[Congressional Record Volume 144, Number 56 (Thursday, May 7, 1998)]
[Senate]
[Pages S4535-S4538]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERREY (for himself, Mr. Bond, Mr. Durbin, Mr. Kennedy, 
        Mr. DeWine, and Mr. Moynihan):
  S. 2049. A bill to provide for payments to children's hospitals that 
operate graduate medical education programs; to the Committee on 
Finance.


      the children's hospitals education and research act of 1998

  Mr. KERREY. Mr. President, I am pleased to submit this proposal to 
provide critical support to teaching programs at free-standing 
children's hospitals. I am also honored to be joined by Senators Bond, 
Durbin, Kennedy, DeWine and Moynihan on this bill.

  Children's hospitals play an important role in our nation's health 
care system. They combine high-quality clinical care, a vibrant 
teaching mission and leading pediatric biomedical research within their 
walls. They provide specialized regional services, including complex 
care to chronically ill children, and serve as safety-net providers to 
low-income children.
  Teaching is an everyday component of these hospitals' operations. 
Pediatric hospitals train one-quarter of the nation's pediatricians, 
and the majority of America's pediatric specialists. Pediatric 
residents develop the skills they need to care for our nation's 
children at these institutions.
  In addition, pediatric hospitals combine the joint missions of 
teaching and research. Scientific discovery depends on the strong 
academic focus of teaching hospitals. The teaching environment attracts 
academics devoted to research. It attracts the volume and spectrum of 
complex cases needed for clinical research. And the teaching

[[Page S4536]]

mission creates the intellectual environment necessary to test the 
conventional wisdom of day-to-day health care and foster the 
questioning that leads to breakthroughs in research. Because these 
hospitals combine research and teaching in a clinical setting, these 
breakthroughs can be rapidly translated into patient care.
  Children's hospitals have contributed to advances in virtually every 
aspect of pediatric medicine. Thanks to research efforts at these 
hospitals, children can survive once-fatal diseases such as polio, grow 
and thrive with disabilities such as cerebral palsy, and overcome 
juvenile diabetes to become self-supporting adults.
  Through patient care, teaching and research, these hospitals 
contribute to our communities in many ways. However, their training 
programs--and their ability to fulfill their critical role in America's 
health care system--are being gradually undermined by dwindling 
financial support. Maintaining a vibrant teaching and research program 
is more expensive than simply providing patient care. The nation's 
teaching hospitals have historically relied on higher payments--
payments above the cost of clinical care itself--in order to finance 
their teaching programs. Today, competitive market pressures provide 
little incentive for private payers to contribute towards teaching 
costs. At the same time, the increased use of managed care plans within 
the Medicaid program has decreased the availability of teaching dollars 
through Medicaid. Therefore, Medicare's support for graduate medical 
education is more important than ever.

  Independent children's hospitals, however, serve an extremely small 
number of Medicare patients. Therefore, they do not receive Medicare 
graduate medical education payments to support their teaching 
activities. In 1997, Medicare provided an average of $65,000 per 
resident to all teaching hospitals, compared to an average of $230 per 
resident in total Medicare GME payments at independent children's 
hospitals.
  This proposal will address, for the short-term, this unintended 
consequence of current public policy. It will provide time-limited 
support to help children's hospitals train tomorrow's pediatricians, 
investigate new treatments and pursue pediatric biomedical research. It 
will establish a four-year fund, which will provide children's 
hospitals with a Federal teaching payment equal to the national average 
per resident payment through Medicare. Total spending over four years 
will be less than a billion dollars.
  All American families have great dreams for their children. These 
hopes include healthy, active, happy childhoods, so they seek the best 
possible health care for their children. And when these dreams are 
threatened by a critical illness, they seek the expertise of highly-
trained pediatricians and pediatric specialists, and rely on the 
research discoveries fostered by children's hospitals. All families 
deserve a chance at the American dream. Through this legislation, we 
will help children's hospitals--hospitals such as Children's Hospital 
in Omaha, Boys' Town, St. Louis Children's Hospital, Children's 
Memorial Hospital in Chicago, Children's Hospital in Boston and 
others--train the doctors and do the research necessary to fulfill this 
dream. Through this legislation, Congress will be doing its part to 
help American families work towards a successful future.
  Mr. President, this legislation will address a short-term problem--
actually a problem that is a short-term solution to a problem that we 
have with graduate medical education for pediatricians. Pediatric 
hospitals perform a very important part of the teaching and the 
training of our pediatricians. But because they see very few Medicare 
patients, which is obvious, they don't receive Medicare graduate 
education payments to support their teaching activities. What that 
means is there is a huge difference in Federal support across teaching 
hospitals--about $65,000 per resident in Medicare GME payments to all 
teaching hospitals, compared to an average of $230 per resident in 
total Medicare GME payments to independent children's hospitals.
  It is a very big problem as we increasingly pay attention to the need 
for good pediatric health care for our children. We have to make sure 
that we solve this problem. This is a short-term solution.
  I mentioned the short-term solution. The Presidential Commission on 
Medicare will be making its recommendation next year. One of its 
responsibilities is to deal with the question of graduate medical 
education--coming up with a solution of how we can fund it in an 
environment where more and more health care is going into managed care. 
That will be an especially difficult problem for us to solve.
  But inside of that overall problem is an even more compelling 
problem, as I think Members will see when they look at the differential 
in reimbursement for teaching costs in pediatric hospitals versus all 
residents nationwide.
  Thank you, Mr. President. I ask that the complete text of this 
legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2049

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Children's Hospitals 
     Education and Research Act of 1998''.

     SEC. 2. PROGRAM OF PAYMENTS TO CHILDREN'S HOSPITALS THAT 
                   OPERATE GRADUATE MEDICAL EDUCATION PROGRAMS.

       (a) Payments.--
       (1) In general.--The Secretary shall make payment under 
     this section to each children's hospital for each hospital 
     cost reporting period beginning after fiscal year 1998 and 
     before fiscal year 2003 for the direct and indirect expenses 
     associated with operating approved medical residency training 
     programs.
       (2) Capped Amount.--The payment to children's hospitals 
     established in this subsection for cost reporting periods 
     ending in a fiscal year is limited to the extent of funds 
     appropriated under subsection (d) for that fiscal year.
       (3) Pro rata reductions.--If the Secretary determines that 
     the amount of funds appropriated under subsection (d) for 
     cost reporting periods ending in a fiscal year is 
     insufficient to provide the total amount of payments 
     otherwise due for such periods, the Secretary shall reduce 
     the amount payable under this section for such period on a 
     pro rata basis to reflect such shortfall.
       (b) Amount of Payment.--
       (1) In general.--The amount payable under this section to a 
     children's hospital for direct and indirect expenses relating 
     to approved medical residency training programs for a cost 
     reporting period is equal to the sum of--
       (A) the product of--
       (i) the per resident rate for direct medical education, as 
     determined under paragraph (2), for the cost reporting 
     period; and
       (ii) the weighted average number of full-time equivalent 
     residents in the hospital's approved medical residency 
     training programs (as determined under section 1886(h)(4) of 
     the Social Security Act) for the cost reporting period; and
       (B) the product of--
       (i) the per resident rate for indirect medical education, 
     as determined under paragraph (3), for the cost reporting 
     period; and
       (ii) the number of full-time equivalent residents in the 
     hospital's approved medical residency training programs for 
     the cost reporting period.
       (2) Per resident rate for direct medical education.--
       (A) In general.--The per resident rate for direct medical 
     education for a hospital for a cost reporting period ending 
     in or after fiscal year 1999 is the updated rate determined 
     under subparagraph (B), as adjusted for the hospital under 
     subparagraph (C).
       (B) Computation of updated rate.--The Secretary shall--
       (i) compute a base national DME average per resident rate 
     equal to the average of the per resident rates computed under 
     section 1886(h)(2) of the Social Security Act for cost 
     reporting periods ending during fiscal year 1998; and
       (ii) update such rate by the applicable percentage increase 
     determined under section 1886(b)(3)(B)(i) of such Act for the 
     fiscal year involved.
       (C) Adjustment for variations in labor-related costs.--The 
     Secretary shall adjust for each hospital the portion of such 
     updated rate that is related to labor and labor-related costs 
     to account for variations in wage costs in the geographic 
     area in which the hospital is located using the factor 
     determined under section 1886(d)(3)(E) of the Social Security 
     Act.
       (3) Per resident rate for indirect medical education.--
       (A) In general.--The per resident rate for indirect medical 
     education for a hospital for a cost reporting period ending 
     in or after fiscal year 1999 is the updated amount determined 
     under subparagraph (B).
       (B) Computation of updated amount.--The Secretary shall--
       (i) determine, for each hospital with a graduate medical 
     education program which is paid under section 1886(d) of the 
     Social Security Act, the amount paid to that hospital 
     pursuant to section 1886(d)(5)(B) of such Act

[[Page S4537]]

     for the equivalent of a full twelve-month cost reporting 
     period ending during the preceding fiscal year and divide 
     such amount by the number of full-time equivalent residents 
     participating in its approved residency programs and used to 
     calculate the amount of payment under such section in that 
     cost reporting period;
       (ii) take the sum of the amounts determined under clause 
     (i) for all the hospitals described in such clause and divide 
     that sum by the number of hospitals so described; and
       (iii) update the amount computed under clause (ii) for a 
     hospital by the applicable percentage increase determined 
     under section 1886(b)(3)(B)(i) of such Act for the fiscal 
     year involved.
       (c) Making of Payments.--
       (1) Interim payments.--The Secretary shall estimate, before 
     the beginning of each cost reporting period for a hospital 
     for which a payment may be made under this section, the 
     amount of payment to be made under this section to the 
     hospital for such period and shall make payment of such 
     amount, in 26 equal interim installments during such period.
       (2) Final payment.--At the end of each such period, the 
     hospital shall submit to the Secretary such information as 
     the Secretary determines to be necessary to determine the 
     final payment amount due under this section for the hospital 
     for the period. Based on such determination, the Secretary 
     shall recoup any overpayments made, or pay any balance due. 
     The final amount so determined shall be considered a final 
     intermediary determination for purposes of applying section 
     1878 of the Social Security Act and shall be subject to 
     review under that section in the same manner as the amount of 
     payment under section 1886(d) is subject to review under such 
     section.
       (d) Limitation on Expenditures.--
       (1) In general.--Subject to paragraph (2), there are hereby 
     appropriated, out of any money in the Treasury not otherwise 
     appropriated, for payments under this section for cost 
     reporting periods beginning in--
       (A) fiscal year 1999 $100,000,000;
       (B) fiscal year 2000, $285,000,000;
       (C) fiscal year 2001, $285,000,000; and
       (D) fiscal year 2002, $285,000,000.
       (2) Carryover of excess.--If the amount of payments under 
     this section for cost reporting periods ending in fiscal year 
     1999, 2000, or 2001 is less than the amount provided under 
     this subsection for such payments for such periods, then the 
     amount available under this subsection for cost reporting 
     periods ending in the following fiscal year shall be 
     increased by the amount of such difference.
       (e) Relation to Medicare and Medicaid Payments.--
     Notwithstanding any other provision of law, payments under 
     this section to a hospital for a cost reporting period--
       (1) are in lieu of any amounts otherwise payable to the 
     hospital under section 1886(h) or 1886(d)(5)(B) of the Social 
     Security Act to the hospital for such cost reporting period, 
     but
       (2) shall not affect the amounts otherwise payable to such 
     hospitals under a State medicaid plan under title XIX of such 
     Act.
       (f) Definitions.--In this section:
       (1) Approved medical residency training program.--The term 
     ``approved medical residency training program'' has the 
     meaning given such term in section 1886(h)(5)(A) of the 
     Social Security Act (42 U.S.C. 1395ww(h)(5)(A)).
       (2) Children's hospital.--The term ``children's hospital'' 
     means a hospital described in section 1886(d)(1)(B)(iii) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(iii)).
       (3) Direct graduate medical education costs.--The term 
     ``direct graduate medical education costs'' has the meaning 
     given such term in section 1886(h)(5)(C) of the Social 
     Security Act (42 U.S.C. 1395ww(h)(5)(C)).
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.

  Mr. BOND. Mr. President, I am pleased to rise today as an original 
cosponsor with Senator Bob Kerrey of the ``Children's Hospitals 
Education and Research Act of 1998.'' This bill seeks to address an 
unintended inequity in federal support for graduate medical education. 
If not addressed, this inequity will jeopardize the future of the 
pediatric health care work force as well as the pediatric biomedical 
research enterprise for our nation's children.
  Specifically, this bill will provide capped, time-limited, interim 
commensurate federal funding for the nearly 60 independent children's 
teaching hospitals, including the children's hospitals in Kansas City 
and St. Louis, which are so important to the training of the nation's 
physicians who serve children. They are equally important to the 
conduct of research to benefit children's health and health care.
  Let me illustrate the magnitude of the inequity in federal investment 
in graduate medical attention (GME). In 1977, the federal Medicare 
program reimbursed teaching hospitals, on average, more than $76,000 
for each resident trained. In contrast, Medicare reimbursed independent 
children's teaching hospitals--children's hospitals that do not share a 
Medicare provider number with a larger medical institution--less than 
$400 per resident, because children's hospitals care for children, not 
the elderly, and therefore do not serve Medicare patients, except for a 
small number of children with end stage renal disease.
  Until recently, this inequity was not a problem as long as all payers 
of health care were willing to reimburse teaching hospitals enough for 
their patient care to cover the extra costs of GME. As the health care 
market has become increasingly competitive, it has become harder and 
harder for all teaching hospitals to generate patient care revenues to 
help cover their GME costs. But only independent children's teaching 
hospitals face these competitive pressures without the significant 
federal GME support, which the rest of the teaching hospital community 
relies upon.
  This is more than a problem for the financial well-being of the 
education programs of a small number of children's hospitals--less than 
one percent of the nation's hospitals. It is a problem for our entire 
pediatric workforce and pediatric research enterprise, because these 
institutions play such a disproportionately large role in academic 
medicine for children. On average, their education programs are equal 
in size to the GME programs of all teaching hospitals, but they train 
twice as many residents per bed as do other teaching hospitals.
  As a consequence, independent children's teaching hospitals train 
about 5 percent of all physicians, 25 percent of all pediatricians, and 
the majority of many pediatric subspecialists who care for children 
with the most complex conditions, such as children with cancer, cystic 
fibrosis, cerebral palsy, and more.
  Recommendations to address the inequity in federal GME support for 
children's teaching hospitals are supported by the National Association 
of Children's Hospitals as well as the American Academy of Pediatrics 
and the Association of Medical School Pediatric Department Chairs. Last 
month, the American Academy of Pediatrics wrote to President Clinton, 
to express support for the establishment of interim federal support for 
the GME program of freestanding, independent children's hospitals. The 
AAP said, ``(w)e regard the education programs of independent 
children's hospitals as important to our pediatric workforce and 
therefore to the future health of all children, because they educate an 
important proportion of the nation's pediatricians.''
  Last year, many members of the Senate, including myself, recommended 
that any comprehensive reform of graduate medical education financing 
should include commensurate federal GME support for children's teaching 
hospitals. Instead of enacting GME reform, Congress directed the 
Bipartisan Commission on the Future of Medicare and the Medicare 
Payment Assessment Commission to prepare recommendations for the future 
of GME financing, including for children's teaching hospitals.
  Since it will be at least another year before Congress receives those 
recommendations and potentially several years before Congress is able 
to act on them, the ``Children's Hospitals Education and Research Act'' 
will provide interim funding for just four years. It will be 
commensurate to federal GME support for all teaching hospitals. 
Specifically, the bill provides, in a capped fund, $100 million in FY 
1999 and $285 million in each of the three succeeding fiscal years, for 
eligible institutions. It will be financed by general revenues, not 
Medicare HI Trust Funds.
  I know what a critical role children's hospitals play in the ability 
of families and communities to care for all children, including 
children with the most complex conditions and children on families with 
the most limited economic means. Through their education and research 
programs, they are also devoted to serving future generations of 
children, too. Certainly, the children of Missouri as well as Kansas 
and Southern Illinois, depend vitally on the services and research of 
independent children's teaching hospitals such as Children's Mercy in 
Kansas City, St. Louis Children's Hospital, and Cardinal Glennon 
Children's Hospital, and the care givers they educate.
  Children's hospitals are places of daily miracles. Healing that we 
would

[[Page S4538]]

never have thought possible a few years ago for children who are burn 
victims, or trauma victims, or even cancer victims now occurs daily at 
these hospitals. And while I am sure divine intervention plays a role 
in this healing, it is also due to the very hard work of skilled 
doctors, nurses, and dedicated staff that is second to none. We must 
therefore ensure that these facilities have the resources to continue 
their noble mission of saving children from the clutches of death and 
disease.
  I know trustees, and medical and executive leaders of these 
institutions. All are committed to controlling the cost of children's 
health to the best of their ability. But their future ability to 
sustain their education and research programs will also depend on 
commensurate federal GME support for them. I urge my colleagues to join 
me in supporting the enactment of the ``Children's Hospital Education 
and Research Act.''
  Mr. KENNEDY. Mr. President, I am honored to join my colleagues 
Senator Kerrey, Senator Bond, Senator Durbin, and Senator DeWine in 
sponsoring this legislation to assure adequate funding for resident 
training in independent children's teaching hospitals.
  These hospitals, such as Children's Hospital in Boston, have 60 
pediatric training programs. They represent less than 1 percent of the 
training programs across the country, yet these hospitals train 5 
percent of all physicians, 25 percent of all pediatricians, and the 
majority of many pediatric subspecialist.
  Too often today, these hospitals are hard-pressed for financial 
support. Medicare is the principal source of federal funds that 
contributes to the costs of graduate medical education for most 
hospitals, but independent children's hospitals have few Medicare 
patients, since Medicare coverage for children applies only to end-
stage kidney disease. Medicaid support is declining, as the program 
moves more and more toward managed care.
  No hospital in the current competitive marketplace can afford to 
shift these costs to other payers. As a result, many children's 
hospitals find it very difficult to make ends meet.
  In 1997, all teaching hospitals relieved a $76,000 in Medicare 
graduate medical education support for each medical resident they 
trained, but the average independent children's teaching hospital 
received only $400.
  Last year, Children's Hospital in Boston lost over $30 million on its 
patient operations. Two-thirds of this loss was directly attributable 
to the direct costs of graduate medical education. Will limited 
resources and increasing pressure to reduce patient costs, such losses 
cannot continue.
  The academic mission of these hospitals is vital. Since its founding 
as a 20-bed hospital in 1869, Children's Hospital in Boston has become 
the largest pediatric medical center and research facility in the 
United States, and an international leader in children's health. It is 
also the primary teaching hospital for pediatrics for Harvard Medical 
School. For eight years in a row, it has been named the best pediatric 
hospital in the country in a nationwide physicians' survey conducted by 
U.S. News and World Report.
  Clinicians and investigators work together at the hospital in an 
environment that fosters new discoveries in research and new treatments 
for patients. Scientific breakthroughs are rapidly translated into 
better patient care and enhanced medical education. We must assure that 
market pressures to not interfere with these advances.
  Independent children's hospitals deserve the same strong support that 
other hospitals receive for graduate medical education. The current 
lack of federal support is jeopardizing the indispensable work of these 
institutions and jeopardizing the next generation of leaders in 
pediatrics.

  Congress needed to do all it can to correct this inequity. This 
legislation we are introducing will provide stop-gap support stabilize 
the situation while we develop a fair long-run solution to meet the 
overall needs of all aspects of graduate medical education. I look 
forward to early action by the Senate on this important measure.
  Mr. MOYNIHAN. Mr. President, I am pleased to join Senators Bob 
Kerrey, Bond, Kennedy, Durbin and DeWine in introducing the 
``Children's Hospital Education and Research Act of 1998.'' This 
legislation recognizes the value of supporting medical training. it 
establishes an interim source of funding for financing residency 
training expenses for free-standing children's hospitals until a 
permanent source of funding for all medical education is developed.
  Medical education is one of America's most precious public resources. 
It is a public good--a good from which everyone benefits, but for which 
no one is willing to pay. As a public good, explicit and dedicated 
funding for residency training programs must be secured so that the 
United States will continue to lead the world in the quality of its 
health care system. This legislation provides for such dedicated 
funding for residency training programs in children's hospitals.
  I have introduced legislation--S. 21--which creates a medical 
education trust fund to support all accredited medical schools and 
teaching hospitals. Additionally, I requested that specific language be 
inserted in the Balanced Budget Act of 1997 charging the National 
Bipartisan Commission on the Future of Medicare to:

       . . . make recommendations regarding the financing of 
     graduate medical education (GME), including consideration of 
     alternative broad-based sources of funding for such education 
     and funding for institutions not currently eligible for such 
     GME support that conduct approved graduate medical residency 
     programs, such as children's hospitals.

  Children's hospitals have a vitally important mission providing 
patient care, medical training and research in the face of an 
increasingly competitive health system. I am pleased to support Senator 
Kerrey's bill and look forward to working with him and other members of 
the National Bipartisan Commission on the Future of Medicare as we seek 
stable and sufficient funding for medical education.
                                 ______