Bloomberg News

Obama Hospital Cuts Seen Worsening Primary Care Shortage

March 01, 2012

A plan to reduce federal funding for teaching hospitals in President Barack Obama’s fiscal 2013 budget proposal will curb training for primary care doctors, undermining a top priority of the 2010 health-care law he fought to enact, a Bloomberg Government study shows.

The law would expand medical coverage to as many as 32 million uninsured people, flooding the system with new patients and driving up demand for family physicians. To narrow the deficit, the president plans to save $9.7 billion over nine years by reducing what Medicare (USBOMDCR) pays to train new doctors.

The proposed cuts, if enacted, will cause hospitals to adjust the mix of residency slots to focus on specialty positions that are the most profitable, according to the study by Bloomberg Government health-care analyst Brian Rye. That will steer medical students to specialties that can pay twice as much as primary care, according to medical school executives.

“You can tell people primary care is great all you want, but unless you show you value it through the payment system, people are always going to go for the economic incentives,” said Atul Grover, chief public policy officer for the Association of American Medical Colleges, in a telephone interview.

Medicare, the U.S. health program for the elderly and disabled, provided about $9.5 billion to hospitals in 2010 to offset the cost of sponsoring residency programs in which graduate medical students train before working independently. Grover’s group estimates the training cuts will contribute to a shortage of 60,000 physicians in the U.S. by 2015.

Priorities Questioned

The Medicare reimbursement goes directly to hospitals and it’s unclear how the money is used, Rye said in the report. That leads to concerns the hospitals may not be spending on the programs that are needed most, said Frederick Chen, a family physician and associate professor at the University of Washington School of Medicine in Seattle.

“We have a situation where the majority of trainees, the majority of physicians that are trained using public funds are not meeting the needs of the country,” said Chen, who trains 24 family medicine residents in a program of 1,000 future doctors at the university’s medical center.

Thirty percent of doctors work in family medicine today, compared with 50 percent in 1961, according to the study. Rye estimates the proposed cuts won’t reduce the number of residents because hospitals depend on them to control costs.

Salary Ranges

The annual salary of a family physician ranges from about $175,000 to $220,196, according to the AAMC. Orthopedists earn from $397,879 to $600,000 while a neurosurgeon can make $287,000 to $637,000, according to the group’s website.

Doctors with specialties will make $2.7 million more in lifetime pay, according to a study by researchers at Duke University in Durham, North Carolina.

“Our system’s upside down,” said Glen Stream, president of the American Academy of Family Physicians, in a telephone interview. “We don’t have enough family doctors to help people plan their wellness treatment.”

The 10 percent reduction Obama proposed may save $9.7 billion in nine years starting in 2013, according to White House estimates.

The health-care law will trim $157 billion in U.S. payments to hospitals through 2019, according to estimates by the Congressional Budget Office. Herbert Pardes, formerly the chief executive officer of the New York Presbyterian Hospital, was one of the industry leaders who agreed to the cuts and said further reductions will jeopardize patient care.

“If a hospital agrees to cuts and then you say, now we want to cut further, they’re making it impossible to have the resources to train the doctors,” said Pardes, who is now the hospital’s executive vice chairman. “There are already patients who can’t find doctors on Medicare, and what are we supposed to do?”

Hospitals faced further reductions as Congress tackled the growing national debt. In 2013, Medicare hospital payments will be trimmed an additional 2 percent.

“On the one hand you have predictions of a physician shortage,” Rye said in a telephone interview. “That’s in contrast with the other goal, which is reducing Medicare spending because of national debt.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net;

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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