There have been several notable events recently in the federal GME funding space. Among them are the President’s recent fiscal year (FY) 2020 budget proposal and a recent round of GME slot redistributions from closed teaching hospitals. Read on for summaries of each.

The President’s FY 2020 budget proposal

President Trump’s FY 2020 budget proposal, which was released in mid-March, requests hundreds upon hundreds of millions of dollars in cuts to the Medicare and Medicaid programs over the coming decade. It is important to bear in mind that the President’s budget proposal is merely an aspirational request to Congress, the White House’s proverbial stake in the ground around which to frame future policy debates. The specific proposals therein are unlikely ever to be implemented. That said, the budget proposal touches on a number issues of interest to academic medical centers that may provide some insight into upcoming policy proposals on the Hill or from CMS.

Among the President’s budget proposals of interest to the teaching hospital community are significant GME reforms and spending cuts; proposed changes in how hospitals are paid for uncompensated care, outpatient services furnished in provider-based departments, and physician-administered prescription drugs; and deep budget cuts for the National Institutes of Health, which, if adopted, would impact federal research funding. A few of these core issues are described below.

GME cuts. The President’s budget proposal would restructure GME payments to consolidate GME spending under Medicare, Medicaid and the Children’s Hospital GME program into a single grant program for teaching hospitals. All told, the proposal would result in net reductions in GME payments to hospitals of $790 million in 2020 and $47.9 billion over the next ten years.

According to the budget proposal and its companion document, Major Savings and Reforms, GME funding would be distributed to “hospitals that are committed to building a strong medical workforce, and would be targeted to address medically underserved communities and health professional shortages.” Funding would be distributed “based on the proportion of residents training in priority specialties or programs” and other criteria intended to help address “health care professional shortages and educational priorities.”

This agency summary of the President’s budget proposal provides a bit more insight into the administration’s proposal to develop a block grant through which to consolidate GME spending. For details on how the total grant amount would be determined, review the chapter entitled, “Empowering States and Consumers to Reform Health Care.”

The President’s budget also proposes to extend the HRSA-administered Teaching Health Centers GME grant program through 2021, in connection with which it proposes to allocate an additional $253 million over the next four years.

Other reimbursement proposals. Among the other budget proposals of interest to the hospital community include the following:

• Transition (over five years) to site-neutral payments for post-acute care, regardless of the setting in which care is furnished;
• Payment at physician office rates for services furnished in any off-campus provider-based hospital department;
• Payment at physician office rates for certain services furnished at on-campus provider-based hospital departments, including imaging tests, clinic visits, and physician-administered drugs;
• Reform of Medicare payments for uncompensated care to distribute payments to hospitals based on their share of charity care and non-Medicare bad debt (a projected $98 billion in payment cuts over ten years);
• Reduction in Medicare bad debt payments, transitioning (over three years) to payments of 25 percent, down from the current 65 percent;
• Expanded pre-authorization authority for certain items and services perceived to be at high risk for fraud and abuse, including inpatient rehabilitation services; and
• Certain budget proposals relating to the 340B program.

Rounds 11 and 12 GME cap slot awards under ACA section 5506

On January 31, CMS announced the awardees of resident cap increases from Rounds 11 and 12 of the Affordable Care Act’s (ACA) section 5506 closed hospital residency slot redistribution program. Applications for Rounds 11 and 12 were due on July 23, 2018.

Through Round 11, CMS awarded GME cap slots from the February 11, 2018, closure of Affinity Medical Center in Massillon, OH. CMS awarded a total of 22.48 DGME and 22.35 IME slots to 4 hospitals out of the 41 that applied. The 4 awardees were as follows: 

Through Round 12, CMS awarded GME cap slots from the February 28, 2018, closure of Baylor Scott & White Medical Center in Garland, TX. CMS awarded a total of 13.53 DGME and 12.52 IME slots to a single hospital—Baylor University Medical Center (CCN 45-0021)—from among 37 applicant hospitals.

CMS has not yet announced the Round 13 slot awards, applications for which were due on October 31, 2018. See Dentons’ prior article summarizing the Round 13 opportunity for more information.

Section 5506 of the ACA required CMS to implement the closed hospital residency slot redistribution program. Under the program, CMS is required to take all of the DGME and IME residency slots from hospitals that closed on or after March 23, 2008, and to permanently redistribute them according to certain criteria.

The ACA specified that hospitals in the same geographic region as the closed hospital would receive priority for that closed hospital’s slots. Among other criteria, CMS also gave preference in distributing these permanent slots to hospitals that:

• Assumed an entire program from the closed hospital;
• Received slots from the closed hospital under a GME affiliation agreement and would use the slots to continue to train at least the number of residents the hospital had trained under the affiliation agreement; and
• Took in residents displaced by the hospital closure and would continue to train residents in the same programs as the displaced residents, even after the displaced residents completed their training.

The GME @ Dentons team listed above can answer your questions about the President’s budget proposal, the most recent rounds of GME slot awards, and broader inquiries about Medicare funding of graduate medical education.