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Regular Article | September 01, 1998

A Survey of State Financing of Psychiatry Residency Programs

Jed G. Magen, D.O.; Deborah A. Banazak, D.O.; Jason Dahn, M.A.

Academic Psychiatry 1998;22:155-161.

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FinancingGraduate Medical EducationResidency

Dr. Magen is Assistant Professor and Residency Education Director, and Dr. Banazak is Assistant Professor and Associate Residency Education Director, and Mr. Dahn is a graduate assistant, Department of Psychiatry, Michigan State University, East Lansing, Michigan. Address reprint requests to Dr. Magen, Michigan State University, Department of Psychiatry, B—109 West Fee Hall, East Lansing, MI 48824.

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Abstract

With upcoming cuts in graduate medical education funding, it is likely that many psychiatry residencies will be searching for new sources of revenue. State funding of residency programs is one possible avenue. The authors surveyed all Accreditation Council for Graduate Medical Education-accredited psychiatry residency programs to assess the present dimensions of state funding. Some programs in both publicly funded and private settings receive large proportions of their budgets from the state. Service commitments are common. State support of psychiatry residency education is currently an important source of funding and could become even more important in the near future.

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Funding for psychiatry residency training programs is provided largely by the federal government through the Medicare program's graduate medical education (GME) pass-through mechanism (1). Hospitals receive their GME funds through two different mechanisms, each calculated in separate ways. The direct pass-through is calculated by adding the costs of house staff stipends, fringe benefits, some salaries for teaching faculty, office space, and a few other costs. The indirect pass-through amount is added onto the diagnosis-related group (DRG) fee for a particular hospitalization reimbursed by Medicare.

Several factors are likely to result in future decreases in these federal funding mechanisms for residency programs. These include federal budget-deficit pressures to reduce spending (2—4), diminished indirect GME funding resources (5), and selective GME funding for primary care residencies, resulting in a net decrease for all other specialties (5).

Given these circumstances, many programs will be looking for other funding sources. As recently as 1993, clinical income from faculty practice plans accounted for some 33% of the revenue of American medical schools (6). However, in cognitively based specialties such as psychiatry, patient care revenues are smaller than those of procedure-oriented specialty programs and are likely to be unable to provide much support for training programs (7,8). Training and research grants are a negligible financing resource.

State funding dollars are a current source of residency financing for some programs and a possible source for others. While limited state budgets make residency funding compete with many pressing social needs, states may have an interest in expanding the supply of psychiatrists for rural, chronically mentally ill populations, and other underserved areas. The Medical College of South Carolina's residency program is one such example of successful state—residency partnering (9).

Overall, there is little comprehensive state funding information available with respect to psychiatry residency training. In cooperation with the National Association of State Mental Health Program Directors and the Research Institute, this survey sought to 1) understand recent and future trends in state funding of psychiatry residency programs, 2) detail how state monies are used in programs, and 3) clarify regional differences in state funding.

METHODS

A survey questionnaire consisting of eight items was developed by the authors and pretested in their home psychiatry department (Appendix 1). Programs were asked to identify and describe funding received from the state other than through the general university budget. The questionnaire was sent to each business manager or equivalent staff person in all psychiatry residency programs accredited by the Accreditation Council for Graduate Medical Education (ACGME). Programs were categorized as located in publicly funded or privately funded institutions on the basis of American Association of Medical Colleges' (AAMC's) data gathered from the 126 U.S. medical schools accredited by the Liaison Committee on Medical Education (LCME) and by directly contacting programs not affiliated with a medical school (6). Publicly funded institutions were those universities or medical schools receiving funding from their state for the university or medical school general fund. Privately funded institutions were those institutions not receiving state funding for the general fund. Programs were assigned to one of four geographic regions (10). Surveys were mailed to 200 programs. Responses were confidential and anonymous to all but the authors. Second and third mailings were sent to nonrespondents, each sent 2 months after the last contact.

RESULTS

Questionnaires were returned from 130 of 194 programs (65% response rate). Ninety-six residencies were located in publicly funded institutions. Sixty-three of these schools responded (return rate 66%). Not all programs reported all data on the questionnaire.

The number and percentage of regional respondents were Northeast (n=32, 49%), Midwest (n=34, 83%), South (n=45, 75%), and West (n=19, 68%). Nationally, there was a 2:1 ratio of university vs. community respondents and a 1:1 ratio of public vs. nonpublic programs.

Data were then examined by region. With respect to university vs. community respondents, the Northeast had a 1:1 ratio, and Southern programs had a 3:1 ratio. No significant regional differences were noted with respect to public vs. nonpublic ratios or program size. Small numbers of respondents for each state made intrastate comparisons difficult.

Of all programs in publicly funded institutions responding, 39 programs reported a total residency budget averaging $1,235,378. The average amount received from the state was $598,875. Fifty-five percent of their residency budget was state supported. Among the programs located in private institutions reporting funding totals (n=37), the total residency budget was $1,189,322. Fifteen (22%) of these programs reported that they received state funding. The average funded amount was $801,753.

Table 1 describes 1) the percentage of programs in publicly funded institutions reporting changes in state funding, 2) the percentage of overall residency budget provided by state dollars, 3) predictions for future funding for programs in publicly funded institutions, and 4) any requirement for service commitment for state funding support. Over the last 4 years, it appears that roughly the same proportion of programs has received increased amounts of state funding and that there is a trend for more programs to experience decreases in state funding. However, for the most part, a majority of the programs each year reported unchanged state funding amounts.

The data suggest that the majority of publicly funded programs maintained the same proportion of budget support from state funds. Up to one-quarter of programs experienced a decrease in the proportion of the budget covered by state funds. Fewer programs seem to have benefited by increasing the proportion of the budget covered by state funding.

The respondents at programs in publicly funded institutions were asked what they thought would happen to their state funding over the next 3 years. More respondents thought there would be a decrease in funding than any other category. There was, however, substantial uncertainty about future funding prospects.

In return for financial support, some states may require service or other commitments. About one-half of the programs in publicly funded institutions incurred some type of service commitment by accepting state funding.

Table 2 presents identical parameters for programs in privately funded institutions. In general, compared with the programs in publicly funded institutions, fewer programs in privately funded institutions received increases in their state funding. More seemed to experience a decrease than an increase in the proportion of the training budget supported by state funding. Compared with the respondents in programs in publicly supported institutions, the programs in privately funded institutions more frequently believed that state funding would increase over the next 3 years.

Table 3 depicts regional differences in funding trends. The year 1994 was chosen for comparison, and the results were similar for all reported years. Western residency programs had more pessimistic views of state funding, with a higher percentage of programs reporting support as decreased or unchanged. The remaining regions had more increases and more stable state funding responses.

Eighty percent of programs in privately funded institutions incurred a service commitment as a condition of funding. Interestingly, a larger percentage of programs in privately supported programs had service-related commitments as part of their state agreement.

Table 1 reports how all programs use their state funds. Data represent the percentage of programs who use state monies to support each activity. Comparisons between programs located in publicly funded institutions and those located in privately funded institutions are made.

DISCUSSION

Substantial numbers of privately and publicly supported psychiatry residency programs receive funding from state governments. The amounts involved are substantial enough that many programs would be unlikely to survive without this funding. In each year of the survey, roughly one-quarter of reporting programs were successful in obtaining funding increases. Fewer programs showed decreases, and one-half of programs had sustained unchanged funding levels. This pattern indicates that funding at the state level may be somewhat more stable.

The fact that a number of programs support substantial proportions of their residency budget through state funding may indicate that this is an untapped resource for other programs. Santos et al. (9) described conditions for obtaining state support. These included both developing a relationship with the state director of the Department of Mental Health, as well as a working relationship with the appropriate local community mental health leaders. Advantages of such collaboration include establishing a residency funding base, servicing the needs of the chronically mentally ill population, collaborating to maintain educational excellence in state/community programs, and recruiting future graduates to practice in underserved areas. As well, a relationship with and opportunities to educate state legislators who are responsible for appropriations can be helpful.

Of note, over 50% of publicly supported programs incurred a state service commitment. For programs in privately supported institutions, the figure was 75%. These service commitments might include requirements for specific rotations, length of rotations, or commitment of faculty time. Thus, in return for funding, programs may experience a decrease in autonomy. This may be in the form of institution or rotation restrictions. This is not a trivial issue, in that while these rotations may be of variable quality, programs may be unlikely to have meaningful control, such that they can affect these issues. Other types of obligations such as those involving commitments of graduates' time postresidency may also exist. If states are really interested in psychiatric workforce issues, they could constrain residents' practice type or location.

The decrease in state support for western residency programs may reflect increased block grants or state support of health care programs such as Medicaid in those areas. Managed care's influence in these areas might undervalue the role of training programs for future psychiatrists.

It is worth noting the considerable uncertainty that exists around the prospects for future funding. In both categories of programs, one-quarter of the respondents did not know how their state funding was likely to change over the next 3 years. As is the case with health care funding in general, this uncertainty makes it difficult to know how to position a program for future survival.

Although the results of this survey may be indicative of the pattern of state funding of psychiatry programs, unfortunately the response rate was 65% for programs located in publicly funded institutions and 68% for programs located in privately funded institutions. In addition, western programs responded less frequently than those from other areas. There may be a tendency for programs receiving state monies to be overrepresented, since programs with "positive results" might be more interested in completing the survey form.

As federal funding decreases, psychiatry residency programs will have to either cut budgets or find new financing sources. As federal funding levels decrease, state funding sources may become increasingly important for program survival. Programs not now receiving state funding may wish to explore the options for residency—state collaboration.

ACKNOWLEDGMENTS

The authors thank Dr. Norbert Enzer and Dr. Noel Mazade for suggestions and comments, Jason Dahn for statistical analysis, and Barbara Terry for secretarial support.

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Appendix:

TABLE 1.

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TABLE 2.

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TABLE 3.

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References

Magen JG, Banazak DB: Graduate medical education financing in psychiatry. Academic Psychiatry 1995; 19:6—11

Congressional budget proposals "will devastate academic medicine." AAMC Reporter, May 1995, pp. 1—2

Foreman S, Kerr WB, Mullins CB, et al: Academic medical centers, proposed Medicare cuts, and the emerging price-competitive environment. Acad Med 1995; 70:510—511

Whitcomb ME, Cleverly WO: Financial performance of academic medical center hospitals. Acad Med 1993; 68:729—731[PubMed][CrossRef]

Association of American Medical Colleges (AAMC): Medicare prospective payment system adjustments. Washington, DC, AAMC, December 6, 1994

Krakower J, Ganem JL, Beran RL: Medical school financing in 1991—1992: comparing seven different types of schools. Acad Med 1994; 69:72—81[PubMed][CrossRef]

Flint L, Flint CB: Academic surgical group practices at the dawn of health care reform. Ann Surg 1994; 220:374—381 [PubMed][CrossRef]

Pardes H, Pincus HA: Challenges to academic psychiatry. Am J Psychiatry 1983; 140:1117—1126[PubMed]

Santos AB, Ballenger JC, Bevilacqua JJ, et al: A community-based public—academic liaison program. Am J Psychiatry 1994; 151:1181—1187[PubMed]

U.S. Department of Commerce, Economics and Statistics Administration, Bureau of the Census: 1990 Census of Population and Housing Unit Counts, United States, October 1993. Washington, DC, Government Printing Office, 1993

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Appendix