At its meeting last week, the Medicare Payment Advisory Commission approved a recommendation that will reduce Medicare indirect medical education payments, if and when a patient severity adjustment system is implemented. IME payments help compensate for the higher costs associated with teaching hospitals. The recommendation states, "Concurrent with implementation of severity adjustment to DRGs [diagnosis related groups], the Congress should reduce the IME adjustment by one percentage point, to 4.5 percent, in FY 2008." MedPAC advised that the funds obtained from reducing this payment adjustment be used to fund a quality incentive payment system. The recommendation will be included in the commission's March report to Congress. Prior to MedPAC's meeting last week, the AAMC sent a letter to the commission stressing the need to maintain the 5.5 percent payment level so that teaching hospitals can continue to meet their important missions. The association also expressed concern that the recommendation to cut IME payments is tied to a severity adjustment system that has not yet been proposed. For more information, please visit the website.