East Carolina University…Tomorrow starts here.

2005 General Assembly Priority 2

Issue: Repeal of Legislation Requiring Payment to the State by the Brody School of Medicine (Medicare Resident Education and Rent of Facilities)

Note: Financial challenges facing medical schools in the U.S., including the Brody School of Medicine, have significantly changed since the enactment of original legislation establishing the school. Over the last decade, medical malpractice insurance rates have increased 388%, the unfunded mandates imposed by HIPAA and the introduction of Federal COBRA continuation coverage have drained local resources. At the same time, reimbursement for health care from virtually all commercial and public (Medicare/Medi-

caid) payors have been sharply reduced. Also, the number of underinsured, uninsured, and indigent patients has skyrocketed. The rationale for the original legislation requiring payment to the State is no longer valid.

Desired Outcomes:

• Repeal legislation requiring the reversion of Medicare Resident Education Funds at BSOM. This would remove restrictions on the use of funds retained at the local level.

-- $1 million in legislated reversions

-- $2.5 million in escrow to “State” accounts

• Repeal requirement of payment of rent for use of outpatient facility in a facility built with State appropriations.

-- $600 K annual in rent for a State facility.

• Allow the Brody School of Medicine to be treated as the other North Carolina public school of medicine and as other public schools of medicine throughout the nation are treated with regard to Medicare Resident Education funds.

Background:

In 1993, the General Assembly enacted legislation (Section 15.4 – 116-36.6) that:

· Requires the Brody School of Medicine (BSOM) to return at least $1 million of the annual formula-based Medicare pass-through funds for physician faculty supervision of resident physicians.

· The legislation also requires funds of approximately $2.5 million of these funds to be put into “State” accounts on an annual basis and held in escrow for use in capital projects rather than be used as reimbursement for resident supervision.

Also, the BSOM Faculty Practice Plan is required to pay $600,000 “rent” for use of outpatient facilities for the Brody Radiation Therapy portion of the Cancer Center that was built by State-appropriated funds.

These practices are unique to the BSOM, not only within the State of North Carolina, but also nationally. UNC-Chapel Hill School of Medicine has no statutory mandate governing the retention and use of Medicare Resident Education Funds. The model of how Medicare Resident Education Funds are used at UNC-Chapel Hill is replicated at virtually every other public medical school in the US,

In total, ECU has returned over $17 million of Medicare Resident Education funds to the State of North Carolina, held an additional $17 million in escrow for capital projects, and continues to pay the “rent” of $600 K and the $1 million return to the State coffers on an annual basis.