Mountain States Health Alliance Chief Financial Officer Marvin Eichorn said last week that the $50 million yearly loss of revenue caused by the implementation of the Affordable Care Act and the state’s refusal to expand Medicaid coverage led the health system to cut the number of resident physician positions at its hospitals by “double digits.”
The cuts to the positions, which graduating medical students take as part of on-the-job training, will be made gradually over the next four years at three of the system’s hospitals as the current residents finish their terms, Eichorn said.
“We’ve had all these cuts from Medicare, we’ve looked under every rock and reduced expenses as much as we could, but ultimately, we made a decision in the short-run to take down the number of residents over time,” he said.
Hospitals all over the country receive federal funding from Medicare to train resident physicians based on the proportion of Medicare patients each hospital serves.
Last year, the program paid $9.5 billion for 94,000 residents at teaching hospitals nationwide.
Eichorn said for years, Johnson City Medical Center, which trains a majority of Mountain States’ residents, has paid out of pocket to have more residents than allowed by the funding the system receives from Medicare.
But with the changing funding structure to the country’s hospitals, the CFO said the health system can no longer afford to pay for the extra residents.
In choosing the positions to shed, Eichorn said careful attention will be paid to the need for extra hands in each specialty, including general practice, pediatrics and obstetrics and gynecology.
“I think there will be an effect at some level, particularly when residents get to their third year and wind up as providers of more patient care,” he said. “There are a lot of services that those residents provide, not just to other doctors, but the community as a whole. With fewer there to do that, it will have some effect in the community, but I don’t think it’s going to be a terribly significant thing.”
But Ken Olive, dean of East Tennessee State University’s Quillen College of Medicine, said the effects of the nationwide reduction in medical training positions could lead to doctor shortages and a higher number of indebted medical graduates without a way to repay their education loans.
“For a number of years, medical schools have been pushed to increase the number of graduates and to increase class sizes,” Olive said. “We can graduate all the doctors in the world, but they aren’t going to be prepared to practice medicine if they don’t get training because they can’t find residency programs.”
He said the current crop of students hasn’t yet been affected by dwindling training position availability, but said instructors and staff at the medical college advise students to carefully consider their chosen specialties and encourage them to choose a few different hospitals to seek residencies.
“We tell them that things are going to be more competitive, so they should think about the number of facilities they apply to,” Olive said. “Some are encouraged to have an alternate plan, a backup plan, in case they don’t get the opportunities they’re looking for.”
Olive estimated that about a quarter of ETSU’s medical school graduates take residency positions at one of the area’s hospitals.
Time-tested studies have also shown many doctors will establish their practices near to, or at least in the same state as, the facilities at which they completed their residency training.
But Olive said, because the loss of positions is occurring nationwide, the effects will not be unique to Northeast Tennessee and Southwest Virginia.
“It’s a national issue,” he said. “One that is likely to be accelerated over the next few years if a solution to the problem is not found.”
One solution, at least to Mountain States, could be Tennessee and Virginia authorizing the expansion of Medicaid coverage intended by the Affordable Care Act.
In the health care law, the cuts to Medicare were supposed to be offset by the millions of newly insured through the health care exchanges and addition to Medicaid rolls, but 23 states, including Tennessee and Virginia, have yet to accept the substantial federal funds offered to pay for Medicaid expansion.
“It is vitally important to Mountain States that Medicaid expansion happens in both states,” Eichorn said. “If both were to expand, that would bring in about $20 to $30 million in revenue from uninsured people that are going to have to use our services.”
If the states don’t accept the funding and expand the coverage, the system could face even more cuts as the hundreds of thousands of still-uninsured residents seek emergency room services for which they cannot pay.
Eichorn said the system’s hopes have been raised by the election of Terry McAuliffe, a proponent of Medicaid expansion, as Virginia’s governor last week.
“We paid very close attention to that election this year and to the things that were being said about Medicaid expansion,” he said. “We certainly hope that Governor-elect McAuliffe will move to get something done as soon as possible, and I’m sure a number of providers will be contacting him as soon as he gets into office.”
Even if McAuliffe decides to pursue Medicaid expansion in the commonwealth, it’s unsure how receptive the Republican-led General Assembly will be to his advances.
But Tennessee has seen little forward movement since Gov. Bill Haslam announced his intentions to pursue his own marketbased approach for expansion, dubbed the Tennessee Plan, last year before the state’s legislators.
Haslam is reportedly still formulating the details of the plan, and has yet to submit an option to the U.S. Department of Health and Human Services for approval.
Eichorn said the delays could cost hospitals across the state more revenue and lead to the loss of more doctors as cuts are made.
“We’re certainly extremely worried about expansion not happening,” he said. “Cuts have already happened, and the way things seem to go in Washington, every year more cuts are made. It’s likely to get even worse, and it’s already pretty bad.”