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Edward Tuohy, MD

JAMA. 1999;282:2268.

The AMA Department of Resident and Fellow Services receives calls each month from residents who are told that they cannot switch specialties because their new residency program would not receive funding for them. Often, residency programs do not provide a complete answer regarding this situation. It is important for residents and medical students to understand how funding for graduate medical education (GME) can make switching specialties difficult. This week's column presents background information on how medicare reimburses hospitals for residency training. Next week's column will describe how reimbursement can affect a change of specialty choice.

Currently, Medicare reimburses teaching hospitals for the costs of GME through 2 payment streams: direct medical education (DME) payments and the indirect medical education (IME) adjustment. The DME payments cover the cost of resident, fellow, and faculty salaries and benefits as well as tangible educational expenses; DME payments depend on the number of residents in a teaching institution. The IME adjustment compensates teaching hospitals for intangible costs associated with the presence of a residency program; Medicare will pay a teaching hospital more for patient care services than it would pay a nonteaching hospital. While reimbursement differs from hospital to hospital, IME payments to hospitals are usually substantially larger than DME payments. On average, indirect payments make up two thirds of the total Medicare payments that a hospital receives for training residents.

When entering a residency program, a resident is counted as a 1.0 full-time equivalent (FTE) for his/her initial residency period. The initial residency period is defined as the number of years required to become eligible to take the board certification examination in that specialty. For example, a resident in general surgery is recognized as 1.0 FTE for 5 years, but a resident in internal medicine is only recognized as 1.0 FTE for 3 years. For any training occurring after the initial period, the resident is counted as a 0.5 FTE. In some combined primary care residencies such as internal medicine/pediatrics, medicare will allow for an additional year as a 1.0 FTE. The FTE figure is permanently set when a physician enters residency; it does not change if a physician takes time off, leaves a program early, switches specialties, or switches residency programs.

The number of FTE residents at a teaching hospital only affects the calculation of DME payments; IME payments are not affected. If a resident is still in training after the initial residency period, the DME payments that the hospital receives for that resident is halved but the IME payments are not affected. If DME payments only make up one third of total GME payments to a hospital, the hospital will still receive 83% of the payments it would have received if the resident were still in the initial residency period. In next week's column, I will discuss how this reduction in reimbursement presents a roadblock to some residents who wish to switch specialties.

Vice-Chair, AMA Resident
and Fellow Section
New Haven, Conn

Prepared by Ashish Bajaj, Department of Resident and Fellow Services, American Medical Association.

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