Research Doesn’t Pay—At Least Not in Graduate Medical Education


Monday the Seventh Circuit upheld the position of CMS that “pure research” by medical residents doesn’t count in the calculation of costs for graduate medical education reimbursement.

Indirect graduate medical costs, or IGME, are what Medicare allows teaching hospitals in increased Medicare rates. IGME represents the indirect costs to a teaching hospital of hosting residents and interns—costs above and beyond the direct cost of their salaries and benefits, or DGME.

Medicare divides such research into two categories:  patient care-related research and research that isn’t patient care-related. This decision concerned the latter—what the court termed “pure research.” The question was whether for the years in question, 1983 to 2001—more on that later—Rush Medical Center could count that cost in IGME. If it could, then the count of its full-time equivalent residents would increase as much as 19 a year. That represents a lot of money.

The period in question ended in 2001 because in the Affordable Care Act of 2010 Congress said explicitly that from 2001 forward pure research costs could not be included in IGME. That same year—2010—HHS issued a regulation announcing that the same principle applied for the years from 1983 to 2001.

Rush challenged the validity of the regulation based on an earlier Seventh Circuit decision involving University of Chicago Hospital. In that case the court had allowed pure research costs.

The court ruled against Rush, deciding that the University of Chicago decision was different because it was announced before HHS had issued the regulation directly on point. The court found no grounds for finding that the regulation exceeded the authority of HHS under the statute. So Rush lost the case and wasn’t allowed to include pure research costs in its IGME for the years 1983 to 2001.

But, putting aside the substantive issue, what kind of system tolerates allowing accounting issues from 1983 to linger into the second half of 2014? Why isn’t that the big story here?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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