Saint Louis University : SLU



Section 1Graduate Medical Education ProgramsDate Revised: January 2001, March 2018 Reviewed: February 20081.5 Guidelines for Residency ProgramsPage 1 of 5III.Funding of Resident Training ProgramsA.Payment for Graduate Medical Education Under Cost-Based Reimbursement Historical PerspectiveFrom the inception of the Medicare program, teaching hospitals have been reimbursed on a reasonable cost basis for their direct medical education costs. Direct graduate medical education (DGME) costs are expenses directly related to a hospital’s teaching activity. Initial calculations for direct costs included the salaries and fringe benefits of residents and the portion of teaching physicians’ salaries that are attributable to educational activities. For many years, teaching hospitals received no special payment for expenses indirectly related to the teaching of residents. Instead, provision for reimbursement of ancillary services and the “cost based” reimbursement system covered these costs. Then in order to prevent a disproportionate number of teaching hospitals from being adversely affected by Medicare limits on reimbursement of routine hospital operating costs, the Department of Health and Human Services (HHS) in 1980 modified the limits to include a resident to bed adjustment for the indirect costs of graduate medical education. These costs reflected the increased demands that residents placed on hospital staff and the tendency of residents to provide more services and conduct more tests. Indirect medical education costs are also used to reflect case-mix intensity in view of the teritiary and referral nature of teaching hospitals, as well as the community service they provide to medical indigent and underserved populations. The indirect medical education adjustment was set initially at 4.7% for each 0.1 full-time equivalent (FTE) resident per bed. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA-PL96-248) replaced the routine cost limits with limits that covered total inpatient/outpatient operating costs, thereby including special care unit costs under the limits. As a result, for hospital cost reporting periods beginning on October 1, 1982 the resident per bed adjustment was increased from 4.7% to 6.06% per 0.1 FTE resident per bed.B.Payment under the Prospective Payment System (PPS)The PPS established under Title VI of the Social Security Amendments of 1983 (PL98-21) retained special treatment of direct and indirect medical education costs.Section 1Graduate Medical Education ProgramsDate Revised: January 2001, March 2018 Reviewed: February 20081.5 Guidelines for Residency ProgramsPage 2 of 51.Direct Graduate Medical Education Costs (DGME) - in its 1982 report to Congress, HHS advocated a continuation of cost based reimbursement for direct medical education costs. Congress agreed that the direct costs of medical education should not be included in the Diagnosis Related Group (DRG) payment. Thus under PPSII teaching hospitals are reimbursed for their direct medical education expenses on a reasonable cost basis in addition to the DRG based per case payment. Medicare’s portion of the hospital’s direct medical education costs was calculated based on generally accepted accounting principles and includes in addition to salaries and fringe benefits, allocated overhead expenses such as the portion of the faculty time devoted to graduate medical education, administration, maintenance, and utilities.2.Indirect Medical Education Costs - The HHC report also proposed an adjustment in DRG payment rates based on the ratio of residents to beds in teaching hospitals. The report stated “the indirect costs of graduate medical education are higher patient care costs incurred by hospitals with medical education programs. Although it is not known precisely what part of these higher costs are due to teaching (more tests, more procedures, etc.), and what part is due to other factors (the particular types of patients which a teaching hospital may attract), the Medicare Cost Reports clearly demonstrate that cost per case are higher in teaching hospitals. The Department believes that recognition of these indirect costs should be accomplished through a lump sum payment, separate and distinct from the base rate. This adjustment will be computed using methods that are similar to the methods currently used to adjust the old routine and new total costs limits for the indirect costs of graduate medical education”. Section 1Graduate Medical Education ProgramsDate Revised: January 2001, March 2018 Reviewed: February 20081.5 Guidelines for Residency ProgramsPage 3 of 5Congress concurred with this recommendation and because of analysis showing that teaching hospitals would suffer greater financial loss than non-teaching hospitals under the DRG system, PL98-21 doubled the existing indirect medical educational adjustment factor. In reporting the legislation, the Senate Finance Committee acknowledged that an additional payment to teaching hospitals for indirect medical education expenses is appropriate: “In the light of serious doubts, explicitly acknowledged by the Secretary in his recent report to the Congress on Prospective Payment, about the ability of the DRG case classification system to account fully for factors such as severity of illness of patients requiring the specialized services in treatment programs provided by teaching institutions and the additional costs associated with the teaching of residents”. Thus, the question of whether indirect medical education reimbursement reimbursed for residents associated costs or for the severity of illness of patients in teaching hospitals remained unresolved.Under PPS the indirect medical education adjustment initially provided 11.59% in the DRG portion of the Prospective Payment rate for each 0.1 FTE resident per bed.C.Incremental Changes to Methods of Payment and ReimbursementThe mechanism of reimbursement and payment for graduate medical education was further altered by the Consolidated Omnibus Budget Reconciliation Act (COBRAPL99-272) activated on April 7, 1986.1.COBRA replaced the Cost Reimbursement System for paying for direct graduate medical education costs with payment based on three factors:a.The hospital’s allowable cost per resident in the first prospective payment year adjusted for inflation,b.The hospital’s number of full-time equivalent residents, and prospective payment year adjusted for inflation and allowed for an increase in DGME as the number of resident FTEs increased.Section 1Graduate Medical Education ProgramsDate Revised: January 2001, March 2018 Reviewed: February 20081.5 Guidelines for Residency ProgramsPage 4 of 5c.The hospital’s percentage of Medicare patient days. To determine the allowable costs per resident, the hospital’s cost report for the first accounting year beginning on or after October 1, 1983 is used as the base period (Base Year). The allowable Medicare graduate educational cost per FTE resident for the base period is calculated. For accounting years beginning after July 1, 1985 but before July 1, 1986, the hospital’s allowable cost per resident would be its base period cost per resident increased by inflation plus 1%. For accounting years beginning on or after July 1, 1986, the allowed payment per FTE resident in the prior year will be adjusted for inflation using the Consumer Price Index. Beginning on July 1, 1986 Medicare counted FTE residents using a weighted system limiting the support of residents and fellows in advanced training.Individuals in the initial residency training period (defined as the period of training required to qualify for board eligibility plus one year but not to exceed a total of five years), the weighing factor is 100%. For individuals in subsequent years, the weighing factor is 50%. Thus, only the initial residency training period is fully reimbursed and only up to the fifth postgraduate year. COBRA removed many programs previously described as fellowships, and some subspecialty residencies from reimbursement.2.Indirect medical education adjustments were made from discharges on or after May 1, 1986. The indirect medical education adjustment was decreased from the then current value of 11.59% per 0.1 resident per bed to 7.8% per 0.1 resident per bed. The latter ratio remained in effect until October 1, 1988 when it decreased to 7.7% then 7.05% in 1994 per 0.1 resident per bed. 3. HCFA has also revised of the method for counting residents for the purpose of determining the indirect medical education adjustment to coincide with the method used for direct medical education payment. The one day September 1 count previously used for IME adjustment was replaced by a requirement that the hospital submit data more closely related to that already submitted for the direct GME payment.Section 1Graduate Medical Education ProgramsDate Revised: January 2001, March 2018 Reviewed: February 20081.5 Guidelines for Residency ProgramsPage 5 of 54.The HCFA regulation that changed hospitals Medicare reimbursement for direct graduate medical education costs from a pass through to a per resident amount (54 Federal Register 40286) defined an “approved medical residency program” as a residency program approved by the Accreditation Council for Graduate Medical Education (ACGME).In response to a letter sent by the AAMC, HCFA decided to expand the definition of an “approved medical residency program” to include specialty and subspecialty programs that have requirements set by member organizations of the American Board of Medical Specialties and that are published annually in the Director of the ABMS, in addition to those listed by the ACGME in its Directory. Subsequently, these specialty and subspecialty programs became the accreditation responsibility of the ACGME as well.5.The Balanced Budget Act of 1997 included provisions which allowed for the freezing of DGME payments to teaching hospitals, and a phased decrease in the IME towards 5.5%. Subsequent Congresses delayed some of these changes, but funding of GME continues to be a target of HCFA and advisory bodies. ................
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