Wisconsin needs to reform its medical school admissions procedures

On June 15, 2017, the U.S. Centers for Medicare and Medicaid Services (CMS) published annual per capita health care expenditure estimates by U.S. residents for the years 1991 through 2014. Expenditures were classified by: 1) the payor’s state of residence; and 2) type of establishment delivering care (i.e., hospitals, physicians and clinics, nursing homes, etc.) or product (pharmaceuticals or medical devices) purchased. In 2014 national per capita hospital expenditures were estimated to be $3,079 while in Wisconsin per capita hospital expenditures were estimated to be $3,502. The national and Wisconsin per capita physician care estimates were $1,874 and $2,168 respectively. The total per capita 2014 discrepancy between Wisconsin and the rest of the country just for physician and hospital services was $717 and across the state totaled over $4 billion.

The reason per capita expenditures in Wisconsin for these services exceed the national averages is a not greater use of services. All of the evidence collected by authoritative and unbiased agencies shows that we pay abnormally high prices for these services in Wisconsin.

In 2014, the Government Accountability Office (GAO) constructed price indices, adjusted for average area wage scales and area rents, from charges to private medical insurers for three different procedures for varying numbers of metro areas. For coronary stents, among 155 metro areas, all identified metro areas whose principal city was in Wisconsin were among the 37 highest priced metro areas. For laparoscopic appendectomies, among 139 metro areas, all identified metro areas whose principal city was in Wisconsin were among the seven highest priced metro areas. For total hip replacements, among 141 metro areas, all identified metro areas whose principal city was in Wisconsin were among the 67 highest priced metro areas and three of them were in the top 15.

In 2009, the consulting firms Mercer and Milliman found that 2007 per unit charges to insurance companies by physicians in Southeast Wisconsin were 24% higher than the Midwest average. In 2011, the firms found 2009 per unit charges by physicians in Southeast Wisconsin were 20%–25% higher than the Midwest average; in 2012, 2011 per unit charges by physicians in Southeast Wisconsin were again 20%–-25% higher than the Midwest average; and in 2014, Mercer and Milliman found that 2012 per unit charges by physicians to employers who self-insured in Southeast Wisconsin were over 45% higher than the Midwest average.

This problem is not new. A 2005 GAO study ranked 319 U.S. metro areas with respect to 2001 physician charges, adjusted for average area wage scales and area rents, to the federal government. Wisconsin had eight out of the 10 highest charging metro areas. Every metro area whose principal city was in Wisconsin ranked in the top 20. Every metro area in Michigan ranked in the bottom half. The price index for La Crosse was 70% higher than the price index for Ann Arbor.

These high prices have nothing to do with medical malpractice litigation. The Wisconsin legislature has almost completely insulated physicians and hospitals in this state from the threat of malpractice liability.

In April 2015, the Center for Healthcare Research & Transformation (CHRT), a nonprofit partnership between the University of Michigan and Blue Cross Blue Shield of Michigan, examined the stark differences among per capita hospital care expenditures by residents of Indiana, Michigan, and Wisconsin. The key reasons cited by CHRT for the difference between Michigan and Wisconsin were: 1) very high profit margins at Milwaukee hospitals; 2) the absence in Wisconsin of an insurance carrier with a large share of the market capable of demanding low prices; and 3) Wisconsin’s failure to regulate hospital and clinic construction.

Wisconsin needs to impose a moratorium on hospital and clinic construction until the state performs a thorough review of Wisconsin’s health care brick and mortar requirements. We also need to encourage the consolidation of the provision of medical insurance to create strong and independent carriers who are capable and willing to drive hard bargains.

In my opinion, the reason we pay abnormally high prices for physician services is that we have to bribe physicians from other states to work in Wisconsin with higher pay, higher benefits, and lower workloads. These extra costs work their way through the health care system to drive up premiums and co-pays, and drive down wages. A review of the May 2016 BLS wage data shows that physicians here earn considerably higher wages than physicians in other states. Assuming a 50 hour work week, if the 11,280 Wisconsin physicians whose wages were surveyed by the BLS, had been paid at the same rates as physicians across the country they would have been paid $489,368,750 less per year, and if they had been paid at New York rates they would have been paid $784,701,750 less. These wage differentials are just the tip of the iceberg. They do not account for higher benefits, lower workloads, and lower malpractice premiums.

The reasons we have to bribe physicians are: 1) not enough Wisconsin residents get into medical school; 2) too many medical students from Wisconsin have to leave the state for medical school; and 3) too many graduates of the state’s medical schools leave the state for residency training. Approximately 43% of the physicians practicing in Wisconsin went to medical school and finished their residency/fellowship training outside Wisconsin. Nationally, 37% of physicians are recruited across state lines. The root causes of these problems are that we do not have enough medical school seats or residency slots, and the two medical schools here give away too many medical school seats and residency slots to nonresidents who leave the state after they finish their training.

There are stark differences among states in the success rates of applicants to medical schools. Because Wisconsin has insufficient seats and because most medical schools in other states are biased in favor of their own residents, Wisconsin is one of the worst places in the country to call home for medical school applicants. To gain acceptance to MD granting medical schools, Wisconsin applicants must have higher GPAs and MCAT scores than applicants from most other states. For every state in the country for the years 2009 through 2016, I divided the number of first year medical students from that state (from data supplied by the Association of American Medical Colleges and the American Association of Colleges of Osteopathic Medicine) by the number of first year college students four or five years earlier from that state who, according to the U.S. Department of Education, went directly to college from high school. (This is the demographic from which virtually all physicians come.) Nationally, first year medical students as a percentage of high school students who went directly to college four or five years earlier was 1.25%. For West Virginia the percentage was 1.81%. For Wisconsin the percentage was 1.03%.

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Based on our share of the U.S. population, even after the expansion of the Medical College of Wisconsin (MCW) to 261 seats and the UW School of Medicine to 170 seats, if you include M.D and D.O. medical school seats in the national total, we have a shortage of approximately 65 medical school seats. A comparison of 2001 medical school seats and classes in Wisconsin with the same data for 2016 shows that medical school seats in Wisconsin have grown by 80 seats from 351 to 431. Unfortunately the number of nonresidents in those seats grew by 92 students from 107 to 199. In the fall of 2016, 51% of the first year medical students of the Medical College of Wisconsin and 38% of the first year medical students at the UW School of Medicine were nonresidents.

The Association of American Medical Colleges tracks every state’s rate of retaining physicians who: 1) go to medical school in that state; 2) go to a publicly owned medical school in that state; 3) finish their training as a resident or fellow in that state; and 4) attend medical school in that state and finish their training in that state. The State of Wisconsin retains 70.14% of the physicians who graduate from a Wisconsin medical school and finish their residency/fellowship training in Wisconsin. The retention rate falls to 35.2% for physicians who graduated from an out of state medical school but finished their training in Wisconsin. The retention rate falls even further to 22.5% for physicians who graduated from a Wisconsin medical school but finished their training outside Wisconsin. Only 30.55% of active physicians who graduated from a Wisconsin medical school finished their training here.

In many of the residency programs at the University of Wisconsin Hospital, the vast majority of residents have no prior significant connection with the State of Wisconsin. According to the UW Emergency Medicine website, only four out of 37 UW emergency medicine residents went to medical school in Wisconsin. According to UW’s Department of Urology website, only one of 15 urology residents went to medical school in Wisconsin.

Wisconsin needs to expand the number of medical school seats in this state by opening a second state-owned medical school and it must limit the number of nonresidents in the UW School of Medicine to 15% of each entering class. The UW Foundation has approximately $350 million sitting in various accounts as a result of the Blue Cross Blue Shield giveaway in 2004 and 2007. That would capitalize a second state-owned medical school quite adequately. The Wisconsin Legislature should statutorily limit the number of nonresidents in the entering classes at the UW School of Medicine to 15%. That percentage would be great enough to cover federally funded M.D./Ph.D. students as well as nonresident members of underrepresented minority groups.

Wisconsin needs to expand the number of residency slots by at least 125. That could be funded by a $40 million increase in the state’s hospital tax. That increase would approximate 0.2% of Wisconsin’s hospital revenues. Furthermore, the top echelon of the UW Madison’s administration needs to know that the current practice of shunning the graduates of the state’s medical schools from the UW Hospital’s residency programs is simply unacceptable.

Based on its share of the U.S. population, the state of Michigan has vastly more than its share of medical school seats, all of which sit at state-owned campuses, and vastly more than its share of residency slots. Assuming a 50 hour work week, if the 11,280 Wisconsin physicians whose wages were surveyed by the BLS had been paid at the same rates as Michigan physicians, they would have been paid $725,598,000 less per year. Through lower insurance premiums, lower copays, and lower taxes those savings would have worked their way into the bank accounts of the citizens of this state.

John Gillis is a semi-retired CPA who lives in Madison.

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