What Payers fund GME costs?

1. Graduate Medical Education (GME), per the Centers of Medicare & Medicaid Services (CMS)DISCUSSION OF gme COSTS & REIMBURSEMENT

2. CMS believes there should be a payment provision for Teaching Hospitals – they refer to this as Graduate Medical Education (or GME) • The GME reimbursement mechanism was created and split into two components: Direct (DGME) and Indirect (IME)

3. What Payers fund GME costs? • MEDICARE (federal program for the aged & disabled) • MEDICAID (federal & state program for the financially challenged) • TRICARE (federal program for active & retired military)

4. What is the Funding specifically for? • DGME funding is for House staff compensation, Faculty Supervision, GME Office Admin costs & Hospital overhead • IME funding is to recognize a hospital’s higher operating costs that result from learning & training activities

5. WHY DO WE GET THIS FUNDING? • CMS realizes that teaching hospitals incur more costs than non-teaching hospitals and feels an obligation to pay THEIR share • They also realize that without teaching hospitals, future doctors would not have real life training grounds to perfect their skills

6. WHY DO WE CARE ABOUT THIS TOPIC - PART I? • We receive approximately $33.3M A YEAR in GME funding from the Medicare program alone • $11.0M for Direct Graduate Medical Education (DGME) costs and $22.3M for Indirect Medical Education (IME) costs

7. WHY DO WE CARE ABOUT THIS TOPIC - PART II? • CMS also gives to State Medicaid programs approximately 50% of their educational cost obligation • That amount is around $19.0M more A YEAR than mentioned on the previous slide

8. Why do we care about this topic - Part III? • Some States, Virginia being one of them, matches the Federal GME contribution and doles out another $19.0M for a total of $38.0M • Medicaid takes the combined funds and distributes those dollars to us as DGME (approx $7.7M) & IME (approx $30.3M)

9. GOOD NEWS / BAD NEWS • Good News – it’s nice that CMS funds their share of the additional costs of being a teaching hospital • Bad News – Even with the additional funding of GME by CMS, hospitals still LOSE LOTS of $$ on their Medicare business

10. GOOD NEWS / BAD NEWS PART II • Good News – the Medicaid GME funding helps get us reimbursed at approximately 97% of our costs of providing Medicaid services • Bad News – it only helps us to get to 97% of our costs – no profit margin

11. What does Tricare pay for GME? • Very little but it’s because we have a very low Tricare utilization (business) • GME Funding from this source is approximately $.8M annually (DGME only, no IME) • As a result of this scant funding, we will largely focus on Medicare & Medicaid funding

12. How are the Resident FTE counts done for DGME? • New Innovations (may sound familiar) • Residents may be “weighted” meaning some can only count as half an FTE, one can never be more than an FTE • Examples – Residents that switch residencies, do a second residency or do a fellowship • Resident time is allowed for patient care, didactics or research while rotating in the hospital, up to a program’s initial residency period • Resident can be claimed in a non-provider setting but research time is excluded

13. The FTE “CAPS” • Based on FY96’s Cost Report, CMS established FTE CAP’s for both DGME & IME (idea – limit how much CMS had to pay for growing GME programs) • For DGME, CMS took all the “weighted” countable FTE’s of that year and “unweighted” them (i.e. made them a full FTE) to come up with a CAP of 401.51

14. FTE CAPS – Part II • The DGME “unweighted” FTE CAP is then compared every year to the “unweighted” FTE count of the current year and that ratio is applied to the current year’s “weighted” FTE count • The IME FTE CAP (since no one is “weighted”) is much simpler – it came from the FY96 Cost Report and is 367.72

15. FTE CAPS – Part III • Hospital Based “Dental” Residencies are excluded from both DGME & IME CAPS • Affiliated Agreements with other hospitals that are under their FTE CAPS help hospitals that are over their CAPS by allowing more GME reimbursement to be claimed (Example: Howard University Hospital)

16. DGME Formulary Components • FTE counts according to DGME counting rules, broken down into Primary Care & Non-Primary Care FTE’s • Three Year Rolling Average (Current, Prior & Penultimate) • Per Resident Amounts (PRA) – established in 1985 for each teaching hospital based on their Direct teaching costs and increased each year for inflation • To encourage Teaching Hospitals to produce more primary care doctors, a higher PRA was given to that group versus groups considered non-primary care • MCR FFS & MCO Inpatient Utilizations (Patient Days)

17. Medicare DGME Formula Part I (Very Simplified) # of FTE’s rotating at hospital 395 (3year rolling avg, Dental & Cap Adj) Blended Per Resident Amount $88,753 Subtotal $35,057,435 Medicare FFS Utilization .2564 Medicare FFS DGME Pmt $8,988,726

18. Medicare DGME Formula Part II (Awarded Slots - MMA) # of DGME Slots Awarded 18.21 Claimable Slots After Formulary 16.38 Nat’l Avg Per Resident Amt $86,993 Subtotal $1,424,945 Medicare FFS Utilization .2564 Medicare FFS DGME Pmt $365,356 Medicare MCO Utilization .0463 Medicare MCO DGME Pmt $65,975

19. Medicare DGME Formula Part III Medicare Managed Care # of FTE’s rotating at hospital 395 (3 year rolling avg, Dental & Cap Adj) Per Resident Amount $88,753 Subtotal $35,057,435 Medicare MCO Utilization .0463 Medicare MCO DGME pmt $ 1,623,159

20. Total MCR DGME Reimbursement • MCR FFS Pmt - $8,988,726 • MCR MMA FFS Pmts - $ 365,356 • MCR MMA MCO Pmts - $ 65,975 • MCR MCO Payment - $1,623,159 • Total MCR DGME Pmt - $11,043,216

21. To see Actual DGME Calculations • The DGME Formularies are found on a teaching hospital’s Medicare Cost Report, Worksheet E-3, Part IV, Lines 3.01 - 25 AND Worksheet E-3, Part VI, Lines 5 - 12

22. GME Salary & Benefits, FY11 • I&R Salary & Benefits - $39,152,007 • Refunds from hospitals - $ 7,334,825 • Net VCUHS I&R Costs - $31,817,182 • This is one component of CMS’s view of a hospital’s DGME costs

23. Federal Regulations • There have been a lot over the years, a lot of acronyms such as BBA, BBRA, BIPA, MMA and most recently ACA (Affordable Care Act) • Discussion of all these would need to be it’s own presentation but suffice it to say, all these regulations were intended to cut GME funding in some way, shape or form

24. Most Relevant GME Regulations • FTE Caps were established for both DGME & IME counts to limit payments in case teaching hospitals expanded their programs (BBA’97) • The IME Federal Formulary began undergoing significant alterations – all negative – which began with the BBA and goes thru today’s ACA • Clarifications on what residents can be doing and where they can be doing it in order to be counted for either DGME or IME

25. Examples of a “Clarification” Part I • ACA Regulation for DGME counts • In the Hospital, Resident can be counted for doing patient care, vacation/sick, didactic & research • In a Non-hospital/Provider Setting, resident can be doing all of the above with the exception of research. Didactics was just recently “clarified” as allowed effective 7/1/09. Prior to that, it was not allowed.

26. Examples of a “Clarification” Part II • ACA Regulation for IME counts • In the Hospital, a resident can be counted for doing patient care, vacation/sick, & didactic. Research time however CANNOT be counted effective 10/1/01 – no word on if it could have counted prior to 10/1/01 • In a Non-hospital/Provider Setting, a resident can only be counted while doing patient care or vacation/sick. Didactics and Research are NOT countable time.

27. IME Formulary Components • FTE’s according to the IME rules & clarifications • Three Year Rolling Average • Acute Bed Days Available (number of staffed beds in acute areas of the hospital times the number of days they are open in a year divided by 365 days) • DRG (inpatient) payments on FFS & MCO

28. Medicare IME Formula Part I # of IME I&R 404.66 Acute Bed Days Available 629.88 IRB Ratio .642446 Plus 1.00 1.642446 Power to .405 1.222570 Minus 1.00 .222570 Times 1.35 .300470 MCR FFS DRG pmts $66,324,839 MCR FFS IME pmts $19,928,632

29. Medicare IME Formula Part II (Awarded Slots - MMA) # of IME CAP Slots 3.02 Acute Bed Days Available 629.88 IRB Ratio .004795 Plus 1.00 1.004795 Power to .405 1.001939 Minus 1.00 .001939 Times .66 .001280 MCR FFS DRG pmts $66,324,839 MCR FFS IME payment $84,880

30. Medicare IME Formula Part III Medicare Managed Care # of IME I&R - 404.66 Acute Bed Days Available - 629.88 IRB Ratio - .642446 Plus 1.00 1.642446 Power to .405 1.222570 Minus 1.00 .222570 Times 1.35 .300470 MCR FFS DRG pmts $7,510,320 MCR MCO IME Pmts $2,256,626

31. Total MCR IME Reimbursement • MCR FFS Payment - $19,928,632 • MCR MMA Payment $ 84,880 • MCR MCO Payment $ 2,256,626 • Total MCR IME Pay $22,270,138

32. To see Actual IME Calculations • The IME Formularies are found on a teaching hospital’s Medicare Cost Report, Worksheet E Part A, Lines 3 – 3.24 AND Worksheet E-3, Part VI, Lines 16 - 23

33. CONCLUSION • Although we receive millions of dollars for GME costs, it only represents a portion of our overall teaching costs • Despite these additional payments from our governmental payers, we still lose significant money on Medicare & Tricare business and only receive up to a % of our costs on Medicaid business • When the Federal government is looking to either save money or be “budget neutral” for a new Program, you can bet that GME will always be up on the proverbial Chopping Block

34. QUESTIONS??? C. Todd Gardner / Acacia Pulliam Dept of Reimbursement, VCUHS 828.4733 or 827.5374