Patient Care

The Cost of Regulation


The impact of last summer’s new restrictions from the Accreditation Council for Graduate Medical Education (ACGME) on how many hospitalized patients a first-year resident can treat on an internal-medicine (IM) rotation was as immediate as it was evident at Monmouth Medical Center, a 527-bed teaching hospital in Long Branch, N.J. The institution had a class of eight rookie residents whose caseloads were cut from 12 to the new threshold of 10.

Physicians “had to find some other way of getting attention . . . for 16 patients,” says Sarah Wallach, MD, FACP, director of Monmouth’s IM residency program and vice chair of the department of medicine at the hospital. At Monmouth, the solution came in the form of a new hire—a nurse practitioner (NP)—to handle the overflow. The NP service is used predominantly for referral patients from primary-care physicians (PCPs), as opposed to independent hospital admissions.

But because the NP service does not provide 24-hour coverage, the hospital can get away with only one person in the position. To extend coverage all day long, Dr. Wallach estimates she would need to hire two or three additional NPs, plus another one or two administrative positions to provide relief on holidays and vacations. “You would need five people,” she says. “I can’t afford that.”

Few hospitals or HM groups can afford new hires in today’s world of Medicare reimbursement cuts, shrinking budgets, and—courtesy of the newest rules—restricting patient caps for residents. The latest rules took hold about a year ago, but hospitalists in both academic and community settings say the impact already is noticeable.

Many hospitals have had to craft solutions, which have included burdening academic hospitals with more clinical responsibilities, turning to private HM groups (HMGs) to assume the patients residents can no longer care for, or hiring nonphysician providers (NPPs) to pick up the slack. As Dr. Wallach pointedly notes, the latter two solutions cost money at a time when hospitals have less to go around.

Already, teaching hospitals have begun discussions about how the newest rules—and the future changes they presage—will change the playing field. Will a wave of academics flee their classroom (the teaching hospital), as nonteaching duties become an intrusion? Will teaching hospitals face financial pressure as they struggle to replace the low-cost labor force that residents represent?

Perhaps most importantly from a medical perspective, will graduate trainees be as prepared as their predecessors when they enter practice?

Dr. Wallach

The answers will have a direct correlation to private HMGs, which are poised to see more patients in the wake of residency restrictions, particularly on overnight services. The cost of hospital care will increase for hospitals, putting more pressure on hospitalist groups that tout themselves to C-suites as engines for cost savings. Long-term implications, unfortunately, remain murky, as the newest rules have been in place for a relatively short time. Plus, ACGME is expected—at the end of this month, according to a recent memo to program directors—to announce more changes to residency guidelines.

“Hospitalists will always be involved in teaching—it will never go away,” says Julia Wright, MD, FHM, clinical professor of medicine and director of hospital medicine at the University of Wisconsin School of Medicine and Public Health in Madison and a member of Team Hospitalist. “But it will be a very different balance, a different kind of feel.”

The Past to the Future

To understand the concerns moving forward, it’s important to first look back. In July 2003, new ACGME rules went into place capping the workweeks of residents at 80 hours. Rules were put into place that regulated the number of patients that residents could be assigned, and those thresholds were further tightened on July 1, 2009. The most notable 2009 change: A first-year resident’s patient census must not exceed 10 patients. ACGME CEO Thomas J. Nasca, MD, MACP, sent a letter to program directors in early May announcing more changes to resident work hours. The letter indicates proposals will be announced by the end of this month, and public comment will follow. At the earliest, new rules changes would go into effect in 2011. “The board may adopt a modification to the duty-hours standard,” says Julie Jacob, a spokeswoman for Chicago-based ACGME. “Any proposed standards would get a public comment.”

Jacob declined further comment, but various hospitalists and academics say they wouldn’t be surprised if new rules reflect 2008 Institute of Medicine (IOM) recommendations.1 The IOM report called for a maximum resident shift length of 30 hours, with admission of patients for up to 16 hours, plus a five-hour uninterrupted sleep period between 10 p.m. and 8 a.m. It also suggested the remaining workweek hours be used for transitional and educational activities.

However those IOM recommendations are incorporated, one thing is clear: Any adoption of those standards will have a financial impact. In fact, a study published last year reported that annual labor costs from implementing the IOM standards was estimated to be $1.6 billion in 2006 dollars (see “The Cost of Progress,” p. 25).2

“Any replacement of a resident costs more than a resident, whether it’s an NP, a PA (physician assistant), an MD, or a DO,” says Kevin O’Leary, MD, MS, associate program director of the IM residency program at Northwestern University’s Feinberg School of Medicine in Chicago. “Everybody costs more.”

Dr. Wallach

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The Fate of Teachers

Some of the largest academic centers, including the Feinberg School, the University of Michigan, and the teaching service at St. Luke’s-Roosevelt Hospital in New York City, reduced patient caseloads ahead of the 2009 round of residency rule changes. Hospitalists and educators at those institutions say the proactive approach helped them adjust to the newest rules, which by some estimates reduce resident productivity by 20%.

But the changes shift the workload to academic hospitalists, many of whom forego higher-paying positions to pursue teaching and research. According to the latest SHM survey data, academic hospitalists make about $50,000 less per year than the average community hospitalist. But as clinical work intrudes further, as residents are unable to assume the patient care they once did, educators are put into positions of having to balance the educational portion of their job with patient care, says John Del Valle, MD, professor and residency program director in the department of internal medicine at the University of Michigan Health System in Ann Arbor.

“This is where difficult decisions have to be made,” Dr. Del Valle says. “This is not the blend of activities that traditional academics signed up for.”

The Cost of Progress

The Institute of Medicine (IOM) was tasked by Congress in 2007 with recommending ways to balance the amount of sleep medical residents need against their need to be well-trained enough to make it on their own in medical practice.

The resulting Dec. 2, 2008, report heard ’round the medical world accomplished that goal; it recommended five days off per month, one 48-hour period off per month, and a maximum shift length of 30 hours, with admission of patients for up to 16 hours.1 Perhaps most striking was the IOM’s recommendation for a continuous and protected five-hour period of sleep between 10 p.m. and 8 a.m.

What the IOM report skips over is the cost of its recommendations. That’s where Teryl Nuckols, MD, MSHS, steps in. Last year, Dr. Nuckols and colleagues at the University of California at Los Angeles and RAND Corporation, published “Cost Implications of Reduced Work Hours and Workloads for Resident Physicians.”1 The review found that implementing the report’s four main conclusions—improved adherence to Accreditation Council for Graduate Medical Education (ACGME) limits, naps during extended shifts, a 16-hour limit for shifts without naps, and reduced workloads—would cost the country’s teaching hospitals about $1.6 billion per year.

Using sensitivity analyses, that figure ranges from $1.1 billion to $2.5 billion, with the annual cost to an individual academic hospital estimated at $3.2 million. All figures are in U.S. dollars as of 2006.

Although the IOM report only suggests changes, many hospitalists expect at least some version of the recommendations to become ACGME policy. “It may force us to move toward complete day- and night-shift models, which we have a lot of services for seniors,” says John Del Valle, MD, professor and residency program director for the IM department at the University of Michigan Health System. “But we all of a sudden have to create capacity for that dual-shift model.”

While cost considerations can’t be brushed aside, some residency program directors have embraced the intent of the IOM recommendations to provide more rest for residents, be they in their first or fourth year.

“Maybe physicians shouldn’t be working tired,” says Ethan Fried, MD, MS, FACP, president-elect of the Association of Program Directors in Internal Medicine (APDIM). “Maybe physicians need to be in networks that will be available for heavy-duty patient care, even when one member is tired. It may not be the end of modern civilization as we know it if we decide that working when you’re tired is not a value we need physicians to have anymore.”—RQ

Solutions to relieve current and impending pressure on teaching hospitalists have presented themselves in different ways. In Dr. Del Valle’s hospital, there is a split between the hospitalist service and the house staff, which is aimed at keeping up with the growth in IM admissions. That tally has climbed an average of 4% per year for the past five years, reaching some 18,000 admissions last year. To handle that workload, the nonresident service last year added three clinical full-time equivalents (FTEs) to bring its total to nearly 30 FTEs.

Dr. Del Valle notes his institution has been fortunate to be able to afford growth, thanks in large part to a payor mix with a relatively low percentage of charity care and high level of activity.

At Brigham and Women’s Hospital in Boston, the answer is a freestanding PA service that has been in place since 2005. Last summer, the program went to a 24-hour rotation to increase continuity for overnight services and to provide coverage on night shifts, an area most in the industry agree will be hit hardest by the resident caps. Physicians at Brigham’s, a teaching affiliate of Harvard Medical School, are now discussing an expansion of the PA service, or perhaps even an overhaul to a more cost-efficient solution, says Danielle Scheurer, MD, MSc, FHM, assistant professor of medicine at Harvard and director of Brigham’s general medicine service.

Dr. Frost

At Medical Center Hospital (MCH) in Odessa, Texas, the hospitalists were added to the ED call schedule once every five nights. The plan was under discussion before the new residency rules went into place; however, it was implemented to keep the IM residency program within the new limits, says Bruce Becker, MD, MCH’s chief medical officer.

And at St. Luke’s-Roosevelt Hospital, discussions are under way on how to best extend the nonteaching staff, says Ethan Fried, MD, MS, FACP, assistant professor of clinical medicine at Columbia University, vice chair for education in the department of medicine and director of graduate medical education at St. Luke’s-Roosevelt. “The adjustment has to come from the nonteaching side because the house staff at this point is saturated,” says Dr. Fried, president-elect of the Association of Program Directors in Internal Medicine (APDIM). “You can’t be cheap about acquiring your nonteaching staff.”

The Fate of Students

Perhaps paramount to the fears of how teaching hospitalists will react to current or future restrictions is the effect those limits have on the residents they safeguard. Some physicians think the new rules will produce crops of ill-prepared residents because they have been coddled with limited patient censuses. Other physicians argue that the new thresholds will actually better prepare physicians when HM groups are hiring residents for full-time positions.

Dr. Del Valle acknowledges there is as yet no rigorous data to show the impact of the current restrictions, but he agrees it’s a simple equation of patient-care mathematics. “You can’t [easily] replace 100-110 hours [of care per week],” he says.

Others say patient caps and rules to limit how much work residents do are in line with the purpose of medical training programs. “I’ve bought into the fact that these programs exist to train residents, not to provide clinical care,” Dr. O’Leary says. “I’ve drunk that Kool-Aid. … I think there’s more variation, person to person, than ‘my era vs. the current era.’ Like any new hospitalist that you hire, you need to give an orientation and give enough support to them so when they begin to see patients that they are not overwhelmed.”

Shaun Frost, MD, FACP, FHM, might be best described as halfway between those two extremes. A regional director for the eastern U.S. for Cogent Healthcare, he says duty-hour restrictions have had deleterious impacts but also create learning opportunities.

“The residency work-hour restrictions have inhibited our ability to train people to work as efficiently as trainees who were taught in the past,” says Dr. Frost, an SHM board member. “That doesn’t necessarily mean you can’t teach people to work more efficiently . . . but in the future, my hope is that residency training programs will recognize the deficit that exists in personal work efficiencies between their completion and their responsibilities as a hospitalist.”

To that end, Dr. Frost works with others to develop both structured curriculum and classroom didactics that help new hospitalists make up for gaps in preparation that weren’t addressed in residency. In some cases, that can be practice management and billing issues, but often, according to Dr. Frost, it is addressing personal workflow and bridging the “unnatural discontinuity” in patient care from residency to the real world.

“There is a cost to this investment for the future,” Dr. Frost adds. “If people don’t recognize the potential return on investment as being critical to the development of an educated workforce—an efficient and competent workforce—and thus critical to the retention of high-performing hospitalists, they are selling themselves, unfortunately, significantly short.”

Work-Hour Regulations

Rules regarding capping residents’ patient caseloads on IM inpatient rotations (2009 changes in italics):

  • A first-year resident must not be assigned more than five new patients per admitting day; an additional two patients may be assigned if they are in-house transfers from the medical services;
  • A first-year resident must not be assigned more than eight new patients in a 48-hour period;
  • A first-year resident’s census must be no more than 10 patients;
  • When supervising more than one first-year resident, the supervising resident must not be responsible for the supervision or admission of more than 10 new patients and four transfer patients per admitting day or more than 16 new patients in a 48-hour period;
  • When supervising one first-year resident, the supervising resident must not be responsible for the ongoing care of more than 14 patients; and
  • When supervising more than one first-year resident, the supervising resident must not be responsible for the ongoing care of more than 20 patients.

Source: American Council on Graduate Medical Education

Caught in the Middle

One man’s trash is another man’s treasure, the axiom tells us. Well, in healthcare circles, that could just as easily read: The woes of academic hospitalists are the wealth of community hospitalists.

The new rules “may result in more opportunities for hospitalists to provide needed clinical services,” Dr. Wright says.

The long-term implications, though, remain to be seen. While academic hospitalists say they have seen preliminary increases in care-delivery costs because of the latest rules changes, many say it’s too soon to tell just how high those costs might climb and what ripple effect might follow.

Some physicians, including Dr. Del Valle, note that while the 2009 changes and the expectation of more changes in 2011 are cause for attention, that doesn’t translate to cause for concern. In 2003, months before the 80-hour workweek rules were first put in place by ACGME, many of the same debates were already under way: How will the faculty of IM residency programs cope? How will institutions pay the bills while putting money aside for other physicians picking up the slack?

“This is a pendulum,” Dr. Del Valle says. “I think it will come back to a balanced place.”

Dr. Fried, who is more optimistic that the residency rules can have a positive, long-term effect, agrees. He says residency caps and limits should not be viewed as “things that limit education. We [should] look at them as things that ensure education continues while patient care continues.” TH

Richard Quinn is a freelance writer based in New Jersey.


  1. Institute of Medicine. Resident Duty Hours: Enhancing Sleep, Supervision, and Safety. Ulmer C, Wolman DM, Johns MM, eds. Washington, D.C.: The National Academies Press; 2008.
  2. Nuckols TK, Bhattacharya J, Wolman DM, Ulmer C, Escarce JJ. Cost implications of reduced work hours and workloads for resident physicians. N Engl J Med. 2009:360(21):2202-2215.

Health Reform Legislation Offers Small Step Forward

While the ACGME continues to spotlight just how much clinical work is too much for residents, the bean-counters of the medical industry continue to struggle with how to pay for those residents. And for all the hype surrounding the healthcare reform bill, the new rules will have a minimal impact on that score, according to the Association of American Medical Colleges (AAMC).

In 1997, Medicare capped the number of residents it would subsidize based on 1996 levels. The actual reimbursement formula for most hospitals, however, remains tied to 1984 costs, with allowances for northward adjustments based on economic indicators.

Landmark legislation signed by President Obama in March does nothing to either of those data points; however, it does allow for more pooling and shifting of roughly 1,000 unused slots to hospitals that need them more. Karen Fisher, AAMC’s senior director for healthcare affairs, says the compromise is a short-term fix that slides resident slots around. AAMC President and CEO Darrell Kirch, MD, says the reform measures are “a work in progress,” and says his group will continue lobbying efforts to increase the number of residency slots.

“Now, more than ever, the nation must expand the physician workforce to accommodate millions of newly covered Americans and a rapidly growing Medicare population,” Dr. Kirch said in a statement when reform legislation was passed. “U.S. medical schools are already doing their part by increasing enrollment. We strongly urge Congress to join in this effort by lifting the caps on Medicare-supported residency positions so that future physicians can finish their training.”

Early on in the healthcare debate, several lawmakers brought up proposals to add 15,000 residency slots—about a 15% increase to the nearly 100,000 slots currently available—but a price tag in the billions quickly scuttled those ideas. Instead, residency reimbursement rules remain largely unchanged.

Medicare pays 1,100 teaching hospitals roughly $9 billion a year in direct graduate medical education (DGME) payments and indirect medical education (IME) payments.

However, AAMC officials estimated in a February letter to Medicare’s Payment Advisory Commission (MedPAC) that teaching hospitals are underfunded by some $2 billion a year. In fact, MedPAC’s own staff estimated in 2008 that “the aggregate overall Medicare margin for major teaching hospitals was negative 1.5 percent,” the letter (download PDF) reads.

“Hospitals are training about 6,000 more residents than what Medicare supports,” Fisher says.

The issue is not likely to go away, as the impending physician shortage threatening the nation’s academic and nonteaching hospitals showcases the need for more residents. On the resident education side, the situation is likely to become even more imbalanced as roughly two dozen new medical schools are in the development pipeline, including several that recently seated their inaugural class.

At least one hospitalist is confident that Medicare and the politicians who ultimately oversee the system eventually will recognize the need to more fully support academic institutions.

“People will realize that to build an outstanding healthcare system, you need to have highly trained and qualified physicians,” says Bradley Sharpe, MD, an associate clinical professor in the Division of Hospital Medicine at the University of California at San Francisco. “Also, because the advancement of science is a consistent goal of the United States . . . and academic centers are a key driver of that advancement, there is likely to be ongoing support of the overall academic missions at teaching hospitals.”—RQ

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