GME: Is the Check in the Mail?

Medlearn Media NPOS Non-patient outcome spending

The FY 2023 IPPS Final Rule includes issues associated with graduate medical education payments.

The Inpatient Prospective Payment System (IPPS) Final Rule was issued Aug.1 by the Centers for Medicare & Medicaid Services (CMS). As others are commenting on the rule as a whole, I am going to focus on one part of the rule that effects a large group if not the majority of teaching hospitals in the United States Medicare pays teaching hospitals two separate payments. One payment reimburses hospitals for the direct cost of teaching interns and residents and that component is addressed in the final rule. On May 17, 2021, the U.S. District Court for the District of Columbia ruled against CMS’ method of calculating direct Medicare graduate medical education (GME) payments to teaching hospitals when their weighted full-time equivalent (FTE) counts exceed their direct GME FTE cap. 

In Milton S. Hershey Medical Center, et al. versus Becerra, the court ordered CMS to recalculate reimbursement owed, holding that CMS’ regulation impermissibly modified the statutory weighting factors. Per the final rule, “The plaintiffs in these consolidated cases alleged that as far back as 2005, the proportional reduction that CMS applied to the weighted FTE count when the weighted FTE count exceeded the FTE cap conflicted with the Medicare statute, and it was an arbitrary and capricious exercise of agency discretion under the Administrative Procedure Act.”

Let’s break down the issue in an easy-to-understand way. Medicare limits hospitals to a cap period from 1996 in counting residents for DME payment. Additionally, Medicare reduces the count of residents that have been residents longer than Medicare expected, only counting them at a 50 percent rate. The rub is that Medicare applies the cap after taking the 50 percent reduction for residents that have been in residency longer than Medicare allows. In the extreme, two hospitals could have the same cap even though one hospital had twice as many residents.

In my mind there is a larger issue here.  How can hospitals continue to be controlled by a determination from 25 years ago? To all the folks reading this from teaching hospitals, contact your reimbursement team to see if a “check is in the mail.”


Timothy Powell, CPA

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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