Minnesota Hospital Association

Policy & Advocacy

Medical Education Funding

Minnesota hospitals are committed to developing the next generation of health care professionals. Federal and state programs that support training and residencies are critical as the nation prepares for a challenging shortage of health care professionals, the effects of an aging population, and the influx of newly insured individuals as a result of the 2010 Affordable Care Act.

Statistics demonstrate that the health care professionals trained in Minnesota are likely to stay in Minnesota. Our cold winter climate contributes to unique recruiting challenges. In 2011, about half of the medical students that graduated from the University of Minnesota completed residencies in Minnesota and of those, 72 percent stayed to practice in our communities. Minnesota’s teaching hospitals need federal and state support, such as the programs below, to ensure we do not remain a net exporter of physicians.

Graduate medical education (GME) – GME payments help fund the teaching costs of residency programs, such as resident salaries and benefits, faculty salaries and benefits, and administrative overhead expenses. These payments are based on hospital-specific per resident cost in 1984, updated annually for inflation. The per-resident payment amount varies by the residents’ specialties, with higher payments for residents training in primary care. The resident count for most hospitals is capped at their 1996 levels.

Indirect medical education (IME) – These payments compensate for the higher costs associated with teaching hospitals, such as hands-on learning experiences for residents, greater use of emerging technology and greater patient severity. The IME payment adjustment is a percentage add-on to the hospital’s inpatient prospective payment system, and it varies based on the intensity of the hospital’s teaching programs as measured by the ratio of residents to hospital beds. The number of residents included in the calculation of resident-to-ratio is capped at 1996 levels.

Children’s Hospitals GME Program – This program funds independent children’s teaching hospitals to support the training of pediatric and other medical residents in GME programs. In addition to training the next generation of pediatricians and pediatric sub-specialists, these hospitals care for many vulnerable children with complex health conditions.

The Medical Education and Research Cost Fund (MERC) – MERC is used to train doctors, nurses, pharmacists, dentists, chiropractors and physician assistants. This single, annual distribution is funded using a portion of the state’s medical assistance program, the cigarette tax and a federal match. The formula used to distribute the money to teaching hospitals and clinics is based on the number of patients on public health insurance programs, not on how many students are being trained. The program was set up this way to maximize the benefit of federal matching dollars.

In Minnesota, MERC funding has been reduced by 45 percent, severely limiting the number of students who can be trained. In September 2012, MHA published a white paper outlining the history of these programs in Minnesota, the threats to the programs, and the case for protecting and even expanding programs to train the next generation of physicians and other health care professionals. MHA values our collaborations on this issue with the University of Minnesota, the Minnesota Medical Association and the Metro Minnesota Council on Graduate Medical Education.