Medical Education and Research Costs (MERC) Distribution Formula

2004-2007

The Calculation of the MERC General Fund and Federal Match Distribution Formula

Prior to fiscal year 2004, the MERC and PMAP/PGAMC distributions were calculated using separate formulas. The MERC formula focused solely on FTE counts and clinical training costs, while the PMAP/PGAMC distribution used a formula that equally weighted relative clinical training costs and relative public program volume at each training site. Beginning with the 2004 distribution however, the two funding streams were combined into a single annual distribution governed by a formula that weights relative clinical training costs at 67% and relative public program volume at 33%. Additionally, a change made to the MERC statute in 2003 directed the Department to set aside 10% of available medical education funds for a 'discretionary pool.' This 10% pool is distributed at the same time as the 90% or formula-based pool, but sponsoring institutions can award these dollars at their discretion to qualifying training sites (see Frequently Asked Questions for more information). The step-by-step calculation below deals with the mechanics of the 90% pool.

Step 1

Calculate an average clinical cost per trainee for each of the provider types. For example, all the clinical training costs reported for medical students are totaled and this is divided by the total number of medical students to arrive at an overall average clinical training cost per medical student.This calculation is based on data submitted in the MERC applications every other year. Beginning in 2004, average cost per trainee for medical residents is based on the costs for primary care residents only; specialty residents/fellows are not included in the calculation.

Step 2

Calculate the adjusted total clinical training costs for each training site.
The number of eligible trainees in each training site multiplied by the average clinical training costs for the appropriate provider type, from step 1 above.

Step 3

Calculate the 'medical education' portion of the trust fund each training site receives
The total adjusted clinical training costs for the training site from Step 2 above divided by the total adjusted clinical training costs overall.This percentage is used to distribute 67% of the formula-based pool.

Step 4

Calculate the relative public program volume for each training site
Using site-level revenue data provided by the Minnesota Department of Human Services and verified by sponsoring institutions, a public program volume is calculated for each site and across all eligible sites. Each eligible site's percentage of the overall total is calculated, and this percentage is used for site-level relative public program volume. Relative public program volume is used to distribute the remaining 33% of the formula-based pool.

Step 5

Calculate the relative public program volume for each program/site combination
As MERC/PMAP funds are distributed through sponsoring institutions and training programs rather than directly to training sites, the overall site-level public program volume percentage calculated in Step 4 must be divided among the various programs who are using each site for clinical training. To do this, adjusted clinical training costs for each program/site combination (average cost per FTE multiplied by the number of FTEs at the site) are divided by the total training cost across all programs using the site to come up with a percentage of costs accounted for by each program. For example, training site X has total clinical training costs of $100,000. If programs A, B, and C all use training site X, and the clinical training costs associated with each program at that site are $10,000, $40,000 and $50,000, then the 'public program' portion of the grant for program A will be 10%, for program B 40%, and for program C 50%.

Step 6

Calculate the amount of the formula-based grant.
To calculate the amount due to each clinical training site, MERC staff multiply the 'medical education percentage' calculated in Step 3 by 67% of the total available pool, then multiply the 'public program' percentage calculated in Steps 4 and 5 by 33% of the available pool. Adding these two percentages together for each site gives the total amount due to each training site from the formula-based distribution.

Step 7

Calculate the amount of the 10% discretionary fund grant.
The 10% discretionary fund is awarded to sponsoring institutions, who are then required to pass these funds onto eligible training sites, using rationale of their choosing. Sponsoring institutions can also choose to award funds to sites using the same percentages the sites received in the formula-based distribution. Each sponsoring institution is awarded funds from the 10% discretionary fund in the same proportion as they received from the formula-based pool. In other words, if the training sites affiliated with a given sponsoring institution received 50% of the formula-based fund, that sponsoring institution would also receive 50% of the discretionary fund.

Actual distribution:

The distribution of funds goes to the sponsoring institution. Each grant distribution packet will indicate which programs (and within each program which training sites) were funded and the amount of the grant due to each site. A combined payment to each sponsoring institution will include the amounts calculated from Steps 6 and 7 for all the approved programs and their training sites submitted in the sponsoring institution's application.

MERC Distribution Process ** Example for $1M formula-based fund**
(Note: The numbers used in this example are FICTITIOUS. Does not include 10% fund.)
A B C D E F G H I J K
Program

Site

Type of
Trainee
Average
Cost
Total #
Eligible
Trainees
Adjusted
Total Clinical
costs (D*E)
Medical Education % (Step 3)
Site's total relative public program volume (step 4)
Program Share of Site Costs (Step 5)

Public program % for program (Step 5)

Total Grant (G*$670,000 + J*$330,000)
1
A Medical Student 42,159 10 $421,590 1.82% 20% 10.1% 2.0% $18,863
2
A Medical Resident 151,952 15 $2,279,280 9.86% 20% 54.4% 10.9% $101,979
3
A Dental Student 159,875 1.5 $239,813 1.04% 20% 5.7% 1.1% $10,730
4
A APN 82,354 10 $417,930 1.81% 20% 10.0% 2.0% $18,699
5
A PharmD Student 35,996 15 $539,940 2.34% 20% 12.9% 2.6% $24,158
6
A PharmD Resident 72,917 4 $291,668 1.26% 20% 7.0% 1.4% $13,050
7
B Medical Student 42,159 20 $843,180 3.65% 11.3% 24.2% 2.7% $33,475
8
B Medical Resident 151,952 10 $1,519,520 6.57% 11.3% 43.6% 4.9% $60,326
9
B Dental Resident 159,875 7 $1,119,125 4.84% 11.3% 32.1% 3.6% $44,430
10
C Medical Student 42,159 5 $210,795 0.91% 13.8% 3.5% 0.5% $7,695
11
C Medical Resident 151,952 1 $151,952 0.66% 13.8% 2.5% 0.3% $5,547
12
C Medical Resident 151,952 37.5 $5,698,200 24.66% 13.8% 94.0% 13.0% $208,009
13
D Medical Resident 151,952 50 $7,597,600 32.87% 32.1% 92.4% 29.7% $318,115
14
D APN 41,793 15 $626,895 2.71% 32.1% 7.6% 2.4% $26,248
15
E Dental Resident 159,875 3 $479,625 2.08% 5.7% 100% 5.7% $32,715
16
F Physician Asst. 42,301 10 $423,010 1.83% 14.5% 100% 14.5% $60,113
17
G APN 41,793 5 $208,965 0.90% 2.1% 100% 2.1% $12,998
18
H APN 41,793 1 $41,793 0.18% 0.5% 100% 0.5% $2,862
SUM 220 $23,110,881 100% 100% $1,000,000
D: Average clinical training costs for that provider type. It is calculated by taking the weighted average of all programs of that provider type.

E: This is the total number of eligible trainees in the program.

F: Column D times Column E.

G: This is the ratio of the program's adjusted clinical training costs to the overall total clinical training costs. This is the proportion of the trust fund that will go to the program.

H: The relative public program volume for a site as a whole; calculated by dividing each site's public program revenue by total revenue across all sites.

I: Share of total training costs at each site that is borne by each program using the site. Calculated by dividing each program's adjusted training costs at the site by total costs across all programs at the site.

J: Public program percentage for each program using a given site. Calculated by multiplying the site's overall relative public program volume (column H) by the percentage of costs borne by a program (column I)

K: Total grant from formula-based distribution. Calculated by giving 67% weight to percentage in column G (medical education percentage) and 33% weight to the percentage in column J (public program percentage for each program/site combination).


The Calculation of the PMAP/PGAMC portion of the MERC Trust Fund Distribution Formula

The PMAP Formula consists of 2 factors, the Education Factor and the Public Program Volume Factor. Each factor constitutes 50% of the formula.

Step 1

Calculate an Average Clinical Training Cost per Trainee for each of the provider types.
For example, all the clinical training costs reported for medical student programs are totaled, and this total is divided by the total number of medical students to arrive at an overall average clinical training cost per medical student.

Step 2

Calculate for each training site the Adjusted Clinical Training Costs.
The number of eligible trainees in each training site times the average clinical training cost for that provider type calculated in Step 1.

Step 3

Aggregate the Adjusted Clinical Training Costs.

Aggregate (sum) the Adjusted Clinical Training Costs calculated in Step 2 for each training site that is a site for more than one teaching program, so that each training site is listed only once along with its total Adjusted Clinical Training Costs.

Step 5

Calculate the EDUCATION FACTOR.

Each site's total Adjusted Clinical Training Costs from Step 3 is divided by the overall Grand Total Adjusted Clinical Training Costs across all training sites. This results in a percentage, which across all training sites sums to 100%.

Step 6

Calculate the PUBLIC PROGRAM VOLUME FACTOR.

Each site's PMAP/PGAMC/GA/MA Revenues are divided by the Grand Total PMAP/PGAMC/GA/MA Revenues across all sites. This results in a percentage which, across all training sites sums to 100%.

Step 7

Calculate the Training Site's Trust Fund Payment.
The education factor from Step 5 times 50% PLUS the public program volume factor from Step 6 times 50%
is multiplied by the total Trust Fund amount. This results in the total amount this training site will receive from the PMAP/PGAMC portion of the MERC Trust Fund.

Step 8

Allocating the Amount across the teaching programs.
For training sites that serve more than one teaching program, the total grant amount is allocated out to the teaching programs. For each training site that hosts more than one teaching program, each teaching program's adjusted clinical training costs associated with that training site is divided by the training site's total adjusted clinical training costs. This percentage is then multiplied by the training site's total trust fund amount from Step 7.

For an example of the distribution of the PMAP/PGAMC portion of the MERC Trust Fund, see the MERC FAQ page.

Actual Distribution:

As with the MERC General Fund and Federal Match monies, the PMAP/PGAMC portion of the MERC Trust Fund is distributed from the Department of Health to the Sponsoring Institutions. Each sponsoring institution is then responsible for distributing the money to the training site.

Updated Tuesday, 16-Nov-2010 12:25:26 CST