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GME Formulas and Funding Continue to Hold Arizona Back

By Brian Powell, Communications Manager at Flinn Foundation

From Print Issue - Spring 2023
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Arizona medical leaders are in a seemingly endless struggle to expand residency and fellowship positions at hospitals and health centers around the state.


A vote in Congress more than a quarter century ago continues to financially haunt Arizona with each passing year and makes it nearly impossible for the fast-growing state to catch up and end its physician shortage—one of the worst in the nation.


The problem worsened with Arizona’s budget crisis at the onset of the Great Recession, and in 2010, the state eliminated all direct state funding for GME. But over the last several years there have been some wins.


Arizona has substantially increased the number of medical-school graduates—the state has gone from one to six medical schools in less than 30 years—and found creative ways to tap into uncapped Medicaid funding to dramatically increase residency opportu­nities. And following the years of austerity, there’s been new direct investment from the state to help expand hospital residency programs.


The number of GME slots in Arizona in allopathic and osteopathic training programs has increased from 1,262 in 2007 to 2,191 in 2022. This coin­cides with the dramatic increase in the number of medical-school graduates with the opening of the University of Arizona College of Medicine-Phoenix as well as the Arizona campuses of the Mayo Clinic Alix School of MedicineCreighton University School of Health Sciences, Midwestern University-Glendale, and A.T. Still University-Mesa


Still, despite GME programs expanding, and 95% of available residency training positions filled, the reality is the state still falls well short of what is needed for primary care and key specialties, according to physicians and policy experts who work in graduate medical education.


Dr. Daniel Derksen, director of the Arizona Center for Rural Health at the University of Arizona, said that based on current projec­tions, the state will be 2,000 residency slots short of where it should be by 2030.


“This won’t get addressed by piecemeal alteration,” Derksen said. “We need to take bold steps in Arizona to expand the number of GME slots based on our very rapid population growth over the last two decades.”


Dr. Cheryl O’Malley, Associate Dean of GME at the University of Arizona College of Medicine-Phoenix, said: “GME is a big investment without short-term solutions. That is why there is this urgency. If we don’t act quickly, it will take that much longer for these physicians to get into the workforce.”


An Uphill Battle

Arizona was a different place in the mid- 1990s, with just one medical school—the University of Arizona College of Medicine in Tucson—and about 3 million fewer people.


And yet, more than 25 years later, the formula for the largest distribution of GME federal funding through Medicare has not been updated to reflect Arizona’s current population.


The Balanced Budget Act of 1997 locked in the per-capita distribution of funds from the Centers for Medicare and Medicaid Services. The formula that accounts for about two-thirds of federal GME funding in the United States to this day remains based on the population of the United States in 1996, with an exception for new hospital programs. This has penalized states such as Arizona, while states such as New York have a disproportionate number of slots despite a slow-growing or declining population.


“You can imagine that not many FTEs were allocated to Arizona in 1996,” said Dr. Shakaib Rehman, associate chief of staff for education at Phoenix VA Health Care Systems, which sponsors more than 170 GME positions.


Rehman also serves as chair of the American College of Physicians advocacy committee and invites physicians to become involved with policymaking.


“ACP has been raising this issue for many years, but we need to have other organized medicine join the efforts and change this unfair formula.


“Health care is not just practicing medicine but also influencing policymaking. Otherwise, bad policies will cause problems for physicians and patients,” he added.


The Impact of Match Day

According to the Association of American Medical Colleges, 55% of the individuals who completed residency training between 2012 through 2021 are practicing in the state where they did their training.


Dr. O’Malley, whose school has about 350 res­idents and fellows across its approximately 30 programs, said for those graduating from an Arizona medical school, then complet­ing their residency at an Arizona hospital, there’s an approximately 75% chance that the physician will stay and practice here.


Dr. Derksen said statistics show for residents training in a community health center or rural area, the likelihood they will remain and practice in that region is high.


One example of such a program is North Country HealthCare in Flagstaff, which in 2020 started an accredited family-medicine residency program with a community health center as the sponsoring institution.


The cost to fund a residency is high, with training typically lasting between three and seven years. The estimated direct GME expenses per resident per year is $132,583, plus indirect expenses of $124,267, according to 2022 figures provided by the Arizona Health Care Cost Containment System, or AHCCCS.


This spring, AHCCCS anticipates making $381.3 million in GME payments to hospitals for the 2022 academic year. This portion of payments uses a voluntary match provided by local political subdivisions such as Arizona’s public universities and local, tribal, and county governments, according to ACHHHS.


Since 2015, AHCCCS has been allowed to pass on a greater Medicaid payment to Arizona hospitals, which identify and secure a funding partner. GME funding for Arizona hospitals increased by more than $100 million between 2015 and 2016 alone, and the figure has continued to increase.


In late 2022, AHCCCS made $13.8 million in GME payments to hospitals for the 2022 academic year, comprised of a general-fund state match and a federal match, according to the state agency.


Heather Carter, a former state legislator and current executive vice president of Greater Phoenix Leadership, who has worked in health policy at both Arizona State University and the University of Arizona, said the legislature did not revisit direct funding of GME after the Great Recession until a bill she sponsored passed in 2019.


She suggests the continuing education of policymakers. “People don’t naturally know what GME is unless you or a family member studied to be a doctor and did a residency and worked in a hospital system, and most people serving in the legislature have zero experience,” Carter said. “There is a tremendous need to just educate. They are not going to invest in something they do not understand.”

About the Author: 

Brian Powell is Communications Manager at the Flinn Foundation in Phoenix since 2012. Brian is a graduate of Loyola Maramount University and is a frequent author contributor of Arizona Physician magazine.

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