A critical piece of Harvard's top ranked medical education has been put in jeopardy by federal budget cuts, University officials say. And to head off what they call an impending crisis of teaching hospital funding, Harvard's lobbyists are taking drastic action.

The Balanced Budget Act, passed in 1997, placed caps on federal aid to teaching hospitals. These are hospitals affiliated with medical schools that allow students to get first-hand clinical experience.

Harvard Medical School has over a dozen such hospitals, which traditionally have also given charity care and do not operate at a profit.

The federal funding which makes up their losses was capped by the Balanced Budget Act-and as a result money is drying up for hospitals across the country and at Harvard.

According to President Neil L. Rudenstine, all of the key hospitals associated with Harvard are currently in deficit and having difficulty maintaining their teaching mission.

"I think it's a real crisis...I rarely use the word crisis," Rudenstine said. "Either they get some help from the federal government or they...will be taken over by a for profit hospital...or they just go out of business."

Enter the Harvard lobbying machine.

The University has gone to work to protect its own. For the short term, administrators are looking for a quick solution, such as a trust fund, to give hospitals ready cash to tide them over.

In the long run, Harvard is going to bat in Washington to try to reverse the budget amendment or at least lower the funding caps.

Anatomy of a Crisis

Medicare, the federal program that subsidizes health care for the elderly and disabled, has long been a crucial piece of 1America's medical education system.

Medicare's Graduate Medical Education (GME)program provides stipends for residents duringtheir study in hospitals.

In addition, Medicare has long paid whatamounts to a subsidy, providing reimbursements forcare for the elderly larger than the actualper-patient cost.

This was also true for private insures, anduntil recently their combined reimbursementshelped pay for the instruction and researchprovided by teaching hospital-effectively makingup for operating losses.

Teaching hospitals are more expensive to runbecause of their research and teaching work. Butthey also cost more because they treat patientswho are sicker, on average, as well as a higherproportion of the uninsured, who cannot pay fortheir own care.

However, in recent years insurance companiesusing "managed care"--a health-care managementbureaucracy designed to cut costs--have begunfunding a larger portion of all health care. Andthey do not provide subsides, putting additionalpressure on the funding received form Medicare.