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Last Modified: 4/1/2024 Location: FL, PR, USVI Business: Part A

Indirect medical education (IME) adjustment

Background

Section 1886(d)(5)(B) of the Social Security Act (the Act) provides that prospective payment hospitals that have residents in an approved graduate medical education (GME) program receive an additional payment for a Medicare discharge to reflect the higher patient care costs of teaching hospitals relative to non-teaching hospitals. The regulations regarding the calculation of this additional payment, known as the IME adjustment, are located at 42 CFR §412.105 pdf file . 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 fiscal year (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.
Balanced Budget Act (BBA) of 1997 Reforms: the IME Multiplier -- The BBA reduced the level of the IME multiplier over a four 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.
Balanced Budget Refinement Act (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.
Benefits Improvement and Protection Act (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 October 1, 2000 and before April 1, 2001, and to 6.75 percent for discharges occurring after April 1, 2001 and before October 1, 2001. The IME adjustment would be 6.5 percent in FY 2002 and 5.5 percent in FY 2003 and subsequent years.

Current

In the PPS final rule pdf file CMS revised the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from continuing experience with these systems and to implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively known as the Affordable Care Act) and other legislation. These changes will be applicable to discharges occurring on or after October 1, 2011. CMS is also are setting forth the update to the rate of increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The updated rate-of-increase limits were effective for cost reporting periods beginning on or after October 1, 2011.
CMS updated the payment policy and the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs) and implementing certain statutory changes made by the Affordable Care Act. These changes are applicable to discharges occurring on or after October 1, 2011.
In addition, CMS finalized an interim final rule with comment period that implements section 203 of the Medicare and Medicaid Extenders Act of 2010 relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education affiliated groups for the purpose of determining possible full-time equivalent (FTE) resident cap reductions.
Source: Indirect Medical Education external link on the CMS.gov website
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