Cover Story -- September 2003
At a time when lawmakers and many medical educators say Texas
needs to train more physicians to meet the needs of its growing
population, a series of budget cuts by the Texas Legislature
threaten to cripple the state's ability even to maintain the
Lawmakers earlier this year slashed state support for graduate
medical education (GME) in primary care fields by nearly half and
lopped an average of 5 percent off the budgets of the state's
medical schools. Medical educators say those cuts, combined with
reductions in state funding for indigent health care programs such
as Medicaid and the Children's Health Insurance Program (CHIP),
will dramatically impact the ability of medical schools, teaching
hospitals, and residency programs to provide health services to
low-income Texans. (See "
Cuts in Graduate Medical Education
What's worse, the cuts could shut the doors of some medical
residency programs, forcing Texas medical graduates to go out of
state for their residency training.
The budget cuts came as no surprise to those in the medical
education community. Entering the session, lawmakers faced a
multibillion-dollar shortfall in its fiscal 2003 budget caused by a
sagging economy and declining tax revenues. On top of that was a
budget deficit of almost $10 billion for the state's two-year
fiscal period that began Sept. 1.
Thus, medical school officials and residency directors knew
their programs likely were on the chopping block. And chop the
legislature did. Possibly the cruelest cuts were in graduate
The Texas Higher Education Coordinating Board also fell victim
to the budget axe. While the cuts it experienced were smaller than
those suffered by the medical schools, the coordinating board saw
reductions in nearly half the budgets of the various primary care
graduate medical education programs it administers.
Among the programs cut was the Graduate Medical Education
Program, which provides state support for residency programs. The
program's budget was slashed from $15.2 million in 2002-03 to $3.8
million for 2004-05.
In fiscal year 2003, the program contracted with eight medical
schools and 11 independent residency programs and supported 2,620
primary care residents in training. Because of the budget cuts,
coordinating board staff project that per-resident funding will
drop from $2,839 to $730 in fiscal years 2004 and 2005.
Lawmakers also eliminated the $8 million Resident Physician
Compensation Program and the Family Practice Residency Pilot
Project, which previously was budgeted at just under $2 million.
The first program provided funds to teaching hospitals for training
residents in primary care specialties such as internal medicine,
pediatrics, obstetrics and gynecology, geriatrics, and emergency
medicine. The second program allowed residency programs to build
innovative educational experiences for family practice residents
through providing indigent heath care services.
That means residents' salaries could be cut. Funds from the two
programs are passed through the medical schools to the teaching
hospitals and community-based programs. The money can be used for
faculty expenses or resident stipends. Without these funds, those
programs will have to pay those expenses out of other funds or cut
On top of those cuts, lawmakers also eliminated some $42 million
in GME funding in the Medicaid budget, says James C. Guckian, MD,
acting executive vice chancellor for health affairs for The
University of Texas System. Those reductions, combined with the
overall reductions in the Medicaid and CHIP programs, could force
some residency programs -- particularly community-based programs --
to close, warns Nancy W. Dickey, MD, president of the Texas A&M
University System Health Sciences Center.
"GME's being hammered from the perspective that our graduate
medical education programs provide a tremendous amount of indigent
and Medicaid care in this state," she said. "The reality is that
330,000 fewer children will be covered by Medicaid this coming
year, 200,000 fewer children will be covered in CHIP this year, and
about 17,000 adults will not receive coverage they had in the past.
That does not translate into fewer babies being delivered or fewer
kids falling off their bicycles or swing sets needing stitches and
casts. What it translates into is community physicians and
hospitals having to find a way to pay for care that in previous
years was being paid for by state and federal programs."
Marcia Collins, director of Texas Medical Association's Medical
Education Department, says the outlook is not good for resident
"Because of the overall economic climate, we think that some
residency programs will close," Ms. Collins said. "It's not just
because of the GME cuts. That's a big factor, but generally it's
the overall economic picture."
Within the past two years, a family practice residency program
in Beaumont closed, and Dr. Dickey says a second recently came
within 72 hours of shutting its doors before contract negotiations
provided adequate funds to allow the program to remain open.
A&M's community-based family practice residency program also
has experienced financial difficulty, but Dr. Dickey believes it
will survive, at least for now.
If residency programs are forced to close, medical educators are
concerned it will result in an exodus of Texas medical graduates
from the state.
"There's a concern that we're going to spend all this money to
educate new physicians and yet we're not going to preserve the
opportunity for them to stay in Texas for their residency
training," Ms. Collins said. "That's a serious concern when you
consider the relationship between where physicians do their
residency training and where they end up practicing."
The Budget Shuffle
While the expected impact of the budget cuts on the residency
programs is dramatic, medical school officials say they also will
have to cut services to make ends meet. All state-run
health-related higher education institutions, as well as the
privately owned Baylor College of Medicine, which receives some
state dollars, were included in the average 5-percent cut in
general revenue appropriations. That cut actually was less than
originally anticipated, says Stacey Silverman, program director of
the coordinating board.
"That decrease is less than [the cuts for] the general academic
institutions and less than the community and technical colleges,"
Ms. Silverman said. Those schools took 7-percent and 10-percent
Most of the funding cuts for the health science centers came in
a reduction in the state's funding formula system, which has been
used to set state medical school appropriations since 1999. The
formula's base unit was reduced from $11,776 per student to $9,934,
a 16-percent reduction. That means state appropriations to medical
schools will be reduced from $56,000 per medical student to
While the cuts average 5 percent, there was great variation
among individual institutions. Dr. Dickey says her institution took
one of the smaller cuts, at about 1 percent. She praised College
Station-area lawmakers for preserving the school's funding, but
added that A&M also was aided by its rapid growth. While such a
small cut was good news, it also is bad news because it leaves the
school scrambling to figure out how to fund that growth in the
"The reality is the cuts are much more substantial than 1
percent because our health science center is in a rapid growth
phase," Dr. Dickey said. "At a time when we would have anticipated
that growth to show a substantial increase in state dollars because
of an increased number of students, we actually stayed level."
While A&M's cut was small, it may actually be hurt more than
other institutions because it is most dependent on state revenue,
Dr. Dickey says. A&M gets roughly 68 percent of its operating
funds from state appropriations, compared with about 50 percent for
the University of North Texas Health Science Center, and between 15
and 20 percent for UT System health science centers.
"It's not that the state gives less money to the UT health
science centers; they actually get more total dollars, but they
have over the years had opportunities to diversify their budgets,"
Dr. Dickey said. "They have good practice plans, they have
hospitals they run or own. We don't have a practice plan, and we
don't own a hospital."
While A&M saw a small cut, some of the UT System
institutions took much more significant cuts. The six UT System
health-related institutions took a total cut of $78.05 million, or
5.18 percent, with UT Medical Branch at Galveston seeing the
largest cut in general revenue at 8.65 percent, or $42.2 million.
UT Southwestern Medical Center at Dallas was the only UT System
health institution that did not get a cut. Its state funding
actually increased 3.67 percent, or $6.84 million, because of
special item appropriations to provide $7 million for research
activities related to heart disease and stroke, neurological
disease, cancer immunology, pharmacology, and genetics and
molecular biology, and $7.87 million to fund an Institute for
Innovations in Medical Technology.
Officials representing a majority of the state's medical schools
say they will be able to shuffle funding and staff to preserve the
core missions of their institutions, which are medical education
and research. However, patient care and some program areas, such as
allied health training, may have to be sacrificed, they say.
The 5-percent average cut for the medical schools, including
Baylor, came on top of 7-percent reductions in fiscal year 2003
spending that Gov. Rick Perry asked all state agencies to plan for
in order to resolve the shortfall in the 2002-03 budget. The impact
of both cuts already is being felt.
For example, in late June, UTMB announced it would immediately
lay off 100 employees and cut another 50 workers from its payroll
by Sept. 1. Those layoffs came on top of 660 employees who lost
their jobs earlier in the year.
Some laid-off employees were able to fill other positions at
UTMB, but the medical school's president, John Stobo, MD, has
warned his employees that lean times are ahead. And the lean times
are not staring just UTMB in the face.
The Double Whammy
Despite the fact that UT System schools generate more revenue
through practice plans and hospital income than A&M or other
institutions, Dr. Guckian says those revenues won't help his
system's health science centers weather these tight economic times.
In fact, he says cuts in Medicaid, CHIP, and the medical programs
of the Texas Department of Criminal Justice will put an additional
financial strain on UT System institutions and their partner
"We generate such a large part of our practice plan and hospital
revenue from governmental payers -- Medicaid and Medicare -- that
have limited reimbursement, and in Texas, for example, Medicaid is
being cut," he said. "So we expect our Medicaid revenue to actually
With the exception of M.D. Anderson, which generates millions in
outside dollars from both public and private payers because of its
reputation as a world-class cancer center, most other UT System
institutions will have to cut patient care services so that their
core missions of medical education and research can be
"They will have to cut back some services," Dr. Guckian said.
"It's true not only for the Medical Branch, it's true for our
affiliated hospitals, as well, like Parkland in Dallas, University
Hospital in San Antonio, and Harris County Hospital District. These
hospitals, because of the cuts in Medicaid and CHIP, also are
facing budget shortfalls that they are going to have to adjust to.
And because they're our partners, and in many respects they
compensate us for the care we provide to their indigent patients,
they're going to be strapped. As a result, we're going to be
impacted by that."
While Drs. Guckian and Dickey and Ronald Blanck, DO, president
of the UNT-Fort Worth, say they will adjust their budgets to
protect teaching and research functions, there already have been
some very real and dramatic reductions in programs. In addition to
the layoffs at UTMB, about 120 employees were cut at UT-Houston,
Dr. Guckian says.
UTMB also has eliminated some cardiac care programs, closed its
hyperbaric medicine unit, and likely will close some beds at
UTMB-owned hospitals. Some UTMB outreach clinics that provide
indigent care outside the Galveston area also likely will close,
Dr. Guckian says.
While UT Southwestern got more money for research, it may have
to eliminate as many as three of its 10 allied health programs
because of the cuts in formula funding. Gordon Green, MD, dean of
the school's Allied Health Sciences School, says allied health and
nursing programs will be disproportionately hurt by the budget cuts
because they do not enjoy the level of research grant and practice
plan revenue that medical schools can generate.
"The allied health programs are much more dependent on state
appropriations," Dr. Green said. "For the most part, clinical
service income is a very, very small portion of what comes into
allied health training programs and an even lesser amount into
public health educational programs. In addition, the research
grants that the medical schools enjoy in considerable abundance
typically are not available to a great extent in the allied health
Meanwhile, Dr. Blanck says UNT-Fort Worth, which experienced a
4-percent reduction in general revenue, has mostly avoided program
cuts by making some administrative reductions, such as eliminating
some campus police officer positions and hiring security guards to
replace them. However, library hours have been cut, a pathology lab
for the school's practice plan was closed, and about 30 positions
have been eliminated, with more likely to follow.
The cuts, he says, will affect UNT's ability to expand its
research activities, practice plan, and other programs that
generate nonstate revenue. "It will affect our ability to grow and
to put investment dollars into programs that would ultimately allow
us to be less state dependent," he said.
The $51 Million Question
While the health science centers were still scrambling to figure
out how to live within their reduced revenues, uncertainty about
just how much money lawmakers had appropriated for those
institutions remained. Through a quirky rider to the appropriations
bill, some $51 million was still in question.
As lawmakers were finishing up the budget, Congress approved
federal tax cut legislation that included the appropriation of
so-called "state fiscal relief funds" that should net Texas an
additional $2 billion in federal aid during the coming biennium.
Under Rider 56, lawmakers announced their intent to earmark $51.23
million of those fiscal relief funds to meet a "target"
appropriations level for the health-related institutions.
However, that money was not actually appropriated and it will be
up to the governor or the Legislative Budget Board to eventually
allocate those funds. Dr. Dickey says there are still unresolved
questions about whether those funds will be needed elsewhere to
balance the state budget or when the money actually might be
available to the medical schools.
Without the federal funds, the UT System cuts would jump from
$78 million to more than $116 million, Dr. Guckian says. A&M's
cut would be an additional $3 million without those funds.
Additional funding for at least two institutions -- UTHSC-San
Antonio and Texas Tech University Health Sciences Center -- also
remained unresolved in mid-July as some attempted to push funding
measures through the special legislative session to provide more
money to the Regional Academic Health Center (RAHC) in the Lower
Rio Grande Valley and TTUHSC in El Paso.
Sen. Eddie Lucio (D-Brownsville) filed legislation to provide an
additional $19 million in funding to support further development of
the Valley RAHC. Meanwhile, House Appropriations Committee Chair
Talmadge Heflin (R-Houston) filed a competing bill to provide an
additional $9 million for the RAHC and $2 million to help the
two-year health science center in El Paso gain accreditation as a
four-year medical school.
Both Senator Lucio and Sen. Eliot Shapleigh (D-El Paso) say
Representative Heflin's bill provides too little money, but it was
unclear whether either bill would make it through the legislature
this summer because Governor Perry had not included funding for
either the Valley RAHC or the El Paso medical school in his call
for the special session.
Ken Ortolon can be reached at (800) 880-1300, ext. 1392, or
(512) 370-1392; or by e-mail at
Cuts in Graduate Medical Education
The Texas Legislature made deep cuts in medical school and
graduate medical education programs administered by the Texas
Higher Education Coordinating Board that are designed to promote
careers in primary care medicine. Below is a comparison of fiscal
2002-03 funding with appropriations for the biennium that began
Family Practice Residency Program
Primary Care Residency Program
Graduate Medical Education Program
Statewide Preceptorship Programs
Joint Admission Medical Program (TAMS)
Resident Physician Compensation Program
Family Practice Residency Pilot Project
Source: Texas Higher Education Coordinating Board
*FY 2003 totals reflect the 7-percent cuts made in all state agency
budgets for the fiscal year.
Back to Article