Direct Graduate Medical Education (DGME)

Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99-272) and implemented in regulations at existing §§413.75 through 413.83, establish a methodology for determining payments to hospitals for the costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act, as added by COBRA, sets forth a payment methodology for the determination of a hospital-specific, base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable costs of GME for a base period by its number of residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, the period of beginning between October 1, 1983, through September 30, 1984). Medicare direct GME payments are calculated by multiplying the PRA times the weighted number of full-time equivalent (FTE) residents working in all areas of the hospital (and non-hospital sites, when applicable), and the hospital's Medicare share of total inpatient days.

Section 1886(h)(4)(F) of the Act established limits on the number of allopathic and osteopathic residents that hospitals may count for purposes of calculating direct GME payments. For most hospitals, the limits were the number of allopathic and osteopathic FTE residents training in the hospital's most recent cost reporting period ending on or before December 31, 1996.

Prior to July 1, 2010, under section 1886(h)(4)(E) of the Act, a hospital could count residents training in nonprovider settings for direct GME purposes (and under section 1886(d)(5)(B)(iv) of the Act, for IME purposes), if the residents spent their time in patient care activities and if ". . . the hospital incurs all, or substantially all, of the costs for the training program in that setting." The implementing regulations, first at §413.86(f)(3), effective July 1, 1987, and later at §413.86(f)(4) (redesignated as §413.78(d)) , effective January 1, 1999, required that, in addition to incurring all or substantially all of the costs of the program at the nonprovider setting, there must have been a written agreement between the hospital and the nonprovider site (in place prior to the time the hospital began to count the residents training in the non-provider site) stating that the hospital would incur all or substantially all of the costs of training in the nonprovider setting. The regulations further specified that the written agreement must have indicated the amount of compensation provided by the hospital to the nonprovider site for supervisory teaching activities. Effective October 1, 2004, the hospital must have either had a written agreement with the nonprovider setting, or, as described in the regulations at §413.78(e), paid for all or substantially all of the costs, concurrent with the training in the nonprovider setting. Effective for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2010, "all or substantially all of the costs for the training program" in the nonprovider setting is defined as at least 90 percent of the total of the costs of the residents' salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physician's salaries attributable to nonpatient care direct GME activities.

The Affordable Care Act amended section 1886(h)(4)(E) of the Act for direct GME purposes (and section 1886(d)(5)(B)(iv) of the Act for IME purposes), effective July 1, 2010, to allow a hospital to count residents training in nonprovider settings if the residents are engaged in patient care activities and if the hospital incurs the costs of the stipends and fringe benefits of the resident during the time the residents spend in that setting. In addition, effective July 1, 2009, for direct GME purposes only, the time residents spend in certain nonpatient care activities that occur in a nonprovider setting that is primarily engaged in furnishing patient care may also be counted. For IME purposes, residents training in nonprovider settings must spend their time in patient care activities in order to be counted. The implementing regulations at §413.78(g) for direct GME and at §412.105(f)(1)(ii)(E) for IME require that the hospital must either have a written agreement with the nonprovider setting, or the hospital must pay for the costs of the stipends and fringe benefits of the residents concurrently during the time the residents spends in that setting.

Section 5503: Distribution of Additional Residency Positions

Section 5503 of the Affordable Care Act provides for reductions in the direct GME and IME FTE resident caps for certain hospitals, and authorizes a "redistribution" to certain hospitals of the estimated number of FTE resident slots resulting from the reductions. Effective for portions of cost reporting periods occurring on or after July 1, 2011 for direct GME and IME, a hospital's FTE resident caps will be reduced by 65 percent of the "excess" resident slots if its "reference resident level" is less than its "otherwise applicable resident limit." The Secretary is authorized to increase the otherwise applicable FTE resident cap for each qualifying hospital that submits a timely application by a number that the Secretary may approve, effective for portions of cost reporting periods occurring on or after July 1, 2011. In no case may any hospital receive an FTE cap increase of more than 75 FTE positions for direct GME and IME respectively as a result of the redistribution. Section 5503 specifies that the slots are to be distributed in the following manner: 70 percent of the resident slots are to be distributed to hospitals located in States with resident-to-population ratios in the lowest quartile, and 30 percent of the resident slots are to be distributed to hospitals located in a State, a territory of the United States, or the District of Columbia that are among the top 10 States, territories, or Districts in terms of the ratio of Health Professional Shortage Area (HPSA) population to the total population, and/or to hospitals located in rural areas. Hospitals not located in these states or in a rural area do not qualify for redistributed slots. To see a list of the qualifying states, see pages 1497-8 and page 1503 of the OPPS final rule PDF document (click on the link below).

Applications for hospitals requesting slots under section 5503 are due to the CMS Regional Office and CMS Central Office by Friday, January 21, 2011. However, if a hospital is notified by the Medicare Contractor that it will be audited for purposes of determining a possible cap reduction, such a hospital would be allowed to submit an application for additional cap slots until Tuesday, March 1, 2011. Please refer to the CY 2011 Outpatient PPS final rule for policies and instructions regarding eligibility for applying for slots and the application process (the link is provided below). Also, click on the link below to access the application form to apply for slots under section 5503. Applications must be received by [i.e., not postmarked by] the CMS Regional Office and the CMS Central Office by the due dates listed above.

Section 203 of the Medicare and Medicaid Extenders Act (MMEA) of 2010 amended section 5503 of the Affordable Care Act, relating to the treatment of teaching hospitals that are members of a Medicare graduate medical education affiliated group for the purpose of determining possible full time equivalent resident cap reductions. This amendment allows CMS to consider hospitals that are members of the same Medicare GME affiliated group during a hospital's reference cost reporting period in the aggregate, rather than only on an individual basis, for the purposes of determining a GME FTE cap reduction. Please refer to the interim final rule with comment period (IFC) published March 14, 2011 (the link is provided below) for policies and information regarding the implementation of section 203 of the MMEA. The comment period for this IFC closes April 13, 2011.

Section 5506: Preservation of Resident Cap Positions from Closed Hospitals

Prior to the passage of the ACA, generally, if a teaching hospital closed, its direct GME and IME FTE resident cap slots would be "lost," because those slots are associated with a specific hospital's Medicare provider agreement that has terminated. Section 5506 of the ACA addresses this situation by instructing the Secretary to establish a process by regulation that would redistribute slots from teaching hospitals that close to hospitals that meet certain criteria, with priority given to hospitals located in the same Core Based Statistical Area (CBSA) or in a contiguous CBSA as the closed hospital.

Section 5506 applies to teaching hospitals that closed on or after March 23, 2008, and to future teaching hospital closures. For teaching hospital closures that occurred on or after March 23, 2008 through August 3, 2010, applications for receipt of slots are due to the CMS Regional Office and CMS Central Office by April 1, 2011. All teaching hospital closures occurring after August 3, 2010 will be handled as part of a separate notification and application process. For a list of teaching hospitals that have closed on or after March 23, 2008 through August 3, 2010, and from which slots are available for redistribution, please see page  13294 of the correction notice to the CY 2011 OPPS final rule (the link is provided below). Refer to the CY 2011 OPPS final rule for policies and instructions regarding eligibility for applying for slots and the application process (the link is provided below).  Also click on the link below to access the application form to apply for slots under section 5506. Applications must be received by [i.e., not postmarked by] the CMS Regional Office and the CMS Central Office by the due dates listed above.

Downloads
Section 5506 Cap Increases Related to Applications Due April 1, 2011 - Posted 1/30/12 [ZIP, 355KB] Section 5503 Cap Decreases and Increases - Posted 8/15/2011 [ZIP, 28KB] CMS Evaluation Form 5503 [PDF, 151KB] CMS Evaluation Form 5506 [PDF, 150KB] 2009 American Medical Group Association Compensation Survey Data [PDF, 53KB] 2008 American Medical Group Association Compensation Survey Data [PDF, 52KB] 2007 American Medical Group Association Compensation Survey Data [PDF, 21KB]
Related Links Inside CMS
There are no Related Links Inside CMS
Related Links Outside CMS
CMS–1430–IFC:  Revisions to the Reductions and Increases to Hospitals' FTE Resident Caps for Graduate Medical Education Payment Purposes [PDF, 86KB]   CMS–1430–IFC:  Revisions to the Reductions and Increases to Hospitals' FTE Resident Caps for Graduate Medical Education Payment Purposes - Text Version CY 2011 OPPS Final Rule Corrections including Changes to Payments to Hospitals for Graduate Medical Education Costs; Corrections (Published Version - page 13294) [PDF, 55KB] CY 2011 OPPS Final Rule Corrections including Changes to Payments to Hospitals for Graduate Medical Education Costs; Corrections - Text Version CY 2011 OPPS Final Rule including Payments to Hospitals for Graduate Medical Education Costs (Published Version - pages 72133 - 72240 and 72261 - 72264) [PDF, 44.75MB] CY 2011 OPPS Final Rule including Payments to Hospitals for Graduate Medical Education Costs (Published Version - pages 72133 - 72240 and 72261 - 72264) - Text Version

Page Last Modified: 01/30/2012 4:00:00 PM
Help with File Formats and Plug-Ins