This analysis was prepared by Venable LLP, on behalf of AACOM.

IPPS Proposed Rule:

On May 2, 2024, the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register the fiscal year (FY) 2025 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) proposed rule. The proposed rule includes provisions to update Medicare fee-for-service payment rates and policies for inpatient hospitals and LTCHs for FY 2025. The proposed rule has been available for public inspection since April 10; comments are due June 10.

The text of the proposed rule is available here, and a fact sheet can be found here. 

Key Highlights:

• CMS is proposing a 2.6% increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users, which reflects a projected hospital market basket update of 3.0% reduced by a projected 0.4 percentage point productivity adjustment.
• CMS is extending a temporary policy finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage index disparities affecting low-wage index hospitals, including many rural hospitals. The extension would be for three years starting with FY 2025.
• CMS solicits feedback on several requests for information (RFIs), including RFIs on maternity care, obstetrical services, measure concepts for the LTCH QRP, a star rating system for the LTCH QRP, public health reporting and data exchange, Scope 3 Metrics, incentives for voluntary decarbonization, and the CDC’s National Syndromic Surveillance Program, as well as medical education RFIs (discussed further below).

Graduate Medical Education Proposals:

Proposed Distribution of Slots Under Section 4122 of the Consolidated Appropriations Act, 2023 (2023 CAA)

The 2023 CAA required the Secretary of Health and Human Services to start an application round for 200 additional residency positions by FY 2026. 

For hospitals, there are four categories the Secretary must consider. Each category must get at least 10 percent of the total number of slots. The four categories are:

1. Rural (or treated as rural) hospitals
2. Hospitals where the reference resident level exceeds the otherwise applicable resident limit
3. Hospitals in states with new medical schools (including new branches or locations of existing schools)
4. Hospitals in Health Professional Shortage Areas (HPSA)

Furthermore, each hospital that applies in a timely fashion gets one slot. If there are more than 200 qualifying applicants, however, the one slot could be prorated as a fraction of a full-time equivalent (FTE). No hospital can get more than one slot (or the prorated equivalent) until every hospital that applied in time gets one. The overall cap is 10 slots awarded to any one hospital and hospitals receiving a limit increase must use the increased slots to expand an existing training program if they have an existing program.

In distributing slots, any slots left after meeting the one slot per hospital minimum will be prioritized by HPSA score as per section 126 of the 2021 CAA.  

Lastly, at least 100 of these slots must go to psychiatry or psychiatry subspecialty residency training.

CMS proposes making March 31 of the prior fiscal year the deadline for applying for additional residency positions. For FY 2026, therefore, the deadline is March 31, 2025. Hospitals would show a need for increased caps by providing copies of their Worksheet E, Part A and Worksheet E–4 from the Medicare cost report. Hospitals would also need to provide documentation from the ACGME or American Board of Medical Specialties (ABMS). 

Alternative Allocation Method

In an appendix to the proposed rule, CMS notes that it is also considering an alternative approach to the above. Under this alternative method, each eligible hospital would start with 0.01 FTE and then the remaining FTEs would be based on HPSA scores. As an example, CMS says that if there were 1,000 eligible hospitals, each would get an initial 0.01 FTE allocation, exhausting 10 FTEs overall (1000 x 0.01 = 10). The remaining 190 slots would then be distributed by the section 126 (of the 2021 CAA) HPSA score method mentioned above.

Proposed Modifications to the Criteria for New Residency Programs and Requests for Information (RFI)

CMS notes in the proposed rule that questions have arisen over the definition of a “new” residency program given existing residents sometimes transfer programs and that urban hospitals reclassified as rural receive additional Indirect Medical Education (IME) slots. As such, CMS is proposing a 90 percent threshold for a new program to qualify as new. 

On other questions related to “newness,” CMS issued an RFI, including the following questions:

1. What should the threshold be for the newness of faculty and staff? CMS acknowledges that “it would be reasonable for a new program to wish to hire some staff that already have experience teaching residents and operating a program” and that the “percentage of faculty with no previous experience teaching in a program in the same specialty should probably be less than 90 percent, but we are uncertain what the appropriate threshold should be.” CMS also asks, should this threshold vary for small and/or rural programs?
2. How should commingling residents be treated? What amount of commingling should be allowed? Commingling refers to residents in separately accredited programs sharing some training experiences. In this case, commingling refers specifically to shared experiences between a new program and an existing program.
3. Why might hospitals want to train residents in separately accredited programs but in the same specialty? How often does this happen?

Notice of Closure of Teaching Hospital and Opportunity to Apply for Available Slots

In accordance with the Affordable Care Act, the proposed rule distributes residency slots that had been previously allocated to the now-closed McLaren St. Luke’s Hospital in Maumee, OH and South City Hospital in St. Louis, MO. 

The IME FTE cap at McLaren St. Luke’s was 14.93, as was its Direct GME cap. At South City, the cap was 67.54 for IME and 74.00 for Direct GME. The due date for applying for these slots is July 9, 2024, via https://mearis.cms.gov/public/home. There is no deadline for final determinations of which hospitals will receive the slots.

Please contact AACOM Government Relations at aacomgr@aacom.org with questions or for further information.