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Written By: Kathleen Hatfield

Law Offices of Stewart and Stewart

Washington, D.C.

The United States faces a looming shortage of primary care physicians that will only be exacerbated next year when, under the Affordable Care Act (ACA), 32 million additional Americans gain access to health insurance.[1]  To help alleviate this crisis, the ACA in 2010 provided $230 million to fund an innovative proposal called the Teaching Health Center Graduate Medical Education (THCGME) residency training program.  The program provides hospitals and community health centers with funds to train new primary care physicians each year in the amount of approximately $150,000 per resident.  The funding is made available through a non-competitive grant, which means that all applicants who meet five eligibility requirements will be funded.  The opportunity will be posted by the government later this fall, with applications due approximately 60 days thereafter.


Traditionally, resident physicians in hospitals received their training supported primarily with Medicare dollars administered by the U.S. Centers for Medicare and Medicaid Services (CMS).   CMS funded the resident training, also known as “graduate” medical education (GME), after the medical students received their Doctorate of Medicine (M.D.) or Doctor of Osteopathic  Medicine (D.O.) degrees in the United States.  GME still supports residencies and leads to state licensure and board certification.  Because CMS administers GME, it was long assumed that unless redirected by Congress, CMS would largely determine the future size and character of the physician workforce in America -- a system rooted in legislation which preceded the ACA, namely the Balanced Budget Act of 1997.  The 1997 Act sought to reduce Medicare spending on GME by placing a “cap” on the number of residents that could be trained at each hospital.  These and other spending reductions were imposed in 1997 across facilities nationwide, with payments for resident training, home health services, skilled nursing care, and hospital outpatient services all reduced via a new prospective payment system.[2] Indirect Medical Education Reimbursement (IME) payments, used to subsidize hospital expenses associated with running resident training programs, were also reduced.[3] [4]

The 1997 Act evoked a negative response when rapid population growth in particular areas of the United States placed considerable burdens on hospitals and medical schools.[5] Physician residency training programs struggled to produce enough physicians to provide adequate care in geographic areas where primary care physician (PCP) training was most needed.[6] This was because community hospitals experiencing Medicare cutbacks had to decrease residency training, even though family physicians were always considered more likely than general internists or pediatricians to be trained in community hospitals and locate their practices in rural underserved areas.[7]

According to the Center for Workforce Studies in Washington, D.C., the number of physician residents and fellows changed little between academic year 1997 (98,143) and 2002 (98,258), but increased to 106,012 in academic year 2007, a net increase of only 8.0% over the decade.  While the annual number of new GME entrants increased by 7.6%, this was due to an influx of international, rather than U.S., medical graduates.  From 2002 to 2007, American doctors training in primary care decreased by 2,641, while international medical graduates increased by 3,286.   Increased specialization rates also led fewer doctors to enter primary care practice post-residency.[8]

Thus, Medicare’s support for physician training was effectively “frozen” in 1997, which led to concerns that unless the number of residency training slots was increased in America’s teaching hospitals, the nation would continue to confront a declining number of physicians per capita -- just as baby boomers joined Medicare rolls.  The U.S. now faces a shortage of more than 45,000 primary care physicians by 2020.[9]


Recognizing that something must be done to address the shortage, pursuant to the ACA and consistent with congressional directive, the U.S. Department of Health and Human Service’s Health Resources and Services Administration (HRSA) for three years has provided grant funding for hospitals in partnership with community-based ambulatory care centers and/or medical schools to train new residents in the following practice areas:

  • Family medicine;
  • Internal medicine;
  • Pediatrics;
  • Internal medicine-pediatrics;
  • Obstetrics and gynecology;
  • Psychiatry;
  • General dentistry;
  • Pediatric dentistry; or
  • Geriatrics.

Under the THCGME grant program, approximately $150,000 is provided per new resident, each year, to increase the supply of primary care physicians.  Today, HRSA-funded teaching health centers exist in:  Alaska, Arkansas, California, Connecticut, Iowa, Idaho, Illinois, Kentucky, Maine, Massachusetts, Michigan, Missouri, Montana, North Carolina, New Mexico, New York, Oklahoma, Pennsylvania, Texas, Washington and West Virginia.

HRSA intends to post a notice announcing the fourth round of this funding sometime this fall, with applications due approximately 60 days thereafter.  The goal of the THCGME program is to move primary care physicians into traditionally underserved areas, whether urban or rural. Government payments will cover direct expenses (i.e., salaries) associated with the residency training programs, as well as indirect expenses associated with training the new residents.

Specific examples of eligible community-based ambulatory patient care facilities with which hospitals can partner to obtain this funding include:  federally-qualified health centers; community mental health centers; rural health clinics; health centers operated by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization; and entities receiving funds under title X of the Public Health Service Act.

Whichever of these eligible entities partners with a hospital in the application, it must be listed as the institutional sponsor of the proposed Teaching Health Center by the relevant accrediting body, meaning either the Association of Osteopathic Medicine (AOA) or the Accreditation Council for Graduate Medical Education (ACGME).  A hospital can partner with the accredited FQHC/CHC, or create an entirely new consortium also eligible for funding by collaborating with a health center and/or a medical school in operating one or more residency programs.  In its grant guidance, HRSA finds teaching hospitals and academic institutions have proven to be successful members of many established GME consortia. In these cases, the consortium itself may serve as both the applicant and the institutional sponsor of the residency program.  In all cases, the health center must be an essential and key partner in the project.

Federal funding provided under the grant may be used to pay the costs of training new residents either in a newly-established teaching health center, or it may support an expanded number of new residents to be trained in an existing teaching health center.

The teaching health center model has a long history with several successful teaching health centers dating back to the 1980s.  However, past growth of these facilities has been limited due to the difficulty of bringing together the dual missions of training and service; administrative complexities; and a lack of financial resources.[10]

What really influenced the U.S. government to undertake this program were studies which demonstrated that family medicine residents who train in teaching health center settings are nearly three times more likely to practice in underserved settings after graduation compared to residents who did not train in such settings.  Further, the government describes successful teaching health centers as having these common elements:  an institutional commitment to the dual mission of medical or dental education and service to an underserved patient population, including underrepresented minority and other high risk populations.[11]

In sum, the THCGME program represents one way in which the nation’s graduate medical education program is moving beyond the limits which resulted from the 1997 Balanced Budget Act.   In underserved areas, primary care physicians and community hospitals remain invaluable, and their recognized high caliber and commitment to care can be credited specifically to the health facilities that undertake exactly these types of residency training programs.


In this time of worsening physician shortages, the provision of funding for these training programs will go a long way to improve quality of care and expand services. Today’s health care environment is far different from that of 1997. Residency programs need to be expanded rather than capped.  To counter imminent provider shortages and provide all-encompassing quality care, America simply needs more well-trained doctors.  The THCGME program helps accomplish this goal.

Currently, there exist 32 federally-funded teaching health centers.  This summer, Health and Human Services Secretary Kathleen Sibelius announced another $12 million in additional ACA funding to support the program.  She stated the money would help train more than 300 residents during the 2013-2014 academic year -- doubling the number of residents trained in the prior one.

“Teaching Health Centers help attract students who are committed to serving communities of need and prepare them to practice in these communities,” Secretary Sebelius said in her statement.  She noted that teaching health centers are in urban, rural, and Tribal communities, and serve populations including veterans, minorities, older adults, and children.

“This program not only provides training to primary care medical and dental residents, but galvanizes communities,” said HRSA Administrator Mary K. Wakefield.  “It brings hospitals, academic centers, health centers, and community organizations together to provide top-notch medical education and services in areas of the country that need them most.”

Because traditional CMS-funded residency training continues to produce an inordinate proportion of specialists under fixed “caps” -- largely at the expense of primary care -- it is anticipated that the THCGME program will be extended by Congress for another five years beyond its current expiration date in 2015.  This is because the continued funding and expansion of the THCGME program will:

  • provide more than 700,000 primary care visits in needy rural and urban settings; and
  • guarantee that every dollar expended by the government for this project will be used exclusively for primary care training.

To ensure that the THCGME program will be extended, an organization called the American Association of Teaching Health Centers was established in Washington, D.C., in June 2013, to lobby the U.S. Congress for the reauthorization and expansion of the THCGME program.  The group is requesting an additional $800 million to fund the program through the end of fiscal year 2021, and Senators Kay Hagan (D-NC) and Bernie Sanders (D-VT) have drafted legislation that will obtain this goal.

Once funded, the extended THCGME program is expected to double the number of teaching health centers in the United States and support the training of over 1,000 residents each year.  The teaching health centers will “graduate” more than 350 new primary care providers annually, who will serve an additional 700,000 new patients every year through nearly 1.5 million patient visits.

If you and your clients would like to discuss this federal funding opportunity and obtain ongoing support for your application from your Members of Congress, please contact Kathleen Hatfield in the Law Offices of Stewart and Stewart at 202.315.0765 or e-mail her at:

For more information about the Law Offices of Stewart and Stewart, please visit or the International Society of Primerus Law Firms.

[1] Association of American Medical Colleges, Physician Shortages to Worsen Without Increases in Residency Training, 1 available at


[2] “Ronald Schneeweiss, MBChB; Roger A. Rosenblatt, MD, MPH; Susan Dovey, PhD; L. Gary Hart, PhD; Frederick M. Chen, MD, MPH; Susan Casey, PhD; George E. Fryer, Jr., PhD, The Effects of the 1997 Balanced Budget Act on Family Practice Residency Training Programs, Family Medicine 93, 94 (February 2003), available at

[3] Association of American Medical Colleges, Medicare Indirect Medical Education (IME) Payments, available at

[4] Health Affairs, Health Policy Brief on Graduate Medical Education (August 31, 2012), available at

[5] “Ronald Schneeweiss, MBChB; Roger A. Rosenblatt, MD, MPH; Susan Dovey, PhD; L. Gary Hart, PhD; Frederick M. Chen, MD, MPH; Susan Casey, PhD; George E. Fryer, Jr., PhD, The Effects of the 1997 Balanced Budget Act on Family Practice Residency Training Programs, Family Medicine 94 (February 2003), available at

[6] Id.

[7] Ibid.

[8] Edward Salsberg, MPA; Paul H. Rockey, MD, MPH; Kerri L. Rivers, MS; Sarah. E. Brotherton, PhD; and Gregory R. Jackson, BS, Center for Workforce Studies, Association of American Medical Colleges, U.S. Residency Training Before and After the 1997 Balanced Budget Act, 1 (September 10, 2008), available at

[9]Association of American Medical Colleges, Physician Shortages to Worsen Without Increases in Residency Training, 1 available at


[10] Affordable Care Act – Teaching Health Center Graduate Medical Education (THCGME) Program Funding Opportunity Announcement Number:  HRSA 13-144 (August 3, 2012).

[11] Id.