On Jan. 31, Christus St. Elizabeth Hospital in Beaumont, Texas, announced that it would not renew its contract with the University of Texas Medical Branch at Galveston, in effect closing the hospital’s family practice residency program and its associated clinic as of June 30, 2002. The closure affects 16 first- and second-year residents, 30 employees, eight faculty members and two sports medicine fellows, not to mention the 5,000 regular patients to the clinic. The program’s eight third-year residents will graduate on schedule.

Hospital leadership cited financial reasons for the decision, saying the program cost St. Elizabeth more than $2 million last year. Four days after giving final notice of the closure, the hospital announced that it would be going ahead with phase two of its three-stage, $190 million expansion project, and that the construction of a new five-story parking garage should be finished by May. The final bill on the garage is estimated to be $8.97 million.

“The residents are hanging in there,” says Dannen Mannschreck, M.D., director of the Christus St. Elizabeth Family Practice Residency Program, adding most of the residents have found other programs where they will continue their education. “They have a great deal of loyalty to their patients.” Hospital employees will be reassigned to other positions and the program faculty will be left to fend for themselves.

The affected group of most concern is the clinic’s patients. Of the 15,000 outpatient visits to the clinic last year, half were classified as self-pay, “which translates to no-pay,” Mannschreck says. These are the working poor; they have no insurance but they don’t qualify for federal, state or county aid. In it’s Jan. 31 press release, the hospital says it is working with other providers in the region to serve the health needs of the clinic patients. Hospital leadership did not make itself available for comment.

“I feel very concerned about our specialty,” Mannschreck says. “I’m not sure that if we had been valued as a specialty that we would have necessarily been chosen as the place to make up the hospital losses.”

As the costs of running a residency program increase while federal and state support for graduate medical education remains stagnant, hospitals are left to make up the difference. Cuts in Medicare and Medicaid reimbursement coupled with steep hikes in medical liability insurance rates continue to squeeze all health care providers including hospital systems, leading to increased scrutiny of residency programs nationwide.

In the last 18 months, more than 20 family practice residency programs have announced plans to close, according to Perry Pugno, M.D., director of the AAFP Division of Medical Education. “They are threatened because on a straight profit and loss sheet, they don’t make enough money from the family practice center to pay everybody’s salary and the educational expenses of the program,” Pugno says. Some of these closures are a result of hospital mergers and many other programs are reducing the number of residency positions they offer because of economic pressures.

In these times of tightening hospital budgets, family practice residency program directors must constantly demonstrate the intangible benefits of their programs to hospital administrators to offset the losses on the books. One of those benefits is that residency programs bring new physicians to a community. Residents become involved in the community where they train. They get to know their patients as well as the other physicians in the area. This level of involvement is crucial for attracting doctors to places that have trouble recruiting against larger metropolitan areas.

“The data is very clear that about 50 percent of all residents that train in a program in primary care — family medicine, internal medicine, pediatrics — stay within 100 miles of where they train,” says Roland Goertz, M.D., chair of the Family Practice Residency Advisory Committee of the Texas Higher Education Coordinating Board. He says another major benefit of residency programs is that they give communities a method to take care of indigent populations. That’s what worries the leadership of the Beaumont residency program. Where will their patients turn next?

The program began operations in 1980 at St. Mary Hospital in Port Arthur. In 1995, it began splitting services between St. Elizabeth and St. Mary, with residents at both locations, and by 2001, all rotations at St. Mary were closed. Last year, the Residency Review Committee of the Accreditation Council for Graduate Medical Education told the program leadership that it did not have enough space for its 24 residents and the program had begun looking into the construction of a new building. The proposed building was to cost $1.5 million.

Mannschreck, who has only been with the program since June 2000, says this extra expenditure may have been the sticking point for hospital leadership. He says the hospital also complained that the program was receiving no financial support from UTMB Galveston other than the funding of staff salaries and benefits.

To add to the program’s financial woes, it had never received direct medical education (DME) funding. According to Mannschreck, no one had ever applied for these federal dollars intended to cover the direct costs of residency programs, like resident stipends, faculty and administration salaries, building maintenance and personnel. At the time of the announcement, the program was in the process of securing DME. “I had thought we had put some things together and we were making significant improvements and we had a pretty nice team working here, and then all of the sudden …” Mannschreck says, not finishing the sentence.

“I’ll bet you 90 percent of the indigent care delivered in this city is delivered through the various emergency rooms,” Gerhardt says. “There’s nowhere for them to go.”

According to him, a third of the 30 patients the emergency room admits to the hospital each day have either no funds or no physicians. Currently, the residency program handles the inpatient care for those patients and then performs any follow-up care through the clinic. After the closure, the hospital’s on-call staff will have to pick up those 10 or more patients each day.

While the immediate question of who will care for the clinic patients looms large, perhaps the most damaging impact of the closure on the community will be the loss of potential new physicians in an area that needs more doctors. “We have a horrible time recruiting physicians to the area,” Gerhardt says. According to him, the petrochemical history of Beaumont and the hot and humid summers contribute to many prospective new doctors’ decisions to settle somewhere else. Since the program came to Beaumont though, roughly half of each graduating class has opened practice in the area, Mannschreck says. Now the community will have to do without those three or four new doctors each year.

Gerhardt says it would be a mistake to blame the hospital for the closure. “The hospitals are in the same fix as the doctors are in,” he says. “The third party payers are cutting back. Medicare and Medicaid are cutting back. More requirements, EMTALA (Emergency Medical Treatment and Active Labor Act), lab, etcetera — [hospitals] are operating on a very thin margin … They’re choking us. They’re choking the hospitals.”

According to a story in the Business Monthly section of The Beaumont Enterprise, St. Elizabeth CEO Ed Myers says the decision to close the program was made before approval for the hospital’s expansion project came from the Christus Health board. In the story, Myers describes the hospital’s role in caring for the indigent as “a continuous balance.” The newspaper reports him as saying that state law requires a hospital to provide 4 percent of their net revenue in free care to maintain its not-for-profit tax status, and that St. Elizabeth more than doubles that.

St. Elizabeth’s expansion plan includes a new outpatient center, emergency center and two parking garages, one of which is already being built. The estimated total cost is between $190-200 million. The Beaumont Enterprise reports that Myers expects the investment to attract new physicians and help the hospital eliminate medical errors.

Operating the residency program costs about $4 million each year. Federal, state and local funds cover half of that leaving about $2 million for the hospital to pick up. Construction of the new building for the program would have increased the hospital’s bill to $3.5 million for the coming year.

Hospitals are businesses, and the people in charge of them will make decisions that are good for business. Can they be asked to subsidize medical education to the detriment of their thinning profit margins?

“It’s a fair question,” says Linda McClung, a senior vice president of communications for Christus Health. “It’s part of our mission and our vision to expand and improve health care in the communities we serve, but as we continue to face challenges in reimbursement and increased community need — more uninsured and more community need — it does get difficult to make those decisions.”

McClung says the examination leading to the decision to shut down the Beaumont program was part of an annual evaluation based on community need. Christus organizations regularly go through the process before budgetary planning. “It just seemed to us that the community was asking for other things, that those patients that are seen in the family practice clinic, there were other places in the community where they can and will be served,” McClung says.

According to her, St. Elizabeth Hospital is in dire need of expanded outpatient services, the emergency room is too small and there aren’t enough patient beds to meet the needs of the community. She says the hospital expansion project addresses these shortcomings, and that while the clinic closure may seem incongruous in light of these needs, supporting the program was not the best use of hospital funds.

McClung says the hospital is committed to finding medical homes for affected patients by supporting other community clinics and negotiating to bring more clinics to the area. She dispels the idea that Christus is targeting its educational programs elsewhere, pointing out the strength of the other three Christus programs in the state.

“It becomes increasingly difficult as years go on and reimbursement continues to decline, we have to make some choices that are hard — that are very hard,” she says.

The Balanced Budget Act of 1997 capped federal graduate medical education dollars and subsequent refinements to the legislation have only postponed scheduled cuts. During each budget cycle, organized medicine has to fight just to keep funding where it is. An increase is not likely.

The state contributes $10.7 million for the education of family practice physicians and somewhere between $3-4 million for some primary care residency programs. That money is split between 32 family practice programs and a handful of internal medicine and pediatric care programs. That’s an average of about $400,000 per program, but with a projected state budget shortfall of $5 billion, legislators will be looking to make cuts. As programs across the country like the one in Beaumont announce their closures, the question is: who’s willing to pay for the education of new family doctors?

In Beaumont, no one really knows what effect the program’s closure will have on the community. Some of the residents will be leaving Texas, but many will stay. They are all busy finishing their terms, each trying to find extra time to arrange their relocation.

To some, the closure represents one more barrier to care for those who can’t afford to pay. “The hospital has done more than they would have had to do,” Gerhardt says. “On the other hand, you can’t expect two hospitals in the area and two ER groups to carry 90 percent of the indigent care. It’s not fair. That’s where we are at right now, and the community shows no interest to help.”