Medicare GME PRIMER

1. Medicare GME PRIMER OGME Development Initiative 2011

2. Direct Graduate Medical Education (DGME) Payment • Payment for Medicare’s share of the costs of training physicians, including resident salaries and fringe benefits, supervisory physician compensation, and program administration and overhead costs • Product of the hospital’s per resident amount (PRA), Medicare utilization rate, and number of full time equivalent (FTE) residents

3. Indirect Medical Education (IME) • Recognizes that teaching hospitals have higher patient care costs due to treating sicker patients, offering more services and technology and training residents who order more tests and are inherently less efficient in providing patient care • Product of the hospital’s teaching intensity, DRG payments and the IME adjustment factor for the current fiscal year

4. FTE Cap • Establishes a limit on the number of FTE residents Medicare will pay for • For most hospitals, cap is based on resident counts in cost reporting periods ending on or before 12/31/96 • A new teaching hospital’s cap is set at the highest number of residents in any program year in the program’s third year • Cap restricts program flexibility and opportunities for expansion

5. 3-Year Rolling Average • Reduces the FTE cap over time when a hospital fails to fill all of its Medicare-funded resident positions • Interacts with the cap to limit the number of residents Medicare will pay for • Is the average of the hospital’s FTE resident count in the current cost reporting period and the counts in the two preceding periods

6. “New” Teaching Hospitals • Hospitals with graduate medical education (GME) programs established on or after January 1, 1995 • Resident cap will be established based on the number of residents in all programs in the third year after the hospital becomes a teaching hospital • With certain exceptions, once caps are set, urban hospitals cannot add Medicare-funded positions • Rural hospitals will be allowed to increase their caps by adding new specialty programs

7. “New Teaching Hospital” • Can share resident rotations with existing teaching hospitals (each hospital counts the time residents spend training there) • Should not share rotations with nonteaching hospitals - doing so can result in low caps & per-resident amounts for unsuspecting nonteaching hospitals

8. Per Resident Amount (PRA) • Hospital-specific amount used in calculating a teaching hospital’s DGME payment • Is multiplied by the hospital’s number of FTE residents and its Medicare utilization rate to calculate DGME payment • PRAs for “new” teaching hospitals will be set at program costs or the locality-adjusted national average

9. Initial Residency Period (IRP) • Equals the minimum number of years required for board eligibility in a resident’s specialty or subspecialty • For payment purposes, residents are counted as 1.0 FTE during their IRPs, up to a maximum of 5 years, and as .5 FTE thereafter • If a resident changes specialty, in most cases the IRP will be the minimum number of years required by the first specialty

10. Medicare Affiliation Agreements • Allow hospitals that share in resident rotations to apply their FTE resident caps on an aggregate basis • Used to temporarily transfer FTEs from one affiliated hospital to another to account for resident rotations • Offer relief to hospitals at risk for losing FTEs because their programs are under cap • The number of FTEs for the affiliated group may not exceed the combined caps of the individual hospitals

11. Nonprovider Rules • For DGME purposes, a hospital can count all time residents spend training in nonhospital settings such as physician offices & clinics if it pays resident stipends & benefits for time spent there • For IME purposes, a hospital can count the time residents spend in patient care activities in such settings if it pays resident stipends and benefits for time spent there

12. For Further Information OGME Development Initiative 1 (800) 962-9008 x 0155 (202) 414 0155 OGMEDevelopment@osteopathic.org