The Graduate Medical Education Compliance Project (GMECP)

GME Funding and Accountability(?)

Page created: 17 Sept 2018

Updated: 17 Oct 2018


The funding of residency programs is poorly understood by residents, and even residency program faculty and staff. The public, which itself is the primary funder of Graduate Medical Education (GME) at approx $15B per year, has no understanding whatsoever.  Neither do our elected representatives, who also lack any power of oversight, instead relying on private organizations to regulate the non-transparent system. (Medicare covers almost $10B, Medicaid almost $4B, with a few other tax-funded sources. Private sources, like hospitals themselves, provide some GME funds for their own residents and service provision at an unknown amount.) This page will be an ongoing project for a while as we decipher some of the mysteries ourselves.


For a quick overview, please review the GMECP original article U.S. Physician Residency Funding: Unravel the Mystery, Participate in the Conversation.

The Association of American Medical Colleges (AAMC) is a good source of information, including a GME “advocacy” homepage, pages describing the allocation of Direct (DGME) and Indirect (IME) funding, among others.

Additionally, the AAMC has created four short video “primers” which address aspects of Medicare-funded GME.

Points from Video Primer Part 1: GME Overview

  • Direct GME payments include monies for directly training residents, like their stipends/benefits. DME totals about $3B/yr.
  • Indirect GME payments are related to supplementing patient care in a teaching environment. IME totals about $7B/yr.
  • The Centers for Medicare and Medicaid Services (CMS, a branch of the Dept of Health and Human Services) makes the rules about GME payments. These can be found in the Social Security Act of 1965 and in the Code of Federal Regulations.

From Primer Part 2: DGME, direct payments

  • DGME provides funds for Medicare’s share of the cost directly related to educating residents. Specifically: resident stipends and benefits, salaries/benefits of resident faculty, accreditation fees, GME office support,…
  • For Non-Medicare related costs, funds may be acquired from teaching hospital revenue, private payers, Medicaid, Children’s GME, VA GME, … (these are all minor contributors in comparison to Medicare).
  • Payments are only provided for residents who are in “approved” programs, essentially those accredited by the ACGME. There are programs that are not approved (un-accredited) and do not receive Medicare GME funds, like transplant surgery fellowships, for which there is no official ABMS board exam.
  • The payment system was started and is based on 1984 numbers. It uses the amount of money that hospitals claim to have spent per resident (the Per Resident Amount – PRA) on that base year. There are adjustments for inflation, for the number of full-time equivalent (FTE) residents, and for the number of Medicare inpatient days (Medicare’s share of total inpatients).
  • For example, a hospital’s PRA is $100K x 100 FTEs x 35% Medicare patients share of beds = $3.5M DGME payment to the teaching hospital
  • Medicare will pay for the minimum accredited length of the first residency program (the Initial Residency Period – IRP). If a resident matches into Family Practice right out of medical school, she’ll get 3 years of funding for that anticipated training period. If general surgery, then 5 years of funding.  That initial funding duration is fixed, even if one changes residencies or repeats a year. However, additional years or fellowship years will still be covered, but at a 50% DGME funding amount (IME is covered in full).

From Primer, Part 3: IME, indirect payments

  • IME covers costs of caring for Medicare patients in teaching hospitals to offset teaching inefficiencies and the expenses of higher acuity services and patients.
  • Medicare pays for the basic health care services of its patients (per the Medicare Severity Diagnosis Related Group: MS-DRG). IME is an added payment to hospitals and varies as a percentage of the MS-DRG service provided to a patient.
  • The IME adjustment is based on the Intern and Resident to Bed ratio (IRB – usually 0.25 or greater for a teaching hospital) and a multiplier set by Congress (currently 1.35).
  • Adjusted ratio = IME multiplier  x ((1 + IRB) ^0.405 – 1). The IME adjustment = Adjusted ratio x (%Medicare pts)(DRG payment) (Case mix ratio)
  • An IME adjustment might be 13%. As an example, a patient having a pacer/defibrillator implanted would elicit the MS-DRG 227 payment of $29,748 to the hospital, Because it is a teaching hospital with residents, the IME adjustment of 13% would be added on to that payment, for an additional payment of $3,867 to the hospital. (It seems like those additional IME payments could add up pretty quickly, perhaps even making residents a steady revenue stream, if not a cash cow, for teaching hospitals?)

From Primer, Part 4:

  • The Balanced Budget Act of 1997 capped the number of residents for which a hospital can receive GME funding. “The Cap.”
  • There are some exceptions to the existing caps on resident numbers: rural hospitals, critical access hospitals, non-teaching hospitals starting new programs, slots that become available from a closed program,….
  • About 2/3 of hospitals are currently training MORE residents than those for which they receive Medicare GME funding. They are ABOVE CAP. There are approximately 11,000 FTEs above cap nationally. (Where are those funds coming from? Mostly from the hospitals themselves, it appears. And if that is the case, then certainly hospitals are not LOSING money by training residents. Perhaps they are even making money by using cheap labor? If the economics didn’t work out, they wouldn’t be doing it.)


The Institute of Medicine’s (IOM) study, Graduate Medical Education That Meets the Nation’s Health Needs, published in 2014 (a free .pdf download) is an insightful report. The US Senate charged the IOM with helping the government understand the financials and details of GME. While the study is broad, particularly looking at recommendations for future policy and direction, it offers good information and analysis of funding and accountability issues for physician resident training.


Some relevant points from the study:

  • Pg 8: The financials of GME are complex, largely undocumented. There is little data, it is opaque, incomplete, not standardized or audited.
  • Pg 9: The Medicare funding (~65% of GME money) is provided in Direct Graduate Medical Education (DGME) funds which cover resident (and partial faculty) salaries and benefits, and in Indirect Medical Education (IME) funds which cover the assumed additional costs of sponsoring residents (inefficiencies in time, procedure, testing,..). DGME makes up about $3B (30%) and IME $7B (70%) of Medicare GME funding. The IME is determined by complex formula but is derived from inpatient numbers and complexity.
  • Pg 15-16: there is a “striking absence of transparency and accountability” in the GME system.
  • Pg 17: GME funding was mandated in the 1965 creation of the Medicare program.
  • Pg 62-63: Funding is “daunting, complex, undocumented,…” as illustrated in one of the study’s charts.
  • Pg 92-93: Residents may be an inexpensive source of labor, averaging annual stipends in the $50K range, in comparison with fully trained physicians. “If residents weren’t contributing more than they cost, then they wouldn’t be paid and would instead be charged tuition.”
  • Pg 98: Surgery residents, in particular, likely “provide considerable savings to institutions” as they provide large amounts of on-call services.
  • Pg 100: Given the unaccountable and direct flow of GME funds to hospitals, “there is no financial incentive to improve the quality or efficiency of physician training.”
  • Pg 108: Financing and governance of GME are “essentially disconnected.”
  • Pg 111: Program outcomes are neither measure nor reported.
  • Pg 114: Little is known about the management and effectiveness of the $15B annual taxpayer investment in GME.
  • Pg 118: There is a dearth of federal oversight and accountability as private organizations have control of the money and training.
  • Pg 123: There is no stewardship of the public’s investment, no mechanism or infrastructure for oversight.
  • Pg 125: The governance of GME is inadequate.


Sanner L and Voorhees K. Medicare GME Payments –
Background and Basics. March 2017. Presentation, Am Acad of Fam Phys (AAFP).


Some points:


  • Medicare IME payments and other teaching hospital data can be found at Hospital 2552-10 Cost Report Data files page. Download the Hospital 2010 Reports (.zip, which contains data from 2010 forward), then open the IME_GME folder to access data by year.
  • As an example, CMS data appears to show 2016 IME information for St. Louis University Hospital (line 3104, column L) = $19,533,995; DSH (disproportionate share payment for indigent/adverse payer mix, column O )=  $2,794,656; and total interns and residents (column Z) = 293.
  • CMS pays the money but does not oversee GME rules, regulations, efficiencies, training outcomes,… (p. 12)
  • IME usually approx doubles DGME (p. 12)
  • The reality is that IME functionally subsidizes indigent care. 1/5 of the nation’s hospitals in big cities consume 2/3 of IME (p.13)
  • For Medicare DGME purposes, a resident can be counted 100% during the initial eligibility period, then only 50% beyond that. e.g., a resident starts in Peds and after 1 year transfers to FM (another 3 year specialty program). The FM program will get to claim  100% DGME funding for 2 years but then only 50% thereafter.
  • Discussion on residency program slot CAPS starts on p. 20
  • IME for residents is NOT discounted after the initial eligibility period. IME continues at 100% (p 27)
  • To find Medicaid contributions by state, go to the AAMC site, click on the “store” tab, search “,”Medicaid GME,” and download the free Medicaid Graduate Medical Education Payments: A 50-State Survey. (Missouri taxpayers, for example, contributed $110M in Medicaid dollarsfor teaching hospital GME in the state.)



Some GME funding questions and issues:


What are the legal implications for institutions that receive federal tax monies?

e.g. EEOC: a resident’s civil rights complaints (discrimination, harassment, retaliation) may fall under both Title VII employment and Title IX education protections. [See United States Court of Appeals, Third Circuit. Jane Doe v. Mercy Catholic Medical Center, No. 16-1247 (2017).] Additionally, the Patient Protection and Affordable Care Act (PPACA), section 1557, addresses discrimination in programs or activities which receive funding from the Department of Health and Human Services, which administrates Medicare (GME funding).

How is $15B of our taxes devoid of Congressional oversight as to where it goes and how it is used/misused? How has Congress abdicated its responsibility, surrendering those funds over to private corporations (ACGME, hospitals, universities)? The public should be concerned not only about taxation without representation, but with the health of the education/training system that it funds and upon which it relies for the pipeline of the nation’s physicians.

What are the implications/requirements for recipients of other public funds? e.g. local, state, federal grant money to hospitals; Medicare/Medicaid and other tax funded, third party health coverage payments to hospitals and physicians; research grants,…?

Taxpayers fund at least $100K in direct and indirect funding for each resident position in the US each year. When a hospital/program accepts that money, but fails to train the resident per agreement and requirement (perhaps even wrongfully terminating a resident), is that fraud against the government? Should that money be repaid?

What exactly is the flow of GME funds from Medicare dollars to Hospital/University, residency program and faculty, ACGME program fees ($50M/year per their annual report),…? What is that funding request process?

How are Medicare and other GME funds intended to be used? Classroom/didactic learning is minimal (perhaps 4 hours/wk out of a 60-80+ hour work week). Does any other health care professional in training work to provide actual services, doing the job, with decreasing supervision as she approaches the end of the 3-8+ year post-graduate track? Are the Medicare/caid payments really for education, or are they paid to provide for the least expensive care of the elderly and under-served? If a resident salary/stipend averages in the $50K range, and a resident works 80 hours/wk (as they often do, if not more), what is that hourly wage? (About $12/hour). Compare that wage, hospital expenditure and faculty practice plan savings to the cost and complexity of care delivered by other health care professionals (RNs, NPs, PAs are likely to make $25-50/hr).

If GME funds are paid primarily for care of the elderly and indigent, is it reasonable to expect the fully trained physician to “owe” something back to society? Or has she been paid a very depressed wage to provide inexpensive services while concurrently receiving multi-year, on-the-job training throughout residency, under conditions and work hours that no other trainee/worker in the developed world would tolerate? If doctors were truly trained by society, wouldn’t their medical school tuitions be paid by society, rather than resident physicians carrying $150-300K+ in student loans throughout residency and for many years to follow?

How many residents do not complete training? What happens to those residents? Where do they go? Are they tracked? What responsibility and accountability do those training programs have for the millions of dollars in taxpayer funds that they received to educate and train those residents (at approx $100K/year/resident)? Did the programs fail the residents? If the failure were entirely the fault of the resident, then why did the program’s selection criteria and process fail to identify him? Does the ACGME track these? Which programs have high rates of failure (and/or complaints)? Is the ACGME guilty of Failure to Warn in not sharing that vital information with residency program applicants whose careers may be altered, delayed or ended by a dysfunctional program? Why is this information not available when residents are considering applications/Match? How many residents end up at a program which is nothing like what was sold to them in the interview process, the resident dinner, the conversations with the program director?



Some other resources for review and exploration:

Mihalich-Levin L, Cohen, A. Demystifying What Medicare GME Payments Cover and How They’re Calculated. Acad Med: September 2015 – Volume 90 – Issue 9 – p 1286 (open graphic at site) 

ACGME Annual Report 2016-17. 10,672 programs, <2% on probation or received warning (pg 32). 129,720 residents (pg 34). Revenue $57M, 84% from program fees.

Bready LL, Luber MP. Costs Associated with Residency Training. Symposium on Medical Education — February 2016. Tex Med. 2016;112(2):44-49.

McGee D, Wagner MJ. Introduction to GME Financing. Assoc for Hosp Med Ed (AHME).

Bernstein N. Job Prospects Are Dimming for Radiology Trainees. NY Times. 27 Mar 2013.

“One hospital, McLaren Macomb, in suburban Detroit, instead offered several residents slots in its ‘unfunded program,’ in which most radiology residents essentially pay for their own positions through donations, typically from a spouse or parents: $65,000 a year to cover a $42,000 salary and $2,000 for expenses.” – National Health Policy Forum. Proof of residency programs’ value to hospitals: hospitals self-finance approximately 12,000 residency slots (p. 9)

Macy Foundation, 2011, 292 pg publication, Ensuring an Effective Physician Workforce for America:  Recommendations for an Accountable Graduate Medical Education System.

GME Funding and Its Role in Addressing the Physician Shortage. AAMC News. May 29, 2018


… more to follow


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