On December 17, 2021, CMS issued a final rule implementing three changes to Medicare’s payment rules for graduate medical education that Congress enacted last year in the Consolidated Appropriations Act, 2021 (CAA). The final rule describes how CMS intends to execute Congress’s directive to distribute 1,000 new full-time equivalent (FTE) cap positions to qualifying hospitals over the next five years. The rule also explains how hospitals can qualify to establish new FTE caps and/or per-resident amounts (PRAs). Lastly, the rule implements the changes that the CAA made to the payment rules for rural training track (RTT) programs. The final rule will take effect 60 days after it is published in the Federal Register.
Distribution of 1,000 FTE Cap Positions
Section 126 of the CAA requires CMS to distribute 1,000 new full-time equivalent (FTE) cap positions to qualifying hospitals over five years starting in fiscal year (FY) 2023.
Hospitals will have to submit applications to CMS to qualify for distributions. Separate rounds of applications will be required in each of the five years. In the final rule, CMS stated that applications will be due on March 31 of the year preceding the FY of the award, and that hospitals will be notified of their awarded distributions by January 31 of the following year. The awarded distributions will take effect July 1 of that same year. For example, applications for FY 2023 distributions will be due March 31, 2022. Hospitals will be notified of their awards by January 31, 2023, and the award will take effect July 1, 2023.
In the final rule, CMS said that hospitals will need to show a “demonstrated likelihood” that they will fill the positions they are applying to receive. To that end, qualified applicants must (1) be training residents in excess of their FTE cap (as demonstrated by their latest filed cost reports), and (2) show that they have applied for or received approval from the appropriate accrediting body to either establish a new program or expand an existing program. Commenters asked whether hospitals that are already operating in excess of their FTE caps could use that excess to fill awarded positions. CMS answered in the negative. Awarded positions will have to be filled by either new programs or the expansion of existing ones. The one exception is that hospitals will be allowed to fill awarded positions with unused accredited positions.
Hospitals will also have to fall into one of four eligibility classes to qualify for distributions. The first eligibility class is for hospitals located in rural areas. CMS intends to define rural in the same way it is defined for the purposes of the wage index. Hospitals that reclassify as rural will be considered rural for the purposes of this class. The second eligibility class is hospitals training in excess of their FTE caps. The third class is hospitals located in states with new medical schools or new branches of existing schools. CMS determined that this class would consist of hospitals in 35 states and 1 territory. The fourth and final class is for hospitals that participate in training residents in a program in which residents rotate for at least fifty percent of their training time to training sites physically located in health professional shortage areas (HPSAs) in primary care or mental health.
CMS also adopted rules placing limits on the number of positions that can be awarded in a year. The maximum award that a hospital will be eligible to receive will depend on the length of the program. Hospitals can receive up to 1 FTE per program year, not to exceed 5 FTEs. Additionally, CMS is capping the aggregate annual distribution at 200 positions.
Because there are only so many positions to go around, CMS has decided to prioritize applications based on HSPA scores. HRSA assigns a score for each HSPA ranging from 0 to 25 indicating the severity of the shortage in the area, with higher scores indicating greater severity. Each year, CMS will make the first round of distributions to hospitals serving HPSAs with a score of 25. If positions remain after that distribution, CMS will distribute positions to hospitals serving HSPAs with a score of 24. That process will continue until all 200 positions for a year are distributed. Within each HPSA score group, CMS will prioritize the applications of hospitals with less than 250 beds (as beds are defined for the purposes of IME).
Resetting PRAs and FTE Caps
Section 131 of the CAA provides both retrospective and prospective relief for hospitals that inadvertently establish low FTE caps and/or PRAs. Retroactively, section 131 provides an opportunity for certain qualifying hospitals that already have an FTE cap or PRA to establish new ones. On a prospective basis, section 131 prohibits CMS establishing and FTE cap or PRA for a hospital that trains less than 1 FTE during that year.
CMS has interpreted the statute as identifying two categories of hospitals that qualify for retrospective relief: Category A hospitals and Category B hospitals. Category A consists of hospitals that, as of enactment, have an FTE cap or PRA that was based on the training of less than 1.0 FTE in a cost reporting period prior to October 1, 1997. Category B refers to hospitals that, as of enactment, have an FTE cap or PRA established based on the training of 3.0 or fewer FTEs in a cost reporting period beginning on or after October 1, 1997 and before enactment of the CAA on December 27, 2020.
In the final rule, CMS explained that a hospital will be considered to have an FTE cap or PRA as of enactment if an FTE cap or PRA was reported in a cost reporting period beginning prior to enactment. If a hospital disagrees with the FTE cap or PRA reported in the applicable base year, and the base year is within the three-year reopening window or is not yet settled, a Category B hospital can initiate a one-time request for reconsideration with its Medicare contractor to dispute the FTE cap or PRA in the base year. The request must be submitted by July 1, 2022. The Medicare contractor’s decision will be appealable to the PRRB. No similar relief is afforded for Category A hospitals. CMS is soliciting comments regarding how to handle base-year disputes when the base year is beyond the three-year reopening window.
Commenters asked what treatment would be afforded to hospitals that trained residents in prior years but do not currently have FTE caps or PRAs because they did not report that past training in their cost reports. CMS answered that if the base reporting period is open or reopenable, then the hospital will be entitled to a reset. As for base years that are beyond the three-year reopening window, CMS is soliciting comments about how to handle those years.
In the final rule, CMS explained that the reset will be triggered for Category A hospitals when they train at least 1 FTE in a cost year beginning after December 27, 2020, and for Category B hospitals when they train more than three years in a cost year beginning after that same date. But the cost report that triggers the reset cannot begin more than five years after December 27, 2020. Regarding the FTE cap, CMS explained that only new programs will trigger the reset. And for the PRA, CMS said that the reset will be triggered even if residents are not on rotation at the hospital during the first month of the cost reporting period (a deviation from the current PRA rules).
CMS explained in the rule that the triggering year will also serve as the base year for calculating new PRA determinations. However, hospitals will have the option of instead using the year beginning on or after the issuance of the final rule. The new FTE caps and PRAs provided under these rules will generally be calculated in the same way that FTE caps and PRAs are calculated under current rules. The new FTE cap adjustments will be added to the hospital’s existing FTE cap.
RTT Changes
Section 127 of the CAA made several changes to the payment rules for RTT programs. The final rule implements those changes.
First, the final rule provides that when an urban and rural hospital participate in an RTT program, both the urban and the rural hospital will receive a cap adjustment for the program. The previous rule only allowed an adjustment for the urban hospital. Rural hospitals are entitled to adjustments for new programs but not existing programs. This meant that rural hospitals did not receive adjustments for existing RTT programs. The CAA, as implemented in the final rule, changes that policy.
The final rule also provides that urban and rural hospitals will be eligible to receive additional adjustments for more than one RTT program. Previously, hospitals were only eligible to receive a cap adjustment for the first RTT program they participate in.
CMS also lifted the requirement that RTT programs must be separately accredited. In addition, the final rule says that RTT programs can be in any specialty. Previously, only RTT programs specializing in family medicine were allowable.
Finally, the final rule changes how payment for RTT programs will be determined during the cap building period. Previously, residents in RTT programs were included in the three-year rolling average during the five-year cap-building period. CMS interprets the CAA as exempting residents in RTT programs from the three-year rolling average during the five-year cap building window and has updated its regulations accordingly.
The final rule is available here, and a CMS fact sheet is available here.
