to which they were entitled.
From his work in the finance department of the University of Utah academic health center, Squire knew
the university was training about twice as many residents as it was reporting on its Medicare cost reports.
Squire began to examine the 1996 cost reports of all Utah teaching hospitals. GME claims on the 1996
cost reports were of special interest because it was these reports which CMS used to determine the
maximum number of residents and interns for which Medicare would henceforward pay training costs,
that is, to determine each teaching institution‟s cap on the number of residents to be supported with
Medicare GME payments. For all of the approximately 625 residents training in Utah in 1996, Squire
compared records of their 1996 rotation schedules with the training time claimed for them on 1996 cost
reports. It was found that a substantial number of Medicare graduate medical education FTEs had been
omitted from Utah FY1996 cost reports. Subsequently, the Medicare fiscal intermediary acknowledged
Squire‟s findings to be the more accurate FTE number and accepted it as the official one for Utah‟s
aggregate pool of Medicare GME FTE positions. The Medicare DME FTE cap was increased by 28
resident positions, a 9 percent increase; the Medicare IME FTE cap was increased by 51 resident
positions, a 13 percent increase. The teaching institutions, using the corrected GME FTE information
provided to them by the Medical Education Council, revised all their non-final cost reports. These
institutions were able to recoup nearly $2 million additional in Medicare GME monies for 1996 and
similar amounts for the 1997, 1998 and 1999 fiscal years. The resulting increases in Utah‟s allowed
number of Medicare DME and IME slots have meant that Medicare GME payments to Utah have been
higher every year since then and will continue at that rate.

         The GME undercount on teaching hospital cost reports stems from the fact that there is no
coordination of the GME FTEs reported to Medicare by the multiple teaching institutions through which
interns and residents rotate in a year. The principal reporting problem occurs when residents move from


 4.   See Appendix II, Section III.


                                                     16
one rotation location to another. Residents‟ weekends and vacation time between rotations were often
not counted on the cost reports, in accord with Medicare GME cost-reporting regulations. In order to get
correct counts, Squire developed a retrospective database of all residents‟ medical education time for FY
1996, and later extended the retrospective count through FY 1999 cost reports. These data were used by
the teaching hospitals to revise their non-final cost reports for these four years. The Utah Resident
Review Information data base is now maintained by Council staff as part of their regular work. This data
base is key to the completeness and accuracy of the GME elements in Utah teaching institutions‟
Medicare cost reports. It houses information on the rotation blocks for all residents training in Utah,
accounting for their location for all the days of the year.

B. Council facilitates annual multi million dollar increase in Medicaid GME monies

         Another early undertaking of the Council‟s finance officer was to initiate a collaboration of the
Council with the Utah Medicaid office in an analysis of Federal Medicaid regulations. The goal of this
collaboration was to identify whether additional Medicaid support for graduate medical education could
be put in place in Utah. As the Federal rules regarding Medicaid funding for GME are complex, the
Council finance officer and the State Medicaid staff invested more than a year in mastering these rules
and then exploring options for increasing Medicaid support for GME. The culmination of this
collaboration was a three-step plan for increasing the Federal Medicaid match for Utah‟s graduate medical
education. The first step was to amend the Utah Medicaid plan on file with CMS to allow more GME to
be paid by the Federal government, depending upon the availability of a State match. The second step
was to identify the appropriate amount to be devoted to GME out of fee-for-service Medicaid payments
and develop the formula for determining the appropriate amount of a „GME carve out‟ from the State‟s
payments to Medicaid managed care organizations, with both these amounts to be earmarked for the
State‟s Medicaid GME pool. Finally the State of Utah increased its Medicaid match. As a result of
these efforts, Utah received additional Federal Medicaid revenues of $11 million in 2002, $14 million in
2003 and an estimated $19 million in 2004. These new Medicaid GME monies have been paid out by
the State‟s Medicaid agency to the teaching hospitals.

        In this section of the report, we have described how the efforts of Council staff have increased
Utah‟s Medicare GME payments by about $2 million annually and Federal Medicaid GME payments by
about $19 million in the most recent year. Clearly this amount of new GME money coming in annually
to Utah is sufficient for a substantial expansion of graduate medical education training in the State. The
ways in which these new Federal GME monies are being spent is addressed later in this report.

   Chapter 5. Utah Gets Medicare Graduate Medical Education Demonstration
        The Medicare demonstration described in this chapter is just one facet of the Utah graduate
medical education experiment. In early 2000, Utah and CMS signed a five-year cooperative agreement
which provided funding to revise the application and prepare to implement the demonstration, and
authorized Utah to request the Medicare waivers necessary for the demonstration. The Council
resubmitted its demonstration application in September 2000 (UMEC, 2000). In Spring 2002, the Office


                                                     17
of Management and Budget approved the Medicare waivers required for the demonstration (Appendix I).
In Summer 2002 the CMS and the Council agreed upon the special terms and conditions for the
demonstration (Appendix IV). In Summer 2003, seven years after Utah‟s initial conversations with
CMS and submission of its original demonstration proposal, the Council received the first payment of all
Utah-bound Medicare DME funds.

A. Demonstration Design

        The purpose of Utah‟s demonstration was to test the feasibility of linking graduate medical
education funding policies to the State‟s physician workforce needs. The demonstration design proposed
to change a number of elements of Medicare‟s GME funding arrangements. The Medical Education
Council was to receive all Utah Medicare DME and IME monies. Agreements between the Council and
the hospitals would specify the methodologies by which the Council would pay hospitals and other
providers for the direct and indirect costs of their training programs. The proportion of Medicare IME
payments which were over and above the teaching hospitals‟ actual IME costs were to be a revenue
source for expanding residency training in specialties in critical shortage. They would also fund special
Council initiatives such as establishing a rural-based primary care residency program and paying the extra
expenses of required rural rotations.

          DME to be paid directly to residency programs. The Medicare DME funds were to be paid
by the Council directly to individual residency programs, rather than to the teaching hospitals. This
change would give the residency programs much greater certainty and control over their finances, and
increased independence from teaching hospitals as the once exclusive domain of physician training. It
would allow GME payment for training in locations other than teaching hospitals‟ inpatient units and
outpatient clinics, such as freestanding ambulatory care clinics and in shortage settings such as rural
hospitals and clinics and inner-city clinics. The GME funding would follow the residents and support
their training wherever it needed to occur. This provision would enable the Council to encourage and
finance physician training in diverse settings, for the best mix of educational experiences. Over the
course of the demonstration, the Council would undertake a study of the actual direct costs of residency
training. The Council would then change DME payments to residency programs from a formula based
on historic costs adjusted for inflation to actual cost reimbursement.

         Aggregate Statewide pool of resident slots. The Council, by agreement with all the
sponsoring institutions, already controlled a statewide pool of all Utah Medicare GME FTE positions. In
the demonstration, it would be authorized to reallocate slots between programs and institutions. This
would enable the Council to adjust training locations to ensure the quality of training experiences. For
example, if a teaching institution were to misuse residents the Council could remove or reduce the number
of residents rotating to this institution. The Council also would be able to change the allocation of funds
for residency positions between primary and specialty care on a statewide basis, rather than hospital by
hospital, with the allocation tied to State workforce plans. Additionally, the Council would be authorized
to determine the total number of GME positions and specialty mix to be supported by public funds.



                                                    18
        Additional Payment Design. The State Medicaid agency agreed to seek a Federal waiver to permit payment of the
Medicaid GME funds to the Medical Education Council. In the absence of a waiver, the State Medicaid agency is
required by Federal law to pay the GME monies to teaching hospitals. The demonstration was to be
budget neutral for Medicare. GME payments to the State were not to exceed what they would have been
without the demonstration. Additionally, the Council would the develop a strategy for bringing new
dollars into the GME funding pool, over and above Medicare and Medicaid funds. For example, it might
seek an appropriation from the legislature. It would also seek GME funding from private sector health
insurance companies.

        The Demonstration Application. The demonstration application committed the Council to:
providing funding for training in outpatient settings and with rural and underserved populations;
expanding the amount of interdisciplinary training, when funds became available.

B. Implementation of the demonstration

        This demonstration is a complex undertaking in which some elements were scheduled for
immediate implementation and others were to be phased in over the 5-year period of the demonstration.
This section describes accomplishments in one year of preparation time and one year of responsibility for
Medicare GME monies.

     The Council accomplished a good deal of essential, if unexciting, groundwork in the development of
decision-making criteria and processes including the development of its criteria for allocating resident
positions, the principles and objectives to be used for funds allocation, and a process for receiving and
transferring DME funds. The DME funds are now paid by the Council directly to the GME directors at
the institutions sponsoring the residency programs rather than, as before, to the teaching hospitals.
Additionally, the Council has developed an appeal process that any party can use if it disagrees with a
Council decision and the disagreement is not settled through negotiation. The appeal goes to an
independent reviewer for binding arbitration.

     At the start of the demonstration, Utah already had a number of residency programs – about 60
programs and 625 interns, residents and fellows. The physician implementation advisory committee
found that none of these residency programs were producing physicians in specialties that were in surplus
supply in the State. This finding made the Council‟s work easier as it would not have to decrease
funding or slots to any existing residency program. Hence, the Council‟s starting point was its decision to
maintain the Medicare DME funding to all of these programs, which would consume essentially all of its
first-year revenues.

         Modifying existing residency programs. The Council has come up with an innovative
strategy for modifying the existing residency programs in directions desired by the Council. The Council
may withhold 10 percent from its annual payment to a residency program. Release of the amount
withheld is contingent on evidence of a program‟s progress toward the Council‟s statewide workforce
objectives for training programs. Annually, each residency program is to submit a plan to the Council
detailing specific steps it will take toward achieving the Council‟s objectives. In FY 2004 and FY 2005,

                                                         19
the Council‟s objectives for residency programs are: (1) operate the program at its current number of
residents, (2) increase the percentage of program graduates who stay in Utah to practice, (3) increase the
amount of training done in rural places, and for specialties in very short supply, (4) start work on
expanding the program – by applying to the Council for additional funding and to the specialty‟s
residency review committee for permission to admit additional residents.

         FY 2004 was the trial year for this strategy, both to give the residency programs and their
sponsoring organizations an opportunity to learn the process and give all involved some time to think
together on means to achieve some of the objectives. It has proved especially difficult to come up with
concrete steps toward the objective of increasing the percentage of graduating residents who stay in Utah
to practice. The Council hired a new staff member who is to work with the residency programs on ways
to increase retention. At the suggestion of the residency programs, the new staff member has created a
system to identify all current and some expected physician openings in Utah and make this information
easily available to the programs and the residents. All current openings are now posted on the Council‟s
new web page, www.utahmec.org. In addition, the retention specialist is contacting all University of Utah
Medical School graduates now enrolled in out-of-State residency programs. The graduates are asked if
they are interested in returning to Utah to practice when they complete their residencies, and offered
assistance if interested in practicing in Utah. Also, job information and assistance with help in linking graduates
to temporary practice positions in Utah during vacations is available.

           Stabilizing, expanding and adding residency programs.                       The physician implementation
advisory committee (PIAC) developed criteria and a methodology for prioritizing its recommendations for
funding specific specialty residency programs. The methodology is somewhat complicated, but both the
PIAC and the Council members consider it rational for deciding on the State‟s greatest needs for
physicians by specialty. The first group of residency programs considered for expansion were those
specialties which are needed in every hospital, including rural community hospitals. The Council is
particularly attuned to the staffing needs of rural hospitals. Starting early in calendar 2003, the PIAC
reviewed and ranked a total of 13 residency programs in these specialties. The one program which was
at risk of closing, the child and adolescent psychiatry residency, received the top rank. Eleven others
were ranked for expansion, though only eight of these requested funding for additional positions. None
of the four family practice residency programs requested expansion funding because of the difficulty of
filling slots, a nationwide problem for family practice residencies. One new residency program was proposed – in
emergency medicine -- but it did not rank within the funding range.

        The Council unanimously accepted the PIAC recommendations and approved the addition of
these new resident positions to those for which the Council was already committed to provide funding.
This decision was a sentinel accomplishment in view of the fact that some specialist physicians on PIAC
and the Council voted against the interests of their own specialties. The Council now had a ranked list of
new resident positions to be funded, but no funds.

       Currently, in the second year of reviews, the residency program directors are interacting with the
PIAC in a more helpful fashion. They have come to meetings with the PIAC more prepared to explore

                                                         20
options and to present information to help the committee arrive at recommendations for the next two
decades, and with more honest assessments of the limitations of their faculty and clinic settings for
providing quality educational experiences.

          If an institutional sponsor of a residency program has some internal objective and wants to fund
GME program expansion beyond what the Council determines is required to meet statewide requirements,
that sponsor can proceed, but there is no promise of future funding through the Council for those slots.
This arrangement has the advantage that the Council looks at statewide needs, and the teaching
institutions are free to accomplish their objectives if they have the funds. In practice it has produced new
partnerships. One example is the collaboration of the University of Utah and Intermountain Healthcare
to jointly sponsor and fund a new residency program in emergency medicine. Another example is the
collaboration of a rural community hospital, a rural educator and a family practice residency program to
seek grant funding for Utah‟s first rural residency training track program in family practice.


        Increasing funding for graduate medical education. Achievements in the area most
important to the Council‟s success – expanding the GME funds controlled by the Council – have proved
the most difficult. The Council has experienced serious setbacks in this area as those who historically
have controlled these monies have proved reluctant to cede control to the Council. However, the Council
has achieved one notable success which may lead to further ones.

         The demonstration application specified that all Federal Medicare and Medicaid GME payments
to Utah would be channeled through the Medical Education Council, including both DME and IME for
Medicare. The Council had projected that these funds would be sufficient to support all existing
residency training programs at current levels, expand some programs and start additional new programs,
thereby meeting a larger proportion of the State‟s physician workforce needs. However, only the smallest
of these three Federal payments is being paid to the Council – Medicare DME, about $7.5 million in
2004. The teaching hospitals have not agreed to have the Medicare IME payments go to the Council.
One reason may be their desire to retain control of that half of their Medicare IME payments which is
over and above their actual IME costs (MedPAC, 2003, 57). Total Medicare IME payments to Utah in
2004 were about $21 million and are projected to be about $21.8 million in FY 2005.

         Nor has the State‟s health department requested a waiver from CMS to enable the State to carve
out GME funds from its Medicaid payments to Utah hospitals in order to channel these funds to the
Council. In the absence of a waiver, Federal regulations require the State to pay the Medicaid GME
monies directly to the teaching hospitals. The State and the Council have limited means of holding the
hospitals accountable on how the Medicaid GME funds are actually used. The waiver from CMS would
ensure that these monies were used for GME, but the State Medicaid agency has not put a high priority on
seeking a waiver. While some hospitals have dropped these funds to their bottom line, others have used
the funds to accomplish some of the Council‟s GME workforce objectives. For example, the University
of Utah used its Medicaid GME funds to fully fund all residents‟ salaries and put the remaining money
into creating a total of 41 new resident positions in programs that are priorities for the Council. St.

                                                     21
Marks Hospital has used the Medicaid GME monies to stabilize the financially fragile family practice
residency program.

          Some Council members had expected the teaching hospitals to voluntarily channel the increased
Medicare and Medicaid GME monies to the Council. However, this has not yet occurred and the
hospitals are under no legal obligation to make the transfer. Some hospital executives regard the
additional Medicare and Medicaid GME revenues as earned compensation for the Federal government‟s
decreased Medicare IME payments and payback to the hospitals for their subsidization of Medicaid
patient care over the years. The Council, on the other hand, has said GME is for training physicians and
if that is not occurring then no GME payments should be made.

         The Council is working on how to have more of the Federal GME monies come directly from
CMS to the Council. Recently the Council has begun to examine the uses to which teaching hospitals
put their Medicare and Medicaid GME payments. The Council has asked all the organizations
sponsoring residency programs in Utah and all the hospitals receiving Medicare and Medicaid GME
funds directly to report to the Council how the funds were used – broken out by Medicaid GME and
Medicare IME. This information will be requested annually starting in FY 2004. If the council is
successful in obtaining the data it will be the first time anywhere in the nation that this information is
known for a whole region. Such information could strengthen whatever case the Council subsequently
makes in asking the teaching hospitals for additional GME funds. Interestingly, the Medicare Payment
Advisory Commission (MedPAC) is weighing the recommendation of a similar policy – that teaching
hospitals be required to demonstrate that any Medicare IME funds above their actual costs are being used
for graduate medical education (MedPAC, 2003, 59). If such a MedPAC recommendation were to
become law, it would bring to teaching hospitals nationwide the same transparency in the use of GME
monies which the Utah Medical Education Council is now seeking.

    Another approach taken by the Council to obtain more GME funding is to go directly to the teaching
hospitals. In June 2004, the Council and all the teaching hospitals reached a five-year agreement which
may be renewed.

·   The two large teaching systems – the University of Utah and Intermountain Health Care -- have
    committed to fund the 18 new resident positions approved by the Council. The funding is initially
    for five years and likely will continue. In addition, these hospitals have committed clinical space and
    physician faculty time for the expanded training programs – a generous in-kind commitment which
    will cost more than the financial commitment in the agreement. The hospitals will channel these
    new GME monies through the Council, which will increase the Council‟s GME funding pool. Lack
    of the Medicaid waiver led to the development of this pooling concept, wherein each hospital will
    contribute a portion of its Medicaid GME revenues to the Medical Education Council‟s GME pool.
    This agreement is a model for further expansions of the Council‟s GME funding pool.

·   The University of Utah will continue to supply intergovernmental transfer funds for Utah‟s Medicaid
    GME match – approximately $5 million annually.



                                                    22
·    Intermountain Health Care will supply most of the Council‟s administrative budget. The two small
     teaching hospitals, Salt Lake Regional Medical Center and St. Mark‟s Hospital, will also contribute to
     it. This commitment is a large step forward in the stability of the Council. Up to this time, funding
     for the Council staff and administrative expenses had been uncertain. Now it is guaranteed for the
     next five years.

     The Council is also moving forward on its demonstration commitment to develop a broadly based
funding pool. In 2003, it created a GME funding subcommittee and charged it with identifying funding
mechanisms through which additional stakeholders would contribute their fair share to the costs of
training physicians in Utah to meet the needs of the population. These additional stakeholders might
include the private health insurers and the State government. The creation of this subcommittee, whose
members have contacts in the legislature and professional associations, is a rational beginning on this
commitment. If stakeholders were to agree, a broadly based funding pool could operate without CMS
approval or waivers. Some Council members consider such a voluntary agreement among all major
stakeholders to participate in a GME funding pool to be a realistic possibility. If it were to come about,
no Medicare demonstration or Medicare or Medicaid waivers would be needed for Utah‟s GME planning
and funding initiative to continue indefinitely. Other Council members are less sanguine that Utah‟s
private health insurance industry will make voluntary contributions to GME funding. The weight of
National commissions which have recommended all-payer GME funding is on their side. The all-payer
proposals of COGME, the Pew Health Professions Commission and the Commonwealth Fund Taskforce
on Academic Health Centers have all included mandated contributions by private health
insurers.(COGME, 2000a, 49-51).

         Building health workforce data bases and conducting workforce analyses. Although the
constrained funding for Council staff limits its capacity in this part of its responsibilities, its ongoing
accomplishments in workforce data collection and analysis are noteworthy. In 2004, it will publish
survey-based reports on Utah‟s 2003 workforces of physicians, advanced practice nurses, physician
assistants and podiatrists, as well as reports based on information gleaned from data bases in three State
agencies for medical laboratorians and radiology technologists.

         Increasing residents’ rural training experiences. The Council and Council staff are
committed to increasing the amount of resident training which takes place in rural places. Although
family practice physicians are the predominant specialty in small towns and are in short supply in Utah‟s
rural areas, it has proved difficult to increase the number being trained in Utah and also to increase the
amount of rural training of family practice residents. None of the four existing family practice residency
programs in Utah currently have plans to expand. This is principally because of the short supply of applicants
and the difficulty in recruiting well-qualified students. In the 2003 match, only 1,200 U.S. medical school seniors
matched into the 3,000 family medicine slots.   This is a National problem which cannot be solved in any one State.

         As an alternative, the Council considered starting a 3-year family practice residency program in a
rural town. The Council and the Utah Area Health Education jointly evaluated seven rural Utah
communities for suitability as sites for 3-year rural family practice residency programs. Only one

                                                                   23
community was judged suitable (Catinella, 2003), but it does not have funds or local physician educators interested in this
considerable undertaking.

         The Council is now focusing its efforts to increase rural training of family physicians on use of
the rural training track (RTT) residency program model. Planning of Utah‟s first rural training track
program is well-advanced and seems likely to come to fruition. In an RTT, the resident‟s first year is
spent in an urban-based residency program, completing such specialized rotations as pediatrics and
obstetrics and gynecology. The second and third years of the residency are done in a rural community,
where the resident lives and works. RTTs have the best track record (76 percent) of any variant of family
practice residency programs in graduating physicians who locate in rural areas. An RTT needs to recruit
only one new resident a year, a feature of importance in light of the difficulty of recruiting family practice
residents. A rural community hospital and a family practice educator in Sanpete County and a family
practice residency program in Provo -- about 60 miles south of Salt Lake City and 60 miles north of
Sanpete County -- are collaborating to establish Utah‟s first rural training track (RTT) residency program.
The Council is assisting with the planning. If this RTT is successfully started, it may be the first of
several. Other rural communities which have learned of the RTT plans have already asked whether they,
too, might be RTT sites.
         The University of Utah‟s graduate dental residency program has added a one-month mandatory
rural rotation. The Medical Education Council had encouraged the residency to add this rural rotation
experience. The rural experience for these dental residents is especially important in light of the shortage
of dentists in rural areas. This residency‟s experience in adding rural rotations also sheds light on some
of the reasons this can be difficult for other residency programs to emulate. This dental rural rotation
program is first described and then analyzed to understand how the program directors solved problems
which have been barriers to its replication by other residency programs in the State.
         Every dental resident now spends one month at the remote rural clinic in Montezuma Creek (a
PHS 330 Community Health Center) serving American Indians. The residency program pays for
residents‟ housing and transportation costs. The rural clinic is 300 miles from Salt Lake City – a full
day‟s drive in one direction. The residents are supervised by the clinic‟s staff dentist who has been given a
faculty appointment in the residency program. This dentist is now fulfilling his National Health Service
Corps obligation and plans to continue at the clinic after completing his Corps obligation. The director of
the University of Utah‟s dental program was already acquainted with the CHC‟s staff dentist whose
educational progress he had tracked from pre-dental training through dental school.
         There is a good partnership between the residency program in Salt Lake City and the rural clinic.
The clinic‟s staff dentist and the resident at the remote site can link electronically to the Salt Lake City
program via a two-way audio-visual connection. Through this connection, they are able to participate in
the dental residency program‟s regular Wednesday afternoon didactic session in Salt Lake City. Two
times a year, the dental residency program pays the transportation costs for the faculty member to come up
to Salt Lake City to attend the Wednesday seminar in person and meet with the residency program




                                                             24
director. The program director has made two site visits to the Montezuma Creek Clinic, each of which
requires the program director to be away from the residency program in Salt Lake City for three days.
        The dental residency program has sufficient funds for the expenses of its rural rotation. Some
funds have come from the rural clinic, which pays a stipulated amount to the residency program. Some
funds were available as the result of the residency program‟s expansion which increased its Medicare and
Medicaid GME revenues.
        Several factors are requisite for the addition of a rural rotation to a residency program, and all
were present for the University of Utah dental residency program.
1) A rural practice site must be interested in having resident(s), have one or more clinicians interested in
supervising the resident(s), and be willing to absorb the cost of freeing up teaching time for the
supervising clinician(s).
 2) The residency program‟s „coverage‟ obligations permit its residents to be away from the home base
for the period of the rural rotation.
3) The residency program‟s faculty needs to be confident of the professional skills of the educator (dentist
or physician) at the rural location.
4) Funding is available to pay the transportation and housing costs for the resident.
5) It is highly desirable for the resident(s) at the rural site to be able to electronically „attend‟ the residency
program‟s weekly didactic session.
6) The residency program director must make regular site visits to the rural site, to ensure the quality and
content of the supervision of the resident.
7) It is desirable that the faculty member at the rural site be integrated with the faculty at the residency
program‟s home base, which is best accomplished by spending some time with them. Therefore,
transportation expenses must be funded.
         Seven residency programs located in Salt Lake City have told the Council they are interested in
adding rural rotations. Most have been stopped by the lack of funds for the additional costs of rural
rotations. The Council is trying to identify a funding source for these expenses. As one option, the
Council has approached the State legislature for an appropriation to fund a „rural incentive pool.‟
         The general surgery residency program is very interested in adding rural rotations, and has
already identified general surgeons in four rural communities around the State who are willing to host
two-month rotations. To date, the program has not been able to start rural rotations because their
residents‟ time is already fully committed for coverage of various departments in their home hospitals,
such as the trauma department. These commitments mean that residents cannot be absent from Salt Lake
City for one or two-month rural experiences.
       A new emergency medicine residency program which will have required rural rotations of at least
two months is being started. Funding for it has already committed by the University Hospital and



                                                        25
Intermountain Health Care‟s LDS Hospital. As Intermountain Health Care is also the owner of a number
of rural hospitals, there is a good chance the rural rotations will become a reality.


           Need for new strategies for meeting Utah’s health workforce needs.             The Council„s initial strategy for meeting the
State„s future physician workforce needs was to expand its existing residency programs.     It is now apparent that these residencies cannot
be expanded enough to meet the State„s needs for subspecialists.     One new strategy being investigated is the provision of augmented
training by subspecialists to existing physicians to enhance the number of procedures they can perform.        The primary care specialties of
family practice, pediatrics, obstetrics and general surgery are being considered for augmented training.   This strategy will require funding
for fellowships for the practicing physicians who would receive this training.   Another strategy being considered is to increase the
number of nurse practitioners and physician assistants providing direct patient care.   This search by the Council for new strategies for
accomplishing its goals illustrates its maturation in   health workforce planning.

           These are the Council„s activities and achievements to date toward the objective of increasing the amount of physician training
which takes place in rural areas.   It seems a good beginning, but only time will tell how much is achieved.




                                          Chapter 6. Lessons for Other States
         Utah‟s GME planning initiative may serve as a model for other States. It seems especially
appropriate for States that have only one or two medical schools and a small number of teaching hospitals
who currently recruit many of their physicians in the National market. Several States with these
characteristics have studied the Utah model, and two of them have started to emulate it. The Hawaii and
Nevada State governments have enacted legislation creating a State Medical Education Council. Their
legislation is modeled on Utah‟s, including a grant of authority to the State Medical Education Council to
apply to CMS to receive and disburse Medicare and Medicaid GME monies. Nevada‟s Medical
Education Council held its first meeting in late 2004 and, as the first step in its planning activities, has
begun to gather health workforce data.
         States not interested in statewide GME planning may want to adopt one or more of the elements
of the Utah model. A State might choose to pursue an increase in Medicare and Medicaid GME
payments to the State by the methods used by Utah. As a first step, a State agency or a nonprofit
organization with no financial interest in the teaching hospitals could investigate whether the teaching
hospitals are claiming all of the Medicare GME monies to which they are entitled. Utah‟s investigation
into this matter revealed that about 10 percent of the GME monies earned in this State were not being
claimed. Utah has developed a detailed template for this investigation and is willing to share it. Also, a
State could look into options for increasing Federal Medicaid GME payments. Utah‟s experience could
be helpful in understanding how this might be done.
        Most States could benefit from having good information on their health profession‟s workforce,
including its current adequacy and projected need. This information will be useful to the State legislature


                                                                      26
and State administrative agencies, as well as to its universities and colleges which train health
professionals. Utah is just one of a number of States which maintain this information. As part of its
planning activities, the Utah Medical Education Council has built databases on a wide range of health
professions and developed projections of future need.
         States with a persistent shortage of health professionals in rural areas might create a Council to
develop and implement strategies for alleviating these shortages, giving it control over some funds and
input into the State appropriations for public universities and colleges. Utah‟s Medical Education Council
has some responsibility for addressing rural shortages in the health workforce, and is in the early days of
tackling this assignment. Another State, Wisconsin, has just started a Council for the purpose of
addressing its shortage of rural physicians. In the fall of 2004, the Wisconsin Rural Medical Education
Advisory Committee came into being, charged with increasing the number of its medical school‟s
graduates who practice in rural Wisconsin communities. The Council‟s “primary responsibility will be to
develop a proposal for a „school within a school‟ program, the Wisconsin Academy for Rural Medicine,
aimed at rural physician training at the University of Wisconsin Medical School.” 5




                                      Chapter 7. Conclusions
         In less than a decade, Utah has created a structure and process for linking the funding of graduate
medical education to rational planning to meet Utah‟s future physician workforce needs. The Medical
Education Council was created by the legislature in 1997 and has grown steadily stronger in the
subsequent years. The key GME stakeholders in Utah are all active participants on the Council. The
Council successfully applied for a groundbreaking Medicare demonstration of State GME planning, to
link the funding to statewide physician workforce needs. It has demonstrated its ability to manage
Medicare GME monies. It has successfully solicited additional, voluntary contributions from the
teaching hospitals to its GME pool. The Council staff has found ways to substantially increase Federal
payments to Utah for graduate medical education. The teaching hospitals‟ participation in Council
activities has led them to collaborate on GME initiatives beyond the Council‟s scope. The Council and the
State government now have good data on the current workforce situation of many health professions as
well as projections of future supply and shortages. Up to this point in time, each year has seen additional
accomplishments for the Council. Further accomplishments seem likely.
        However, the Council has fallen short of the centerpiece of its Medicare demonstration to control
all Medicare and Medicaid GME payments, with flexibility to use them to improve the current and future
physician supply in needed specialties. The lack of funds has limited the Council‟s ability to undertake a
number of initiatives which could improve the State‟s supply of health professionals. Nevertheless,



         5
             Eye on Health, October 1, 2004. Newsletter of the Rural Wisconsin Health Cooperative.


                                                     27
Council members and staff are pleased with the progress they have made in gaining control of some
additional monies beyond Medicare DME funds and believe they will be able to make further progress.
          The Council has so far failed to get the Board of Regents to pay close attention to the workforce
recommendations, especially to assure that the allied health field will grow to support the expanded
physician training. The Council has shown that laboratory workers and radiology technicians are in
critically short supply and must be increased or the support staff to do the diagnostic testing for physicians
won‟t be adequate to get the work done in a timely manner. The whole workforce needs to be expanded
concurrently. Otherwise, the strength of the health care system will be limited to that of the profession in
the shortest supply. Challenges remain on other fronts as well as there remains understandable tensions
between major stakeholders who are business competitors.
        This said, the Council has some notable achievements. They are remarkable in today‟s health
policy environment in which health planning is in disfavor and competition is widely promoted as the
means for solving problems in the health care system. The successes of Utah‟s GME planning initiative
are more than sufficient for it to be considered by other States as a model for health workforce planning,
including graduate medical education planning. If the Council should succeed in gaining control over
additional GME monies, it is ready and able to accomplish a great deal more.




                                                      28
                                              References
Biviano, M. (2001). “National Center for Health Workforce Information and Analysis: Research
Agenda,” slide presentation for the NCSL Forum for State Health Policy Leadership, Lake Tahoe,
California, April 26-27, 2001, 23. As cited in Karen Matherlee, Federal and State Perspectives on GME
Reform, National Health Policy Forum Issue Brief, 2001. Washington DC: National Health Policy
Forum.

Bowman, RC, Penrod, JD. (1998). Family practice residency programs and the graduation of rural
family physicians. Family Medicine, 30(4), 288-92.

Bureau of Health Professions, HRSA, DHHS. (2000) Graduate Medical Education and Public Policy:
A Primer. Rockville, MD

Catinella, AP, Magill, MK, Thiese, SM, et al. (2003). The Utah rural residency study: a blueprint for
evaluating potential sites for development of a 4-4-4 family practice residency program in a rural
community. J Rural Health 19:2:190-198.

Centers for Medicare and Medicaid Services. (2002) Health Care Industry Market Update: Acute Care
Hospitals, Volume II, Appendix: Medicare Payment Systems, November 12, 2002.
www.cms.hhs.gov/reports/hcimu/hcimu_04292002_append.pdf

Commonwealth Fund Task Force on Academic Health Centers. (1997). “Leveling the Playing Field:
Financing the Mission of Academic Health Centers.” The Commonwealth Fund

Council on Graduate Medical Education. (1997) Ninth Report: Graduate Medical Education Consortia:
Changing the Governance of Graduate Medical Education to Achieve Physician Workforce Objectives.
Washington DC: US DHHS, HRSA.

__________. (1999). Fourteenth Report: COGME Physician Workforce Policies: Recent Development
and Remaining Challenges in Meeting National Goals. Washington DC: US DHHS, HRSA.

__________. (2000a) Fifteenth Report. Financing Graduate Medical Education in a Changing Health
Care Environment. Washington DC: US DHHS, HRSA.

__________. (2000b) The Effects of the Balanced Budget Act of 1997 on Graduate Medical
Education: A COGME Review.

Crump, WJ, Barnett, B & Fricker, S. (2004) A sense of place: rural training at a regional medical school
campus. J Rural Health 20:1: 80-84 (Winter).

Elison, Gar. (2003) Presentation, Graduate Medical Education Seminar, October 29-31, 2003. Salt
Lake City, Utah.

Larson, EH, et al. (2003) State of the Health Workforce in Rural America: profiles and comparisons.
Monograph. WWAMI Rural Health Research Center, Seattle WA.

Geyman, JP, et al. (1999) Physician Education and Rural Location: A Critical Review. WWAMI
Rural Health Research Center, University of Washington School of Medicine. Working Paper #49.


                                                   29
Henderson, TM. (2000) Medicaid‟s role in financing graduate medical education. Health Affairs 19:1:
221-229.

Henderson, TM. (1998). Medicaid Support for Graduate Medical Education: Should There Be a
National Policy?   A Policy Issue Brief, Center for Health Professions, University of California, San
Francisco.

Koenig, L, Dobson, A, et al. (2003). Estimating the Mission-Related Costs of Teaching Hospitals
                                 Health Affairs 22:6:112-125.

MedPAC. (1999). Report to the Congress: Rethinking Medicare‟s Payment Policies for Graduate
Medical Education and Teaching Hospitals. Washington, DC.

________ (2003) Report to the Congress: Medicare Payment Policy. Washington, DC.

Osborn, Lucy M. (1966). Proposal to the Health Care Financing Administration for a Utah Graduate
Medical Education Consortium. University of Utah Health Science Center.

Pew Health Professions Commission. (1998). Report of the Pew Federal Policy Taskforce.        Beyond
the Balanced Budget Act of 1997: Strengthening Federal GME Policy. San Francisco.

Saver, BC, Bowman, R, Crittenden, RA, Maudlin, RK and Hart, LG. (1998) Barriers to Residency
Training of Physicians in Rural Areas. WWAMI Rural Health Research Center, University of
Washington School of Medicine. Working Paper #46.

Shirk, C. (2003) Shaping public programs through Medicare, Medicaid, and SCHIP waivers: the
fundamentals. National Health Policy Forum. Background paper. Washington, D.C.

Slifkin, RT, Popkin, B & Dalton, K. (1998). The impact of Medicare graduate medical education
funding on rural hospitals. North Carolina Rural Health Research and Policy Analysis Center.
Working Paper # 56.

Slifkin, RT and Dalton K. (1999). Medicare Graduate Medical Education Payments to Rural Hospitals.
 Findings Brief.   North Carolina Rural Health Research and Policy Analysis Program, University of
North Carolina at Chapel Hill. Chapel Hill, NC.

Squire, David F. (2003). UMEC Chief Financial Officer. Correspondence, 12/16/2003.

Ricketts, TC, Hart, L.G. and Pirani, M. (2000). How many rural doctors do we have? J Rural Health.
16:3:198-207.

Rosenthal, TC (2000). Outcomes of rural training tracks: a review. J Rural Health 16:3:213-216.

U.S. Congress, House of Representatives, Committee on Ways and Means. (1999). Medicare and
Health Care Chartbook. Government Printing Office. Washington DC.

Utah Medical Education Council. (2000a) Utah Waiver application to HCFA for a Demonstration Project
to Rationalize Graduate Medical Education Funding. Salt Lake City, Utah. September 28, 2000.

___________________. (2000b). Utah’s Clinical Healthcare Workforce – Achieving Balance Through
2020. Salt Lake City, Utah. December 2000.

                                                   30
                                        Appendices
I.     Utah Statute Creating the Medical Education Council
II.    Year 2000 Workforce Report - Executive Summary
III.   CMS: Utah Graduate Medical Education Demonstration Waivers (March 2002)
IV. CMS: Special Terms and Conditions of the Utah Graduate Medical Education
Demonstration




                                            31
                                                         Appendix I.


                      Utah Statute Creating the Medical Education Council

                                                              1997


                                                          HB 141 (Enrolled)


                                               MEDICAL EDUCATION PROGRAM
                                                     1997 GENERAL SESSION
                                                           State OF UTAH
                                                    Sponsor: J. Brent Haymond


 AN ACT RELATING TO STATE AFFAIRS IN GENERAL; CREATING THE MEDICAL

 EDUCATION PROGRAM AND COUNCIL; DEFINING TERMS; EXEMPTING

 EMPLOYEES OF THE COUNCIL FROM THE STATE PAY PLAN; ENUMERATING

 THE DUTIES AND POWERS OF THE COUNCIL IN SECURING FEDERAL

 FUNDING FOR GRADUATE MEDICAL EDUCATION THROUGH A

 DEMONSTRATION PROJECT; DETERMINING THE TRAINING NEEDS OF

 HEALTH CARE PROFESSIONALS; AND DISTRIBUTING FUND MONIES.

 This act affects sections of Utah Code Annotated 1953 as follows:

 AMENDS:

        67-19-12, as last amended by Chapters 192 and 283, Laws of Utah 1996

 ENACTS:

        63C-7-101, Utah Code Annotated 1953

        63C-7-102, Utah Code Annotated 1953

        63C-7-103, Utah Code Annotated 1953

        63C-7-104, Utah Code Annotated 1953

        63C-7-105, Utah Code Annotated 1953

Be it enacted by the Legislature of the State of Utah:

      Section 1. Section 63C-7-101 is enacted to read:



                                                                1
         CHAPTER 7. MEDICAL EDUCATION PROGRAM

         63C-7-101. Definitions.

         As used in this chapter:

   (1) "Accredited clinical training program" means a clinical training program that is accredited by an entity recognized within
medical education circles as an accrediting body for medical education, advanced practice nursing education, physician assistance
education, or doctor of pharmacy education.
  (2) "Accredited clinical education program" means a clinical education program for a health care profession that is accredited by the
Accreditation Council on Graduate Medical Education.
         (3) "Council" means the Medical Education Council created under Section 63C-7-103.
    (4) "Health Care Financing Administration" means the Health Care Financing Administration within the United States
Department of Health and Human Services.
     (5) "Health care professionals in training" means medical students and residents, advance practice nursing students, physician
assistant students, and doctor of pharmacy students.
         (6) "Program" means the Medical Education Program created under Section 63C-7-102.
         Section 2. Section 63C-7-102 is enacted to read:
         63C-7-102. Medical Education Program.
     (1) There is created a Medical Education Program to be administered by the Medical Education Council in cooperation with the
Division of Finance.
         (2) The program shall be funded from monies received for graduate medical education from:
         (a) the Federal Health Care Financing Administration or other Federal agency;
         (b) State appropriations; and
         (c) donation or private contributions.
         (3) All funding for this program shall be nonlapsing.
         (4) Program monies may only be expended if:
         (a) approved by the council; and
         (b) used for graduate medical education in accordance with Subsection 63C-7-104 (7).
         Section 3. Section 63C-7-103 is enacted to read:
         63C-7-103. Medical Education Council.
     (1) There is created the Medical Education Council consisting of the following members appointed by the Governor:
         (a) the dean of the school of medicine at the University of Utah;
         (b) a person who represents graduate medical education at the University of Utah;
     (c) a person from each institution, other than the University of Utah, that sponsors an accredited clinical education program;
         (d) a person from the health care insurance industry; and
  (e) three members of the general public who are not employed by or affiliated with any institution that offers, sponsors, or finances
health care or medical education; however, the Governor may appoint an additional member of the public under this Subsection
(1)(e) for each person the Governor appoints that increases the total number of persons appointed under Subsection (1)(c) beyond
two.

                                                                 2
      (2) Except as provided in Subsection (1)(a) and (b), no two council members may be employed by or affiliated with the same:
          (a) institution of higher education;
          (b) State agency outside of higher education; or
          (c) private entity.
          (3) The dean of the school of medicine at the University of Utah:
          (a) shall chair the council;
          (b) may not be counted in determining the existence of a quorum; and
      (c) may only cast a vote on a matter before the council if the vote of the other council members results in a tied vote.
          (4) The council shall annually elect a vice chair from among the members of the council.
          (5) (a) Consistent with Subsection (6)(b), a majority of the council members constitute a quorum.
          (b) The action of a majority of a quorum is the action of the council.
      (6) (a) Except as provided in Subsection (6)(b), members are appointed to four-year terms of office.
    (b) Notwithstanding Subsection (6)(a), the Governor shall, at the time of the initial appointment, adjust the length of terms to
ensure that the terms of council members are staggered so that approximately half of the council is appointed every two years.
    (c) If a vacancy occurs in the membership for any reason, the replacement shall be appointed by the Governor for the unexpired
term in the same manner as the original appointment was made.
     (7) (a) Per diem and expenses incurred in the performance of official duties may be paid at the rates established by the Division
of Finance under Section 63A-3-106 and Section 63A-3-107
  to a council member:
          (i) who is not a government employee; or
      (ii) who is a government employee, but does not receive salary, per diem, or expenses from the council member's employing unit
for service to the council.
          (b) A council member may decline to receive per diem and expenses for service to the
  council.
          Section 4. Section 63C-7-104 is enacted to read:
          63C-7-104. Duties of council.
          The council shall:
          (1) submit an application in accordance with Federal law for a demonstration project to the
      Health Care Financing Administration before December 31, 1997, for the purpose of receiving
and disbursing Federal funds for direct and indirect graduate medical education expenses;
          (2) seek private and public contributions for the program;
          (3) study and recommend options for financing graduate medical education to the State
  Board of Regents and the Legislature;
      (4) advise the State Board of Regents and the Legislature on the status and needs of health care professionals in training;
      (5) determine the method for reimbursing institutions that sponsor health care professionals in training;
      (6) determine the number and type of positions for health care professionals in training for which program monies may be used;
and


                                                                 3
                (7) distribute program monies for graduate medical education in a manner that:
        (a) prepares postgraduate medical residents, as defined by the accreditation council on graduate medical education, for inpatient,
    outpatient, hospital, community, and geographically diverse settings;
        (b) encourages the coordination of interdisciplinary clinical training among health care professionals in training;
                (c) promotes stable funding for the clinical training of health care professionals in training; and
                (d) only funds accredited clinical training programs.
                Section 5. Section 63C-7-105 is enacted to read:
                63C-7-105. Powers of council.
                The council may:
       (1) conduct surveys, with the assistance of the Division of Occupational and Professional Licensing within the Department of
    Commerce, to assess and meet changing market and
    education needs;
         (2) appoint advisory committees of broad representation on interdisciplinary clinical education, workforce mix planning and
    projections, funding mechanisms, and other topics as is necessary;
        (3) use Federal monies for necessary administrative expenses to carry out its duties and powers as permitted by Federal law;
                (4) distribute program monies in accordance with Subsection 63C-7-104 (7); and
                (5) as is necessary to carry out its duties under Section 63C-7-104 :
                (a) hire employees; and
                (b) adopt rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking
         Act.




                                                               Appendix II


                                          Utah’s Clinical Healthcare Workforce:
                                            Achieving Balance Through 2020


                                   Prepared by Medical Education Council, State of Utah
                                   Salt Lake City, Utah                 >><<            December 2000


                                                   EXECUTIVE SUMMARY
                               Section I. Capacity of Current Clinical Workforce
1. Utah is on the verge of a crisis in the clinical healthcare workforce. Unless something is done to avert this
crisis, Utah citizens will no longer be able to access the quality healthcare that they deserve.


                                                                        4
2. There is a chronic maldistribution of primary care clinicians among urban and rural settings.

3. There are some statewide specialist shortages developing. At present there is a statewide shortage of
emergency room physicians, adult and child psychiatrists in public settings, pediatric and adult
endocrinologists, nephrologists, neurologists, rheumatologists, anesthesiologists, and gastroenterologists.

4. Healthcare providers are highly influenced to practice in locations where advanced clinical training was
received. This has implications for both Utah in general and for rural locations.

5. National policy to reduce the number of medical residency training slots throughout the nation will reduce
the pool of fully trained physicians from which Utah will compete. This is expected to hamper the
maintenance of Utah‟s physician workforce. The demand for advanced practice nurses and physician assistants
will continue to grow as a result of the possibility of increased shortages of physicians.

6. As Utah faces physician shortages, it should be noted that enrollment at the University of Utah Medical
School has not increased since 1972 (and cannot without additional funding and facility expansion). Advanced
practice nursing programs would likewise require added funding for expansion and the State‟s physician
assistant program would need both funding and facility expansion.

Section II. Workforce Requirements (Demands and Needs)
1. Population Growth over the next 20 years will require, at current provider ratios, that Utah increase its
clinician workforce by 1,880 physicians, 362 advanced practice nurses, and 124 physician assistants by 2020.

2. In addition to maintaining current ratios, the projected retirement rate will require that Utah recruit: 3,540
physicians, 583 APNs, and 191 PAs to replace those retiring by 2020.

3. The aging of the population is expected to increase the projected minimum of physicians by 20 per 100,000
                                         6
total population over the next 20 years.

4. As the demographic composition of Utah‟s physician workforce changes Utah will need to add between
three and seven percent more physicians in order to provide a minimum level of services. Physician assistants
will likewise need to increase by one to two percent. Data for advanced practice nurses are not conclusive.

5. Due to the changing models of care delivery, an increase in demand of five percent of the number of
advanced practice nurses and physician assistants over the next ten years is likely.

6. Over the next twenty years, Utah will be even more dependent upon the recruitment of clinicians, especially
physicians from outside of the State, to meet Utah‟s future healthcare requirements.

7. To avoid being excessively dependent upon out-of-State recruitment, Utah‟s current clinician training
programs must, at a minimum, be maintained at current production capacity.


          6
            The number of needed APNs and PAs is also expected to increase due to population aging,
 however, specific numbers are difficult to quantify from current provider based data.


                                                        2
Section III. Actions to Achieve Workforce Requirements
1. Institute a clinical environment that fosters the development and evolution of integrated workforce models.

2. To meet projected workforce requirements, Utah is going to need to expand its physician, advanced practice
nurse, and physician assistant clinical training capacity commensurate with population growth.

3. Utah will need to utilize multiple Utah hospitals and ambulatory sites that have the capacity to expand
healthcare clinical training.

4. Create an interState compact for intermountain States to combine resources in order to train clinicians in
certain specialties and subspecialties for which single State demand is not sufficient to accommodate the cost
of supplying such specialty training by one State alone.

5. Explore options for a reallocation of Federally supported residency slots to more nearly match Federal
residency training support to the geographic workforce requirements.

6. Policy recommendations and decisions should be data driven. This will require the collection of quality
information elements, analysis completed using sound methods and procedures, maintaining existing quality
data resources, and continually updating the data to keep them chronologically current.




                                                      3
                                                                Appendix III.

                                            Centers for Medicare and Medicaid Services


                                                     Special Terms and Conditions

                                        Utah Graduate Medical Education Demonstration
 Preamble. The Utah Graduate Medical Education Demonstration aims to reallocate residency positions in the State according to health
 professions work force planning. The Office of Management and Budget approved waivers of Medicare law for the project on March 26,
 2002. The approval follows upon a cooperative agreement dated February 18, 2000, which authorized the development of an application
 for the project and request for waivers. The terms and conditions that were approved at that time still hold.

 This set of terms and conditions contains the requirements for the project in its implementation, operational, and close-out phases. In the
 demonstration, the fiscal intermediaries will subtract direct and indirect medical education payments from each hospital„s Medicare
 payments and pay these amounts to the State of Utah Medical Education Council. The terms and conditions govern the payment of
 Medicare graduate medical education dollars to the Medical Education Council, the reallocation of residents in the State, and the close-out of
 the project. Standard terms and conditions that accompany all CMS grants and demonstrations are also Stated.

 1. The Utah Graduate Medical Education demonstration will be conducted from July 1, 2002 through June 30, 2007.            Both CMS and the
 Utah Medical Education Council have the option to terminate the project, as described below.

 The State of Utah Medical Education Council will implement an agreement with each participating hospital or hospital system. These
 contracts will specify the length of time (a minimum of one year) for which Medicare direct and indirect medical education funds that would
 otherwise be paid to the hospital(s) will be paid to the Council. The effective date and the length of time must be identical for each
 hospital or hospital system. Each contract must be executed at least two months prior to the effective date. Once a contract is effective,
 the hospital will not be allowed to request payment of direct or indirect medical education funds from CMS.

 These agreements between the Medical Education Council and the hospitals will be subject to CMS„s approval. CMS will have the right to
 determine each year, prior to the implementation of these contracts, whether it chooses to continue the demonstration. Similarly, the
 Medical Education Council will be able to end the demonstration following a contract year. Either CMS or the Medical Education Council
 must provide notice to terminate the project at least six months prior to the implementation of the next demonstration year.

2. These agreements between the Medical Education Council and the hospitals shall specify methodologies according to which the
Medical Education Council will pay hospitals and other providers for the direct and indirect costs of their training programs. The
methodologies must be agreed upon by all participating hospitals in consultation with the officials responsible for residency and other
types of training at the hospitals, and they must be approved by CMS before the demonstration is implemented.

3. Within 60 days of the date of agreement on the terms and conditions of the demonstration, the State of Utah Medical Education
Council will submit to CMS for its approval a complete operational plan for the demonstration. This plan shall outline all proposed
residency programs and positions under the demonstration, including rotations and the length of time for each residency program, and the
payer source. As part of the plan, the Council shall provide a detailed description for concluding the demonstration. The plan will




                                                                     1
outline payer sources for any residency programs that will extend past June 30, 2007, the demonstration„s concluding date.        The plan will
include a discussion of how the awardee will implement any management and staffing needs for the demonstration.

4. The operational plan will be subject to review and approval by CMS before implementation of the demonstration. The
demonstration operational plan will show that all residency positions financed through Medicare funds are for the types of residency
training that are currently approved for Medicare funding.

5. The awardee agrees to fully cooperate in the coordination of demonstration activities with the Medicare fiscal intermediary and
carrier, and to promptly resolve any issues or questions as identified by the CMS project officer. The Medical Education Council will keep
all documents pertaining to residency training at hospitals and other sites. In the case of the withdrawal of a teaching hospital from the
project, the Council will forward these documents to the fiscal intermediary for its use and record keeping. The Council will develop
other necessary contingency plans in the case of termination of a demonstration. These plans will be contained in the operational plan of
the demonstration.

6. For all participating hospitals, Medicare Northwest will conduct settlement of cost reports for one year to determine base year values
of factors that will in part determine Medicare GME payments under the demonstration. This year will be the most recent year for which
settled cost reports are available, to be agreed upon by the fiscal intermediary, the Medical Education Council, and CMS.

7. The Medical Education Council will receive annually a total payment equal to the sum of the amounts determined for direct graduate
medical education (DGME) according to the demonstration methodology. According to this methodology, a count of weighted residents
is determined from the base year cost report. This value is to be multiplied by the hospital-specific per resident amount updated to the
respective year by inflation, and the respective year„s Medicare patient load. (In calculating amounts for DGME, the weighted number of
residents will be fixed at the level of the base year noted in #6, whereas the respective year„s value for Medicare patient load, as calculated
from the current year„s cost report will be used.)

8. The Medical Education Council will receive an annual payment for operating indirect medical education equal to the sum of the IME
payments for each participating hospital. Under the demonstration, operating IME payments for each hospital will be calculated using
the formula specified by then current legislation. The calculation will use the appropriate multiplier, as specified by then current
legislation and then current DRG payments as reported to the fiscal intermediary, but will fix the intern-and-resident-to-bed ratio according
to the base year.

9. Annual capital IME payments will be made according to the formula specified by current law, but holding the capital indirect medical
education adjustment factor constant to the factor defined for the base year. The number of residents, the average daily census, and,
thus the capital IME adjustment factor, will be held constant at these base year values.

The following table summarizes the components that will be fixed for the demonstration, and those that will be allowed to vary and be
calculated for each respective year.



                                                      FIXED AT BASE YEAR              VARIABLE – AT                 SPECIFIED BY
                                                                                      CURRENT YEAR                  LEGISLATION
                                                                                         VALUE
            Direct GME
            # Weighted Residents                                  X

                                                                      2
            Per Resident Amount                                                                  X*
            Medicare Patient Load                                                              X
            Indirect GME (Operating)
            IRB Ratio                                             X
            DRG Payments                                                                       X
            Multiplier                                                                                                      X
            Indirect IME (Capital)
            # Residents                                           X
            Average Daily Census                                                               X


10. The demonstration payment methodology for the operating year will change to any modification to the formulas for calculating
Medicare direct and indirect medical education payments, so that payment to the Medical Education Council will remain budget neutral.

11. Payment for residency programs started after the base year will be made according to the payment methodologies Stated in #7, #8,
and #9, since the resident counts for these programs are not included in that of the base year.

12. Participating hospitals training residents in “rural track” or “integrated rural track” programs, started after the base year, will have
Medicare payment for these residents and eligibility determined by CFR 413.86.

13. Medicare direct and indirect graduate medical education payments will be made to the Medical Education Council through interim
payments by the fiscal intermediary. The amount and frequency of these payments will be specified by the fiscal intermediary in
accordance with the State„s financial system and subject to CMS approval. The total annual amount of these payments will equal the
amount calculated for direct and indirect GME payments under #7, #8, and #9.

14. For each hospital, the fiscal intermediary will subtract an appropriate amount of money from each interim payment over the year, so
that the total amount deducted will equal the direct and indirect medical education payments calculated in #7, #8, and #9. If necessary,
the fiscal intermediary will conduct a year-end settlement for differences that arise between the total of interim payments and DGME and
IME as calculated, according to the methodology State in #7, #8, and #9.

15. The fiscal intermediary will calculate GME payment to the Medical Education Council on the basis of hospital cost reports, covering
specified year long intervals. Because teaching hospitals participating in the demonstration have different end dates to their cost report
years, the Council will negotiate with participating hospitals to assure that the schedule of payment from the Council to the hospitals is
acceptable to them given the different cost report periods. These agreements shall be included in the contracts between the Council and
the teaching hospitals, and approved by CMS.

16. The Medicare monies received by the UMEC are to reimburse the hospitals for the costs incurred for Graduate Medical Education.
As such these funds are outside of the scope of the Federal Single Audit Act and the Federal Cash Management Improvement Act. Once
the reimbursement is received by the UMEC any interest earned would accrue to the hospitals.

17.   At the end of the demonstration, payments for graduate medical education in the State will be governed by then current Federal law.

18.   Medicare funds paid through the demonstration will not be allowed to be counted for Medicaid Federal matching.



                                                                      3
19. Medicare Northwest and Mutual of Omaha, the fiscal intermediary, will handle separate from the overall system the changes
necessary to send DGME and IME funds directly to the Medical Education Council.

20. CMS and the Medicare fiscal intermediary will determine answers to issues that may be raised by the Medical Education Council in
determining the base year amounts to be paid from cost reports. However, once base year values for resident count are determined, the
fiscal intermediary will have the right to refuse requests for re-openings.

21. A task force consisting of representatives of CMS, the Medical Education Council, and the fiscal intermediary will develop by
December 1, 2002 a process to mediate disputes that might arise about payment of Medicare GME funds to the Council. Payment and
administrative rules for the demonstration are subject to clarification by the CMS project officer, which must be in writing.

22. The Medical Education Council has presented a time line of steps leading to the National Residency Match in January 2003. The
Council will inform CMS of a general strategy of its allocation among the various specialties by July 2002 and its decision on allocations by
September 2002. Each future year of the demonstration will be approved under the condition that the Medical Education Council
provides information on its allocations, and the allocations are approved.

23. The Medical Education Council may revise its resident allocation decisions prior to the respective year„s National Residency Match.
These revisions must be submitted to CMS to assure continued compliance with Federal laws and regulations.

24. The State Medical Education Council will track rotations among the participating hospitals. The Medical Education Council will
provide to CMS all data on Medicare patient days, resident counts, and the allocation of funds to each hospital. These data must be
provided as soon as possible in the process for determining residency allocations.

25. If there is a Medicare + Choice plan established in Utah during the period of the demonstration project, a committee consisting of the
representatives of CMS, the Medical Education Council, and the fiscal intermediary will determine how to include Medicare + Choice
DGME and IME payments in the demonstration project.




                                                                     4
                                                            Appendix IV

                              Utah Graduate Medical Education Demonstration Waivers
    The following are specific waivers for the demonstration:


   Section 1886(h)(3)(A) of the Social Security Act, and corresponding 42 CFR 413.86, which provide that Medicare direct graduate
    medical education payments are made to hospitals. Under the demonstration, direct graduate medical education payments will be
    made to the State of Utah Medical Education Council instead of to the hospitals.


   Section 1886(h)(3)(A) of the Social Security Act, and corresponding 42 CFR 413.86. The demonstration will change the
    methodology by which direct graduate medical education payment is calculated to one that establishes an annual amount from most
    recently settled cost reports of participating teaching hospitals, to be updated by the CPI-U inflation factor.


   Section 1886(d)(5)(B) of the Social Security Act, and corresponding 42 CFR 412.105, pertaining to the requirements that indirect
    medical education payments be made to hospitals. Under the demonstration, IME payments will be made to the State of Utah
    Medical Education Council, instead of to hospitals.


   Section 1886(d)(5)(B)(I) of the Social Security Act, and corresponding 42 CFR 412.105, that specifies the formula by which indirect
    medical education payments be changed. IME payments will be calculated using the formula specified by then current legislation,
    including DRG payments and intern-and –resident-to-bed ratio as specified by most recent settled cost reports.


   Section 1886(h)(4)(F) and corresponding 42 CFR 413.86 of the Social Security Act places a limit on the number of FTE residents that a
    hospital can count for cost reporting purposes for direct graduate medical education. This limit is the number of FTEs on the
    hospital„s latest cost report prior to December 31, 1996. Section 1886(d)(5)(B)(v) establishes the same limit for indirect medical
    education. Under the demonstration, the number of residents per hospital will not be limited by this number. The total Medicare
    direct and indirect graduate medical education payment will be limited to an annual amount. Under the terms and conditions of
    the waiver, CMS will review the Council„s resident allocations to assure that the amount of training is not reduced.


 42 CFR 413.64, which States that retroactive payment to the hospital must be made as soon as possible by
    the fiscal intermediary. Any reconciliation payment from the fiscal intermediary that would compensate
    Utah teaching hospitals for underpayment would ordinarily be made directly to the participating hospitals.
     Because the teaching hospitals participating in the demonstration have different end dates for the cost
    report year, this regulation will be waived. The intermediary will wait for the end of all cost report
    periods in a given calendar year, and determine the settlement with the hospitals.




                                                                  1

				
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