With: Art Boll, President, Germain Solutions

Question: If enacted as proposed, would the Resident Physician Shortage Reduction Act of 2009 provide relief for hospitals operating well over their cap?

Answer: There are approximately 1,100 teaching hospitals, of which 400 currently train over 200 residents each. Most of these larger teaching hospital programs are over their resident FTE (Full Time Equivalents) cap, some by substantial amounts. I am aware of several large hospitals that are 150+ residents over their cap. I have heard anecdotal comments about one institution being several hundred residents over its cap. If one-third of the expanded residency slots, or approximately 5,000 slots, are available for hospitals over the cap, that will translate into only 10 to 15 residents actually being available per major teaching hospital while the bill, in theory, would provide relief of 50 residents per hospital. The bill may not help large teaching hospitals get back or below their current cap levels. These hospitals could also pursue the 10,000 new positions that would be available if this bill is passed as proposed, but doing so will not directly help them since they will have to add “new” residents to get “new” cap positions.

Question: Will approximately 10,000 new slots for starting or expanding residency programs address the need for additional physicians?

Answer: This bill, if passed, will hopefully provide some relief to a large number of hospitals that would like to start or expand Medicare-supported residency programs. Funded residency positions have been capped for each teaching hospital for over 10 years. I think most hospitals will have to consider taking advantage of this bill if it is passed. The impending physician shortages, especially in primary care, are encouraging hospitals to train and retain their own primary care physicians and general surgeons for their medical staff. The question is whether there will be enough physicians graduating from medical schools to fill these new slots. If indeed 10,000 new funded resident slots become available, each year there will need to be a large number of graduates from medical schools to fill them. Assuming an average residency program length of 3–4 years, 2,500 to 3,300 additional medical school graduates each year will be needed to fill these newly funded residency positions. With new medical schools (allopathic, osteopathic, and international) being created each year and established medical schools increasing class sizes (20–30%), there should be adequate numbers of physicians graduating from medical school to fill these new slots.

Question: How stiff will competition be for obtaining any of the 15,000 new slots?

Answer: There clearly will be competition for both pools of new resident caps. Similar to the Medicare Modernization Act process, CMS will interpret the bill, if and when it is passed, and set forth priorities and criteria that will be used to allocate the “new” resident slots.

Question: What can teaching institutions do now to posture themselves to receive new slots under the Act?

Answer: My advice would be to begin planning and preparing for this event. Address any accreditation issues and begin internal planning and consensus building to help establish the business case to pursue these residency positions if the bill is passed. This decision is never easy because there will be internal competition within a hospital to expand existing programs as well as potentially starting new programs (i.e., primary care) that will qualify under the new provisions. Hospital leadership will need to understand the costs/financing implications and the medical staff will need to weigh in. Start now to internalize this opportunity and begin planning to position your organization for a successful outcome. Each residency slot may have a future reimbursement value of $1–2 million dollars. Residency programs, if aligned with the strategic and operational needs of a hospital, are a powerful tool to accomplish a hospital’s current and future goals.

Question: What factors should teaching institutions be considering now as part of their pre-planning?

Answer: If your hospital is over the cap, it’s a no brainer; you will throw your hat in the ring for the 5,000 or so slots that will be in that pool. The benefit of pursuing slots for hospitals over the cap will always exceed the cost, since the costs of operating the residency program are already in place. Going after resident slots in the second pool of new residents is a more complicated equation. For these resident slots, the hospital will need to incur new costs to add them (i.e., faculty salaries, resident stipends, etc.). Expanding residency programs in New York and Michigan will have a strong business case because of favorable payor treatment of GME costs. For other states, a key variable will be the cost of building your own primary care medical staff through a residency program versus recruiting these physicians ($200–$300K each), if you can even find them. Historically, many graduating residents have stayed in the community where they trained. This has changed dramatically in the last 5–8 years for many reasons. Clearly, this should be a core objective of any expanding primary care-based residency program or general surgery program. To bring a financial perspective to this topic, a recent article estimated the number of smaller hospitals in New York State that might close simply because the general surgeons, who are the economic backbone of these hospitals, are nearing retirement, and the hospitals may not be able to replace them because of general surgeon shortages. [1] The article highlights the importance of this specialty in rural and smaller hospitals.

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Arthur G. Boll

Mr. Boll consults nationally in the specialized financial, operational and strategic issues associated with Academic Medical Organization and Teaching Hospitals. Mr. Boll retired as a national healthcare partner at Deloitte & Touche after 26 years. Mr. Boll led Deloitte’s Academic Medical Organization consulting service. This group consults with major Universities and Schools of Medicine, Teaching Hospitals, Physician Practice Plans, Group Practices and Research Organizations on a nationwide basis.

Mr. Boll is the President and Owner of Germain Solutions. which is a consulting and technology company that provides solutions and tools to Academic Teaching Organizations.

Mr. Boll is acknowledged as a national expert in the financing of academic missions and the structuring of economic arrangements, ambulatory care services and arrangements, reimbursement maximization, the structuring of academic support agreements, hospital/physician organizational issues and economic arrangements, and coordinating economic arrangements and incentives between teaching, research and clinical activities within an academic environment. Mr. Boll has performed multiple physician economic engagements related to GME and Administrative services in a variety of academic and teaching organization. Mr. Boll has developed a variety of proprietary tools and benchmarks to assist graduate medical education programs to improve both educational and financial performance.

Mr. Boll has conducted numerous training sessions and presentations to organizations such as AHA, AAMC, GBA, AHME and various state health care organizations.