Here's part two of my thoughts on MedPAC's June report, Improving Incentives in the Medicare Program.   Yesterday I posted on Accountable Care Organizations, or ACOs. Today I'll focus on how Medicare pays for medical residents.

Medicare doesn't pay for medical school per se, but the federal government does heavily subsidize medical education, particularly residencies. In 2008, Medicare spent $9 billion—about $100,000 each for 90,000 residents annually—to teach physicians how to take care of mostly acutely ill patients in hospital settings. But MedPAC called for bold changes. If we want to change our delivery system, we need to change medical education in tandem. MedPAC wants education and training to encompass disease prevention, chronic care management, and care coordination across settings. MedPAC is especially concerned about a lack of "formal instruction and experience in multidisciplinary teamwork, cost awareness in clinical decision making, comprehensive health information technology, and patient care in ambulatory settings."

That last item, "patient care in ambulatory settings," is of particular interest to us. As MedPAC states:

The reluctance of teaching hospitals to have residents rotate outside the hospital can be attributed to historical patterns of medical education, regulatory issues, and financial incentives. For example, under current statute and regulations, in certain circumstances, when residents rotate to nonhospital settings, teaching hospitals may lose some of the funding they could otherwise receive through Medicare's graduate medical education payments. Hospitals face an even greater financial incentive to keep residents within the hospital to retain the clinical labor that residents provide.

The few articles I've seen on the MedPAC report make no mention of its medical education component. But there is a silver lining. According to The Post, Congress and the Obama Administration are considering providing incentives for doctors entering primary care residencies. While this won't address the content and setting of residency experience, using residency payments to encourage more primary care physicians might be an opening to improve the residency experience in multiple ways.  

Fitzhugh Mullan and Elizabeth Wiley at the Health Affairs Blog expand on this point with a stellar post that includes some new governance ideas. They also remind us that:

The complement of residents that hospitals need to staff their services is not the same complement that the nation needs to deliver health care to 300 million people—99% of whom are not in a hospital ... During the last decade, 20 family medicine residency programs have been closed and 645 less residents are being trained in family medicine today than ten years ago. In 1998, 54% of internal medicine residents planned careers in primary care, whereas only 23% did in 2007.

There are two takeaways. First, by paying for physician residencies, the government has the authority to alter the requirements necessary for programs to receive payment. This is a very specific instance where all the endless talk about making primary care a priority can actually come to fruition. Note that Medicare governance reforms, such as those Mullan and Wiley propose, might be necessary to achieve these reforms. Powerful forces in Washington, representing diverse interests that could suffer setbacks in a move toward primary care, will use their power to block or delay reform. The Mullan/Wiley commission could protect against this. 

Second, we should consider integrating the ideas of ACOs and residency payments.  As MedPAC noted, hospitals do not want to let their residents work in unaffiliated physician practices, nursing homes, rehab centers, and the like, because they lose reimbursement.  If we require hospitals to partner with "teaching physician practices," and "teaching nursing homes," there would be a financial incentive to allow residents to learn outside the hospital setting, where most health care is delivered.

I'll have one more post tomorrow on the new MedPAC report.