IPPS FY23 proposed rule: Medicare proposes changes to methodology for determining graduate medical education payments to teaching hospitals

The primary change, which arose from a 2021 federal court ruling, affects the weighting of FTE slots.

In the proposed rule for hospital inpatient payments in FY23, CMS has recommended changes to policies regarding Medicare funding for graduate medical education (GME).

Part of the proposal stems from a 2021 court ruling in which a federal district court said the formula long used by CMS to determine direct GME payments contradicted the Medicare statute in calculating a hospital’s weighted number of FTE residents and fellows. The issue stemmed from the methodology used to assign FTE weights for hospitals that exceeded their GME caps.

Going forward, if a hospital exceeds the FTE cap in both its unweighted and weighted number of FTE residents, adjustments would be made to ensure the hospital’s weighted FTE counts are equal to the FTE cap.

The new methodology also would apply retrospectively to any cost reports that date back to 2001 and are “reopenable or open,” CMS stated.

In an August 2021 blog post, attorney Gregory N. Etzel of the law firm Morgan Lewis wrote, “To the extent academic medical centers have not already moved to recover underpayments caused by the regulatory weighted FTE calculation, they should strongly consider claiming the affected amounts on their pending cost reports using the protest instructions set forth in the Provider Reimbursement Manual, Part II, Section 115.” (The relevant passage can be found at the first link on this page.)

Some rural hospitals can participate in ‘slot sharing’

CMS also seeks in the proposed rule to provide flexibility to rural teaching hospitals that participate in a rural training track. According to the rule, participating hospitals would have the same opportunity as other teaching hospitals to share and redistribute FTE-resident cap slots.

Starting with the academic year beginning July 1, 2023, an urban hospital and a rural hospital participating together in a rural training program (RTP) could enter into an “RTP Medicare GME affiliation agreement,” CMS stated. Urban hospitals already receive additional cap slots as an inducement to establish RTPs, and those slots will be sharable assuming the proposal is finalized.

Current regulations prohibit GME affiliation agreements in RTPs.