December 21, 2021

CMS Finalizes Policies on Residency Positions and Organ Procurement Payment

Holland & Knight Healthcare Blog
Miranda A. Franco
Healthcare Blog

The Centers for Medicare & Medicaid Services (CMS) has released the Final Rule with a comment period for the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; Changes to Medicare Graduate Medical Education Payments for Teaching Hospitals; Changes to Organ Acquisition Payment Policies. The Final Rule, released on Dec. 17, 2021, addresses proposed, but not finalized, policies in the initial Inpatient Prospective Payment System (IPPS) Final Rule.

A fact sheet is provided on the CMS website. This Final Rule with a comment period is scheduled to be published in the Federal Register on Dec. 27, 2021, and comments are due within 60 days of publication.

Changes to Graduate Medical Education (GME)

Distribution of 1,000 New Residency Positions. Under Section 126 of the Consolidated Appropriations Act (CAA), CMS is required to distribute an additional 1,000 new Medicare-funded medical residency positions, at no more than 200 slots per year, beginning in Fiscal Year (FY) 2023. As required by Congress, CMS is prioritizing applications from qualifying hospitals that serve geographic areas and underserved populations with the greatest needs by using the Health Resources and Services Administration's (HRSA) health professional shortage areas (HPSA) score in allocating full-time equivalents (FTEs). In order to be eligible for prioritization based on HPSA scores, hospitals must first qualify under one or more of four statutorily defined categories.

  • Category One: Hospitals that are in rural areas or treated as such. A hospital is considered to be in a rural area if its main campus is in an area outside an urban core-based statistical area (CBSA).
  • Category Two: Hospitals that are training residents in excess of their current Medicare direct graduate medical education (DGME) and indirect medical education (IME) caps. CMS would require hospitals to submit cost reports as evidence that they are training more residents than are in 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 Jan. 1, 2000.
  • Category Four: Hospitals that serve areas designated as HPSAs. To qualify under Category Four, CMS proposed that a hospital must attest that more than 50 percent of resident training time in each program for which funding is requested would be spent training at the hospital locations within the HPSA. However, CMS modified its proposal to provide additional flexibility. Now, all program training that occurs in a geographic HPSA at scheduled program training sites that are physically located in that HPSA and treat the HPSA's population, including nonprovider settings and Veterans Affairs facilities, will count toward meeting the 50 percent training requirement to qualify under Category Four.

Under these four categories, CMS will prioritize applications from qualifying hospitals that assist underserved populations in geographic HPSAs or population HPSAs. Based on the residency training program for which the hospital is applying, the hospital will choose, if applicable, a geographic or population HPSA where residents spend at least 50 percent of their training time.

The HPSA scores associated with the geographic or population HPSAs chosen by hospitals that qualify will be ranked highest to lowest. The 200 residency positions available for each fiscal year will be prioritized in this manner, with each applicant hospital receiving up to five FTEs based on the length of the program associated with the hospital's application.

Notably, CMS modified its proposal to adjust the size of the award to the length of the program for which a hospital is applying. Specifically, the maximum award amount is contingent on the length of the program for which a hospital is applying, with up to one FTE being awarded per program year, not to exceed a program length of five years or five FTEs. For example, a hospital applying to train residents in a three-year program may request up to three FTEs per fiscal year.

Hospitals can find information about the HPSA or HPSAs associated with their training program locations using the HRSA search tool. When a hospital finds that its residency training program meets the requirement to be prioritized by more than one HPSA, it may choose which HPSA to use on its application. Note: Only one HPSA can be prioritized.

To be considered for an increase in resident positions, each qualifying hospital must apply. An application is considered timely for additional residency positions effective July 1 of the applicable fiscal year if it is submitted by March 31 of the prior fiscal year. As such, the first round of 200 residency slots will be announced by Jan. 31, 2023, and become effective July 1, 2023 (meaning applications must be submitted by March 31, 2022).

CMS did not finalize its alternative distribution proposal to prioritize hospitals that qualify in more categories.

(Comment Solicitation: CMS seeks comment on how to account for healthcare provided outside of a HPSA to HPSA residents and feasible alternatives to HPSA scores as a proxy for health disparities in the prioritization of additional FTE cap slots. CMS also seeks comment on potential alternative definitions of Category Four to inform future rulemaking.)

Promoting Rural Hospital GME Funding Opportunity. CMS is implementing Section 127 of CAA, "Promoting Rural Hospital GME Funding Opportunity," which allows rural teaching hospitals participating in an accredited rural training program to receive increases to their FTE caps. Specifically, the agency will provide an adjustment to IME and direct GME FTE resident caps each time an urban and rural hospital establishes a Rural Training Track (RTT) program for the first time, even if the RTT program does not meet the newness criteria for Medicare payment purposes. CMS also will adjust resident caps for an urban hospital creating additional RTTs after establishing its first RTT.

Adjustment of Low Per Resident Amounts (PRAs). Section 131 of CAA made statutory changes to the determination of PRAs and GME caps of hospitals that hosted a small number of residents for a short duration. Accordingly, CMS finalized its proposals to allow qualifying hospitals that previously had low FTE caps to recalculate the PRA and FTE cap. CMS will post a file on its website containing an excerpt of the Healthcare Cost Report Information System (HCRIS) cost report worksheets on which FTE counts, caps and PRAs, if any, would have been reported, starting with cost reports beginning in 1995. CMS also will permit certain hospitals with no more than three FTEs on their cost report a one-time opportunity to request reconsideration by its MAC, which must be submitted electronically and received by the MAC by July 1, 2022.

(Comment Solicitation: CMS seeks public comment regarding how to handle reviews of PRAs or FTE caps from cost reports that are beyond the three-year reopening period – with the exception of Category A and Category B hospitals that agree with the HCRIS posting).

Treatment of Certain Medicaid Section 1115 Demonstrations for Medicare Disproportionate Share Hospital (DSH) Payments. CMS is not addressing its proposal related to the treatment of Section 1115 waiver days for purposes of the DSH adjustment, though it expects to revisit the issue in future rulemaking.

Organ Acquisition Payment Policies

After considering the numerous public comments received, CMS is not finalizing its proposal concerning the organ counting policy for Medicare's organ acquisition payment purposes and the research organ counting policy. While CMS notes it "may revisit" the policy in future rulemaking, it is, however, finalizing other Medicare organ acquisition payment policies with some modifications.

To apply a coordinated approach across organ types, CMS finalized the codification and compilation of Medicare organ acquisition policies under a new 42 CFR Part 413.400.

Other key policies of note include:

Medicare's Principles of Reasonable Costs. CMS finalized that donor community hospitals bill organ procurement organizations (OPOs) for costs of services furnished to a cadaveric donor for cost reporting periods beginning on or after Oct. 1, 2021. OPO cost reports include OPO donor acquisition costs and donor community hospital costs for services provided to cadaveric donors. As such, these charges are subject to Medicare's principles of reasonable cost, and donor community hospitals should bill the lesser of customary charges reduced to cost based on the most recent hospital-specific cost-to-charge ratio for the period in which service was rendered.

Medicare's Role as a Secondary Payer. Specifically, if the primary insurer's agreement requires the transplant hospital to accept the primary insurer's payment as payment in full for the transplant and associated organ acquisition costs. In that case, Medicare has zero liability as a secondary payer, and the organ at issue is not counted as a Medicare usable organ. When the payment from the primary insurer is insufficient to cover the entire cost, Medicare may have a secondary payer liability, and the organ would count as a Medicare usable organ. To determine whether Medicare has a secondary payer liability, the provider must submit a bill to its Medicare contractor and compare the total cost of the transplant, including the transplant diagnosis-related group amount and organ acquisition costs, to the payment received from the primary payer.

Clarification of Items That Qualify (and Don't) Toward Medicare's Share of Organ Acquisition Costs. This includes, but is not limited to, costs incurred in the acquisition of organs from a living donor or a cadaveric donor, costs for services provided to transplant recipients, certain registration fees, surgery fees for kidney acquisition, costs associated with excising organs including general routine and special care services, operating room and other inpatient ancillary services applicable to living or cadaveric donors, certain transportation costs, certain costs associated with organizational membership, meetings or conferences, organ preservation and perfusion costs, outpatient costs, costs for certain laboratory services, and costs for seminars for continuing education credits (which are allowed provided they are limited to OPO staff). CMS also clarified several specific costs that Medicare will not pay for, such as burial and funeral expenses for cadaveric donors and costs associated with transportation of a living donor. Additionally, CMS clarified that billing amounts in addition to standard acquisition charges (SACs) would be "inappropriate" and encouraged OPOs to ask their MACs to adjust their SACs if they no longer cover increased costs, adding that MACs are encouraged to refer inappropriate or abusive fiscal procedures by OPOs.

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