ISSUE: Indirect Medical Education (IME)

As mandated under current law, in October 2002, IME payments were cut 15% bringing the total cuts since 1997 to 28.6%. IME payments are critical to the financial viability of teaching hospitals. The nearly 30% IME payment reduction is one of the largest (in percentage terms) mandated by the Balanced Budget Act.

The most recent reduction comes at a time when teaching hospitals are facing other reductions from the Medicare program, including reductions in Medicare outlier payments as a result of a 65% increase in the Medicare outlier threshold, changes to the calculations of the wage index, and a less-than-inflation update. In addition, major teaching hospitals are faring more poorly under the Medicare outpatient system than other hospital groups. Teaching hospitals are also dealing with challenges including payment cuts in Medicaid programs, workforce shortages, increased emergency and stand-by preparedness, and the financing of cutting-edge technologies. The rising growth of uninsured persons (charity care) is placing additional financial pressures on many of these institutions because of their role as safety net providers.

Recommendation: The Medicare program’s support for teaching hospitals through the IME adjustments must be maintained if we are to avoid dismantling this important component of the healthcare system—a scenario that would be difficult, if not impossible, to reverse in the future.

Current Action by NJCTH:
On the federal level, NJCTH has been working with the AAMC (Association of American Medical Colleges) and AHA (American Hospital Association) on the IME funding issue.

More information from related organizations: