GME Background Information

As a result of the Balanced Budget Act of 1997, and its later iterations, (The Balanced Budget Refinement Act of 1999, or BBRA; and the Medicare, Medicaid and SCHIP Benefits improvement and Protection Act of 2000, or BIPA) the payment update factor for Indirect Medical Education (IME) decreased in FY2003 to 5.5%, down from the recent level of 6.5%.

IME payments to hospitals are paid to help cover the additional intangible costs associated with training physicians. Decreasing the payment rate will translate to even lower margins for teaching hospitals.

The BBA mandated a 29% cut in Medicare Indirect Medical Education (IME) funding over 4 years. IME funds help cover the systematically higher costs teaching hospitals incur. These costs are a necessary component of training physicians to serve both Medicare beneficiaries and the general population. In an attempt to mitigate the drastic IME cuts, Congress postponed the implementation of the full 29% IME cut, but time has now run out. The update factor is currently down to 5.5%.

Returning the IME update to 6.5% would help protect teaching hospitals' financial stability and allow institutions to provide high quality care to their communities while training the next generation of physicians. Teaching hospitals across the country need this additional relief. Reports of hospitals scaling back programs and services, or even closing entire departments, have become all too common.

Maintaining the IME at higher levels is critical to sustaining teaching hospitals' important mission of training future physicians and providing the medical services severely ill patients needs.