On April 27, CMS released the fiscal year (FY) 2022 hospital inpatient prospective payments system (IPPS) proposed rule. The rule contains many proposals related to hospital payment policy, including three notable GME sections implementing certain provisions of Division CC of the Consolidated Appropriations Act of 2021 (Pub. L. 116-260), which enacted various health extenders (herein, simply the “CAA”). Comments on the proposed rule are due June 28, 2021.

CAA Section 126: 1,000 new Medicare GME slots

Section 126 of the CAA creates an additional 1,000 funded Medicare GME positions (200 per year for five years), to be distributed through an application process under which 10 percent of such positions are reserved for each of (1) rural hospitals, (2) hospitals training residents in excess of their current Medicare DGME or IME FTE caps, (3) hospitals in states with new medical schools or new branch campuses of medical schools established on or after January 1, 2000, and (4) hospitals located in health professional shortage areas (HPSAs). Under the statute, no hospital may receive more than 25 additional Medicare-funded GME slots through this provision, and hospitals must use awarded slots to increase the number of trainees at the hospital by a number commensurate with the awarded slots. Funded positions awarded under this provision may be aggregated through Medicare affiliated group slot-sharing agreements only after a 5-year waiting period.

To implement this provision, CMS proposes to create four categories of eligible hospitals, as follows:

• Category One: Hospitals that are located in a rural area or are treated as being located in a rural area. CMS proposes that a hospital will be considered to be located in a rural area if its main campus is located in an area that is outside of an urban CBSA. Hospitals can verify whether they qualify as rural (either by geography or reclassification) using the Tables and files located on CMS’s FY 2022 IPPS Proposed Rule Homepage.
• Category Two: Hospitals training residents in excess of their current Medicare DGME and IME caps. CMS would require hospitals to submit cost reports as evidence that they are training more residents than their number of funded Medicare cap slots.
• Category Three: Hospitals in states with new medical schools, additional locations, or branch campuses, that were established on or after January 1, 2000. Hospitals in 35 states and one territory would qualify under this provision.
• Category Four: Hospitals that serve areas designated as HPSAs. CMS proposes to interpret this provision to refer to hospitals with a main campus or provider-based facility physically located in either a primary care geographic HPSA (which hospitals may apply for residency positions in any specialty), or a mental health only geographic HPSA (which hospitals may apply for positions for a psychiatry residency program only). To qualify under Category Four, a hospital would need to attest that more than 50% of resident training time in each program for which funding is requested would be spent training at the hospital locations within the HPSA.

Using these four categories to define the universe of eligible hospitals, CMS offers two possible alternative distribution methods. Under the Agency’s first proposal, CMS would prioritize residency programs that are serving underserved populations within population HPSAs and would use HPSA scores to prioritize applicants. Under the alternate proposed distribution method, which would apply only to the first year of the CAA’s 5-year distribution period, CMS would give higher priority to hospitals that qualify in more categories.

Additionally, CMS proposes an application deadline of January 31 of the fiscal year prior to the one in which the slots would take effect. Thus, the first round of applications would be due January 31, 2022, for slots that would take effect in FY 2023. The Agency also proposes that hospitals may submit no more than one application per year, and that, due to anticipated high demand for slots, each hospital may apply for a cap increase of no more than 1.0 full-time equivalent (FTE) per year. Hospitals that apply for these funded positions must submit specific documentation of their plans to create new or expand existing residency programs. These slot-distribution proposals are discussed on pages 1070 through 1098 of the display copy of the proposed rule.

CAA Section 127: Rural training track flexibility

Section 127 of the CAA makes changes to the Medicare GME rural training track (RTT) program, to provide greater flexibility for rural and urban hospitals to partner and address the physician workforce needs of rural areas. To implement Section 127, beginning October 1, 2022, CMS proposes four significant changes to the RTT program, as follows:

• Both rural and urban hospitals will be eligible for a “rural track FTE limitation” (i.e., an RTT cap), regardless of whether an RTT program meets CMS “newness” criteria.
• Urban hospitals with existing RTT caps may receive additional RTT cap adjustments for any subsequent RTT program the hospital begins, and the rural hospital(s) associated with such subsequent RTT programs will also receive RTT cap increases. Additionally, if an urban hospital with an existing RTT program (a “hub”) adds an additional rural hospital (a “spoke”) to any of its existing RTT programs, both the “hub” and “spoke” hospitals may receive RTT cap increases.
• Residency programs will no longer require “separate accreditation” to be eligible for RTT funding.
• Residents participating in RTT programs will be excluded from the 3-year rolling average during the duration of a hospital’s 5-year RTT cap-building window.

The proposed rule also contains a list of documents a hospital must provide to its MAC to receive RTT-related payments and several detailed examples of urban and rural hospital RTT cap-building calculations. These RTT proposals are discussed on pages 1098 through 1118 of the display copy of the proposed rule.

CAA Section 131: Re-establishment of PRAs and caps for small numbers of resident rotators

Section 131 of the CAA provides hospitals that were adversely affected by small numbers of resident rotators in prior periods with a new 5-year period in which to re-establish new per resident amounts (PRAs) and FTE caps for GME reimbursement purposes. The statute was designed to address the following three problems:

• Extremely low 1997 base-year caps or PRA established based on a small number of rotators: Any hospital whose base-year DGME and IME FTE caps or PRA was set based on the training of less than 1.0 FTE resident prior to October 1, 1997 would be permitted to establish a new PRA and/or caps under the existing PRA-setting and cap-building processes for new teaching hospitals. In the proposed rule, CMS calls this group of hospitals “Category A” hospitals.
• Accidental establishment of a hospital's PRA or caps after the 1997 base year: Under the CAA, any hospital whose cap was established based on training fewer than 3.0 FTE resident rotators between October 1, 1997 and the date of enactment would be permitted to establish new PRAs and/or caps under existing PRA-setting and cap-building processes for new teaching hospitals. CMS refers to this group of hospitals as “Category B” hospitals.
• Prospective safeguards for small numbers of resident rotators: Moving forward, the CAA prevents a hospital’s FTE caps and PRA from being established until the hospital trains more than 1.0 FTE resident in a given fiscal year.

With respect to the PRA replacement provisions for Category A and Category B hospitals, CMS proposes that an eligible hospital would have its PRA re-established using data from the first cost reporting period beginning on or after December 27, 2020 and before December 26, 2025, in which a Category A hospital trains “at least 1.0 FTEs” or a Category B hospital trains “more than 3.0 FTEs” of residents participating in any new or existing residency training program.

With respect to the FTE cap replacement provisions, CMS proposes that caps will only be reset when a given hospital trains residents in a new program. Notably, the Agency also proposes that a hospital’s caps will not be reset unless and until the hospital begins training residents in a new program for the first time. Specifically, CMS proposes to interpret the phrase “begins training” to mean “future training in a new program for the first time on or after enactment” (emphasis in original). (The CAA’s date of enactment is December 27, 2020.) It is not clear from CMS’s proposal how a “Category B” hospital, whose cap-building window was previously triggered by residents from a new program, could ever participate in a new program for the first time on or after the relevant date of enactment. This is one area where stakeholders may wish to consider submitting comments to seek clarification of the Agency’s proposal.

Finally, with respect to the prospective protections provided in the CAA, CMS proposes that for cost reporting periods beginning on or after December 27, 2020, a hospital must only report FTE residents on its Medicare cost report for a cost reporting period, if (1) in the absence of a Medicare GME affiliation agreement, the hospital trains at least 1.0 FTE in an approved program or programs; or (2) if there is a Medicare GME affiliation agreement, a hospital trains less than 1.0 FTE in an approved program or programs.

CMS indicates in the proposed rule that the Agency intends to issue additional instructions to the MACs and to hospitals to provide for an “orderly process of request and review” for purposes of receiving replacement PRAs and caps. These PRA and FTE cap proposals are discussed on pages 1119 through 1131 of the display copy of the proposed rule.

IRIS-related proposals

The only remaining GME provision in the IPPS rule is not related to CAA implementation, but rather to the Intern and Resident Information System (IRIS). CMS proposes that effective October 1, 2021, the total weighted and unweighted FTE counts on the IRIS for DGME and IME, respectively, must equal the same total weighted and unweighted FTE counts for DGME and IME reported on Worksheet E-4 and Worksheet E, Part A of the filed Medicare cost report. This IRIS proposal is discussed on pages 1132 through 1134 of the display copy of the proposed rule.

The GME @ Dentons team can answer your questions about the FY 2022 IPPS proposed rule or broader inquiries about Medicare funding of graduate medical education.