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The Keckley Report

Physician Training Gets a Fresh Look

By August 4, 2014March 1st, 2023No Comments

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article. 

Last Tuesday, a 21-member Institute of Medicine (IOM) expert panel led by former CMS administrators Donald Berwick and Gail Wilensky released recommendations to overhaul the way the U.S. funds graduate medical education. The impetus for the report:  “It’s time to modernize how graduate medical education is financed so that physicians are trained to meet today’s needs for high-quality, patient-centered, affordable health care.”

Background: There are two overarching issues in graduate medical education: effectiveness and funding.

1.  Effectiveness: Graduate medical education (GME) includes 3-7 years of training in teaching hospitals and their ambulatory settings through sponsored internships, residencies, and fellowship programs. GME is a requirement for all MDs/DOs after graduation from medical school before state licensure and board certification. The issue is – GME in the U.S. producing the appropriate numbers and competencies of physicians necessary to patient health in our population? GME is a key operating focus in the 1,000 hospitals in the U.S. that sponsor residency programs including 400 that sponsor 4 or more residency programs and are members of AAMC’s Council of Teaching Hospitals. The effectiveness of GME is central to the U.S. health system’s stature as the world leader in medical education and a key consideration in the day to day operations of our largest, most prominent hospitals. The question is – can it be improved? Are products of today’s GME programs prone to be life-long learners, or disposed to practice otherwise and given the complexity of the health care environment, is GME adequately preparing physicians to manage change proactively.

2.  Funding: GME is funded by 4 sources: In 2012, Medicare paid $9.7 billion to teaching hospitals for graduate medical education in the form of direct compensation for residents employed and indirect payments to cover their higher operating costs associated with the specialized care provided in teaching programs. Medicaid paid $3.9 billion, the Department of Veterans Affairs contributed $1.437 billion, and HHS’ Health Resources and Services Administration (HRSA) $464 million. The AAMC estimates a shortage of 130,600 physicians by 2025: the 26,000 residency slots available to first year enrollees will not accommodate the shortage Federal funding for residency positions was capped in 1997 at 26,000 slots as part of the Balanced Budget Act but funding from other sources has increased the number of training slots by 17.5% . Is $15.5 billion for GME enough or not enough? 

IOM Panel conclusions:

“Even though funding largely is paid for by the federal government, new doctors ‘have no obligation to practice in specialties and geographic areas where they are needed or to accept Medicare or Medicaid patients once they enter practice’.”

“There was not a consensus that there is a shortage going forward… Rapid changes in medical practice, including sharply higher use of non-physician health professionals such as physician assistants and nurse practitioners, might be enough to provide care to aging baby boomers and those obtaining coverage under the Affordable Care Act.”

“The evidence instead suggests that while the capacity of the GME system has grown in recent years, it is not producing an increasing proportion of physicians who choose to practice primary care, to provide care to underserved populations, or to locate in rural or other underserved areas.”

“Increasing the number of residency positions would not address issues related to geographic and specialty distribution. Medicare’s graduate medical education funds are disproportionally awarded to New York, New Jersey and Massachusetts.”

IOM panel recommendations:

The IOM panel recommended transitioning GME to a “performance-based system,” over 10 years requiring Congressional approval to be implemented:

1.  Maintain current level of funding: Maintain aggregate GME support at the current levels with annual adjustments for inflation, transition toward performance-based payments and phase out the existing payment system for Medicare.

2.  Create federal oversight process to modernize GME: Create two-branch infrastructure to oversee GME: a GME Policy Council in the Office of the Secretary of the Department of Health and Human Services to oversee decision- and policy-making, and a GME Center within the Centers for Medicare & Medicaid Services to handle payment reforms and demonstrations of new payment models.

3.  Streamline the Medicare funding mechanism: Within Medicare, create one GME fund with two elements: the Operational Fund, which would sponsor continuing residency training, and the Transformation Fund (10% initially increasing to 30% by year 10), which would help develop new infrastructure, programs, payment demonstrations and performance methods.

4.  Change the Medicare payments methodology: Modernize the Medicare GME payment methodology, replacing the separate indirect medical education and direct GME funding streams with one direct payment to GME sponsoring organizations based on a national per-resident amount (PRA), with a geographic adjustment.

5.  Maintain Medicaid funding, increase accountability: Maintain Medicaid funding for GME at each state’s discretion, but improve transparency and accountability.


Kaiser Healthcare News captured reactions succinctly: “A high-level report recommending sweeping changes in how the government distributes $15 billion annually to subsidize the training of doctors has brought out the sharp scalpels of those who would be most immediately affected.” Examples:

  • Association of American Medical Colleges (AAMC): “While the current system is far from perfect, the IOM’s proposed wholesale dismantling of our nation’s graduate medical education system will have significant negative impact on the future of health care. By proposing as much as a 35 percent reduction in payments to teaching hospitals, the IOM’s recommendations will slash funding for vital care and services available almost exclusively at teaching hospitals, including Level 1 trauma centers, pediatric intensive care units, burn centers, and access to clinical trials.” (
  • American Hospital Association: “Today’s report on graduate medical education is the wrong prescription for training tomorrow’s physicians. We are especially disappointed that the report proposes phasing out the current Medicare GME funding provided to hospitals and offering it to other entities that do not treat Medicare patients.” (
  • American Medical Association: “Despite the fact that workforce experts predict a shortage of more than 45,000 primary care and 46,000 specialty physicians in the U.S. by 2020, the report provides no clear solution to increasing the overall number of graduate medical education positions to ensure there are enough physicians to meet actual workforce needs.” (

Some reacted more favorably:

  • American Academy of Family Physicians: “We welcome the proposal to shift funding away from the legacy hospital-based system to more community-based training sites; including allowing funding to go directly to those organizations that sponsor residency training. By giving these organizations more control over how they train residents, the financial investment will better align with the health needs of a community.”

My take:

Medical education and its symbiotic relationship with teaching hospitals traces its origin to 1765 in Philadelphia when Thomas Bond convinced the Board of Pennsylvania Hospital that bedside training was a necessary skill for modern clinicians: “Realizing that the student ‘must Join Examples with Study, before he can be sufficiently qualified to prescribe for the sick, for Language and Books alone can never give him Adequate Ideas of Diseases and the best methods of Treating them.” Since then, in my opinion, medical education has struggled to find methods to equip clinicians with tools and methodologies necessary to practice effectively while scientific discovery expands, clinical knowledge management technologies that improve diagnostic and treatment accuracy proliferate, team-based clinical decision-making is standardized in major provider health systems and data about physician training and competence is more widely accessible.

The IOM panel, to its credit, included a wide range of perspectives outside traditional academic medicine: members like Peter Buerhaus (nursing), Glenn Steele, Mike Dowling, Gale Warden (integrated health systems) and others provided unique and necessary input to the panel’s perspectives.

Is GME as currently implemented, achieving optimal effectiveness? The panel concluded no. Growing shortages in primary care, and maldistribution of specialists illustrate this point. But the panel’s report did not go far enough in addressing needed changes to a modernized GME strategy. At the outset, the panel stated that a goal was to insure that GME contributed to the delivery of affordable care. That laudable goal was not addressed in substance by the panel, and remains a source of tension in the industry. Physicians can play a much more effective role in managing health costs without compromising safety and quality. The panel’s conclusion that GME is not optimally effective in its current deign is accurate in my view, but the urgency for GME to address affordability, patient engagement, and care coordination via “system-ness” would have been useful.

Is funding sufficient to provide for an adequately equipped future physician workforce in the U.S.? The panel concluded yes, but only if re-distributed from traditional methods of payment that favored large, urban teaching hospitals in the Northeast, and only if sponsors of GME expand beyond traditional teaching hospitals to community clinics and other settings.

I remember the excitement and apprehension around National Resident Match Day in my years at Vanderbilt. In 228 days, March 20, 2015, the next wave of physicians will learn where they’ll apply their training to practice. They’ll learn more in these years than perhaps the 8 years prior spent in undergraduate and medical school, and in so doing, learn much about themselves.

GME deserves the attention given by the IOM Panel- the conversation should not end. It matters to all of us.


SOURCES: “Graduate Medical Education That Meets the Nation’s Health Needs,” Institute of Medicine, July, 2014;  “IOM Report calls for Changes to Graduate Medical Education Funding,” California Healthline, July 30, 2014; Julie Rovner, “Report Touches Off Fight Over Future Of Doctor Training Program,” Kaiser Health News, July 30, 2014; Zack Budryk, “IOM report calls for overhaul of medical education funding,” Fierce Healthcare, July 30, 2014;  Julie Rovner, “Hospitals Fight Proposed Changes In The Training Of Doctors,” National Public Radio blog in partnership with KHN, July 31, 2014;  Journal of Graduate Medical Education, June, 2014 (Vol.6, Issue 2); Association of Academic Medical Centers (; American Council on Graduate Medical Education (; Council of Teaching Hospitals (; Abraham Flexner, “Medical Education in America,” The Atlantic,  June 1, 1910.; Andis Robeznieks, “Revamp funding for training residents,” Modern Healthcare, July 29, 2014


The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.


© 2014 Navigant Consulting, Inc.