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Department of Health and Human Services
Council on Graduate Medical Education


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Designated Federal Officer (DFO) - Kennita Carter, MD

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Summary of Sixth Report

Managed Health Care: Implications for the Physician Workforce and Medical Education

September 1995

Executive Summary


Finding #1: Managed care has been growing rapidly in both the private and public sectors and in most geographic areas, and this growth is likely to continue or accelerate in the future.

Managed care reflects a broad set of fundamental changes taking place in the health care system, characterized in both the delivery and financing of health care. Each of the various types of managed care has been growing in recent years, with health maintenance organizations (HMOs) and preferred-provider organizations (PPOs) having grown 3 to 4-fold in the past decade, and more recently with point-of-service (POS) and other hybrid plans rapidly emerging. Almost two-thirds of employees in large firms are now in HMOs, PPOs, or POS plan, and the number of federal employees and Medicaid and Medicare recipients enrolled in managed care programs has more than doubled over th past decade (increasing to approximately 39 percent, 12 percent, and 7 percent of their respective populations).

Despite the concern of many physicians about managed care, over three-fourths have at least one managed care contract, and almost one-half are involved with at least one HMO. While managed care has increased in most areas, wide geographic variation remains, ranging from 0 to 35 percent of the population enrolled among states, and from less than 10 percent to greater than 50 percent among metropolitan areas. Continued pressures from government and business to increase the quality and cost effectiveness of medical care will reinforce this trend of managed care growth, which appears to be irreversible, and which many experts predict will accelerate.

Finding # 2: The growth in managed care will magnify the physician workforce concerns expressed by COGME in prior reports, that there is a large and growing oversupply of physicians overall and especially of specialists and subspecialists, and that there is a modest need for more generalist physicians. 

Health Maintenance Organizations have long embraced the concept of primary care, and have shown a strong preference for generalist physicians. In addition, HMOs are moving in the direction of increasing the scope of practice of generalist physicians, and decreasing utilization of and referrals to specialists and subspecialists.

The continued growth in managed health care may magnify the physician surplus and generalist: specialist imbalance identified in the 1992 COGME Third Report. Given the current rate of producing physicians (25,000 residents are entering the first year of training each year, equivalent to the number of 1993 US medical students graduates plus 40 percent), and of specialty output (30 percent generalists and 70 percent specialists), the patient care specialist supply is projected to increase from 140 to 150 specialists per 100,000 between the year 2000 to 2010. This compares with COGME's estimated staffing requirements of 85 to 105 specialists per 100,000 population in a managed care dominated environment. Compared with the midpoint of the requirements range, this would translate into a projected surplus of 125,000 specialists in the year 2000 and 170,000 in the year 2010.

During the same period, the patient care generalist supply is projected to remain stable at 63 to 67 generalists per 100,000 population, compared with COGME's estimated staffing of 60 to 80 generalists per 100,000. Compared with the midpoint of the requirements range, this would represent a modest shortage of 20,000 generalists in the year 2000 declining to 8,000 (or near balance) in 2010. The potential for physician underemployment or unemployment as we enter the 21st century is suggested by this and other workforce analyses, whether they assume that managed care of fee-for-service arrangements will predominate.

Finding # 3: Changes in the health care environment that have led to the growth in managed care will also have major effects on the allopathic and osteopathic medical education system and their teaching institutions; this will likely result in decreased financial support for medical education at both the undergraduate and graduate levels which could affect the quality of these endeavors. 

The growth in managed health care will influence educational institutions to make major changes in the way they deliver and finance patient care. Teaching institutions will be required to compete with other health plans and medical groups for managed care contracts. However, many teaching institution may be hindered by their traditionally higher operating costs, predominance of specialists and orientation towards specialty care, lack of primary care infrastructure, and emphasis on teaching and research, as well as their more complicated patient mix and larger proportion of the uninsured and underinsured. The higher costs traditionally attributed to the learning needs of trainees such as increased use of diagnostic tests and procedures and longer lengths of stay, can no longer be accepted as part of normal operating expenses in the increasingly competitive health care marketplace.

The net effect of increased competition may well be a decrease in clinical income for many teaching institutions, which has traditionally supported their medical educational components. Increased competition may also result in a decrease in the availability of other important educational resources, such as training sites, teachers, and patients. These necessary adjustments may be considered contrary to the traditional "culture" of academic medicine, which placed a high value on departmental autonomy and a decentralized decision-making structure. Teaching institutions that cannot adjust may see the quality of education at the undergraduate as well as the graduate level affected and their own survival threatened.

Finding # 4: The growth of managed care will magnify the deficiencies of the current educational system, yet will also provide new and essential educational opportunities to improve the preparation of physicians for their future roles. 

In response to the needs of the changing health care environment educational programs will have to produce a physician with a different set of skills and new areas of knowledge. The current medical educational system has been successful in training physicians for a health care system based on fee-for-service, specialty, and acute hospital care. However, changes in the content of the educational program and the sites used for clinical training will be needed to prepare physicians for effective practice in a managed care environment, with an emphasis on cost-effective, ambulatory, and primary care. Although the number of relationships are growing, relatively few educational linkages exist between academic medical centers and managed care organizations, especially with newer independent practice association (IPA) types of managed care.

Finding # 5: There are currently many barriers and few incentives by which health care and teaching institutions can address these problems regarding the physician workforce and medical education.

Currently there are few incentives for medical schools, residency programs, teaching hospitals, managed care organizations, or state of federal government to work either individually or collaboratively to address the nation's physician workforce or medical education priorities. Competition for patient care between teaching hospitals and managed care organizations, concern for who shares in the cost of medical education and ambulatory training, and conflicts between patient satisfaction and trainee needs have all created barriers against which health care delivery systems and teaching institution must attempt to address national physician workforce and medical education goals.

Key federal policies, particularly Medicare graduate medical education (GME) financing, have produced significant disincentives toward training more generalists and fewer specialists, move training to ambulatory, community-based and managed care settings, and prepare new physicians in the requisite competencies for managed care practice. These disincentives in Medicare GME should be corrected to better prepare physicians for effective managed-care practice.


With the rapid changes taking place in the health care environment, medical schools, residency programs, teaching hospitals and managed care organizations are encouraged to collaborate and cooperate to produce physicians with in the requisite numbers, specialty mix and competencies to meet patient needs. In addition, public funds for medical education through Medicare and the Public Health Service must be targeted prudently to provide the right incentives in the medical education marketplace.

Recommendations are the following:

Medical Schools, Residency Programs, and Teaching Facilities:

  1. As medical schools, residency programs and teaching facilities restructure in order to be more competitive in patient care and at the same time preserve their academic mission, they will also need to reassess their roles and responsibilities regarding the physician workforce and medical education.

  2. Medical schools, residency programs and teaching facilities should share in the responsibility to train the number and types of physicians appropriate to the nation's needs.

  3. Medical schools, residency programs and teaching facilities need to evaluate their institutions and identify deficiencies that are barriers to achieving a more balanced physician workforce, and to train physicians for their future roles. These institutions should:

    a. assure that the process selects applicants who are motivated, have the qualities and abilities, and who can be educated and trained to become the physician workforce which the nation needs;

    b. assure that the curriculum educates students for their future role, including the "new basic sciences" of population-based medicine, epidemiology, and decision analysis; and

    c. assure that the clinical curriculum provides an adequate education in ambulatory and managed care settings, preventive care, team care, and cost-effective patient care.

  4. The size, composition and competencies of the full-time faculty at medical schools and residency programs must be reviewed in order to assure that they are appropriate to train physicians for their future roles.

  5. Residency programs need to train residents in managed care environments, to review and revise existing residency curricula to ensure that the knowledge, skills and attitudes necessary for future physicians are included, and to adequately prepare both their primary care and specialty graduates for the scope of practice, coordinated relationships, and referral patterns found in managed care organizations.

  6. Additional training programs should be developed to meet the needs of the future health care delivery system, e.g. programs for retraining specialist physicians as generalist physicians; and fellowship training to develop physician leadership in managed care environments.

  7. Medical schools, residency programs and teaching hospitals need to identify and review their teaching costs, and make their educational programs more efficient.

  8. Evaluation at the medical school residency and continuing medical education levels should incorporate the knowledge, skills and attitudes that will be needed by future physicians, and should be reviewed as medical education and training becomes more decentralized.

  9. External certifying and accrediting organizations (e.g. the National Board of Medical Examiners, the National Board of Osteopathic Medical Examiners, the Accreditation Council for Graduate Medical Education, the American Osteopathic Association-Bureau of Professional Education, the Liaison Committee on Medical Education, the Residency Review Committees) need to address the new elements in health care delivery and reassess their structure, policies, and procedures in light of the findings in this report.

  10. Medical schools and residency programs (in cooperation with the government and managed care organizations) need to develop an infrastructure in primary care research, and to conduct and support primary care research.

Managed Care Organizations:

  1. Managed care organizations need to identify and define their needs as to the number, types and competencies of physicians, and should communicate this information and provide feedback to medical schools and residency programs.

  2. Managed care organizations need to work cooperatively and collaboratively with medical schools and residency programs in developing programs to address the physician workforce and medical education.

  3. Managed care organizations (and all other third-party payers) need to share in the cost of paying for medical education, through an all-payer fund, and by developing mechanisms to support and encourage training and evaluation of medical students and residents in their sites. This could include:

    • bonus payments for teaching
    • sponsoring preceptorships and clerkships
    • residency program sin managed care environments or sharing sponsorship of a residency
    • teaching residents about practice management issues
    • collecting data regarding educational and training needs
    • collaborative health services research
    • collaborative development of standards of care
    • developing managed care leadership programs
    • innovative approaches and models of medical education.

  4. Managed care organizations should work with external certifying and accrediting organizations to help address the issues identified in this report.


  1. Continue to pay Medicare DME and IME for all residents who are graduates of US medical schools, but gradually reduce DME and IME for international medical graduate residents to 25 percent of the 1995 levels. Establish a transition program to assist institution providing essential services which are dependent on IMG residents.

  2. Upweight both DME and IME to encourage more generalist training and downweight DME and IME to discourage specialist training.

  3. Provide both DME and IME payments for teaching in non-hospital settings, including physician offices, community health centers and managed care practices. Funding should follow the resident to his or her site of training.

  4. Identify and remove the DME and IME components of the Average Adjusted Per Capita Cost (AAPCC) from Medicare capitation rates and utilize these funds specifically for GME purposes.

  5. Create demonstration projects to foster the growth of consortia to manage medical education policy and financing.

  6. Reauthorize, at 1995 pre-recision appropriated levels, the National Health Service Corps, Title VII (Health Professions Education), and primary care research funding.

  7. Reauthorize the council on Graduate Medical Education (COGME) to monitor the physician workforce and medical education system given the rapidly changing health care marketplace.

  8. The federal government should play a major role in the collection and analysis of data regarding the physician workforce and medical education. this should include current data on staffing patterns in specific organizational forms of managed care (e.g., independent practice associations), information on the cost of medical education (medical students and residents) in the ambulatory and managed care settings, and on the differences in the cost of training generalist and non-generalist physicians.