[House Hearing, 109 Congress]
[From the U.S. Government Printing Office]



 
                   EXAMINING THE CHILDREN'S 
                       GRADUATE MEDICAL
                     EDUCATIONAL PROGRAM
_____________________________________________________________________

                            HEARING

                          BEFORE THE

                    SUBCOMMITTEE ON HEALTH

                            OF THE 

                   COMMITTEE ON ENERGY AND 
                           COMMERCE
                   HOUSE OF REPRESENTATIVES


                 ONE HUNDRED NINTH CONGRESS

                         SECOND SESSION
 
                          ___________
                          
                          MAY 9, 2006
                          ___________
                          

                       Serial No. 109-87
 
   Printed for the use of the Committee on Energy and Commerce


 






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                       COMMITTEE ON ENERGY AND COMMERCE
                           Joe Barton, Texas, Chairman
Ralph M. Hall, Texas                         John D. Dingell, Michigan               
Michael Bilirakis, Florida                    Ranking Member
  Vice Chairman                              Henry A. Waxman, California  
Fred Upton, Michigan                         Edward J. Markey, Massachusetts 
Cliff Stearns, Florida                       Rick Boucher, Virginia
Paul E. Gillmor, Ohio                        Edolphus Towns, New York
Nathan Deal, Georgia                         Frank Pallone, Jr., New Jersey
Ed Whitfield, Kentucky                       Sherrod Brown, Ohio
Charlie Norwood, Georgia                     Bart Gordon, Tennessee
Barbara Cubin, Wyoming                       Bobby L. Rush, Illinois
John Shimkus, Illinois                       Anna G. Eshoo, California
Heather Wilson, New Mexico                   Bart Stupak, Michigan
John B. Shadegg, Arizona                     Eliot L. Engel, New York
Charles W. "Chip" Pickering,  Mississippi    Albert R. Wynn, Maryland
  Vice Chairman                              Gene Green, Texas
Vito Fossella, New York                      Ted Strickland, Ohio
Roy Blunt, Missouri                          Diana DeGette, Colorado
Steve Buyer, Indiana                         Lois Capps, California
George Radanovich, California                Mike Doyle, Pennsylvania
Charles F. Bass, New Hampshire               Tom Allen, Maine
Joseph R. Pitts, Pennsylvania                Jim Davis, Florida
Mary Bono, California                        Jan Schakowsky, Illinois
Greg Walden, Oregon                          Hilda L. Solis, California
Lee Terry, Nebraska                          Charles A. Gonzalez, Texas
Mike Ferguson, New Jersey                    Jay Inslee, Washington
Mike Rogers, Michigan                        Tammy Baldwin, Wisconsin
C.L. "Butch" Otter, Idaho                    Mike Ross, Arkansas
Sue Myrick, North Carolina
John Sullivan, Oklahoma
Tim Murphy, Pennsylvania
Michael C. Burgess, Texas
Marsha Blackburn, Tennessee
                         Bud Albright, Staff Director
                        David Cavicke, General Counsel
      Reid P. F. Stuntz, Minority Staff Director and Chief Counsel

                                 ________
                                 
                           SUBCOMMITTEE ON HEALTH
                        Nathan Deal, Georgia, Chairman
Ralph M. Hall, Texas                       Sherrod Brown, Ohio 
Michael Bilirakis, Florida                  Ranking Member
Fred Upton, Michigan                       Henry A. Waxman, California
Paul E. Gillmor, Ohio                      Edolphus Towns, New York
Charlie Norwood, Georgia                   Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming                     Bart Gordon, Tennessee
John Shimkus, Illinois                     Bobby L. Rush, Illinois
John B. Shadegg, Arizona                   Anna G. Eshoo, California
Charles W. "Chip" Pickering,  Mississippi  Gene Green, Texas
Steve Buyer, Indiana                       Ted Strickland, Ohio
Joseph R. Pitts, Pennsylvania              Diana DeGette, Colorado
Mary Bono, California                      Lois Capps, California
Mike Ferguson, New Jersey                  Tom Allen, Maine
Mike Rogers, Michigan                      Jim Davis, Florida
Sue Myrick, North Carolina                 Tammy Baldwin, Wisconsin
Michael C. Burgess, Texas                  John D. Dingell, Michigan
Joe Barton, Texas                            (Ex Officio)
  (Ex Officio)
  
  
  














 

CONTENTS
 
                                                                 Page
Testimony of:
  Nesseler, R.N., M.S., Kerry, Associate Administrator, Bureau 
   of Health Professions, Health Resources and Services 
   Administration, U.S. Department of Health and Human Services... 14
  Magoon, Patrick, President and CEO, Children's Memorial 
   Hospital, Chicago, Illinois.................................... 32
  Considine, Bill, President and CEO, Akron Children's Hospital, 
   Akron, OH...................................................... 38
















                               EXAMINING THE CHILDREN'S 
                                   GRADUATE MEDICAL 
                                   EDUCATION PROGRAM
                                      _________

                                TUESDAY, MAY 9, 2006

                              House of Representatives,
                           Committee on Energy and Commerce,
                              Subcommittee on Health,
                                                      Washington, DC.


The subcommittee met, pursuant to notice, at 3:00 p.m., in Room 2322 
of the Rayburn House Office Building, Hon. Nathan Deal (chairman of 
the subcommittee) presiding.
	Present:  Representatives Deal, Hall, Burgess, Brown, Waxman, 
	Pallone, Capps, and Baldwin.
	Staff Present:  Randy Pate, Counsel; Katherine Martin, 
	Professional Staff Member; Chad Grant, Legislative Clerk; 
	John Ford, Minority Counsel; and Jessica McNiece, Minority 
	Research Assistant.
Mr. Deal.  The committee will come to order.  The Chair recognizes 
himself for an opening statement.
	I'm proud to say that we have three expert witnesses who 
	are appearing before us this afternoon, who will help us 
	examine the issues related to the reauthorization of 
	enabling legislation for the Children's Hospital Graduate 
	Medical Education Program.
Children's hospitals are an important part of our country's healthcare 
delivery system.  They help improve by health outcomes by providing a 
unique set of specialized healthcare services and treatment options 
for children.  As many of you know, this subcommittee has exclusive 
jurisdiction over the CHGME program, and we are committed to being 
good stewards of the program.
	In all of my years of public service, I have never seen a 
	perfect government program, and the CHGME program is 
	certainly no exception to that rule.  I firmly believe, 
	however, that it is possible to improve the efficiency and 
	the effectiveness of the program.  To this end, I am 
	particularly interested to hear from our witness from the 
	Health Resources Service Administration about the 
	Administration's proposals to reform the way in which funding 
	is allocated under the program, and I am interested to hear 
	the reaction to those proposals from our two children's 
	hospital CEOs.  
As we move forward with this reauthorization opportunity, it is my 
sincere hope that we can improve the outcomes of the CHGME program 
for the benefit of the children that these institutions serve.
	At this time, I would like to ask unanimous consent that 
	all members be able to submit statements and questions for 
	the record, and without objection, it is so ordered. 
	[The prepared statement of Hon. Nathan Deal follows:]

Prepared Statement of the Hon. Nathan Deal, Chairman, Subcommittee 
on Health

	The Committee will come to order, and the Chair recognizes 
	himself for an opening statement.
	I am proud to say that we have three expert witnesses 
	appearing before us this afternoon that will help us examine 
	the issues related to the reauthorization of enabling 
	legislation for the Children's Hospital Graduate Medical 
	Education Program.
	Children's Hospitals are an important part of our country's 
	health care delivery system.  They improve health outcomes 
	by providing a unique set of specialized health care services 
	and treatment options for children.  As many of you know, 
	this Subcommittee has exclusive jurisdiction over the CHGME 
	program, and we are committed to being good stewards of this 
	program. 
	In all my years of public services, I have never seen a 
	perfect government program, and the CHGME program is no 
	exception.  I firmly believe that it is possible to improve 
	the efficiency and effectiveness of this program.  To this 
	end, I am particularly interested to hear from our witness 
	from the Health Resources Service Administration about the 
	Administration's proposals to reform the way in which funding 
	is allocated under this program.  And I am interested to hear 
	the reaction to these proposals from our two Children's 
	Hospital CEO's.
	As we move forward with this reauthorization opportunity, it 
	is my sincere hope that we can improve the outcomes of CHGME 
	program for the benefit of the children that these 
	institutions serve.
	At this time, I would also like to ask for Unanimous Consent 
	that all Committee Members be able to submit statements and 
	questions for the record.
	I now recognize the Ranking Member of the Subcommittee, 
	Mr. Brown from Ohio, for five minutes for his opening statement.

	Mr. Deal.  I am now pleased to recognize the Ranking Member of 
	the subcommittee, Mr. Brown from Ohio, for his opening statement.
	Mr. Brown.  Thank you, Mr. Chairman.  Thank you to our witnesses, 
	all three of you, for joining us this afternoon.  
	I particularly want to thank Bill Considine, the CEO of Akron 
	Children's Hospital.  I think he is the longest reigning CEO of 
	any children's hospital in the country now, despite his 
	youthful appearance.  And Bill and several pediatricians at 
	Akron General taught me about this issue many years ago, before 
	anybody in this Congress knew about it, and talked about the 
	impending problem, as managed care squeezed children's hospitals 
	and all hospitals in their funding mechanisms, and what that 
	meant to GME, and the funding of pediatric training, especially 
	those pediatric specialists, many of whom are trained, some of 
	the best are trained in our freestanding children's hospitals 
	and other children's hospitals around the country.
	In 1999, then Chairman Bilirakis and I introduced the 
	legislation that established this program.  Last year, 
	Nancy Johnson and I introduced the pending reauthorization 
	program.  Each year, many of us, including on this committee, 
	Mr. Waxman and Mr. Stupak, and I believe Ms. Capps and 
	Ms. Baldwin also, gathered signatures in support of an ample 
	appropriation for children's GME funding.  This year, 218 
	members, a majority of this chamber, signed on.
	Clearly, this program enjoys significant support in the 
	House.  It is the same in the Senate.  In fact, they have 
	already passed the reauthorization legislation.  Now, it is 
	our turn.  There is solid logic behind the support this 
	program enjoys.  Historically, both Medicaid and most State 
	Medicaid programs have provided funding for graduate medical 
	education.  Unfortunately, the Medicaid funding has never 
	been sufficient.  It has never even been consistent across 
	different States, and now it is withering away as States 
	cut their Medicaid budgets and contract with managed care 
	plans unwilling to foot any of the GME bill.
	Texas recently eliminated its Medicaid GME program.  Other 
	States will likely follow suit.  Medicare has always been 
	the larger of the two payers.  It is a funding source upon 
	which hospitals depend, except that is, for children's 
	hospitals, especially those freestanding.  My recollection 
	is that Akron Children's, for instance, they have a burn 
	unit which brings in some Medicare GME funding, and they get 
	in-stage rail funding, as other Medicare GME programs do 
	around the country, that brings money to children's 
	hospitals.  But other than that, that is about it.
	Children's hospitals can't rely on Medicare GME funding 
	because they don't have access to it.  Under-investing in 
	pediatric medicine makes no sense.  We protect our children.  
	We nurture our children.  Why should we finance our way 
	toward a healthcare system that shortchanges them?  The 
	answer is we shouldn't and we wouldn't.
	The Children's GME program fills in the funding gap to 
	provide public financing of GME, regardless of whether a 
	hospital focuses on children or attends to the broader 
	population.  OMB has raised some concerns about children's 
	GME, but it is almost as if they had a quota of concerns to 
	fill, so they filled them.  They talk about program 
	accountability, but children's GME functions much the same 
	as the regular GME program.  Why is the children's program 
	the target?  Both programs could benefit from a better 
	auditing process, and that process is going into place for 
	the children's GME program.  So, what is the problem again?
		OMB also noted that children's hospitals receive 
		Medicare GME.  So do other hospitals, to the extent 
		that--I am sorry, Medicaid GMEs.  So do other 
		hospitals, to the extent that Medicaid GME funding 
		is still available.  So, what actually is the point 
		of OMB's finding?  And OMB discusses the financial 
		outlook for children's hospitals, both those 
		freestanding, like Children's in Akron, or like 
		Rainbow in Cleveland, it is affiliated with a larger 
		hospital.  It doesn't, though, discuss the financial 
		outlook for other hospitals.  That is because GME 
		funding isn't linked to hospital finances.  It is 
		linked to the public's desire for well-trained 
		health professionals.  If children's hospitals are 
		doing well, I would hope that is reflecting the 
		availability, the quality, and the sophistication of 
		the healthcare they provide.  But GME is a public 
		priority.  That is true regardless of a hospital's 
		year-to-year financial footing.
	The President's budget proposes cutting the children's GME 
	program by 66 percent.  I propose that we invest where we 
	need to invest before we drain the Federal budget into yet 
	another round of billionaire tax cuts, something that my 
	friends in this body want to do again.  We want our children 
	to thrive.  We want sick children to get well.  We want 
	children with disabilities to fulfill their dreams.  We can't 
	do something for nothing.
	Let us reauthorize children's GME.  Let us fund it 
	sufficiently, and let us resolve not to hurt kids as we 
	choose.  Do we give tax cuts to the wealthiest people in 
	this country, or do we fund GME for children?  It is a 
	pretty simple choice.
	Thank you, Mr. Chairman.
	Mr. Deal.  I recognize my friend from Texas, Mr. Hall, for 
	an opening statement.
	Mr. Hall.  Mr. Chairman, thank you.
	You and the Ranking Member have done a very good job of laying 
	it out, so I can be a little more brief.  I am really pleased 
	that you are having this hearing today on an issue that is 
	very important, not just to any particular part of the Nation, 
	but to all parts of the Nation.
	Since 1999, the Graduate Medical Education funding has helped 
	children's hospitals across the Nation reach a level of parity 
	with other teaching hospitals.  This program was established 
	by Congress in recognition of an unfair disparity between 
	medical education funding in adult versus children's hospitals, 
	because children's hospitals do not treat Medicare patients 
	and receive a GME pass-through from that program.
	We have all heard, and we are likely to hear more today, 
	about the growing shortage of qualified pediatric specialists, 
	whether training in the pediatric field or researchers or 
	whatever, the work of the children's hospitals in preparing 
	doctors to further qualify pediatric healthcare is 
	immeasurable.
	So, I will just cut right through to it.  Congress should 
	continue to adequately fund and not cut graduate programs at 
	these vital institutions, and I look forward to hearing from 
	our panelists today, and I yield back the balance of my time.
	Mr. Deal.  I thank the gentleman.  Ms. Capps, you are 
	recognized for an opening statement.
	Ms. Capps.  Thank you, Mr. Chairman.  I thank you for holding 
	this very important hearing today to highlight children's 
	hospitals graduate medical education.
	Children's GME programs are the backbone of training 
	pediatricians, pediatric specialists, and pediatric 
	researchers, and in the State from which Mr. Waxman and I 
	come, California, we have seven children's hospitals that 
	receive children's GME, who alone train hundreds of residents, 
	nearly half of whom are trained in pediatric specialties.  
	This is very vital to the care of our sick children.
	Today, our country is experiencing a shortage of pediatric 
	specialists.  I think no one disagrees with that statement, 
	and it is our children's hospitals, where they receive the 
	training, the skill sets, to fill these positions.  At the 
	same time they are devoting resources to training new 
	residents, they are also treating the Nation's sickest 
	children, who are more often than not being covered by 
	Medicaid.  These are children suffering from cancer, children 
	needing organ transplants, children needing heart surgery.  
	The list goes on and on.  Since the authorization of the 
	children's GME program through this committee in 1999, we 
	have enabled a response to the shortage of physicians able 
	to treat children with life-threatening, chronic, or rare 
	diseases.
	Children's GME programs currently get less funding than other 
	GME programs, a disparity that is current, but there has been, 
	over the past few years, significant progress.  It is, 
	therefore, very astounding to me that this Administration has 
	proposed such a severe reduction in funding, by two-thirds 
	for these programs, just in one year.  I am sure we will hear 
	today the argument that it is due to budget constraints, but 
	I think we need to look at the facts, and look at the real 
	world.  Training more doctors now, providing children's 
	hospitals with better resources to treat and early identify 
	their patients, many of whom are on Medicaid, is certainly 
	going to translate into cost savings later.  We will be able 
	to better diagnose and better treat children early on, before 
	they become sicker, more disabled, more costly to treat.
	So, I look forward to hearing from our witnesses today, who 
	represent two of our Nation's children's hospitals, about the 
	successes that children's GME has provided in the field.  
	More importantly, I want to learn why the Administration has 
	chosen to jeopardize, practically eliminate this program.
	I yield back.
	Mr. Deal.  I thank the gentlelady.  Mr. Waxman, you are 
	recognized for an opening statement.
	Mr. Waxman.  Mr. Chairman, I am pleased this subcommittee is 
	holding a hearing today to examine the success of the 
	children's hospital GME program, because a success it has been.
	As you know, whether by design or accident, this country 
	supports its graduate medical education through payments made 
	as part of the Medicare program.  Generally, that has worked 
	well and achieved its goal, but one critical set of hospitals 
	was essentially left out, and that was children's hospitals.  
	Yet these institutions have a critical role in training 
	physicians, particularly pediatric and pediatric specialty 
	residents in doing research and in serving as centers of 
	excellence for serving children.
	We attempted to correct that problem when we passed a program 
	in the Public Health Service Act to provide critical GME 
	support to children's hospitals.  That program has enjoyed 
	strong bipartisan support from the beginning, and has made a 
	critical contribution to the training of physicians, the care 
	of our children, and the financial health of children's 
	hospitals, and that is why it is particularly distressing to 
	me that the Administration has shown so little support for 
	this program, keeps trying to cut its funding, and now is 
	attempting to revise the legislative authority as well.
	They want to impose a principle of directing funds only to 
	children's hospitals that are in critical financial 
	circumstances, yet I note that they are not similarly 
	concerned about how the Medicare program support operates.  
	They recognize that there, that the support must be provided 
	to all hospitals with GME costs.  Why should children's 
	hospitals, which play such a critical role in our society, be 
	treated less generously?
	I have a wonderful children's hospital that serves the 
	children in my district and greater Los Angeles.  While 
	nearly half of its patients are Medicaid beneficiaries, it 
	is an important source of care for all children.  It is a 
	valued resource in the community, and I think this is typical 
	of the view of children's hospitals around the Nation.  I hope 
	that after this hearing today, we will reaffirm our support 
	for the children's hospitals GME program and for the wonderful 
	institutions that receive funding from it.
	Thank you.
	Mr. Deal.  I thank the gentleman.  Ms. Baldwin, you are 
	recognized for an opening statement.
	Ms. Baldwin.  Thank you, Mr. Chairman, and I also want to 
	thank the witnesses who are joining us today.
	Like many of my colleagues, I am a proud supporter of the 
	Children's Hospital GME Program.  Children's hospitals play a 
	vital role in training the doctors who will care for our 
	Nation's children in the future, and it is important that we 
	support them in this critical endeavor.
	The program has had a remarkable success in both stemming 
	reductions in the number of pediatric residents, and also, in 
	helping to provide stability for children's hospitals.  I 
	know that the Wisconsin Children's Hospital in Milwaukee has 
	directly benefited from the Children's Hospital GME program, 
	and that the University of Wisconsin's Children's Hospital 
	in my district, although not eligible for Children's Hospital 
	GME payments, has also benefited from the program, because 
	the program has helped to train pediatricians who bring their 
	expertise to the UW.
	I am sorry to note that this program expired at the end of 
	fiscal year 2005.  A program like this, that has such strong 
	bipartisan support deserves better.  And we all know what 
	happens to programs when their authorizations are allowed to 
	lapse.  Slowly, but surely, we see their appropriations 
	levels drop.  In fiscal year 2005, the Children's Hospital 
	GME program received $300 million.  That fell to $297 million 
	in fiscal year 2006, and the President, in his fiscal year 
	2007 budget, proposed drastically cutting the funding to 
	$99 million.  Who knows what will happen if the House ever 
	passes a fiscal year 2007 budget resolution?  But one thing 
	I do know is that this program provides valuable services, 
	and it deserves to be fully funded.
	I would also like to spend a brief moment reflecting on the 
	environment in which children's hospitals operate.  They are 
	major providers of services to low-income children.  In fact, 
	more than 47 percent of their days of care, on average, are 
	for children covered by Medicaid.  As we see pressure on the 
	Medicaid budget continue, and as the majority in Congress 
	weakens the program as was done recently during the last 
	year's budget reconciliation process, it becomes even more 
	vital that we support children's hospitals GME.
	So, I am happy that the committee has decided to take up 
	this issue, and I look forward to working with my fellow 
	Members on moving forward with a reauthorization bill.  And 
	thank you, Mr. Chairman.  I yield back my remaining time.
	Mr. Deal.  I thank the gentlelady.  Mr. Pallone, you are 
	recognized for an opening statement.
	Mr. Pallone.  Thank you, Mr. Chairman.  I want to, in some 
	ways, repeat what some of my colleagues said, and also add 
	to it, if I can.
	I do have a number of children's hospitals in my district, 
	and of course, the one that immediately comes to mind is 
	the one in New Brunswick, which is increasingly the health 
	center for the State of New Jersey.  And listening to what 
	my colleague, Ms. Baldwin, said in particular applies to 
	New Brunswick, where we have a large Medicaid population.  
	Today, in fact, there was much made in the media in New 
	Jersey about the fact that the Governor, because of budget 
	shortfalls, is having a hard time even keeping up with the 
	family care program, because of the SCHIP program, I should 
	say, as we know it here, because of Federal budget cuts, as 
	well as the State budget crisis.  So, all the things that 
	my colleague from Wisconsin mentioned about the impact on 
	children's healthcare is, I think, even more magnified in 
	my home State of New Jersey these days, and particularly, 
	in New Brunswick, which is a center, because of their 
	children's hospital.
	The other thing I have to tell you is that you know, I 
	have a sort of special reason to be opposed to what the 
	President is proposing here with these cuts in the 
	children's hospital GME program.  First of all, because my 
	next door neighbor is a pediatrician and has practically 
	raised my three children when I am not there, and  he is 
	constantly pointing out to me, as my wife does constantly, 
	about how we neglect children that the Federal government 
	and the Congress, because they are not voters, essentially, 
	are neglected.
	And it is pretty sad to think that, hospitals are able to 
	rely, because they have a large Medicare and senior 
	population, and because seniors vote, that we link formulas 
	to them, but then at the same time, because the children's 
	hospital doesn't have the Medicare population, that they, 
	you know, that they have a funding shortfall.  So, this 
	GME program was designed essentially to make up for the 
	fact that there are a lot of children's hospitals that 
	don't have this Medicare population and therefore have the 
	funding shortfalls.
	For us to now turn around and say, as the President does, 
	that we are going to change this, and make those cuts, I 
	think directly goes back to the fact that children are not 
	represented, that children are not viewed positively by 
	politicians, and I think that, you know, those of us who 
	feel strongly that it shouldn't be that way need to speak 
	out against these types of cuts.
	The other thing I would point out is that this subcommittee 
	and this committee in general, has been very much trying to 
	promote research in children's diseases.  I remember 
	Mr. Waxman, Mr. Brown, on many occasions pointing out that 
	a lot of times, when we come to drugs in particular, but 
	other things as well, that we need to do more research on 
	the impact on children, but that is not done, and I know 
	that that is, in fact, done in New Brunswick at the 
	children's hospital.  I know that a lot of these hospitals 
	are doing a lot of research that directly relates to how 
	drugs and other things impact children.
	So, this is not the time to cut this.  We need these 
	residents.  We need the research, and we certainly shouldn't 
	be discriminating against children, which this children's 
	hospital GME program was designed to overcome.
	So, I think it is very important to have this hearing today, 
	and I appreciate the fact that we are paying attention to 
	it on both sides of the aisle.
	Thank you, Mr. Chairman.
	[Additional statements for the record follow:]

Prepared Statement of the Hon. Joe Barton, Chairman, Committee on 
Energy and Commerce

Thank you Chairman Deal for holding this hearing on the Children's 
Hospital Graduate Medical Education program, commonly referred to 
as CHGME.
First established in 1999, the program was designed to better 
balance the levels of federal funding for adult teaching hospitals 
and children's teaching hospitals.  The program helps children's 
hospitals which do not receive a significant amount of federal 
dollars for their residential training programs because of low 
volumes of Medicare patients.   The nation's sixty teaching 
children's hospitals are responsible for the education of nearly 
one out of three pediatricians and half of all pediatric 
specialists.  
The Administration has proposed several reforms to the program in 
its FY 2007 Budget.  Specifically, the President wants the program 
to prioritize payments to hospitals that demonstrate the greatest 
financial need; that treat the largest number of uninsured 
patients; and that train the greatest number of physicians.  
This Committee has been very active in looking at all programs 
within our jurisdiction, with particular emphasis paid to those 
with expiring authorizations.  It is our responsibility to 
recipients of federal dollars and, of course, to the taxpayers to 
ensure each program is structured to achieve optimal efficiency 
and effectiveness.  We should examine proposed reforms with these 
goals always in mind.
I hope this hearing provides an opportunity to examine issues 
related to reauthorization of the program and the potential need 
for structural reform.   I expect this Committee to consider 
reauthorization legislation in the near future.  Thank you again 
Chairman Deal for holding today's hearing and welcome to our 
witnesses.

Prepared Statement of the Hon. Barbara Cubin, a Representative in 
Congress from the State of Wyoming

Thank you Mr. Chairman.
Today we have an opportunity to take a close look at the impact of 
Children's Hospitals Graduate Medical Education (GME) Program on 
communities across the nation.  First authorized in 1999, the 
program has proved to be of tremendous help in supporting graduate 
medical education training at Children's hospitals.
Congress again amended and reviewed this program in 2004, and over 
the past three fiscal years has approved a level funding allocation 
of $303 million.  In Fiscal Year 2007, the Administration has 
proposed to reduce the program to $99 million, a drastic reduction 
that gives me pause considering the impact of the program on the 
State of Wyoming.  
While the State of Wyoming is without a children's hospital, the 
Children's Hospital in Denver, CO serves thousands of Wyoming 
patients in need of care.  The facility is also a valuable training 
resource in the region.  There are at least sixteen physicians 
currently practicing in Wyoming who trained at the hospital.  Other 
residents complete rural rotations, providing care to communities
throughout the state.  We have a shortage of health professionals 
in the state and we need all the providers that we can muster.
I hope our Health Resources and Services Administration panelist 
will be able to shed some light on why the Administration feels 
the GME Program cut is necessary.  I understand the merits of 
trying to improve accountability in the program and ensure that 
federal aid is appropriately targeted, especially given the budget 
crunch we are facing.  Even as we tighten our fiscal belts, however, 
we must be careful not to throw the baby out with the bath water.

Prepared Statement of the Hon. Anna Eshoo, a Representative in 
Congress from the State of California

Thank you, Mr. Chairman for holding this important hearing. 
As an original cosponsor of the Children's Hospitals Education 
Equity and Research (CHEER) Act, I hope we can move on a 
reauthorization of the Children's Hospital Graduate Medical 
Education program soon.
I'm proud to represent one of the leading children's hospitals 
in the country - Lucile Packard Children's Hospital.  
The work that's been pioneered at Packard has benefited not 
only patients from throughout the country, it has also benefited 
patients at other hospitals through techniques which have been 
developed at Packard by the personnel trained there.
I'm sure every children's hospital which receives funding under 
the CHGME program can make a similar claim.
CHGME hospitals train 30% of all pediatricians, half of all 
pediatric subspecialists, and the majority of pediatric 
researchers in our country.
In California alone, CHGME program funds are used by 7 children's 
hospitals to train 652 full-time residents annually, with 318 
trained in a pediatric subspecialty.
These hospitals treat the most difficult cases, often children 
from families who do not have the resources to pay for treatment 
on their own.  In California, more than half of the children 
cared for are Medicaid eligible.
With such a record, it's difficult for me to comprehend why the 
Administration proposes to cut the CHGME program from its 
current appropriated level of $297 million to $99 million in 
fiscal year 2007, and scale back the program in the next 
reauthorization.
No one in the health care community supports this proposal, and 
beyond the desire to cut spending, there can be no justifications 
for such a draconian cut.  
The Administration has made this proposal solely for the Children's 
Hospital GME program, not for the Medicare GME program, even 
though the Medicare GME program reimburses at a higher rate.
Mr. Chairman, I hope our Committee will recognize how shortsighted 
the Administration's proposal is and then will move forward in a 
bipartisan manner to reauthorize the CHGME program as the Senate 
has already done.

Prepared Statement of the Hon. Gene Green, a Representative in 
Congress from the State of Texas

Thank you, Mr. Chairman, for holding this hearing on the Children's 
Hospital Graduate Medical Education Program (CHGME).  We in Congress 
established this program nearly seven years ago in recognition of 
the federal support needed for training activities at our children's 
teaching hospitals.  In other hospital settings, training dollars 
needed for residents are funded, in part, through Medicare's graduate 
medical education program.  With relatively few Medicare patients 
being served at children's hospitals, however, children's teaching 
hospitals cannot fully benefit from Medicare's graduate medical 
education program.  CHGME was established to help alleviate the 
inequity faced by children's hospitals with respect to the training 
of their residents.
Since its inception in 1999, the CHGME program has achieved 
tremendous success and enabled our children's teaching hospitals to 
address reductions in the number of pediatric residents.  With this 
funding, children's teaching hospitals - such as Texas Children's 
Hospital in my hometown of Houston - have been able to keep their 
residency programs alive and ensure that the pediatricians treating 
our children and our grandchildren are trained at the best facilities 
in the country.  
It's no surprise that the same children's teaching hospitals 
receiving CHGME funds provide the ideal training grounds for 
pediatric residents.  These hospitals house the nation's leading 
pediatric research institutions and provide residents with experience 
in treating the whole gamut of childhood health care problems, from 
routine immunizations to pediatric trauma care and pediatric 
oncology.  
Continued CHGME funding is critical if our children's hospitals are 
going to continue providing quality care to low-income children, as 
well as children whose families have private health insurance.  
Nearly fifty percent of care delivered at our children's hospitals 
nationwide is provided to Medicaid beneficiaries, and CHGME payments 
help cover the gap created by a Medicaid reimbursement policy that 
covers only 80 percent of care delivered to Medicaid patients.
The CHGME program provides children's teaching hospitals with real 
funding, without which their residency programs would face severe 
financial strain.  Texas Children's Hospital in Houston is one of 
the top children's hospitals in the country and received nearly 
$11 million last year in CHGME payments.  Even with this funding, 
Texas Children's absorbed an additional $11.5 million in 
unreimbursed costs associated with their training of pediatric 
residents.  
We want our pediatricians trained at quality hospitals like Texas 
Children's, where they can put their skills to use on a diverse set 
of patients with varying diagnoses.  Through this type of education 
and training, pediatric residents can leave children's teaching 
hospitals and travel to all corners of the country armed with the 
experience to effectively treat the young patients in their 
community.  CHGME makes this possible, and I join my colleagues in 
supporting the reauthorization of this important program. 

Prepared Statement of the Hon. George Radanovich, a Representative 
in Congress from the State of California

	I would first like to thank the Chairman for his leadership 
	on this issue, and for calling this important hearing looking 
	into the reauthorization of the Children's Hospital Graduate 
	Medical Education Program.  This is an extremely important 
	program that has consistently proven well worth the investment 
	we make, and I am very glad to see this committee addressing 
	the needs of Children's Graduate Hospital Medical Education.
	When Congress first authorized $285 million in 1999 for this 
	program, we were addressing the unintended inequity created 
	by government financing of graduate medical education.  Since 
	that time, children's hospitals have utilized these funds to 
	increase the numbers of residents they train, types of training 
	programs they provide, and quality of the training offered.  
	This has all been done without having to compromise clinical 
	care or research.
	Children's hospitals continually strive to see that every 
	child has access to high quality, cost efficient care.  In 
	doing so, they can save taxpayers money by providing the 
	preventive care necessary to ensure that many problems are 
	detected, addressed and treated before they become much more 
	expensive emergencies and chronic problems in the future.  I 
	have had the pleasure of personally visiting some of the fine 
	safety net children's care providers around my district in 
	California, and I can assure you first hand that the work 
	done in these children's hospitals is literally saving lives.  
	Through the funds provided by the Children's Hospital Graduate 
	Medical Education Program, California hospitals have been 
	able to increase their quality and availability of care, even 
	at a time when the country is experiencing a shortage of 
	pediatric specialists.
However, to allow them to continue to do their work we must ensure 
that there the funds are available to help cover the costs incurred 
at children's hospitals for the training of pediatricians and 
children's healthcare specialists.
Mr. Chairman, I am a proud cosponsor of HR 1246, the �Children's 
Hospital Equity Education and Research�, also known as the �CHEER�, 
Act.  I thank the gentlelady from Connecticut, Mrs. Johnson, for 
introducing this important legislation.  I understand and agree with 
the Administration that we need to try to reduce spending where 
possible, but I do not think this is the appropriate area to do so 
and that the funding request in the President's Budget Proposal of 
$99 million for this year - a $198 million reduction from last 
year - is inadequate.  
The best way to utilize limited healthcare funds is to ensure that 
we provide them to programs that will efficiently use the money to 
produce results.  I don't believe there is any question that 
funding for children's graduate medical education produces results.
I thank the Chairman again for his leadership, thank our witnesses 
for being here today to share their expertise, and look forward to 
a productive and informative hearing on how we can best support 
Children's Hospital Graduate Medical Education Programs.

	Mr. Deal.  Well, that will conclude our opening statements.  
	We are pleased to have our first panelist, Ms. Kerry 
	Nesseler, who is the Associate Administrator for Health 
	Professions of the Health Resources and Services 
	Administration of the U.S. Department of Health and Human 
	Services.
	Ms. Nesseler, we are pleased to have you here.  I would 
	remind you that your printed testimony is already a part of 
	the record, as I would advise the other witnesses.  We 
	already have your printed testimony.  It has been available 
	to the panel.  We appreciate that.
	Ms. Nesseler, we are pleased to have you here, and we will 
	recognize you for your opening statement.
	Ms. Nesseler.  Thank you, Mr. Chairman.  I am pleased to be 
	here also.  I request permission to submit to the record my 
	entire written statement.
	Mr. Deal.  Yes, it is already a part of the record.

STATEMENT OF KERRY NESSELER, ASSOCIATE ADMINISTRATOR, BUREAU OF 
HEALTH PROFESSIONS, HEALTH RESOURCES AND SERVICES ADMINISTRATION, 
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Ms. Nesseler.  Mr. Chairman, members of the subcommittee, thank you 
for the opportunity to meet with you today on behalf of the Health 
Resources Services Administration, HRSA, to discuss the Children's 
Hospitals Graduate Medical Education Program.
	The Children's Hospitals Graduate Medical Education Program 
	was authorized by the Healthcare Research and Quality Act of 
	1999.  The program was amended by the Children's Healthcare 
	Act of 2000, and was further amended in 2004.  Its purpose 
	is to support graduate medical education training in 
	freestanding children's teaching hospitals.  And payments are 
	made to these hospitals to enhance their financial viability.
	The Children's Hospitals Graduate Medical Education Program 
	addresses the need for funds beyond patient revenues to 
	support the broad teaching mission of freestanding children's 
	teaching hospitals, which includes conducting biomedical 
	research, training health professionals, providing rare and 
	highly specialized clinical services, innovative clinical 
	care, and providing care to the poor and the underserved.  
	Teaching hospitals have higher costs than other hospitals 
	because of the special services they provide.
	The program currently disburses Direct Medical Education 
	and Indirect Medical Education payments to eligible and 
	participating children's hospitals.  Based on Congressional 
	mandate, one third of the total appropriated funds are 
	disbursed for direct medical education, and the remaining 
	two thirds are disbursed for indirect medical education.  
	A Children's Hospital's GME Payment Program's DME allocation, 
	and those are costs associated with training the residents, 
	is based on the national updated per resident amounts, as 
	defined by Section 340E(c)(2) of the Public Health Service 
	Act, and the 3-years rolling average of weighted full-time 
	equivalent medical resident counts as determined under 
	Section 1886(h)(4) of the Social Security Act.  A Children's 
	Hospitals GME Payment Program's IME, indirect medical 
	education, payments are the payments associated with 
	adjustments for the cost of direct patient care.  Currently, 
	IME payments are determined by: one, participating children's 
	hospitals numbers of discharge; two, the severity of illness 
	of the patient population, using a case mix index; and three, 
	the teaching intensity factor, as captured by the 
	resident-to-bed ratio.
	In fiscal year '05, the Children's Hospitals GME supported 
	61 freestanding children's hospitals and the training of 
	about 4,892 medical residents on and offsite.  The program, 
	as currently implemented, is in need of change.  The 
	President's fiscal year 2007 budget requests $99 million to 
	support the mission of children's teaching hospitals.
	To support this budget request, the Administration is 
	proposing legislative reform of this program, specifically 
	with the IME payments.  The DME, direct medical education 
	payments, which are associated with training of medical 
	residents, will remain the same.  The President's budget 
	proposes ensuring access to care by supporting children's 
	hospitals based on: one, their financial status; and two, 
	the children's hospitals who continue to care for those 
	children who are underinsured or uninsured.  Participating 
	children's hospitals would be required to account for the 
	use of these Federal funds, and have clear, standardized 
	performance requirements, such as the effect of program 
	funds on improvement in patient care.
	Under this new proposal, we emphasize that payments will 
	focus on those children's hospitals with one, the greatest 
	financial need; two, that treat the largest number of 
	uninsured patients; and three, that train the greatest 
	number of physicians.
	The proposed legislative reform is designed to better 
	target limited Federal resources where they are needed 
	most.  Federal support would be provided to ensure that 
	the pediatricians first will continue to receive the best 
	training possible, with the objective of achieving 
	improvements in patient care outcomes.  Reporting 
	requirements on the use of funds will demonstrate the 
	results achieved by freestanding children's hospitals in 
	performing their three-pronged mission, as teaching 
	hospitals, safety-net providers, and providers of quality 
	care for children.
	Under this proposal, Federal support for direct medical 
	education, which is the training of physicians, will 
	continue to depend on the number of full-time equivalent 
	residents trained.  The President's new formulation will 
	replace the current indirect medical education payment 
	formula, which currently accounts for the teaching intensity,
	which is using residents-to-bed ratio; the number of 
	patient discharges; and the severity of illness of the 
	inpatient population.  Federal support will be distributed 
	based again on the volume of uncompensated care provided by 
	the institution and two, the financial status of the 
	hospitals.
	The impact of the proposal is to target the funds to help 
	children's hospitals caring for the poor and the underserved, 
	and help the children's hospitals that are in the greatest 
	financial need.
	Thank you for this opportunity to discuss the Administration's 
	principles for the legislative reform of the Children's 
	Hospitals Graduate Medical Education Program.  We look forward 
	to working with this subcommittee on this proposal.
	[The prepared statement of Kerry Nesseler follows:]

Prepared Statement of Kerry Nesseler, R.N., M.S., Associate 
Administrator, Bureau of Health Professions, Health Resources and 
Services Administration, U.S. Department of Health and Human 
Services

Mr. Chairman, Members of the Subcommittee, thank you for the 
opportunity to meet with you today on behalf of the Health Resources 
and Services Administration (HRSA) to discuss the Children's Hospitals 
Graduate Medical Education Program.

Background
The Children's Hospitals Graduate Medical Education Program was 
authorized by the Healthcare Research and Quality Act of 1999.  The 
program was amended by the Children's Health Act of 2000 and was 
further amended in 2004.  Its purpose is to support graduate 
medical education (GME) training in freestanding children's 
teaching hospitals.  Payments are made to these hospitals to 
enhance their financial viability.
The Children's Hospitals GME Program addresses the need for funds 
beyond patient revenues to support the broad teaching mission of 
freestanding children's teaching hospitals, which includes 
conducting biomedical research, training health professionals, 
providing rare and highly specialized clinical services and 
innovative clinical care, and providing care to the poor and the 
underserved.  Teaching hospitals have higher costs than other 
hospitals because of the special services they provide.

Implementation
The program currently disburses Direct Medical Education (DME) and 
Indirect Medical Education (IME) payments to eligible and 
participating children's hospitals.  Based on Congressional mandate, 
one-third of total appropriated funds are disbursed for DME and the 
remaining two-thirds are disbursed for IME.  A Children's Hospitals 
GME Payment Program's participating hospital's DME payment 
allocation is based on the national updated per-resident amounts 
as defined by �340E(c)(2) of the Public Health Service Act and the 
three years rolling average of weighted full time equivalent medical 
resident counts as determined under �1886(h)(4) of the Social 
Security Act.  A Children's Hospitals GME Payment Program's IME 
payments are determined by a participating children's hospital's 
capacity to treat patients (number of discharges), severity of 
illness of the patients population (using a case mix index), and 
the teaching intensity factor as captured by the intern-resident
to bed ratio.
In fiscal year (FY) 2004, the Children's Hospitals GME supported 61
freestanding children's hospitals and the training of 4,892 medical 
residents on and off site.  The financial support for the training 
of medical residents is based on a three-year rolling average of 
weighted and unweighted full time equivalent residents, number of 
discharges, number of available beds, and a case mix index.  The 
program as currently implemented is in need of change.

Proposal
The President's FY 2007 Budget requests $99 million to support the 
mission of children's teaching hospitals, which includes training 
medical residents, ensuring access to care by supporting children's 
hospitals based on their financial status, and encouraging the 
children's hospitals to continue caring for those children who 
are underinsured or uninsured.  
To support this Budget Request, the Administration is proposing 
legislative reform of this program.  The proposal will address 
specific needs of children's hospitals in the nation.  Under this 
new program, funds will be distributed based on the financial
status of freestanding children's hospitals, their uncompensated 
care caseload, and the number of full time equivalent medical 
residents (including interns and fellows) in training.  The payment 
formula will weight financial status, uncompensated care, and 
number of full time equivalent medical residents (interns and 
fellows) in training.  Participating children's hospitals would 
be required to account for the use of these Federal funds, and have 
clear, standardized performance requirements, such as the effect of 
program funds on improvements in patient care.  Under this new 
proposal, we emphasize that payments will focus on those children's 
hospitals with the greatest financial need that treat the largest 
number of uninsured patients and train the greatest number of 
physicians.  

Rationale
The proposed legislative reform is designed to better target 
limited Federal resources where they are needed most.  Federal 
support will be provided to ensure that the pediatric workforce 
will continue to receive the best training possible with the 
objective of achieving improvement in patient care outcomes.  
Furthermore, Federal support will be provided to those freestanding 
children's hospitals with the greatest financial need, and Federal 
support will be provided to encourage teaching hospitals to 
continue providing quality patient care to those children who are 
without a source of payment or are underinsured.  Reporting 
requirements on the use of funds will demonstrate the results 
achieved by freestanding children's hospitals in performing 
their three-pronged mission as teaching hospitals, safety net 
providers, and providers of quality care for children.

Impact
Under this proposal, Federal support for the training of physicians 
will continue to depend on the number of full time equivalent 
residents trained, the national average per resident amount adjusted 
for labor and non-labor share and geographic distances.  
The impact and reasoning of the proposal is to target the funds to 
help children's hospitals caring for the poor and underserved, and 
help children's hospitals that are in the greatest financial need. 
This new formulation will replace the current Indirect Medical 
Education payment formula which accounts for teaching intensity 
(using the interns and residents to bed ratio), capacity for patient 
care (number of inpatient discharges), and severity of illness (case 
mix index) of the inpatient population.  Federal support for 
uncompensated care will be distributed based on the volume of 
uncompensated care provided by the institution.

Conclusion
Thank you for the opportunity to discuss the Administration's 
principles for the legislative reform of the Children's Hospitals 
Graduate Medical Education Program.  We look forward to working with 
this Subcommittee on this proposal.

	Mr. Deal.  Well, thank you.
	You have heard the concerns that have been expressed in the 
	opening statements on both sides here--
	Ms. Nesseler.  Yes, sir.
	Mr. Deal.  --about the proposed reductions in funding of the 
	payment program for graduate medical education--
	Ms. Nesseler.  Yes, sir.
	Mr. Deal.  --in children's hospitals.  Would you comment on 
	what you think the impact of such a reduction in funding would 
	actually be?
	Ms. Nesseler.  Well, sir, currently the Administration is still 
	proposing Federal support for this graduate medical education 
	training at freestanding children's hospital.
	The Administration is trying to align Federal support with the 
	mission of teaching hospitals.  Federal graduate medical 
	education support for freestanding teaching hospitals comes 
	from appropriated funds which are limited, while support for 
	the adult teaching hospitals is provided through a Medicare 
	trust fund.  We believe the FY 2007 budget request of $99 
	million is good, strong funding for children's hospitals, and 
	especially, if we focus on children's hospitals that need it 
	the most, and do provide care to the most underserved 
	populations.
	Mr. Deal.  You mentioned in your testimony that statute 
	currently sets the ratio between the IME and the DME.
	Ms. Nesseler.  Yes, sir.
	Mr. Deal.  Are you proposing that that formula be changed, as 
	to the proportion?  As I see the proposal, the DME would 
	actually consume the entire $99 million, if we didn't do 
	anything to change the formula allocations.  Are you proposing 
	changing the formula allocations?
	Ms. Nesseler.  Yes, sir.  Currently, as it stands, one-third 
	goes to direct medical education, and two-thirds goes to 
	indirect medical education.  And we are looking at keeping the 
	direct medical education formula mostly the same, but looking 
	at about 40 percent for DME.  And then, this second piece, 
	which is about 60 percent, is again looking at the financial 
	status, and the number of uncompensated care patients that 
	they treat.
	Mr. Deal.  Being someone who comes from a rural area--
	Ms. Nesseler.  Yes, sir.
	Mr. Deal.  --I am concerned about the lack of children's 
	teaching hospitals in most rural areas.  Does the 
	Administration 
	have any proposal with regard to children's hospitals in more 
	rural areas that may not quite have the caseload to qualify 
	for some of these funds?
	Ms. Nesseler.  Currently, we do not.  It is under discussion 
	of how we will determine financial need, and how we will 
	determine uncompensated care and the increased numbers of 
	patients seen that are uninsured.  That is under discussion 
	at this point, but I do not have a formula.
	Mr. Deal.  This is a little bit of a complicated question, 
	so I am going to read it, but--
	Ms. Nesseler.  Yes, sir.
	Mr. Deal.  --it is an important piece of information we need 
	to know.  Medicare allows low Medicare utilization hospitals, 
	such as children's hospitals, to file low-volume reports that 
	do not contain all the cost information required for the 
	full-cost report.
	Do you believe your agency has sufficient information regarding 
	the financial status of all the participating children's 
	hospitals, bed count, patient volume, and other such data 
	points, to effectively make changes to the program, or will 
	you require some additional information and reporting on those 
	items?
	Ms. Nesseler.  We currently believe we get sufficient 
	information.  Yes, we do get cost reports from all of our 
	61 children's hospitals.  Some are larger reports, depending 
	on how much Medicare dollars they get; depending on how much 
	chronic care that they provide, like dialysis; and that is 
	how they receive their additional extra Medicare payments.  
	But yes, we do feel we have sufficient cost reporting.
	Mr. Deal.  And from what other sources do children's 
	teaching hospitals receive funding, and does this other source 
	include GME funding?
	Ms. Nesseler.  Other sources of funding are, again, a bit of 
	Medicare dollars, if they are taking care of chronically ill 
	children, such as dialysis patients, or severe heart 
	problems.  They receive funding from State Medicaid.  They 
	receive a lot of private dollars also, sir, in addition to 
	the Federal dollars.
	Mr. Deal.  Many of them receive rather significant private 
	contributions, I believe, do they not?
	Ms. Nesseler.  Sir, I can get you an answer for the record. 
	I don't have that exact number.
	Mr. Deal.  All right.  It appears that the direct medical 
	education dollars are allocated to hospitals on a per 
	resident formula, and IME dollars are determined by a 
	number of factors.  Can you better explain to us how these 
	dollars are currently distributed?  Maybe you have 
	already touched on that, but--
	Ms. Nesseler.  Yes, I can.  Currently, I guess about 
	one-third of the dollars go for direct medical education, 
	and that is literally the training of the physicians, 
	which are mostly pediatricians and sub-specialists in 
	pediatrics.  That is for their salaries, for their stipends, 
	so that goes for direct medical education, about a third 
	of the dollars.  Two-thirds of the dollars goes for indirect 
	medical education.  And that is a combination between the 
	children's hospital capacity to treat patients, which is 
	their number of discharges; the severity of the illnesses 
	of the patient population, if you have a NICU, neonatal 
	intensive care unit, or a burn center, there are more severe 
	patients at that hospital, and that uses a case mix index.  
	And also, the teaching intensity factor, as captured by the 
	resident-to-bed ratio, or how many physicians for how many 
	beds, if it is a higher or lower number.  That is currently 
	how it is, and that is two-thirds.
	Mr. Deal.  Mr. Brown, you are recognized for questions.
	Mr. Brown.  Thank you, Mr. Chairman.  Thank you, 
	Ms. Nesseler, for joining us.
	Ms. Nesseler.  Thank you, sir.
	Mr. Brown.  And I appreciate your testimony.
	I am trying to understand why the Administration wants to cut 
	children's GME.  I mean, this has been a battle really since 
	the early part of this century.  I mean, for the last five 
	years, it has always been an issue with this Administration 
	on GME.
	There were a couple of hints in the OMB that, looking at 
	this, there seemed to be a couple of hints in OMB's program 
	assessment.  From my understanding, what they were able to, 
	and if you kind of read between the lines, they seem to say 
	that the money that went to GME, and Akron Children's or 
	Rainbow or Columbus Children's or whatever, that that money 
	could be used for other things, and they weren't so sure 
	the money was really going to what it was intended.  But my 
	understanding is the larger GME program works the same way.  
	We don't tell the Boston and New York hospitals, or we don't 
	tell any of the hospitals that generally address illness for 
	the general population, we don't tell them specifically where 
	their GME money goes, either.  Is that the right assessment, 
	generally?
	Ms. Nesseler.  Sir, I am not as familiar with the CMS adult 
	hospitals.  I can tell you under the PART score, we did get 
	a rating of adequate.  And we really look at $99 million as 
	a sufficient budget for children's hospitals GME.  The PART 
	score of adequate gave us two recommendations: to look more 
	closely at auditing, and to do an objective evaluation study.  
	Those are two, so according to us, this program has been 
	very successful.  We believe the $99 million is adequate if 
	we are looking at the hospitals with the highest need.  With 
	the PART score of adequate, we have a little bit of work to 
	do, but we feel as though we have done well with the program, 
	sir.
	Mr. Brown.  But generally, GME to other hospitals goes 
	without strings attached, correct?  When GME funding goes 
	to any large hospital that doesn't just focus on children, 
	the money is--
	Ms. Nesseler.  Correct, for adult hospitals.
	Mr. Brown.  Yeah, it is not connected to--we want to make 
	sure we know where every penny that we are giving you goes, 
	that this dollar goes to training of specialists, this dollar 
	goes to salaries and equipment and training of new doctors, 
	correct?
	Ms. Nesseler.  Sir, I am not a witness to testify for CMS 
	adult hospitals, and I could get some answers to the record 
	for you, but I don't feel--
	Mr. Brown.  If you would.  Okay.  Shift to Medicaid for a 
	minute.  Medicaid provides funding in some States to 
	hospitals in other States, as in Texas, and in others to 
	follows.  It doesn't.  Children's hospitals, I believe, 
	discuss that with me for a moment, what you see for the 
	future, if these States, if States begin to cut back, as 
	Texas is, cuts back its Medicaid funding for GME, what 
	kind of impact will that have, in your mind?
	Ms. Nesseler.  Currently, we are looking at hospitals
	with the greatest financial need, and that the $99 million 
	is a sufficient budget to keep their services.  That is 
	all I can say, sir.
	Mr. Brown.  Okay.  Thanks.
	Ms. Nesseler.  Thank you.
	Mr. Deal.  Mr. Hall, you are recognized for questions.
	Mr. Hall.  What is the source of a cut of that magnitude, 
	$297 million, down to $99 million?  They are cutting out 
	$198 million.
	Ms. Nesseler.  Yes, sir.
	Mr. Hall.  What is the source of that?  Whose decision was 
	that?
	Ms. Nesseler.  Sir, it is the President's '07 budget 
	proposal to Congress.
	Mr. Hall.  Well, who proposed that to him?  Were you part 
	of the group that proposed that to him?
	Ms. Nesseler.  Sir, it comes from the President.
	Mr. Hall.  And you really don't agree with it, do you, 
	deep down in your heart?
	Ms. Nesseler.  Sir, I am a maternal child health nurse, 
	and I am very committed to maternal child health, which 
	includes children's, and the President is committed, also, 
	with $99 million, to treat children at children's hospitals, 
	yes, sir.
	Mr. Hall.  Well, I understand you almost have to be in that 
	position, don't you?.
	Ms. Nesseler.  Sir, I--
	Mr. Hall.  You are representing the President, and you are 
	doing the best you can do for the President.  Right?  And 
	his program.  I understand that.  I don't have any argument 
	with it.  I am just trying to figure out how they came to 
	that type of a cut for children's hospitals.  You know, 
	did you cut the program, was the program cut to lessen the 
	part of that $99 million to any particular part of the 
	country?  You didn't do that.
	Ms. Nesseler.  Sir, I think we are looking at putting the 
	money to the highest priority needs, and there are other 
	priority needs in the Federal government.
	Mr. Hall.  What are those priority needs?  Are you 
	talking about low income areas?
	Ms. Nesseler.  One could be the National Health Service 
	Corps.  Money is being put into the National Health 
	Service Corps that provides money for pediatricians to 
	go out to work in underserved areas in the United States.
	Mr. Hall.  Working under what?
	Ms. Nesseler.  The National Health Service Corps, sir.  
	Or the Community Health Center program, which provides 
	more community health services in local communities and 
	rural communities.  Those would be two programs I could 
	cite as programs that are high priority needs for the 
	President.
	Mr. Hall.  You take unmet needs into consideration, 
	you think, in arriving at that cut?
	Ms. Nesseler.  Yes, sir.
	Mr. Hall.  An unmet need's an unmet need, isn't it?
	Ms. Nesseler.  Yes, sir.
	Mr. Hall.  So, let us talk about that a little bit.  Are 
	you trying to funnel the money into the most needy areas?  
	Is that what you are doing?
	Ms. Nesseler.  Into the most priority areas--
	Mr. Hall.  The most needy--
	Ms. Nesseler.  Yes, sir.  Not necessarily needy areas, but 
	priority areas.
	Mr. Hall.  How did you calculate that cut?  Was it done on a 
	percentage basis, a percentage of the needs, like some 
	Medicaid areas would have a greater percentage of low income 
	people?
	Ms. Nesseler.  We are looking at the hospitals that can train 
	the highest number of pediatricians or physicians, that can 
	show the greatest financial need, and can show that they 
	treat the largest number of uninsured.  We are still under 
	discussion on how those calculations will be made.
	Mr. Hall.  Well, that would really not go to the rural 
	areas.  If it is for the largest number, it would go to the 
	most densely populated areas, wouldn't it?
	Ms. Nesseler.  Sir, we are looking at how we will make that 
	calculation.  That is under discussion.
	Mr. Hall.  Who is looking at it?  You have already done it.  
	You have cut it from $299 million to $99 million, so nobody 
	is looking, apparently.  And this Congress is going to look 
	at it.
	Mr. Deal.  The gentleman's time has expired.
	Mr. Hall.  In that case, I will yield back my time.
	Mr. Deal.  I felt sure you would.  Ms. Capps, you are 
	recognized for your questions.
	Ms. Capps.  Thank you, Mr. Chairman.  I want to thank my 
	colleague from Texas for setting this up, and acknowledging, 
	Ms. Nesseler, that you are a maternal child health nurse--
	Ms. Nesseler.  Yes.
	Ms. Capps.  --and I am a public health nurse.
	Ms. Nesseler.  Wonderful.
	Ms. Capps.  I worked in my career with schoolchildren, and 
	I don't know how anybody could say with a straight face 
	that $99 million is an adequate amount for the Federal 
	government to be putting into children's hospitals graduate 
	medical education.
	And I am also taken aback a bit with our Chairman's comment 
	that there is a great deal of private money, and I am 
	thinking of the families I know and you worked with, where 
	the tragic situation of a serious, serious chronic health 
	condition and no resources of any kind of private money, 
	and these are the hospitals where our families go with our 
	children.  And I want to ask you about something particular 
	to California and some other states.
	Ms. Nesseler.  Yes, ma'am.
	Ms. Capps.  The Administration's proposal would change the 
	funding formula to place greater weight on the number of 
	uninsured patients the hospital is treating.  This kind of 
	formula is not a factor in determining funding, though, for 
	graduate medical education in adult hospitals, right?
	Ms. Nesseler.  I am not an expert on GRM in adult hospitals.
	Ms. Capps.  Okay.  I am sorry.  We--
	Ms. Nesseler.  I am really not an expert on this but we 
	could provide an answer for the record.
	Ms. Capps.  California, among other states, is on the 
	forefront, but not the only State, of expanding health 
	coverage for more and more children.  Surely, that is a 
	commendable goal.  Hopefully, we will be able, eventually, 
	to have all children covered.  Children's hospitals 
	equally in California treat patients with or without 
	health insurance.  Funding for training programs affects 
	the number of residents who can be trained.  The changes to 
	the funding formula the Administration is proposing would, 
	in essence, punish children's hospitals in States that are 
	making strides toward covering more children, even though 
	the need to train more pediatric residents still exists, no 
	matter how many of the patients are insured or uninsured.
	However, without full funding, children's hospitals will 
	have to cut their training programs, and still treat the 
	same number of patients.  How do you reconcile this, and 
	why is there so much inequity when it comes to funding 
	graduate medical education at children's hospitals?
	Ms. Nesseler.  There is a limited source of Federal funding, 
	and we are looking at putting our money into other high 
	priority needs, ma'am.
	Ms. Capps.  Higher priority needs than children's hospitals 
	medical education?
	Ms. Nesseler.  We are trying to direct healthcare services 
	out to our populations, ma'am.
	Ms. Capps.  Would you tell me anything that is a higher 
	priority than that?  You said direct medical service to 
	patients.
	Ms. Nesseler.  Through community health centers and the 
	National Health Service Corps, where we are getting 
	pediatricians out to the communities to provide direct 
	healthcare services.  There are two examples--
	Ms. Capps.  But they are being trained at these hospitals 
	with 66 percent less funding, or 67 percent less funding.  
	Does that fit?
	Ms. Nesseler.  The President believes that it is sufficient 
	funding for children's hospitals graduate medical education,
	with the limited source of Federal funding that we have and 
	our priorities.  Yes, ma'am.
	Ms. Capps.  Okay.  Let me try something else, for 16 seconds.
	In your testimony--
	Mr. Deal.  That is over, not under.
	Ms. Capps.  All right.  I will wait.  Thank you very much.
	Mr. Deal.  The gentlelady misunderstood the Chairman's 
	question with regard to private funding.  I was speaking 
	of private funding for the hospitals themselves, not the 
	families.
	Ms. Capps.  I totally understand.
	Mr. Deal.  My hospitals are very well supported in my State 
	with private funds that go along with the other funding 
	sources.  That was the point I was making.
	Ms. Capps.  I guess I would beg to differ, that all 
	States maybe aren't as blessed as yours.
	Mr. Deal.  Well, we set a good example in Georgia.  I 
	recognize Dr. Burgess for his questions.
	Mr. Burgess.  Thank you, Mr. Chairman.  I apologize for 
	being out of the committee hearing while we heard testimony.
	Just for my basic knowledge, forgive me if this is ground 
	that has already been covered.  Mr. Chairman, do we just 
	get three minutes for questions?
	Mr. Deal.  You didn't give your opening statement.
	Mr. Burgess.  Are there other sources of graduate medical 
	education funding?  The Chairman already referenced money 
	that may be available in the community.  Are there other 
	sources for this funding, other than what is provided by 
	the Federal government?
	Ms. Nesseler.  From the Federal government for Children's 
	Hospitals Graduate Medical Education, there is a small 
	amount of Medicare dollars that goes to the children's 
	hospital if they are treating chronic diseases.  And State 
	Medicaid dollars are a bit of a contribution also, in 
	addition to some private funding dollars.
	Mr. Burgess.  Since, what do we see in our packet, 75 to 
	80 percent of the graduates who graduate from training 
	programs in children's hospitals stay within a hundred 
	mile radius of that hospital for their practice, is it 
	appropriate for the communities that benefit from the 
	training program, do in fact contribute?  They are 
	receiving something of value, which is a well trained 
	pediatrician or pediatric sub-specialist in their 
	community.  Is it appropriate that we look to the 
	private sector for some of that funding, as the Chairman 
	has pointed out, that they do so well in Georgia.
	Ms. Nesseler.  Sir, I can get an answer to that question 
	for the record.  I don't think I am prepared to discuss 
	if private funding is fair to the communities.
	Mr. Burgess.  All right.  I think I understand this, but 
	just so that I get it for the record, is there a 
	difference in the way that funding for graduate medical 
	education primarily aimed at adult hospitals, is there 
	a difference between that and the graduate medical 
	education for children's hospitals?
	Ms. Nesseler.  Again, I am not as familiar with the 
	adult hospitals as I am with the children's hospitals 
	graduate medical education program, and I don't feel--
	Mr. Burgess.  Do you think there is a monetary--to the 
	amount that an adult hospital would receive, as opposed 
	to a children's hospital?
	Ms. Nesseler.  Well, a children's hospital is receiving 
	money to help to adjust for the higher cost of care of 
	severely ill children.
	Mr. Burgess.  As the program is currently run, do all 
	hospitals who apply for graduate medical education 
	receive that funding?
	Ms. Nesseler.  Yes, sir.  All 61 that apply receive 
	funding.
	Mr. Burgess.  And then, is that allocation equal amongst 
	the 61, or are there other factors that enter into that?
	Ms. Nesseler.  There are other factors that enter into 
	that, the direct medical education and indirect medical 
	education.  If you look at the number of residents, the 
	FTE counts of number of residents, and you look at their 
	case mix index, and the other factors I discussed.
	Mr. Burgess.  But you don't penalize the Chairman there 
	in Georgia, because they get so much private funding.  
	Let me ask you this.  The gentlelady from California, they 
	have done a wonderful thing in California with the Medical 
	Injury Compensation Reform Act of 1975.  We have done a 
	good thing down in Texas with the so-called stacked cap 
	that we passed in September 2003.  Has liability reform in 
	these States made a difference in the money available for 
	children's hospitals?  That would go off the expense side, 
	I guess, rather than the near side, but I just can't help 
	but feel that the money spent for providing for liability 
	protection--
	Ms. Nesseler.  I understand, yes.
	Mr. Burgess.  Is there any thought to providing any of the 
	protection under the Federal Tort Claims Act for children's 
	hospitals, especially those that are funded primarily from 
	governmental sources?
	Ms. Nesseler.  I believe not at this point.
	Mr. Burgess.  Mr. Chairman, I will yield back.  You have 
	been very indulgent.
	Mr. Deal.  I thank the gentleman.  Mr. Pallone, you are 
	recognized for questions.
	Mr. Pallone.  Thank you, Mr. Chairman.
	I am getting a little upset here, from what I am hearing, 
	and I don't mean to, in any way be upset with you, but the 
	concern I have, as you know, when I did my opening statement, 
	I talked about how I feel that there is discrimination in 
	Federal programs against children.  In other words, that 
	when we do funding, or when we prioritize, seniors always 
	seem to get the short end, and I am just concerned that 
	what I am hearing now from the President's proposed changes 
	here, simply aggravate that situation even more.
	I mean, the way I see it, Ms. Nesseler, this program with 
	the children's hospitals GME, was set up because there was 
	a feeling that these children's hospitals weren't getting 
	enough money, because they didn't have the Medicare 
	patients, since they didn't have a large senior caseload 
	through Medicare.
	Ms. Nesseler.  That is correct.
	Mr. Pallone.  That we needed to do something to make up 
	for it.  Well, if you then say okay, this is not a 
	priority for us any more, and we are just going to help 
	those hospitals that are in crisis because they have a 
	large number of uninsured or whatever, it just seems to 
	me you are magnifying that problem that I am citing, in 
	terms of a shortfall for children and children's hospitals, 
	all the more.  I mean, what are the Administration's 
	priorities?  I mean, would you advocate doing the same thing 
	for adult hospitals?  Would you say, okay, let us do this 
	for adult hospitals.  Let us just provide funding for 
	crisis hospitals?  I mean, how can they justify doing this 
	for children's hospitals, knowing very well that this 
	program was set up because of a disparity?
	Ms. Nesseler.  That is correct.  The program was for the 
	disparity, and we do believe, though, that $99 million 
	will help with that disparity gap, and we do believe that.  
	The CMS funding for the adult hospitals, I don't have that 
	program under my purview, so I can't comment on if I 
	believe that should be cut or not, sir.
	Mr. Pallone.  So, what has been changed?  In other words, 
	what has changed?  We know that this program was set up 
	because of the disparity.  You admit that the disparity 
	existed.  That is why we set up this--
	Ms. Nesseler.  Yes, sir.
	Mr. Pallone.  What has changed?  I don't see, I am sorry.  
	I don't see the Administration proposing this for adult 
	hospitals, so why has this situation changed now?  I mean, 
	what is your counterargument to the fact that--and 
	essentially, I see this change as making the disparity 
	even worse between children's hospitals and adult hospitals.
	Ms. Nesseler.  Sir, we are targeting the limited amount of 
	Federal dollars that there are, and we are targeting that 
	to our hospitals with the greatest financial need that 
	treat the most uncompensated care patients, to reach the 
	best outcomes.
	Mr. Pallone.  But I mean, that is not happening with the 
	adult hospitals that are linked to Medicare in their 
	funding formula.  So, wouldn't you have to conclude 
	that this Administration is, again, aggravating this 
	disparity for children?
	Ms. Nesseler.  Sir, I don't run the CMS program.  And I 
	don't--
	Mr. Pallone.  Well, I mean, I can say from what I know--
	Ms. Nesseler.  --know about adult healthcare.
	Mr. Pallone.  --that that is not happening with the adult 
	hospitals.  We don't have that similar type of proposal here 
	in front of us.  Our committee deals with adult hospitals.  
	That is not the case.  So, it just seems to me that this is 
	just aggravating this disparity, making it worse, and making 
	it easier to argue that this Administration is not concerned 
	as much about children as they would be about adults.  I 
	mean, I don't know what else to say.  I don't want to be so 
	cruel, because I honestly feel that it is a problem that 
	isn't just this Administration, but exists in general.
	Mr. Brown.  Would the gentleman yield?
	Mr. Pallone.  Yeah.
	Mr. Brown.  I hear you come back to that $99 million figure.  
	The last two years, this Congress, bipartisanly, has 
	appropriated, I believe $298 and $302 for these programs.  
	Does that mean that these children's hospitals got overpaid 
	$199 million, or $201 million, or whatever the numbers are, 
	did we waste that money?  Did Children's in Akron and 
	Cleveland and Chicago and all over the country get too much 
	money for graduate medical education, that they squandered?  
	You keep coming back to that $99 million.  You have never 
	told us why it should be $99 million, other than the President 
	says it should be $99 million.  Was that money just something 
	we wasted in this Congress, the extra $200 million the last 
	two years?
	Ms. Nesseler.  We are supportive of the Children's Hospitals 
	Graduate Medical Education Program.  We are supportive of 
	children's care.  We have a limited amount of Federal dollars, 
	and we are putting those into our high priority areas, sir.
	Mr. Pallone.  Well, I mean, I understand.  I just say that I 
	think that what is happening here is increasing the disparity 
	for children's care, and again, shows discrimination against 
	children.  I think that is clear.  But I don't expect you to 
	keep commenting on it, but that is my opinion.
	Thank you.
	Mr. Deal.  I have had a unanimous consent request from Mr. Hall 
	that he be allowed to ask an additional question, and I would 
	extend that request to Ms. Capps, in the event she returns 
	before we complete this witness.  And without objection, it is 
	allowed.  Mr. Hall.
	Mr. Hall.  Ms. Nesseler, I am sorry for you, to have to come 
	over here.  And you are doing a great job.  You are carrying 
	out your duties well, and I admire you for it.  I just don't 
	agree with the things that you are having to testify to.  You 
	talk about disparity.  I live in the smallest county in Texas, 
	geographically, and we are experiencing a children's population 
	growth of about 8 percent.  We are not experiencing any 
	population growth of senior citizens or adults.  They are dying 
	off.  They are going the other way.
	I don't understand how, did you treat adult teaching hospitals 
	any different than you treated children's teaching hospitals?
	Ms. Nesseler.  Sir, I don't administer the adult hospitals, so 
	I cannot comment on that.
	Mr. Hall.  Would it surprise you that they were treated quite 
	differently?
	Ms. Nesseler.  I am not even sure if they were treated quite 
	differently, sir.
	Mr. Hall.  But it would or wouldn't surprise you if they were. 
	You don't have to answer that.  I don't think you are prepared 
	to answer that one.  I just wanted to get that into the record, 
	about the disparity position, and the population growth going 
	one way with children, and the other way with adults, and 
	children getting this treatment.  I can't believe that the 
	adults got that treatment, this whole room would be full, and 
	crowded out into the streets with adults here complaining 
	about it.  And we don't have that situation.
	Mr. Chairman, thanks for letting me ask her that one question.
	Mr. Deal.  Ms. Capps, you are recognized for additional 
	questions.
	Ms. Capps.  I will pose this, but I have a feeling that it is 
	not going to be answered, but I want to get it out anyway, 
	Ms. Nesseler.
	Ms. Nesseler.  Yes, ma'am.
	Ms. Capps.  In your testimony, you stated that the President 
	requests $99 million to support the mission of children's 
	teaching hospitals.  Children's hospitals already get 80 percent 
	of the funding that other GME hospitals receive, so I imagine 
	that percentage is going to be downsized a bit.  But this amount 
	is a great improvement over the percentage that children's 
	hospitals received before children's GME was authorized, but it 
	is still a discrepancy that is now going to be going in the 
	wrong direction.  We were hoping that we would be taking it 
	closer to parity with adults.
	Given this discrepancy, well, first of all, I guess I would 
	like to ask you if there is a rationale for why we have a 
	disparity between funding for children's medical education and 
	adult, that somehow, it is of lesser, it is easier, or lesser 
	value, I don't know, whatever you could answer to that.  But 
	given the discrepancy, I am wondering if you can give us some 
	basis on which to justify the decision to cut the funding now 
	by two thirds, and suggest that these funds would still 
	support the mission of the children's teaching hospitals.  In 
	other words, why fund it at all, when we are going to be 
	cutting so dramatically the amount that the Federal government 
	has invested?
	It is estimated that the cuts to children's GME funding would 
	lead to tremendous financial losses on the part of the teaching 
	hospitals.  I mean for those that don't have enormous amounts 
	of private funding, they are going to be looking at solvency, 
	not even solvency, but being able to stay open and available.
	And at the same time, we see the number of children losing 
	private 	insurance coverage rising, and also, we have 
	been asked in the 	very same budget to cut Medicaid 
	reimbursement.  So, it looks to me like we are pointing 
	toward a perfect storm.
	I am wondering, first of all, is there something within HRSA 
	that 	gives a rationale for a disparity, percentage-wise, 
	between funding for children's medical education and adult, 
	and from however you could do it, and secondly, is there any 
	awareness of what this could do to the presence of children's 
	hospitals throughout the country?
	Ms. Nesseler.  Ma'am, the first question, again, I have to 
	state that the adult hospital program is run through CMS, 
	not through HRSA, and I am not able to comment on that 
	program.
	Ms. Capps.  Well, let me ask is there conversation back and 
	forth between the two?
	Ms. Nesseler.  Yes, we have conversations with CMS regularly.
	Ms. Capps.  You never brought this up with anybody?
	Ms. Nesseler.  I have not personally, no.  But we can get an 
	answer for the record for you.
	Ms. Capps.  I would really appreciate that.
	Ms. Nesseler.  Yes, ma'am.
	Ms. Capps.  I think it is important that we understand, I 
	guess, the philosophy behind it, whether or not this is 
	something that is intended, or is just because it has always 
	been that way, or something like that.
	But let me ask you, because you don't just talk to CMS, you 
	must have some conservations with the teaching hospitals 
	throughout the country, as you are determining your budget 
	and your priorities.
	Ms. Nesseler.  Yes, we do.  We work closely with the children's 
	hospitals, the 61 in the United States.  We have a website.  
	We do technical assistance, conference calls, we do technical 
	assistance workshops, work closely with the children's 
	hospitals--
	Ms. Capps.  And we are going to hear from--
	Ms. Nesseler.  Yes.
	Ms. Capps.  --directly from them.
	Ms. Nesseler.  Yes, ma'am.
	Ms. Capps.  But I am wondering if you had gotten any feedback, 
	and this isn't a surprise today, what has the reaction been to 
	your office or to you, from some of the hospitals, in terms of 
	what this is going to do to their funding source?  Or their 
	solvency, their ability to provide services, and to provide 
	training?
	Ms. Nesseler.  They understand that the Department has a 
	priority list of programs that are a high priority, and they 
	know that we have a good working relationship with them, and 
	that we will all do the best that we can with our $99 million, 
	and we believe we are supportive of the program with $99 
	million, ma'am.
	
	Mr. Deal.  Thank you, Ms. Nesseler.  We appreciate your being 
	here today, and some of the areas that you alluded that you 
	would get further responses, we would encourage you to do that 
	as soon as possible.
	Ms. Nesseler.  Thank you, sir.
	Mr. Deal.  Thank you very much.
	Ms. Nesseler.  I appreciate it.
	Mr. Deal.  Now, our second panel, if you would come to the 
	table.
	Welcome, gentlemen.  We are pleased to have as our second 
	panel, Mr. Patrick Magoon, who is President and CEO of the 
	Children's Memorial Hospital in Chicago, Illinois; and 
	Mr. Bill Considine, who is President and CEO of the Akron 
	Children's Hospital in Akron, Ohio.
	We are pleased to have both of you here.  As I said earlier, 
	your written testimony has been made a part of the record, 
	and we would invite you to summarize in your opening statements.
	Mr. Magoon.

STATEMENTS OF PATRICK MAGOON, PRESIDENT AND CEO, CHILDREN'S MEMORIAL 
HOSPITAL, CHICAGO, ILLINOIS; AND WILLIAM H. CONSIDINE, PRESIDENT AND 
CEO, AKRON CHILDREN'S HOSPITAL, AKRON, OHIO

Mr. Magoon.  Thank you, sir.  Mr. Chairman and subcommittee members, 
it truly is a privilege to be here with you this morning.
	A few points about Children's Memorial Hospital.  We happen 
	to be the only full service children's hospital in the State 
	of Illinois, and have the privilege of serving about 102,000 
	individual children who come to us from every county in the 
	State of Illinois, from every area--urban, rural, and 
	suburban.  We happen to train about 92 pediatric residents, 
	about 75 fellows, and about 100 medical students at our 
	institution.
	We are home to one of five independent, freestanding research 
	centers which focus on providing research into the prevention 
	and cures for diseases of children, and we also happen to be 
	the single largest provider of pediatric Medicaid services in 
	the State of Illinois, a State which does not provide 
	Medicaid funding in support of the GME program.
	I would like to make three points about the children's 
	hospitals GME program.  First, the goal of equity.  Second, 
	is its importance in terms of the training of the next 
	generation of pediatricians and specialists for this country, 
	and the importance of its investment in all children of our 
	country.  
First, as you know, CHGME's goal is to provide equitable Federal GME 
support to independent children's hospitals.  Until GME financial 
reform is achieved, it is an interim step for our hospitals to 
receive Federal GME support comparable to what other teaching 
hospitals receive, and it enables us to make that multiyear 
commitment needed to train physicians.
	Second, it has been a huge success in bolstering our ability 
	to turn around a decline in the size of our training programs, 
	and to strengthen them, at a time of a National pediatric 
	workforce shortage.  
Third, CHGME is an essential and yet critical investment in the 
future health of every child in the United States, because the 
Nation's 60 independent children's teaching hospitals are the 
backbone of healthcare for all.
	But to start, I have to go back to the late 1990s.  
	Healthcare price competition was intense.  Children's 
	hospitals faced enormous pressure because we do everything 
	an academic medical center does, but with no Federal GME 
	support, because we care for children, not the elderly.  So 
	why should that matter?  In 1998, Medicare paid a teaching 
	hospital, on average, more than $60,000 per full-time 
	resident FTE, but paid an independent children's hospital 
	less than $400.  If there had been another major payer for 
	GME, it really wouldn't have mattered, but private payers 
	have stopped paying for the extra cost of teaching, and 
	Medicaid payment for GME, as you know, is well below cost.
	The lack of equitable Federal GME support put our hospitals 
	truly at grave risk.  By the late 1990s, children's 
	hospitals nationwide began to face serious budget shortfalls.  
	That, accompanied with the pressure mounting for the demand 
	for services for children, really has created significant 
	problems.  In the case of the Children's Memorial Hospital, 
	at that time, we were losing about $12.5 million on our 
	operating performance at a very critical time.  Our Medicaid 
	losses totaled more than $23 million.
	We took a very aggressive look at the operating performance 
	for the institution.  We reduced 400 positions, cut $25 
	million out of our operating budget, looked at every 
	opportunity for efficiencies, but chose cognitively not to 
	make a reduction in our training program because of its 
	importance to our mission to train physicians, to improve 
	research, and to really enable us to provide clinical care 
	to our population.
	In 1998 and in 1999, Children's Hospital went to Congress.  
	We told our story.  Few realized that independent children's 
	teaching hospitals were basically left out in the cold when 
	it came to Federal GME support.  They clearly understood the 
	issue of equity.  Congress responded overwhelmingly with 
	bipartisan support that led to CHGME's enactment in 1999 
	and reauthorization in 2000.  We are deeply grateful to this 
	subcommittee and the full committee for your leadership.
	Today, children's hospitals GME provides, on average, about 
	80 percent of the Federal GME support other teaching 
	hospitals receive through Medicare.  It has made an enormous 
	difference.  Over the past five years, Children's Hospital 
	has increased our training of pediatricians by 20 percent, 
	and our pediatric specialists by 47 percent.  Without this 
	growth, the number of pediatricians would have continued to 
	decline, and our training accounted for more than 60 percent 
	of all new pediatric specialists, many who are in very, very 
	short supply.
	There is no better proof of CHGME's importance to all of 
	pediatrics than the testimony of pediatric department chairs 
	of medical schools.  This spring, 80 pediatric department 
	chairs asked the committee to continue CHGME.  More than half 
	have hospitals that receive no CHGME, but they know that 
	independent children's hospitals are indispensable components 
	of the training program.  Why?  Why did they take this position?  
	We are only 1 percent of all of the hospitals in the Nation, 
	but we train nearly 30 percent of all of the pediatricians, and 
	half of the pediatric sub-specialists.  We provide half of all 
	specialty care for the sickest children, such as cancer, birth 
	defects, and we are clearly the safety net to the poorest in 
	our community.
	In short, we are only one percent, but we do what touches 
	children's lives each and every day.  We train those 
	pediatricians, we help with breakthroughs in medicine, and 
	our 
	researchers do everything they can to help discover the 
	precursors to adult disease.  That is why CHGME is an 
	investment in the healthcare of all of our citizens.  It is 
	an investment in our teaching which translates into return 
	on investment with respect to improved clinical care, 
	research, and the ability to serve children.
	We are grateful for the overwhelming support of the members 
	of the House that they have provided for this program, and 
	we respectfully ask that you continue this goal of equity, 
	its success for expanding the pediatric workforce, and its 
	investment in every child in our Nation.
	Thank you very much, sir.
	[The prepared statement of Patrick Magoon follows:]

Prepared Statement of Patrick Magoon, President and CEO, Children's 
Memorial Hospital, Chicago, IL

MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE, IT IS AN HONOR FOR ME 
TO BE HERE TODAY.  I AM PATRICK MAGOON, PRESIDENT AND CEO OF CHILDREN'S 
MEMORIAL HOSPITAL IN CHICAGO, ILLINOIS.   THANK YOU FOR THE OPPORTUNITY 
TO TESTIFY ON BEHALF OF THE FEDERAL CHILDREN'S HOSPITALS GRADUATE 
MEDICAL EDUCATION (CHGME) PROGRAM.
CHILDREN'S MEMORIAL WAS FOUNDED IN 1882 BY JULIA FOSTER PORTER WHO LOST 
HER SON TO ILLNESS. THE HOSPITAL BEGAN AS AN EIGHT BED COTTAGE AND HAS 
EVOLVED INTO A MAJOR MEDICAL CENTER THAT TODAY OWNS AND OPERATES 270 
LICENSED BEDS AS WELL AS A FULL RANGE OF INPATIENT AND OUTPATIENT CARE 
AND  RELATED ANCILLARY SERVICES.  CHILDREN'S MEMORIAL IS ILLINOIS' ONLY 
INDEPENDENT, ACUTE CARE HOSPITAL DEDICATED EXCLUSIVLEY TO CHILDREN.
BECAUSE OF THE DEPTH AND BREADTH OF SERVICES WE OFFER, WE HAVE THE 
PRIVILEGE OF SERVING CHILDREN FROM EVERY COUNTY IN THE STATE.  FOR 
EXAMPLE, FROM DURING FY 2002-2005, WE HAD 46,658 PATIENT ENCOUNTERS 
FROM CONGRESSMAN RUSH'S CONGRESSIONAL DISTRICT LOCATED ON THE SOUTH 
SIDE OF CHICAGO AND 384 PATIENT ENCOUNTERS WITH CHILDREN FROM 
CONGRESSMAN SHIMKUS' DISTRICT LOCATED DOWNSTATE.  
OUR HOSPITAL TRAINS MORE DOCTORS FOR CHILDREN, PROVIDES MORE HOSPITAL 
CARE FOR CHILDREN, CONDUCTS MORE RESEARCH FOR CHILDREN, AND SERVES 
MORE MEDICAID PATIENTS THAN ANY OTHER HOSPITAL IN ILLINOIS.  MEDICAID 
REPRESENTS 48% OF OUR INPATIENT CARE. 
I WANT TO MAKE THREE POINTS ABOUT CHGME'S GOAL OF EQUITY, ITS SUCCESS 
FOR PEDIATRIC TRAINING, AND ITS INVESTMENT IN THE HEALTH OF ALL 
CHILDREN.
FIRST, CHGME'S GOAL IS TO PROVIDE EQUITABLE FEDERAL GME SUPPORT TO 
INDEPENDENT CHILDREN'S HOSPITALS.  UNTIL COMPREHENSIVE GME FINANCING 
REFORM IS ACHIEVED, CHGME IS AN INTERIM STEP FOR CHILDREN'S HOSPITALS 
TO RECEIVE NO MORE BUT NO LESS THAN THE FEDERAL GME SUPPORT THAT ALL 
OTHER TEACHING HOSPITALS HAVE RECEIVED FOR DECADES.
SECOND, CHGME IS A SUCCESS IN BOOSTING OUR ABILITY TO BOTH TURN AROUND 
A DECLINE IN THE SIZE OF OUR TRAINING PROGRAMS AND STRENGTHEN THEM AT 
A TIME OF NATIONAL PEDIATRIC WORKFORCE SHORTAGES - WITHOUT HAVING TO 
SACRIFICE CLINICAL CARE OR RESEARCH.
THIRD, CHGME IS AN INVESTMENT IN THE FUTURE HEALTH OF EVERY CHILD IN 
THE U.S. BECAUSE THE NATION'S 60 INDEPENDENT CHILDREN'S TEACHING 
HOSPITALS ARE THE BACKBONE OF HEALTH CARE FOR ALL CHILDREN.

BUT TO START, I HAVE TO GO BACK TO THE LATE 1990S.  PRICE COMPETITION 
THEN, AS NOW, WAS INTENSE IN THE HEALTH CARE MARKETPLACE.   INDEPENDENT 
CHILDREN'S HOSPITALS FACED ENORMOUS PRESSURES BECAUSE WE DO EVERYTING 
ANY ACADEMIC MEDICAL CENTER DOES - BUT WITH NO FEDERAL GME SUPPORT, 
BECAUSE WE CARED FOR VIRTUALLY NO MEDICARE PATIENTS.
WHY SHOULD THAT MATTER?  IN 1998, MEDICARE PAID A TEACHING HOSPITAL, 
ON AVERAGE MORE THAN $60,000 PER FULL TIME EQUIVALENT RESIDENT, DIRECT 
AND INDIRECT MEDICAL EDUCATION FUNDING COMBINED.  BUT, IT PAID AN 
INDEPENDENT CHILDREN'S HOSPITAL LESS THAN $400 PER RESIDENT.  
IF THERE HAD BEEN OTHER MAJOR PAYERS OF GME FOR CHILDREN'S HOSPITALS, 
IT WOULD NOT HAVE MATTERED.  BUT PRIVATE PAYERS STOPPED PAYING THE 
EXTRA COSTS OF TEACHING AND MEDICAID PAYMENT FOR GME IS WELL BELOW ITS 
COST.  THE LACK OF EQUITABLE FEDERAL GME SUPPORT PUT OUR HOSPITALS AND 
ALL OF OUR MISSIONS - CLINICAL CARE, TEACHING, AND RESEARCH - AT GRAVE 
RISK.
IN 1999, RALPH MULLER WAS THE FORMER CEO OF THE UNIVERSITY OF CHILCAGO 
HOSPITALS, WHICH HAS A NON-INDEPENDENT CHILDREN'S HOSPITAL THAT 
RECEIVES MEDICARE GME.  IN EXPLAINING HIS SUPPORT FOR CHGME, HE ONCE 
SAID: �I DON'T KNOW HOW CHILDREN'S MEMORIAL CAN OPERATE WITHOUT 
MEDICARE GME SUPPORT.  OUR HOSPITAL COULD NOT.�
BY THE LATE 1990S, CHILDREN'S HOSPITALS NATIONWIDE FACED BUDGET 
SHORTFALLS, PRESSURES TO EXPAND AND MOUNTING DEMAND FOR OUR SERVICES.  
CONSIDER MY OWN HOSPITAL.  CHILDREN'S MEMORIAL HAD MASSIVE BUDGET 
LOSSES.  IN FISCAL YEAR 1997, WE HAD A $12.5 MILLION OPERATING LOSS. 
CHILDREN'S MEMORIAL'S MEDICAID OUTPTIENT LOSSES AGAINST OUR COSTS 
AMOUNTED TO $23 MILLION.  
EVERY PROGRAM WITHOUT VIABLE INCOME - INCLUDING GME - WAS UNDER 
INTENSE PRESSURE TO CUT BACK.  WE MADE PAINFUL DECISIONS SUCH AS 
THE ELIMINATION OF 400 JOBS.  WE STREAMLINED OUR OPERATIONS AND 
CUT ALMOST $25 MILLION IN COSTS.  BUT IF WE CUT TRAINING, IT 
WOULD HAVE HAD SEISMIC RAMIFICATIONS FOR OUR CLINICAL OPERATIONS 
AND RESEARCH ENTERPRISE, WHICH ARE INTEGRATED WITH OUR ACADEMIC 
PROGRAM. 
THE IMPORTANCE OF PEDIATRIC RESEARCH CANNOT BE UNDERESTIMATED. 
THE ENTERPRISE OF SCIENTIFIC DISCOVERY IN HEALTH CARE DEPENDS ON 
THE STRONG ACADEMIC PROGRAMS OF TEACHING HOSPITALS.  BY COMBINING 
RESEARCH AND TEACHING IN A SINGLE CLINICAL SETTING, TEACHING 
HOSPITALS COMBINE THE TWO CRITICAL INGREDIENTS FOR SUCCESSFUL 
SCIENTIFIC DISCOVERY IN MEDICINE - SCIENTIFIC BREAKTHROUGHS AND 
RAPID TRANSLATIONS OF THEM INTO PATIENT CARE.  
THE TEACHING ENVIRONMENT ATTRACTS THE ACADEMICIANS DEVOTED TO 
RESEARCH AND DRAWS THE VOLUME AND SPECTRUM OF CASES UPON WHICH 
CLINICAL RESEARCH RELIES. THE TEACHING ENVIRONMENT CREATES THE 
INTELLECTUAL ATMOSPHERE THAT TESTS THE CONVENTIONAL WISDOM OF 
DAY-TO-DAY HEALTH CARE AND FOSTERS QUESTIONS THAT LEAD TO 
SCIENTIFIC BREAKTHROUGHS.
SIMPLY PUT, INDEPENDENT CHILDREN'S TEACHING HOSPITALS ARE PROOF 
OF THE IMPORTANCE OF ACADEMIC MEDICINE TO SCIENTIFIC DISCOVERY 
ESSENTIAL TO IMPROVING CHILDREN'S HEALTH CARE.  
SCIENTIFIC ADVANCES OF CHILDREN'S TEACHING HOSPITALS HAVE HELPED 
CHILDREN SURVIVE ONCE FATAL DISEASES SUCH AS POLIO, TO GROW AND 
THRIVE WITH ONCE CRIPPLING DISABILITIES SUCH AS CEREBRAL PALSY, 
AND TO BECOME ECONOMICALLY SELF-SUPPORTING ADULTS WITH CONDITIONS 
SUCH AS JUVENILE DIABETES AND SPINA BIFIDA.  THIS IS WHY OUR 
HOSPITALS ARE CONSISTENTLY AMONG THE LEADING RECIPIENTS OF NIH 
GRANTS FOR BIOMEDICAL RESEARCH.
CHGME FUNDING IS EXTREMELY IMPORTANT TO THE ABILITY OF CHILDREN'S 
TEACHING HOSPITALS, INCLUDING OURS, TO FULFILL OUR MISSION OF 
TRAINING THE NEXT GENERATION OF PHYSICIANS SPECIALIZED IN THE CARE 
OF CHILDREN, IN ADDITION TO THE MISSIONS OF CLINICAL CARE, RESEARCH 
AND ADVOCACY FOR CHILDREN.  IF WE CRIPPLE OUR TRAINING PROGRAM, WE 
CRIPPLE OUR RESEARCH PROGRAM.
IN 1998 AND 1999, CHILDREN'S HOSPITALS WENT TO CONGRESS.  WE TOLD 
OUR STORY.  FEW REALIZED THAT INDEPENDENT CHILDREN'S TEACHING 
HOSPITALS WERE BASICALLY LEFT OUT IN THE COLD WHEN IT CAME TO 
FEDERAL GME SUPPORT.
CONGRESS RESPONDED OVERWHELMINGLY WITH BIPARTISAN SUPPORT THAT LED 
TO THE ENACTMENT OF CHGME IN 1999 AND ITS REAUTHORIZATION IN 2000.   
WE ARE DEEPLY GRATEFUL TO THIS SUBCOMIMTTEE AND THE FULL COMMITTEE 
FOR THE LEADERSHIP YOU PROVIDED.  TODAY, CHGME PROVIDES, ON AVERAGE, 
TO OUR HOSPITALS ABOUT 80% OF THE FEDERAL GME SUPPORT OTHER TEACHING 
HOSPITALS RECEIVE THROUGH MEDICARE.  IT HAS MADE AN ENOMROUS 
DIFFERENCE FOR OUR HOSPITALS AND FOR OUR TRAINING PROGRAMS.
OVER THE PAST FIVE YEARS, INDEPENDENT CHILDREN'S TEACHING HOSPITALS 
HAVE INCREASED OUR TRAINING OF PEDIATRICIANS BY 20% AND OUR TRAINING 
OF PEDIATRIC SPECIALISTS BY 47%.  WITHOUT THIS GROWTH THE NUMBER OF 
PEDIATRICIANS IN THIS COUNTRY WOULD HAVE CONTINUED THEIR DECLINE.  
OUR TRAINING ACCOUNTED FOR MORE THAN 60 PERCENT OF ALL NEW 
PEDIATRIC SPECIALISTS - SPECIALISTS SUCH AS GASTROENTEROLOGISTS THAT 
ARE IN SUCH SHORT SUPPLY IT CAN TAKE A YEAR OR MORE TO FILL 
VACANCIES.
CHILDREN'S MEMORIAL IS ONE OF THE MAJOR PEDIATRIC TEACHING HOSPITALS 
IN THE COUNTRY.  WE ARE AFFILIATED WITH NORTHWESERN UNIVERSITY'S 
FEINBERG SCHOOL OF MEDICINE. OUR RESIDENCY PROGRAM IS CONSISTENTLY 
ONE OF THE MOST SOUGHT AFTER NATIONALLY. IN 2004-2005, FOR EXAMPLE, 
WE RECEIVED MORE THAN 820 APPLICATIONS FOR 31 OPENINGS.  
BETWEEN 6 SPECIALTIES AND 26 SUBSPECIALTIES, EACH YEAR WE TRAIN 
ABOUT 185 PHYSICIANS, ALMOST HALF -- CURRENTLY 84 -- ARE PEDATRIC 
RESIDENTS. THE REMAINDER ARE FELLOWS IN SUCH AREAS AS INFECTIOUS 
DISEASE, NEONATALOGY, CARDIOLOGY AND OTHER PEDIATRIC SUBSPECIALTIES.  
MORE THAN 200 MEDICAL STUDENTS ROTATE THROUGH THE HOSPITAL FOR 
CLINICAL CLERKSHIPS.  IN FY 2005, WE TRAINED 200 FULL-TIME EQUIVALENT 
RESIDENTS AT OUR INSTITUTION.  THIS REPRESENTS A GROWTH OF 27% 
(42.7 ADDITIONAL RESIDENTS) IN OUR TRAINING PROGRAM SINCE FY 2000. 
THE CHGME PROGRAM HAS ALLOWED US TO IMPLEMENT CUTTING EDGE CLINICAL 
PROGRAMS.  FOR EXAMPLE, WE HAVE DEVELOPED A SMALL BOWEL AND SHORT 
GUT TRANSPLANT PROGRAM.  WE CANNOT OPERATE THESE TYPES OF INTENSIVE 
CLINICAL PROGRAMS WITHOUT OUR REISDENCY TRAINING PROGAM.
THERE IS NO BETTER PROOF OF CHGME'S IMPORTANCE TO THE NATION'S 
PEDIATRIC WORKFORCE THAN THE TESTIMONY OF PEDIATRIC DEPARTMENTS OF 
MEDICAL SCHOOLS, MOST OF WHICH DO NOT HAVE AN INDEPENDENT CHILDREN'S 
HOSPITAL.  THIS SPRING, 80 PEDIATRIC CHAIRS ASKED THE COMMITTEE TO 
CONTINUE CHGME.  MORE THAN HALF REPRESENT HOSPITALS THAT RECEIVE NO 
CHGME.  THEY KNOW INDEPENDENT CHILDREN'S TEACHING HOSPITALS  ARE 
INDISPENSABLE.
WHY?  WE ARE ONLY 1% OF ALL HOSPITALS.  BUT, WE TRAIN 30% OF ALL 
PEDIATRICIANS, HALF OF ALL PEDIATRIC SPECIALISTS, AND MOST PEDIATRIC 
RESEARCHERS.  WE PROVIDE HALF OF ALL SPECIALTY CARE FOR THE SICKEST 
CHILDREN - WITH CANCER, BIRTH DEFECTS, TRAUMA.  WE ARE THE SAFETY 
NET TO THE POOREST CHILDREN.  WE HOUSE THE ENGINES OF PEDIATRIC 
RESEARCH.
IN SHORT, INDEPENDENT CHILDREN'S TEACHING HOSPITALS ARE ESSENTIAL TO 
HEALTH CARE FOR EVERY CHILD IN THIS COUNTRY.  WE'RE ONLY 1% BUT WHAT 
WE DO TOUCHES EVERY CHILD'S LIFE - BY CARE WE GIVE, BY PHYSICIANS WE 
TRAIN, BY BREAKTHROUGHS IN HEALTH CARE OUR RESEARCH DISCOVERS.
THAT'S WHY CHGME IS AN INVESTMENT IN THE HEALTH OF ALL CHILDREN.   
IT IS AN INVESTMENT IN OUR TEACHING, WHICH TRANSLATES INTO AN 
INVESTMENT IN OUR CLINICAL CARE, OUR RESEARCH, AND OUR ABILITY TO 
SERVE ALL CHILDREN.
WE ARE GRATEFUL FOR THE OVERWHEMLING SUPPORT THAT THE MEMBERS OF 
THE HOUSE HAVE PROVIDED FOR THE CHGME PROGORAM AND FOR THE SUPPORT 
THAT OUR COLLEAGUES IN THE PEDIATRIC AND HOSPITAL COMMUNITIES HAVE 
SHOWN, INCLUDING THE AMERCIAN ACADEMY OF PEDIATRICS, ASSOCIATION OF 
MEDICAL SCHOOL PEDIATRIC DEPARTMENT CHAIRS, ASSOCIATION OF AMERICAN 
MEDICAL COLLEGES, AND AMERICAN HOSPITAL ASSOCIATION.
WE RESPECTFULLY ASK YOU TO CONTINUE CHGME'S GOAL OF EQUITY, ITS 
SUCCESS FOR THE PEDIATRIC WORFORCE, AND ITS INVESTMENT IN THE HEALTH 
CARE OF EVERY CHILD AND EVERY GRANDCHILD.  PLEASE REAUTHORIZE CHGME.

One Page Summary
Testimony of Patrick Magoon
Children's Memorial Hospital
May 9, 2006

I want to make three points about CHGME.

First, CHGME's goal is to provide equitable federal GME support to 
independent children's hospitals.  Until comprehensive GME financing 
reform is achieved, CHGME is an interim step for children's hospitals 
to receive no more but no less than the federal GME support that all 
other teaching hospitals have received for decades.

In 1998, the federal government provided independent children's 
hospitals with about 0.5% of the level of federal GME support that it 
provided to all other teaching hospitals through Medicare.  Today, 
thanks to CHGME, it provides about 80%, and it makes it possible for us 
to make the multi-year commitment we need to train residents.

Second, CHGME is a success in boosting our ability to both turn around 
a decline in the size of our training programs and strengthen them at 
a time of national pediatric workforce shortages - without having to 
sacrifice clinical care or research.  

Thanks to CHGME, independent children's hospitals have increased the 
number of pediatric residents we train by 20 percent and the number of 
pediatric specialty residents by more than 40%.  Without the growth in 
our training, the total number of pediatric residents nationwide would 
have declined at a time of national shortages of pediatric specialists.

Third, CHGME is an investment in the future health of every child in 
the U.S. because the nation's 60 independent children's teaching 
hospitals are the backbone of health care for all children.  

Through our clinical care, research, and training, children's hospitals 
touch the lives of all children.  CHGME funding is fundamental to our 
ability to maintain and strengthen our training programs, which in turn 
are fundamental to our clinical and research missions.

Children's Memorial is a perfect illustration.  In the 1990s, we were 
losing money, cutting staff, and facing pressures to curtail training.  
Today, thanks to CHGME, we gave been able to increase our training by 
more than 25%, implement cutting edge clinical programs, and undertake 
new research.

	Mr. Deal.  Thank you.  Mr. Considine.
Mr. Considine.  Thank you, Mr. Chairman, and thank you, Mr. Brown, 
and to all the committee members.  My name is Bill Considine, and I 
have had the privilege of serving as the President and Chief Executive 
Officer of Akron Children's Hospital for 27 years, and it has truly 
blessed my life.  I really appreciate being here today, and being 
given the opportunity to share with you the importance of the CHGME 
program, not only on children's healthcare, but very definitely, on 
the children's hospitals of our country.
	Akron Children's Hospital has been part of our community for 
	116 years, and during that time, has developed a very rich 
	heritage and tradition.  Last year alone, we served patients 
	from all the 51 counties in the State of Ohio, 22 States, as 
	well as other counties.  In total, we saw 433,000 children 
	through all our programs, and 210,000 of those children were 
	served in our primary care offices in the rural areas of our 
	region.
	We believe that our promise is to treat every child as if 
	that child was our own, and to make sure our doors stay open 
	to all children, regardless of their ability to pay.  We are 
	the largest pediatric healthcare provider in our region, and 
	have relationships with literally dozens of other adult 
	hospitals.  We know that it is our responsibility to be child 
	advocates and to speak up in public policy arenas such as these 
	on the needs of our children, and when you talk about medical 
	education, it very definitely is a key priority here in our 
	country, as well as our region.
	When you talk about children's hospitals, too, and you look 
	at the five components of our mission, which are family-
	centered patient care, training and education, research, 
	community service, and child advocacy, you can see that 
	training and education has been part of who we are for 
	literally over a century.
	The first medical resident in the city of Akron was a 
	pediatric resident at Children's Hospital in the early 1900s, 
	and the first nursing student in the city of Akron was a 
	nursing student in 1905, at Akron Children's.  We are one of 
	the founders of the Northeastern Ohio University College of 
	Medicine, very proud of that relationship, and we are the 
	only pediatric provider there.
	When we look at the issue of graduate medical education, I 
	can assure you my 27 years has shown me the ups and downs of 
	dealing with the vagaries relative to payment for medical 
	education.  When we talk about the medical education and the 
	graduate medical education fund that has been put together 
	for children's hospitals with our trustees, our medical staff, 
	parents, and the community leaders that we are involved with, 
	we discuss four items.  One is equity.  The whole premise of 
	this program, back in 1999, was to bring equity to the 
	responsibilities that children's hospitals have, as compared 
	to the adult hospitals.
	Our partners in the medical school, as Mr. Magoon has already 
	pointed out, benefited from Medicare GME funding coming to
	them.  In our town, they were receiving approximately $65,000 
	per resident with the Medicare GME program.  Since we couldn't
	qualify for that, we were receiving under $400 per resident, 
	and then, in 1999, with some of the other cutbacks to 
	Medicaid in our State, that became a huge challenge for us 
	to maintain our promise to our community to be involved in 
	medical education.  So, equity is what this program is about, 
	and the CHGME money has brought us up to about $55,000 a 
	resident, still not at that $65,000 level, but closer, and 
	I think we have heard the figure 80 percent.
	The other component of the program we talk about is need.  
	There definitely is a need out there for the training of 
	pediatricians and sub-specialists in medicine.  Prior to 
	this program, we had to curtail our training initiatives 
	because of funding issues, and we were capping the number of 
	residents we trained at about 50 a year.  With the money that 
	has come to us through this graduate medical education funding, 
	we have been able to increase that to 87 full-time equivalents 
	per year, and we also have 380 residents from adult hospitals 
	rotating to us to get their pediatric experience.  
	Consequently, we have been able to reduce a decline, or turn 
	around a decline of 13 percent in young people going into the 
	pediatric sub-specialties and residencies to where we have 
	seen an 18 percent increase in that.  That is good return on 
	the investment.
	The other need we have is to be a financially viable 
	organization to bondholders and others that come to us for 
	care, and prior to this money coming to us, we were facing a 
	deficit on our margin.  In 2005, our margin at our hospital 
	was 0.4 percent.  If this graduate medical education money 
	would go away, we would have a negative margin, operating on 
	a margin of 1.1 percent, and this has helped us stabilize 
	that, and answer the tough questions that we need to answer 
	about being a viable institution that serves those 433,000 
	children.
	The other component we talk about with our trustees, is this 
	program successful?  And I would suggest, and respectfully to 
	this group, it has been very successful.  The numbers I have 
	shared with you, in terms of what we have been able to do, in 
	terms of training more and more residents, is really 
	remarkable, and of the residents we train, 75 percent of them 
	do stay in Ohio, and 50 percent of them go into primary care, 
	pediatrics, and are placed in rural areas that really do 
	need service directed to those children.  Enormous success.
	The other thing we talk about is value, and we are always 
	looking for return on the investment, and again, I would 
	respectfully say there has been enormous return on this 
	investment.  We have talked about the Medicare GME program, 
	and know that last year, $8 billion was directed to 1,000 
	teaching hospitals to train residents and adult physicians.  
	This CHGME program last year generated $300 million, not 
	$300 billion, but $300 million, compared to $8 billion, and 
	it went to the 61 hospitals, and we trained 5,000 residents.  
	There is a good comparison there, and you can see the return
	on that $300 million is greater than that return on that 
	$8 billion.
	I hate to compare ourselves with the adult hospital, but 
	what we are really trying to get to is a level playing field 
	with our colleagues that have the same kind of mission 
	statement that we do.
	Thank you, Mr. Chairman, for the time.  As you can see, I am 
	passionate about this program.
	[The prepared statement of Bill Considine follows:]

Prepared Statement of Bill Considine, President and CEO, Akron 
Children's Hospital, Akron, OH

Mr. Chairman, Congressman Brown, and members of the subcommittee, I am 
Bill Considine, president of Akron Children's Hospital for more than 
25 years.
   	Thank you for the opportunity to testify on the federal 
   	Children's Hospitals Graduate Medical Education (CHGME) 
   	Program.   Akron Children's is one of the six hospitals in 
   	Ohio and 60 nationwide that qualify for CHGME.  We very much 
   	appreciate the leadership of the Energy and Commerce 
   	Committee and so many members of this Subcommittee  in 
   	authorizing the program in 1999 and reauthorizing it for 
   	five years in 2000.
CHGME strives to give the nation's 60 independent children's 
teaching hospitals a level of federal GME support comparable to 
what all other teaching hospitals receive through Medicare.  CHGME 
has been a success for the children of Akron, the children of Ohio, 
and the children in every state in the country.  It has enabled our 
hospitals to sustain and strengthen our training programs, which are 
a vital part of our mission and the care we provide.
Akron Children's Hospital is a good illustration of the range of 
services an independent children's hospital provides.  
We provide nearly 43,700 days of inpatient care, as well as 433,000 
outpatient visits in the hospital and in 14 neighborhood clinics and 
other facilities throughout the region.  They include 205,000 
primary care visits, 108,000 specialty care visits, 62,000 emergency 
care visits, and other care visits.   We serve children from 51 Ohio 
counties and 22 states each year.   We devote 44% of our patient care 
to children under Medicaid and that proportion is only growing.  
Akron Children's is a major center of excellence for children with 
cancer, heart defects and trauma.  As a consequence, the severity of 
care our hospital provides is nearly 70% greater than it is for 
community hospitals nationwide.  We also conduct research in areas 
such as cancer, heart defects, emergency care, neonatal care, 
emergency medicine, infectious disease, and more.
Akron Children's has a long-standing commitment to training 
physicians.  In the 1920s, our hospital was the first of any 
hospital in Akron to train physicians.  Today we play a unique role 
in physician training in our region.  We are part of an academic 
medical enterprise that includes a medical school with three 
university affiliations and eight teaching hospitals.  Akron 
Children's is the only major pediatric institution.
In addition to training more than 70 pediatric and pediatric 
specialty residents annually, our hospital provides training to more 
than 380 residents in other areas - such as internists, family 
practice physicians, surgeons.  They rotate from the other teaching 
hospitals through our hospital for short periods of time to receive 
exposure to pediatrics.  
More than 75% of all of the pediatricians and pediatric specialists 
we train go on to practice in Ohio.  More than half of the 
pediatricians we train provide care as part of our community based 
primary care network after graduation.   And most of the pediatric 
subspecialists in our community are trained at the hospital.  Our 
training program benefits not only our patients but all children.
In the late 1990s and early years of this decade, as CHGME was 
just starting, Akron Children's had major financial challenges.   
We faced negative operating margins, pressures to curtail our 
training, and pressures to curtail services for which little or no 
income was available.  One example was our regional poison control, 
which we had to close for lack of funds.  Another example was the 
closure of our �continuity� clinic which moved patients from the 
hospital to primary care clinics in the community.
While our adult teaching partners received more than $60,000 of 
dollars in Medicare GME support per resident, we received only a 
few hundred dollars per resident, with no comparable, alternative 
source of GME support.   We were dedicated to our historic mission 
of physician education in our region, but it was becoming harder 
and harder to continue to shoulder our responsibility for training 
about 50 FTE residents at that time, much less strengthen that 
commitment to meet growing need.
Today, the $4 million in annual CHGME funding that Akron Children's 
receives has made a world of difference.   We have increased the 
total number of FTE residents we train by 21%, the number pediatric 
FTE residents we train by 20%, and the number of pediatric 
specialists we train by much more since 2000.  This year, we will 
train more than 87 FTE residents, including 71 pediatric residents 
and fellows with specialty programs in clinical areas such as 
emergency care, radiology, pathology, and sports medicine.   
We have opened new training programs in pediatric oncology, 
pediatric palliative care, and child psychiatry.  We are applying 
for approval to open programs in pediatric general surgery and burn 
care.  Those new programs and the residents we train will help us 
to respond to serious physician shortages.  For example, mental 
health care for children has been in a crisis in our region for 
many years.   In the face of overwhelming need, Akron Children's 
itself was forced to scale back its inpatient psychiatric service.  
Thanks to CHGME funding, we are now able to train pediatric 
psychiatrists with a good chance they will practice in our region.  
That will help us to develop new services and meet the tremendous 
unmet need that exists.
We have been able to improve the quality of the training we 
provide in a number of ways.  By employing hospitalists - full 
time, senior physicians on staff in the hospital -- we enhance 
the training experience of the residents.  By being able to 
increase the physicians we employ, it makes it possible for faculty 
to devote more time to research, which enriches the research 
experience of our residents.  Research is a growing part of our 
hospital's mission, and future pediatric researchers come 
primarily from independent children's hospitals.  
With the resources CHGME has given us, we have been able to 
introduce new electronic technology - hand-held computers to aid 
residents in treating complex patients.   We have expanded training
to include new areas of focus on special dimensions of pediatric 
care, such as palliative care, which is so important with the growing 
numbers of children with cancer we treat.
And we have been able to do all of this without sacrificing our 
clinical care or research efforts.  In fact, with CHGME, we have been
able to strengthen both, as CHGME helped offset losses from the 
uncovered costs of teaching.
If there were no CHGME funding tomorrow, Akron Children's would find 
its operating margins in the red and its financial health at risk.  
Our ability to open new fellowships in surgery and burn care, which 
have been recommended by the American College of Surgeons, as well as 
our ability to continue to provide pediatric rotational training to 
hundreds of non-pediatric physicians would be in jeopardy.  And our 
loss of nearly $4 million would, once again, put pressure to cut back 
on vital services for which there is little or no income, such as the 
physicians we now pay for to deliver care to low-income children at 
a community health center.  
Our experience is reflected among the 60 independent children's 
hospitals.  In the late 1990s, many faced financial challenges, which 
Moody's Investor Services and Standard and Poor's attributed in part 
to the absence of public funding for our education programs.   Many 
of our hospitals had begun to curtail our training, limit services 
that require hospital subsidy or not undertake needed service 
expansions.
Since CHGME's enactment in 1999 and full funding for the first time 
in 2002, the picture has changed significantly.   Collectively, we 
have increased the numbers of pediatric residents trained, the numbers 
of pediatric specialists trained, and the numbers, and the number of 
pediatric subspecialty training programs.  Without our growth in 
training due to CHGME, the number of pediatric residents trained 
would have continued to decline.
 	Equitable GME support through CHGME helped offset our losses 
 	on teaching and that has helped us weather many challenges -- 
 	children's growing loss of private insurance, rising numbers 
 	of children covered by Medicaid for which payment is well 
 	below cost, mounting costs for information technology, and 
 	the ongoing capital needs of resource and service intensive 
 	institutions like ours.
In conclusion, CHGME restores equitable federal GME support and 
fair competition to children's hospitals.   CHGME benefits all 
children.
There is strong, bipartisan support for CHGME.  Please continue the 
strong, successful CHGME program that exists today by reauthorizing 
it as quickly as possible.

One Page Summary

Testimony by WilliamConsidine
Akron Children's Hospital


Greetings

Appreciation for the broad, bipartisan support for enactment and 
reauthorization of CHGME from Congress overall and the leadership 
of full committee and subcommittee.
Authorization in 1999
Reauthorization for five years in 2000

Akron Children's Hospital's commitment to training pediatric and 
specialty residents is historic.
The first teaching hospital in Akron
The single, major children's teaching hospital in our region, 
caring for children from 50 counties in Ohio and 22 states
Today, train more than 80 FTE residents, including pediatric 
residents and other residents receiving pediatric rotations

History of CHGME
Began in the late 1990's when Akron Children's faced financial 
shortfalls: pressure to close poison control center, continuity 
clinic; ability to train only 50 residents with pressure to cut

Financial impact of CHGME on Akron Children's
Offset the financial burden of training residents
Increased pediatric resident trained by 20%
Employment of new specialty physicians
Introduction of electronic technology

A future without CHGME
Financial losses
Curtailment of training
Limiting services

A request for reauthorization of GME funding

Mr. Deal.  Well, thank you.  Both of you made a very compelling 
testimony for us in this consideration, and I would be remiss if 
I didn't say thank you to both of you, and to you your institutions, 
for what you do to train pediatricians and those in pediatric 
specialties.  As a grandfather, I am perhaps a little more acutely 
aware of children's healthcare, maybe, than I was when I was a 
father, but grandchildren seem to get your attention a little bit 
more sometimes.
	You have heard the comments with regard to what the proposal 
	is in the budget, to go to more of a needs basis assessment 
	of allocation of funding.  How would each of you think your 
	institution would fare using that as almost the exclusive 
	criteria?  Mr. Magoon, I will start with you.
	Mr. Magoon.  Thank you, sir.  I would suggest if one were to 
	look at the industry, that is the children's hospitals, the 61 
	of us that are there, a change of this magnitude would reduce, 
	on average, operating margins by about 33 percent.  Prior to 
	the program, the operating margins were somewhere in the range 
	of a negative 4 percent to about 1, 1.5, so it would take many 
	of our institutions, and put them in financial peril immediately.  
	And that really works against our objective of having strong 
	children's hospitals serve as the backbone of the healthcare 
	system for our community, and really, they are the safety net 
	provider.  So, it puts our most vulnerable at risk, quite 
	frankly, for immediate care.
	In the long run, I would also say that we make a commitment to 
	a resident for three years, and so, when you are done with 
	that three year commitment, that resident goes off, but there 
	is another resident right behind him, and behind her, and 
	behind me.  And what we also need to recognize is many of them 
	go into sub-specialty areas of pediatric medicine, and I would 
	just like to highlight two facts.
	We have a fellowship program in pediatric orthopedic surgery, 
	and we have not been able to fill that for the last 3 years. 
	This year, there will be five individuals finishing their 
	fellowship training in pediatric orthopedic surgery nationwide, 
	to meet the needs nationwide.  The other example I would share 
	with you is pediatric endocrinology.  Last year, there were 
	eight individuals across the country who finished their 
	fellowship training in pediatric endocrinology.
	Contrast that to the challenge of obesity in America, the 
	expansion of endocrine problems, and the fact that there are 
	eight positions across the country, and it is no small wonder 
	why there are long waits to see pediatric specialists across 
	the Nation.  You know, the challenge is significant.
	Mr. Deal.  Now, Mr. Considine, how would this kind of criteria 
	affect your institution?
	Mr. Considine.  Well, one of the questions I know that we would 
	have to deal with at our trustee level is why was there a change 
	in the premise of the initial program?  When this program was 
	put in place in 1999, it was to bring equity to children's 
	hospitals that were involved in training at the graduate 
	medical educational level, and bring that equity up to what the 
	adult hospitals are.
	And with this proposal, I see us now being pitted against our 
	fellow children's hospitals, and having to make choices, which 
	ones are more involved in serving the children of their region 
	versus others.  The amount of money that is still not there, to 
	bring us up to that equity level.  If there was a cutback at 
	our place, as Mr. Magoon was pointing out, areas where we have 
	been able to advance our fellowship training with these funds, 
	we have been able to start fellowship trainings in palliative 
	care, sports medicine, endocrinology, radiology, and we have 
	been just approved for a fellowship in pediatric oncology, and 
	also in pediatric psychiatry.  And the American College of 
	Surgeons has asked us to bring on board a fellowship in 
	pediatric surgery and also burn care.
	All of those areas are shortage areas, in terms of men and 
	women choosing those as their professions, and if we were 
	receiving a cutback, Mr. Chairman, we would have to think 
	twice about whether or not we could bring those programs 
	online.
	Mr. Deal.  Mr. Magoon, I believe you mentioned that your 
	State did not provide State-funded medical education dollars. 
	Is that what you said?
	Mr. Magoon.  Yes, sir.
	Mr. Deal.  What about Ohio, Mr. Considine?
	Mr. Considine.  One of the challenges we had in 1999 is Ohio 
	was moving to mandatory Medicaid managed care, and as they 
	did that, the patients who went into the Medicaid managed care 
	organizations, the dollars that used to follow them to us when 
	they were through the State program, for medical education, 
	those dollars disappeared.  And the current program in Ohio is 
	moving more and more statewide to Medicaid managed care, and 
	the amount of money that we would receive through Medicaid 
	for GME will dry up.  It has been reduced substantially.  
	Rainbow Babies and ourselves in Northeastern Ohio have been 
	in counties that have 	been mandatory, so for example, all 
	the patients that are Medicaid patients for our county, 
	Summit County, we have received no GME 	money through 
	Medicaid for them.
	Mr. Deal.  Thank you.  Mr. Brown.
	Mr. Brown.  Thank you, Mr. Chairman.  Mr. Magoon, thank you 
	for your comments.  They were particularly illuminating about 
	pediatric endocrinology.  I spoke just a few days ago with a 
	pediatric specialist in endocrinology in Miami.  You know, we 
	talked about the higher rate of diabetes and obesity, and just 
	what you spoke about, and I think that really underscores the 
	importance of all of this.
	Mr. Considine, talk for a moment, if you would, about other 
	sources of GME funding for Akron Children's.
	Mr. Considine.  Well, our main source right now is the 
	children's hospitals GME program that we were talking about.  
	There are funds, and they are dwindling, that come to us 
	through the Medicaid program, and--
	Mr. Brown.  Could you sort of give us rough ballpark figures?  
	You said you are up to $60,000, or up to $55,000 overall, so 
	can you break down roughly how much of it is GME, how much of 
	it is burn unit?  Is there a way of doing that, roughly?
	Mr. Considine.  Well, our burn unit also cares for adults, as 
	you know.  We are a regional burn center that cares for adults 
	as well as kids.  There are two children's hospitals in the 
	country that do that, Arkansas Children's and ourselves.  And 
	Congressman, I--
	Mr. Brown.  Okay.
	Mr. Considine.  --don't have that on the tip of my tongue, but 
	there is a breakout there, and we do get a little more funding 
	because of that to us, because of the adult component of that 
	care.
	Mr. Brown.  And you get other funding, Medicaid and in-State if 
	there are any significant dollars there?
	Mr. Considine.  Not significant dollars, sir.
	Mr. Brown.  Okay.  What are your thoughts on the previous 
	witness', the Administration's proposal to target funding to, I 
	believe, as Mr. Hall and she were going back and forth, to the 
	neediest hospitals?  What does that mean to Akron and to many 
	hospitals, many of the freestanding children's hospitals?
	Mr. Considine.  Well, during my 27 years, I have had the 
	privilege of visiting a lot of our children's hospitals in 
	this country, and the children that are served by those 
	hospitals, they deserve the very best in terms of the care.  
	There are needs for sub-specialists and primary care 
	pediatricians in all the areas that are represented by those 
	61 children's hospitals, and I don't know how we could go 
	through a process to determine which of those children's 
	hospitals, and which children served by those hospitals are 
	more needy than other children.
	Mr. Brown.  And $99 million just doesn't get there.
	Mr. Considine.  Well, if we are not quite at the equity level 
	with $300 million, you can run the math, $99 million would 
	bring us down.  It wouldn't bring us closer to equity with 
	out adult counterparts.
	Mr. Brown.  Tell us about, you have mentioned that Akron 
	General serves, I believe you said 50plus counties.
	Mr. Considine.  Akron Children's.
	Mr. Brown.  I mean Akron Children's, I am sorry--50 plus 
	counties.  And that you are in an urban area, generally, you 
	people, that Cleveland, Akron, that is a pretty populous area 
	of the State, but obviously, you reach way beyond into 
	Southeast Ohio, Eastern Ohio areas that are less populous.  
	Tell us about the rural GME program, what that means in those 
	communities, 50 miles, 75 miles, 100 miles south or west of 
	Akron.
	Mr. Considine.  Well, as you know, Congressman, we serve the 
	largest Amish population, at the Children's Hospital, in the 
	country, and we have established some primary care offices in 
	the counties where the Amish reside, and those 14 office sites 
	that I was speaking to, that are primary care office sites, 
	that saw this 210,000 children right now, are offices that are 
	based outside of Summit County.  And one of the things the 
	graduate medical education funding has helped us do is make 
	sure that we have increased the number of residents so we can 
	extend resident education into those offices in those counties.  
	So, that definitely does enhance not only the training program 
	that those residents are in, but the services being provided 
	to the children of the folks that live in those communities.
	Mr. Brown.  Thank you, Mr. Chairman.  Thank you.
	Mr. Deal.  Thank you.  Mr. Hall, you are recognized for 
	questions.
	Mr. Hall.  I thank you, Mr. Chairman.  I note that both of you 
	are Presidents and CEOs, so you know what you are doing, and I 
	referred to my own home county a moment ago, with the lady 
	from the Administration, and I noted also that our children's 
	population is growing ten times the national average there, and 
	I hate to think about how far we would be behind if we didn't 
	have this program.  So, Mr. Considine, you are from Ohio, right?
	Mr. Considine.  Yes, sir.
	Mr. Hall.  Is that a similar situation in Ohio?  You have that 
	type dramatic growth in your area?
	Mr. Considine.  We have some of our services that are seeing 
	growth, but we have other components of our service area, 
	quite honestly, that are not seeing that kind of growth.  We 
	are not as robust in population growth as your area, and 
	that is one of the challenges of making sure we get a balance, 
	in terms of the coverage in all those areas.  But at no time, 
	having children that aren't able to access the kind of care 
	we would want for our children.
	Mr. Hall.  I think they must have calculated their figures 
	on what were needy areas.  I think they must have tied it, 
	probably, to Medicaid, and then done it on a percentage basis, 
	which could mean, there is a little town in my county that is 
	the fourth fastest growing city in the United States, and it 
	is growing about 100 or 150 people a month, because they 
	didn't start with much.  But still, that statistic is there, 
	and that could be part of what they based that on.  Do you 
	know she couldn't answer for us, the lady I was sorry for 
	her, being that had to send her over here today.  I would 
	have hated to have been her.  But do you know, what is the 
	difference in adult teaching hospitals, the way they are 
	treated with this budget than the children's teaching 
	hospitals?  Do you have that information?
	Mr. Magoon.  It is my understanding that there is no change 
	in the Medicare program reimbursing the adult institutions, 
	the change is specifically to this program, and to this 
	population of institutions.
	Mr. Hall.  Okay.  Does direct medical education funding, 
	when it is doled out on a per resident basis, a head count 
	basis, does that adequately cover the cost to train an 
	individual physician?
	Mr. Considine.  No, sir, not in our case, and--
	Mr. Hall.  How close does it come?
	Mr. Considine.  Well, with the program we are talking about 
	here, it has brought us to a more equitable level with our 
	adult counterparts.  We are about 80 percent of that.  And 
	we have discussions, too, about what we can include in the 
	Medicare cost report as allowable costs.  Some of the services 
	that we extend with residents, out to our rural primary care 
	clinics, for example, oftentimes some of those expenses 
	cannot be included in those formulas.
	Having said that, I think we are getting closer to equity 
	because of the children's hospital GME Program, and that is 
	why we are concerned about any cut in that program.
	Mr. Hall.  Mr. Magoon.
	Mr. Magoon.  From an accountability point of view, we are 
	required to report back in a very similar fashion to our adult 
	counterparts on the effective use of those dollars.  It is not 
	without accountability.  It is the very same accountability, 
	in fact, we are required to go through any other fiscal 
	intermediary on an annual basis, because the appropriation is 
	annual.  So, if anything, there is greater scrutiny and review 
	of the appropriateness of the use of these funds in these 61 
	children's hospitals than across the country in general.
	Mr. Hall.  Well, I really thank you two for taking the time 
	from a very busy job to come here, and then to give us this 
	testimony, and we have a Chairman that is probably one of the 
	best subcommittee Chairman in this Congress, and I believe he 
	is going to correct some of the Administration's problems on 
	this.  I am going to rely on him, too, and I am going to brag 
	on him until he does.
	I yield back my time.
	Mr. Deal.  You get a lot of things if you give him extra time 
	for questions, you know.
	Dr. Burgess, you are recognized for questions.
	Mr. Burgess.  Thank you, Mr. Chairman.  I also want to thank 
	our two witnesses for taking time out of their schedules and 
	from their work to be here with us.  I also want to acknowledge 
	that there is with us in the audience a representative from a 
	hospital down in Mr. Hall's and my neck of the woods, the 
	Children's Medical Center of Dallas, and Maisy James is with 
	us today, and we appreciate her being here in the committee.
	Mr. Hall correctly pointed out that the Administration's 
	request for this year is far below what we should see in the 
	final appropriations bill, but what was the first year, under 
	this additional funding, what was the first year that the 
	children's hospitals received additional funding under the 
	children's graduate medical education?
	Mr. Considine.  My recollection, it was maybe in 1999 or the 
	year 2000, and I think the amount was $40 million, at a 
	national basis.
	Mr. Burgess.  Yeah, in fiscal year '01, according to the 
	figures I have, it was $235 million, a significant increase 
	the next year, fiscal year 2002, was $285 million.  Fiscal 
	year '03, $290 million, fiscal year 2004, my first year here, 
	was $303 million.  It did decline a little bit after that, 
	'05 was $301 million, and '06, with the across the board 
	1 percent cut that we did, was $297 million.  So, although as 
	Mr. Hall correctly pointed out, I wouldn't have wanted to be 
	here arguing the Administration's position, I think we can see 
	that the funding has been there, and it is incumbent upon us 
	to make certain that that level stays.
	I also feel obligated to point out for the committee that 
	this is important work that these gentlemen do, and the 
	pediatric specialists or the pediatric sub-specialist--
	children are not just little adults.  They require a 
	special expertise and a special gift to be able to provide 
	the highly specialized care that children need.  A surgeon 
	who is trained in adult surgery cannot just overnight become 
	a children's surgeon.  It requires special training and 
	special expertise, the management of fluids, everything 
	about their medical care is considerably different, and it 
	does require the application, the education of specialists.
	One question I do have is has this funding allowed you to 
	increase the number of medical residents that you educate?
	Mr. Considine.  In our case, sir, it has dramatically 
	assisted us in increasing the number of residents.  In 1999, 
	it was 50.  Last year, it was 87 a year, and through our 
	program, and it has also helped us bring fellowships online, 
	and one of the other results of that is more patient activity 
	is coming in through our doors, because of the increase of 
	available manpower.
	Mr. Burgess.  Now, were children's hospitals affected in the 
	year 2000, 2001, I don't remember which it was, when across 
	the country, facilities that provided graduate medical 
	education were required to adhere that resident's work hours 
	be no more than 80 hours per week?
	Mr. Considine.  Yes.
	Mr. Burgess.  So you all follow to those guidelines?
	Mr. Considine.  Yes.
	Mr. Burgess.  Did that result in any requirement for 
	increasing the number of residents that you retain?
	Mr. Considine.  I think that is a critical factor driving--
	Mr. Burgess.  Because I remember they used to get 160 hours 
	of work a week out of us at Parkland Hospital.
	Mr. Magoon.  Things have changed.
	Mr. Considine.  It has, in fact, increased the demand for 
	residents, and I think it has also improved the quality of 
	education.  Now, we have gone from roughly 62 to over 
	90 residents, because the funding is there, the patient 
	demand is there.  It is critically important, in terms of 
	patient safety, and in particular, to meet the requirements 
	for the 8 and 80 work rules.
	Mr. Burgess.  Now, the comment was made that private 
	insurance no longer paid for education for graduate medical 
	education children's hospitals, but they still reimburse 
	you, you still get private insurance reimbursement for 
	children who are covered, who have insurance coverage, 
	correct?
	Mr. Magoon.  Yes, we do.  In negotiations with commercial 
	payers, they make it very clear that that is one of the areas 
	they don't want to see loaded in their pricing.
	Mr. Burgess.  But that would be true for hospitals that train 
	residents who practice adult medicine as well.
	Mr. Magoon.  Yes.
	Mr. Burgess.  So, that is across the board.
	Mr. Magoon.  That is across the board negotiation we get 
	involved in.
	Mr. Burgess.  I do have to ask the question.  I asked it of 
	the HRSA person, and it probably was inappropriate for me to 
	ask, but what have you noticed, has either of your States 
	one of the States that has undergone a significant change 
	in medical liability with passage of caps or any commitment 
	to non-economic damages?
	Mr. Magoon.  Let me, if I may, relate one story.  In the 
	State of Illinois, there virtually is no professional 
	liability insurance, quite frankly, in Cook County, Illinois.  
	Our attachment point for our self-insurance program is 
	$15 million.  Consider that your deductible on your 
	automobile insurance is $15 million.  And there is no 
	aggregate cap, so you can have as many $15 million in claims 
	over the course of the year as they may arise.  There is no 
	aggregate cap, so in our particular circumstance, there 
	virtually is no insurance, and while we buy about $80 million 
	of excess coverage, predominantly offshore, you rarely ever 
	penetrate any one of those layers.  So, it is a huge issue 
	for us, and while cap professional liability reform was 
	passed last year, it still needs to be tested at the State 
	Supreme Court level before we ever see any relief with 
	respect to the insurance coverage.  So, it is a huge burden 
	for places like ours.
	Mr. Burgess.  I would just point out that in Texas, where we 
	passed a constitutional amendment to allow that to happen, 
	our not-for-profit hospitals, I think, have seen a 
	significant benefit from having an aggregate cap on liability, 
	and the hospitals were actually, it was an unintended 
	consequence but a good consequence, that they received the 
	benefit from that.
	Mr. Chairman, I hope we will see some additional activity on 
	that this year.  With that, you have been very indulgent, and 
	I will yield back.
	Mr. Deal.  Well, thank you.  And gentlemen, thank you again 
	for your presence and your testimony.  It was excellent, and 
	with that, this hearing is adjourned.
	[Whereupon, at 4:35 p.m., the subcommittee was adjourned.]