Fact Sheets


For Immediate Release: Wednesday, April 12, 2006
Contact: CMS Media Relations


On April 12, 2006, the Centers for Medicare & Medicaid Services (CMS) issued the hospital inpatient prospective payment system (IPPS) proposed rule for fiscal year (FY) 2007, which includes a number of provisions relating to payment for graduate medical education. 


Financing of graduate medical education (GME)—the period of training following graduation from medical school—is provided predominantly through inpatient revenues (both hospital payments and faculty physician fees) and a mix of Federal and State government funds.    The Federal government is the largest single financing source for GME through the Medicare program.   Medicare recognizes the costs of GME under two mechanisms: direct medical education (direct GME) payments and an indirect medical education (IME) adjustment. 


Merged and New Teaching Hospitals

The rule includes a proposal to determine a merged teaching hospital’s per resident amount (PRA) by using PRA data and full time equivalent (FTE) resident data from the most recent settled cost reports of the merging hospitals.   Currently, when determining the PRA for a merged teaching hospital, CMS uses the direct GME cost data from the hospital’s base year cost report, which is often old and complex to work with.  This provision will allow for the use of more recent and easily accessible data. 


Additionally, this proposed rule makes a change to the regulations to specify that for new teaching hospitals that did not have residents on duty during the first month of the cost reporting period, the base period would be the next cost reporting period. 


Indirect Medical Education

The Social Security Act provides that prospective payment hospitals that have residents in an approved GME program receive an additional payment for a Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals.   This additional payment is known as the IME adjustment and it is based on the IME adjustment factor.  The IME adjustment factor is calculated using a hospital’s ratio of residents to beds and a multiplier, which is set by Congress.   Thus, the amount of IME payment that a hospital receives is dependent upon the number of residents the hospital trains and the current level of the IME multiplier.  Based on the multiplier set in the Medicare Modernization Act, for discharges occurring during FY 2007, the IME multiplier will be set at 1.32.


Requirements for Counting and Appropriate Documentation of FTE Residents

The proposed rule also includes a clarification of the documentation requirements that apply in determining hospitals’ FTE resident counts for Medicare GME payment purposes.   The existing regulations for direct GME specify that no individual may be counted as more than one FTE, and that a hospital cannot claim the time spent by residents training at another hospital.  Therefore, with some exceptions, if a resident spends time training in more than one hospital or non-hospital setting, the resident counts as a partial FTE based on the proportion of time the resident trains at the hospital or non-hospital setting as compared to the resident's total time worked. 


Inaccurate and inappropriate documentation of FTEs will lead to Medicare disallowing those FTEs, and is especially harmful when the hospital is in the process of establishing its cap.  The proposed rule does not establish any new documentation requirements; it is simply a reminder that documentation must be submitted for hospitals and non-hospital sites to demonstrate the exact division of resident FTEs so that payment may be made accurately.


Resident Time Spent in Non-patient Care Activities as Part of an Approved Residency Program

The proposed rule clarifies the policy that, with respect to residency training in non-hospital settings, only the time residents spend in patient care activities may be counted for purposes of direct GME and IME payments.   In other words, resident time spent in didactic activities such as attending lectures, cannot be counted for purposes of direct GME and IME purposes.  With respect to training in the hospital, residents training in all areas of the hospital complex may be counted for direct GME purposes, but may only be counted for IME purposes while the residents are involved in patient care activities in the inpatient portion of the hospital subject to the IPPS or the outpatient department. 


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