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 indirect medical education (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 126: Distribution of Additional Residency Positions
Section 126 of the Consolidated Appropriations Act (CAA), 2021, makes available an additional 1,000 FTE resident cap slots phased in at a rate of no more than 200 slots per year beginning in fiscal year 2023.
Section 126 requires that in order to receive additional FTE resident cap slots a hospital must qualify in at least one of the following four categories: (1) hospitals in rural areas (or treated as being located in a rural area under the law), (2) hospitals training a number of residents in excess of their GME cap, (3) hospitals in states with new medical schools or branch campuses, and (4) hospitals that serve areas designated as health professional shortage areas (HPSAs). Additionally, Section 126 requires that at least 10 percent of the cap slots go to hospitals in each of the four categories, and that no single hospital can receive more than 25 FTE resident cap slots.
Refer to the resources section below to find information on the Section 126 application process and the Section 126 application module.
Each year, prior to the beginning of the application period, HPSA public ID and score information current as of November will be posted below to assist hospitals in the application process for the coming year. HPSA IDs will include geographic and population (primary care and mental health) HPSAs that are in designated or proposed for withdrawal status. The Section 126 application review process includes prioritization of applications based on HPSA score. Only these HPSA IDs are applicable and used for prioritization of Section 126 applications. Applications for fiscal year 2025 will open in January 2024 and will be due March 31, 2024.
CMS has announced the results of Round 2 of the Section 126 awards and this information can be found in the resources section below.
Section 126 Resources:
- Section 126 Application
- Section 126 Application Submission Process and Questions
- HPSA Public ID and Score Information (ZIP)
- Frequently Asked Questions on Section 126 (PDF) – Updated 12/05/23
- Section 126 Cap Increases Round 1 (ZIP) - Updated 02/03/23 to include additional applicant hospital information. All other information remains the same.
- Section 126 Cap Increases Round 2 (ZIP) – Posted 11/15/23
- CMS Contact Information (PDF)
- Section 127: Residents Training in Rural Training Programs (RTPs)
Section 127: Residents Training in Rural Training Programs (RTPs) (PDF) – Posted 11/09/22
- Section 131: Adjustment of Low Per Resident Amounts (Direct GME) and Low FTE Resident Caps (Direct GME and IME) for Certain Hospitals
Section 131 of the CAA, 2021, resets the low or zero direct GME per resident amounts of certain hospitals, and resets the low IME and direct GME FTE resident caps of certain hospitals. The applicable hospitals include those hospitals that as of December 27, 2020 (date of enactment of the CAA, 2021), have a PRA or FTE cap that was established based on less than 1.0 FTE resident in any cost reporting period beginning before October 1, 1997; we refer to these hospitals as “Category A” hospitals. Applicable hospitals also include those hospitals that as of December 27, 2020 have a PRA or FTE cap that was established based on training of no more than 3.0 FTEs in any cost reporting period beginning on or after October 1, 1997, and before December 27, 2020; we refer to these hospitals as “Category B” hospitals. Section 131 provides that the Secretary shall establish a new PRA or FTE cap if the hospital trains at least 1.0 FTE (in the case of a Category A hospital) or more than 3.0 FTEs (in the case of a Category B hospital). The recalculation period begins on December 27, 2020, and ends 5 years later.
Section 131 of the CAA: Use of HCRIS Cost Report Data to Assist in Determining PRA and FTE Cap Reset Status
In the FY 2022 IPPS final rule with comment period, we state that we will post a file on the CMS website containing an extract of the HCRIS cost report worksheets on which the FTE counts, caps, and PRAs, if any, would have been reported, starting with cost reports beginning in 1995. As a first step to determine possible eligibility to receive a replacement PRA or new FTE caps, the hospital must consult the HCRIS web posting first. Refer to section II.B.5.e. of the FY 2022 IPPS final rule with comment period for additional information, including how to use the HCRIS posting.
There are TWO (2) zip files. The first zip file is called “FYS 1995 AND 1996 AND COST REPORT FORM-2552-96 GME DATA.” This contains two (2) spreadsheets. One spreadsheet has GME data from FYs 1995 and 1996; the second spreadsheet has GME data from when the CMS FORM-2552-96 cost report form was in effect (approximately FY 1997 through partial FY 2010). The second zip file is called “COST REPORT FORM-2552-10 GME DATA,” and contains GME data from the CMS-FORM-2552-10 cost report form currently in effect (approximately from partial FY 2010 through partial FY 2020, which is the best available data accessed from the September 30, 2021 quarterly update of HCRIS).
Section 131 Resources:
- Section 5506: Preservation of Resident Cap Positions from Closed Hospitals
Prior to the passage of the Affordable Care Act (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, CMS issued a listing of which hospitals received the slots from the various closed teaching hospitals on February 28, 2012 (refer to “Final 5506 Awards Round 01” at the link “Section 5506 Cap Increases Rounds 1 – 10”). All teaching hospital closures occurring after August 3, 2010 are handled as part of a separate notification and application process. Refer to the resources section below to find a link to the Section 5506 application module, information on the Section 5506 application process, and the Section 5506 cap increases awarded to hospitals under various rounds of Section 5506.
Section 5506 Resources:
- Section 5506 Application
- Section 5506 Application Submission Process and Questions (PDF)
- Guidelines for Submitting Applications Under Section 5506 (PDF) – Posted April 10, 2023
- CMS Contact Information (PDF)
- Section 5506 Cap Increases Round 19 (ZIP) – Applications Due 3/29/21 – Results Posted 4/15/22
- Section 5506 Cap Increases Round 18 (ZIP) – Applications Due 3/29/21 – Results Posted 4/15/22
- Section 5506 Cap Increases Round 17 (ZIP) – Applications Due 1/30/20 – Results Posted 11/29/21
- Section 5506 Cap Increases Round 16 (ZIP) – Applications Due 1/30/20 – Results Posted 12/22/20
- Section 5506 Cap Increases Round 15 (ZIP) – Applications Due 10/31/19 – Results Posted 5/11/20
- Section 5506 Cap Increases Round 14 (ZIP) – Applications Due 7/22/19 – Results Posted 1/22/20
- Section 5506 Cap Increases Round 13 (ZIP) – Applications Due 10/31/18 – Results Posted 5/21/19
- Section 5506 Cap Increases Round 12 (ZIP) – Applications Due 7/23/18 – Results Posted 1/31/19
- Section 5506 Cap Increases Round 11 (ZIP) – Applications Due 7/23/18 – Results Posted 1/31/19
- Section 5506 Cap Increases Rounds 1 - 10 (ZIP)
- Section 5503: Distribution of Additional Residency Positions
Section 5503 of the ACA 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. 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. CMS issued a listing of which hospitals would receive additional slots under section 5503 on August 15, 2011, with the effective date of the slots retroactive to July 1, 2011. See the list of awardees in the resources section below.
Section 5503 Resources:
- Section 5503 Cap Decreases and Increases (ZIP) - Posted 8/15/2011
Please note many of the Inpatient Prospective Payment System proposed and final rules containing GME payment policies can be found on the IPPS Regulations and Notices page.
Fact Sheet on Displaced Residents Due To Program or Hospital Closure (PDF)
2007 American Medical Group Association Compensation Survey Data (PDF)
2008 American Medical Group Association Compensation Survey Data (PDF)
2009 American Medical Group Association Compensation Survey Data (PDF)