CMS Finalizes Various Changes For Physician Residency Programs

• January 14, 2022
• Jennifer Boese

Physician residencies are the intensive, on-the-job training doctors must have after graduating from medical school. These typically occur in hospitals or clinics under residency programs. The Medicare program is the largest funder of residencies, but the number of these funded residency slots nationally is constrained by law.

According to the U.S. Government Accountability Office, “Medicare pays these hospitals to offset some of the costs of training physician residents. For most hospitals, Medicare caps the number of residents it will fund per hospital based on how many residents it funded in 1996.” The good news is that under the Consolidated Appropriations Act of 2021 (CAA 2021), Congress made multiple changes to physician residency programs, including adding 1,000 new Graduate Medical Education (GME) slots. On December 27, 2021, the Centers for Medicare & Medicaid Services finalized regulations on these new GME slots plus several other policies enacted under the CAA 2021.

1,000 New Residency Slots

One of the finalized changes include the distribution of 1,000 new residency slots over the next five years. CMS may not distribute more than 200 of those slots per year. As such, CMS proposes to make 200 residency positions available beginning in 2023 and each subsequent year. For 2023, applications for new slots must be submitted to CMS by March 31, 2022.

The statute requires a demonstrated likelihood the slots will be used. CMS finalizes a Demonstrated Likelihood Criterion 1 (New Residency Program) and Demonstrated Likelihood Criterion 2 (Expansion of an Existing Program). These criterion require that the hospital does not have sufficient room under its FTE resident cap and either intends to establish a new program or expand its existing program.

Further, the CAA 2021 requires CMS to distribute not less than 40% of the slots to four priority categories of hospitals. Generally, those category requirements are:

• Category 1 Hospitals. Not less than 10% of available slots must go to rural hospitals. CMS defines rural as any hospital with its main campus located in an area outside of an urban Core-Based Statistical Area (CBSA). A hospital that is treated as rural is also eligible.
• Category 2 Hospitals: Not less than 10% must go to hospitals training residents above their cap. Generally, CMS refers to the ‘‘reference resident level’’ as a hospital’s allopathic and osteopathic FTE resident count for a specific period. The otherwise applicable resident limit CMS finalizes to define this is the hospital’s 1996 cap during its reference year, adjusted by several items.
• Category 3 Hospitals. Not less than 10% can go to these hospitals with new medical schools. CMS finalizes these are hospitals located in states with new medical schools, or additional locations and branch campuses located in: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.
• Category 4 Hospitals. Not less than 10% of slots can go to hospitals serving underserved areas. CMS finalizes using primary care or mental health health professional shortage areas (HPSAs). CMS finalizes that qualifying hospitals must participate in training residents in a program in which the residents rotate for at least 50% of their training time in scheduled program training sites that are physically located in that HPSA and treat the HPSA’s population, including nonprovider settings and Veterans Affairs facilities. The hospital itself does not need to be physically located in that HPSA.

The CAA 2021 caps the number of slots a hospital can receive at 25. CMS finalizes that the maximum award amount is contingent on the length of the program for which a hospital is applying, with up to 1.0 FTE being awarded per program year, not to exceed a program length of 5 years or 5.0 FTEs. In an example, CMS states a hospital applying to train residents in a program which has a length of 3 years would be able to request up to 3.0 FTEs per fiscal year. Hospitals may only submit one application a year.

CMS will use a scoring system to prioritize applications, including prioritizing qualifying hospitals with the highest HPSA scores and those with less than 250 beds.

CMS will require all applicant hospitals to attest that they meet the National Standards for Culturally and Linguistically Appropriate Services in Health and Health Care (the National CLAS Standards which can be found HERE.

CMS would pay for these additional positions using the same primary care and nonprimary Per Resident Amounts (PRAs) for which payment is made for FTE residents subject to the 1996 FTE cap. CMS will revise Worksheet E–4 to add a line on which hospitals would report the number of FTEs by which the hospital’s FTE caps were increased for direct GME positions received under this change.

Hospitals Qualifying to Reset PRAs, FTEs

CAA 2021 addresses situations where hospitals have low or zero PRAs and FTE resident caps due to hospitals hosting or rotating small numbers of residents for short periods and inadvertently setting those caps. CMS addresses two situations: Category A and Category B hospitals.

• Category A Hospitals. Typically, a Category A hospital is one that trained less than 1.0 FTE in its most recent cost reporting period ending on or before December 31, 1996 and received a very low or $0 PRA.
• Category B Hospital. Category B hospital is one that, as of the date of enactment (December 27, 2020), has a PRA that was established based on training of no more than 3.0 FTEs in any cost reporting period beginning on or after October 1, 1997, and before the date of enactment (December 27, 2020).

CMS finalizes the following policies related to these PRAs and FTE caps:

• CMS will have the MACs first look at request for resets related to cost reports that are open, reopenable, or not yet settled. CMS is posting a file on the CMS website containing an extract of the HCRIS cost report worksheets on which the FTE counts, caps, and PRAs, if any, would have been reported, starting with cost reports beginning in 1995. CMS states that a first step to determine possible eligibility to receive a replacement PRA or new FTE caps, the hospital must consult the HCRIS web posting first, available HERE.
• Hospitals must first consult the HCRIS posting on CMS’s website to determine reset eligibility. MACs will not reach out to hospitals.
• In cases where no PRA or caps are reported on a settled cost report, or when PRAs or caps are reported without any FTEs, and a cost report is settled but reopenable, the hospital gets the benefit of a reset without further review by the MAC.
• If, for open or reopenable cost reports, there is a PRA and/or FTE caps reported on the HCRIS web posting, and the hospital believes its PRA in fact was established based on not more than 3.0 FTEs, or its IME and/or direct GME FTE caps were based on not more than 3.0 FTEs, a hospital has a 1-time opportunity to request reconsideration by its MAC which must be submitted electronically and received by the MAC on or before July 1, 2022.
• Hospitals that disagree with the 1-time MAC determination may appeal, assuming all conditions for appeal are met.
• Eligible hospitals for resets are those only that have a PRA base period that started prior to enactment and/or FTE cap building window that occurred/closed in a cost reporting period that started prior to enactment (December 27, 2020).
• FTE cap resets will only be based on new programs started after enactment and 5 years after (by December 26, 2025).
• Hospitals that qualify for a PRA reset may use as the new PRA base period either the earliest cost reporting period beginning between enactment and 5 years after in which they train FTES in a new program, or the first cost reporting period beginning after issuance of the final rule.
• Effective with cost reporting periods beginning on or after December 27, 2020, a PRA would be established if a hospital trains less than 1.0 FTE as a result of participating in a Medicare GME affiliation agreement. Otherwise, no PRA would be established until a hospital trains at least 1.0 FTE.
• Effective with cost reporting periods beginning on or after December 27, 2020, a hospital must report training of less than 1.0 FTE on its Medicare cost report if that training is as a result of participating in a Medicare GME affiliation agreement. Otherwise, a hospital must report FTEs on its Medicare cost report when it trains at least 1.0 FTE.
• Hospitals eligible to reset their PRAs would get a new PRA replacing their old PRA(s); hospitals eligible to reset their FTE caps would receive an FTE cap adjustment equal to the sum of the original FTE cap and the new program FTE cap adjustment.

CMS also finalizes multiple changes to Rural Training Tracks (RTT) that stem from CAA 2021 requirements. Those changes relate to adjustments for urban and rural hospitals in RTTs, adjustments for urban hospitals that add additional RTTs, removing of requirement that the RTT be separately accredited, and exemptions from the 3-year rolling average.

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