September 27, 2002
Advisory Committee Members Present:
MERC Advisory Committee Meeting
John Abenstein, Stephen Bolles, James Davis, Tim Gaspar, Roger Harms, Jim Kohrt, Larry Kuusisto, Dawn Ludwig, Daniel Mareck, Kathy Meyerle, Paul Olin (for Gary Anderson), Marilyn Speedie, Jim Toscano, Catherine Wisner.
Interested Parties Present:
Carol Backstrom, Ben Bornsztein, Jerry Collingham, Rena Garni, Anna Geary, Tim Jahnke, Margo Marko, Gerhardt Meier, C. Perlimutter, Rick Roberts.
MDH Staff Present:
Scott Leitz, Diane Reger, Diane Rydrych, Michelle Strangis.
I. Introductory Remarks from MERC Advisory Committee Alternate Chair – Cathy Wisner
The meeting began at 1:15 p.m.
Ms. Wisner welcomed the committee and visitors and asked for introductions of all attendees.
II. Legislative Update – Scott Leitz, Health Economic Program
Mr. Leitz discussed the memo sent to Advisory Committee members on July 15, 2002, which summarized legislative issues affecting MERC.
During the 2002 legislative session, the $5 million general fund appropriation for MERC was reduced by $4.85 million and the funding for MERC administrative costs was reduced from $150,000 to $100,000, for a total reduction of $4.9 million. In response to these reductions, the Department and the University of Minnesota Academic Health Center agreed to backfill a portion of the lost funds through an annual loan of $4.85 million from the AHC to MERC beginning in 2002. Under this arrangement, the $4.85 million supplied by the AHC is combined with funds from the medical education endowment and any other unmatched MERC funds and used to draw down federal matching funds. Upon receipt of matching funds, MERC repays the initial amount to the AHC along with five percent interest for the period in which the funds were held by MDH. All other funds, including the remaining matching funds obtained on the AHC dollars, are distributed through MERC. This change went into effect in 2002.
Also in the 2002 session, a modification to Minnesota Statutes 62J.694 allows the Commissioner of Finance, beginning in SFY04, to use funds from the medical education endowment to pay general fund expenses. If such a cash flow mechanism is activated in a given fiscal year, funds earmarked for distribution to MERC or the AHC in that year will not be available for cash flow, and funds from the endowment base will still be included in the calculation of fair market value even if those funds are used for cash flow purposes. If funds are used for cash flow, they must be repaid before the end of the fiscal biennium at a monthly rate of interest comparable to the rate earned by the state on invested treasurer’s cash. The intent of the legislation is to hold the AHC harmless, which means that MERC funds may have to be borrowed in order to make the AHC endowment whole if the repayment rate is lower than the interest which the ‘borrowed’ endowment funds would otherwise have earned. This will not effect the 2003 MERC distribution.
A committee member asked whether staff knew how tobacco endowment funds are currently invested and what the historic interest rate has been on endowment funds. Staff will look for information on current investment of endowment dollars and what the difference between invested treasurer’s cash and endowment interest rates is likely to be.
Mr. Leitz informed the committee that in the coming legislative session, the Department is planning to add additional language to the dental innovations pool portion of the MERC statute. This portion of the statute currently provides minimal guidance related to the grant process and rating criteria to be used for proposals.
Mr. Leitz also noted that the Department is considering a revision to the MERC statute to allow for the use of only prepaid (PMAP/PGAMC) revenues in the calculation of the PMAP distribution rather than using both PMAP and FFS data, as is the current practice. Although the medical education increment is only carved out of capitated payments and not out of FFS payments, FFS revenues were originally included in the calculation due to concerns about the quality of encounter data submitted by health plans. Now, as DHS continues to feel comfortable with the completeness of the encounter database, and sponsoring institutions and training sites will still have opportunities to revise the DHS estimates if they feel they are inaccurate, the Department feels that using only PMAP/PGAMC revenues would more closely align the distribution with its original policy goal of redistributing carved-out funds. Changing the data the Department uses would affect the amount of distribution that certain types of facilities, such as nursing homes, receive since these facilities mainly have FFS claims.
A committee member suggested that as nursing homes are generally facing difficult financial situations, the Department should reconsider making formula changes that would adversely affect them. Another member suggested that as FFS payments continue to include a teaching increment, continuing to include these funds in the revenue calculation is in effect doubly rewarding sites with large FFS volume. A third noted that what nursing homes and other sites need is not just financial support but stability and predictability in the size of their MERC and PMAP grants. The member noted that it is easier for her institution to encourage sites to serve as training sites if the sites know that they can count on a certain level of MERC/PMAP support each year for training, and that this encouragement of training should be the goal of MERC.
Based on the discussion of PMAP revenue calculation, the Committee discussed if the entire MERC distribution formula should be revisited or refined to more explicitly recognize ‘critical’ sites or whether any action that would revise the MERC formula should be delayed until a future session. The committee voted 6-5 against making any formula revisions for the coming legislative session.
III. Update on 2002 and 2003 MERC Distribution Process – Diane Reger
Ms. Reger informed the committee that the MERC 2002 distribution was sent to sponsoring institutions on July 8, 2002. Letters and reports were also mailed to each training site detailing the amount of distribution they should expect to receive from the sponsoring institutions within 60-days. A complete report of the 2002 distribution was handed out to committee members, and Ms. Reger noted that the report is also available on the MERC web site.
Applications for the 2003 MERC distribution are due to the Department of Health by October 31, 2002. The distribution is expected to take place in late June 2003. Financial and cost information is not being collected for this application period but will be collected again on the 2004 application. On the 2004 application, sponsoring institutions will have the option of submitting cost data for smaller sites with equal to or less than .25 FTEs. This will need to be decided at the sponsoring institution level and not at the individual program level.
IV. Dental Innovations Pool Grants – Diane Rydrych
V. MERC 2001 Trainee Exit Survey Report and 2002 Response Rates – Diane Rydrych
VI. Committee Member Term Expiration – Diane Reger
In January 2003, half of the Advisory Committee’s terms will be expiring. Notices will be published in November and Ms. Reger will be mailing notifications and applications to the members whose terms are set to expire. Current Advisory Committee members whose terms are up must complete the application process. Appointments to the committee will be determined by the Commissioner of Health based on departmental decisions related to the future direction and the appropriate composition of the committee.
December 6, 2002 – Meeting cancelled
January 24, 2003
May 30, 2003
September 19, 2003
All meetings are held from 1 – 4 p.m. in the Veterans’ Service Building in the fifth floor conference room.