Medicare bill funds U. Health System

While the recently passed Medicare bill is best known for sparking debate among senior citizens, a little-known provision will provide Penn Health System's hospitals with $1.3 million next year.

The funds -- which are part of a $400 million package set aside for teaching hospitals -- are due to the different economic considerations of for-profit and educational institutions, said University Health System Executive Vice President for Government Relations and Public Affairs Alan Rosenberg.

Hospitals that train residents spend more money than strictly for-profit institutions, since education requires more personnel, more sophisticated diagnostic equipment and experts in rare disorders. Such costs are known as indirect medical education expenses, or IMEs.

Graduate education subsidies are usually "linked to the number of medical residents the hospital is training. The more residents a hospital has, the more payments they receive," Wharton School Professor Sean Nicholson explained.

Consequently, the exact amount given to the University's Health System each year will change, Rosenberg said. Projections indicate that Penn's share of IME funding will increase each year and go into the general operations budget, he added.

Health System officials will not only be impacted by the provisions -- they also helped to create them.

"The hospital industry and the medical schools and the teaching hospitals have advocated for the inclusion of provisions that increase the amount of IME funding," Rosenberg said, noting that Health System Chief Executive Officer Robert Muller lobbied for the changes.

The increased spending needs to be seen in light of recent history, Nicholson said.

Seven years ago, federal education subsidies "amounted to about $8 or $9 billion per year across all teaching hospitals.The Balanced Budget Act of 1997 started cutting those down over a five-year period [and totaled] 20 percent," he said.

"These are important funds for us, and it was a hard-fought battle. We look forward to the president signing the bill," Rosenberg said.

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