Direct Graduate Medical Education / Indirect Medical Education
Direct Graduate Medical Education (DGME)
Section 1886(h) of the Act (scroll down to (h) “Payments for Direct Graduate Medical Education Costs.—“), as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 ( Pub. L. 99-272) and implemented in regulations at existing §§413.75 through 413.83, establish a methodology for determining payments to hospitals for the costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act (scroll down to (h) “Payments for Direct Graduate Medical Education Costs.—“ and then to paragraph (2)), as added by COBRA, sets forth a payment methodology for the determination of a hospital-specific, base-period per resident amount (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 October 1, 1983, through September 30, 1984). Medicare direct GME payments are calculated by multiplying the PRA times the weighted number of full-time equivalent (FTE) residents working in all areas of the hospital (and non-hospital sites, when applicable), and the hospital's Medicare share of total inpatient days.
Section 1886(h)(4)(F) (scroll down to (h) “Payments for Direct Graduate Medical Education Costs.—“ and then to paragraph (4), then to section (F)) of the Act 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 December 31, 1996.
Under section 1886(h)(4)(E) (scroll down to (h) “Payments for Direct Graduate Medical Education Costs.—“ and then to paragraph (4), then to section (E)) of the Act, a hospital may count residents training in non-hospital 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 §413.86(f)(3), effective July 1, 1987, and later at §413.86(f)(4) (redesignated as §413.78(d)) (scroll down to section (d)), effective January 1, 1999, require that, in addition to incurring all or substantially all of the costs of the program at the non-hospital setting, there must be a written agreement between the hospital and the non-hospital site (in place prior to the time the hospital begins to count the residents training in the non-hospital site) stating that the hospital will incur all or substantially all of the costs of training in the non-hospital setting. The regulations further specify that the written agreement must indicate the amount of compensation provided by the hospital to the non-hospital site for supervisory teaching activities. Effective October 1, 2004, the hospital must either have a written agreement with the non-hospital setting, or, as described in the regulations at §413.78(e) (scroll down to section (e)), pay for all or substantially all of the costs concurrently with the training in the non-hospital setting.
Indirect Medical Education (IME)
Section 1886(d)(5)(B) (scroll down to (d) and then to paragraph (5), then to section (B)) of 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 indirect medical education (IME) adjustment, are located at 42 CFR §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% 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% increase in IME payment for every 10% 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% to 7.0% in FY 1998, 6.5% in FY 1999, 6.0% in FY 2000, and 5.5% 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%. For FY 2001, the factor increased to 6.25%. The implementation of the factor at 5.5% 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% for discharges occurring on October 1, 2000 and before April 1, 2001, and to 6.75% for discharges occurring after April 1, 2001 and before October 1, 2001. The IME adjustment would be 6.5% in FY 2002 and 5.5% in FY 2003 and subsequent years.
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