Direct Graduate Medical Education/Indirect Medical Education

Direct Graduate Medical Education

Table of Contents

• Direct Graduate Medical Education
• Indirect Medical Education

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Direct Graduate Medical Education

Section 1886(h) of the Act as added by section 9202 of the COBRA of 1985 (Pub. Law 99-272) and implemented in regulations at existing Sections 413.75 through 413.83, establish a methodology for determining payments to hospitals for the costs of approved 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 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 10/1/1983, through 9/30/1984). Medicare direct GME payments are calculated by multiplying the PRA times the weighted number of FTE residents working in all areas of the hospital (and nonhospital sites, when applicable), and the hospital's Medicare share of total inpatient days.

Section 1886(h)(4)(F) 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 12/31/1996.

Under section 1886(h)(4)(E) a hospital may count residents training in nonhospital settings for direct GME purposes (and under section 1886(d)(5)(B)(iv) of the Act, for IME purposes), if the residents spend 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 Section 413.86(f)(3), effective 7/1/1987, and later at Section 413.86(f)(4) (redesignated as Section 413.78(d)) effective 1/1/1999, require that, in addition to incurring all or substantially all of the costs of the program at the nonhospital setting, there must be a written agreement between the hospital and the nonhospital site (in place prior to the time the hospital begins to count the residents training in the nonhospital site) stating that the hospital will incur all or substantially all of the costs of training in the nonhospital setting. The regulations further specify that the written agreement must indicate the amount of compensation provided by the hospital to the nonhospital site for supervisory teaching activities. Effective 10/1/2004, the hospital must either have a written agreement with the nonhospital setting, or, as described in the regulations at Section 413.78(e) pay for all or substantially all of the costs concurrently with the training in the nonhospital setting.

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Indirect Medical Education

Section 1886(d)(5)(B) of the 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 nonteaching hospitals. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at 42 CFR Section 412.105. The additional payment is based on the IME adjustment factor. The IME adjustment factor is calculated using a hospital's ratio of residents to beds, which is represented as r, and a multiplier, which is represented as c, in the following equation: c x [(1 + r).405 - 1]. The multiplier c 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.

The formula is traditionally described in terms of a certain percentage increase in payment for every 10-percent increase in the resident-to-bed ratio. For discharges occurring during FY 2003 and thereafter, the formula multiplier is 1.35. The formula multiplier of 1.35 represents a 5.5 percent increase in IME payment for every 10 percent increase in the resident-to-bed ratio.

BBA of 1997 Reforms: the IME Multiplier – The BBA reduced the level of the IME multiplier over a 4-year period because of a concern that the IME adjustment overpaid hospitals relative to their additional teaching costs. The BBA revised the IME formula to reduce the IME adjustment factor from 7.7 percent to 7.0 percent in FY 1998, 6.5 percent in FY 1999, 6.0 percent in FY 2000, and 5.5 percent in FY 2001 and subsequent fiscal years.

BBRA of 1999 Reforms: the IME Multiplier – The BBRA slowed the transition set by the BBA for the IME adjustment factor. For FY 2000, special payments were made to each hospital to maintain the IME factor at 6.5 percent. For FY 2001, the factor increased to 6.25 percent. The implementation of the factor at 5.5 percent was delayed until FY 2002.

BIPA of 2000 Reforms: the IME Multiplier – The BIPA changed the IME payment add-on for FY 2001 to 6.25 percent for discharges occurring on 10/1/2000 and before 4/1/2001, and to 6.75 percent for discharges occurring after 4/1/2001 and before 10/1/2001. The IME adjustment would be 6.5 percent in FY 2002 and 5.5 percent in FY 2003 and subsequent years.

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Posted 8/9/2024