AND ON THE 8TH DAY, GOD
CREATED THE
Centers for Medicare
& medicaid services (CMS)

And then, it was decided that CMS should
have a payment provision for Teaching
Hospitals called Graduate Medical
Education (or GME)

The GME reimbursement mechanism was
born and split into two components: Direct
(DGME) and Indirect (IME)
Why the religious connotation?

I’m not a preacher man trapped in a
Finance person’s body

I don’t want any one of us struck down by
lightening

So it’s simple really – CMS giveth’s & CMS
taketh’s away
What Payers fund GME costs?

MEDICARE (federal program for the aged &
disabled)

MEDICAID (federal & state program for the
financially challenged)

TRICARE (federal program for active & retired
military)
What is the Funding specifically for?

DGME funding is for Intern & Resident
compensation, Faculty Supervision, GME
Office Admin costs & Hospital overhead

IME funding is to recognize a hospital’s
higher operating costs that result from
teaching activities
WHY DO WE GET THIS FUNDING?

CMS realizes that teaching hospitals incur
more costs than non-teaching hospitals
and feels an obligation to pay THEIR share

They also realize that without teaching
hospitals, future doctors would not have
real life training grounds to perfect their
skills
WHY DO WE CARE ABOUT THIS
TOPIC - PART I?

We receive approximately $33.3M A YEAR
in Graduate Medical Education funding
from the Medicare program alone

$11.0M for Direct Graduate Medical
Education (DGME) costs and $22.3M for
Indirect Medical Education (IME) costs
WHY DO WE CARE ABOUT THIS
TOPIC - PART II?

CMS also gives to State Medicaid
programs approximately 50% of their
Educational cost obligation

That amount can be approximately
$15.0M more A YEAR than mentioned on
the previous slide
Why do we care about this topic Part III?

Some States, Virginia being one of them,
matches the Federal GME contribution and
doles out another $15.0M for a total of
$30.0M

Medicaid takes the combined funds and
distributes those dollars to us as DGME
(approx $7.7M) & IME (approx $22.3M)
GOOD NEWS / BAD NEWS

Good News – it’s nice that CMS funds their
share of the additional costs of being a
teaching hospital

Bad News – Even with the additional
funding of Graduate Medical Education by
CMS, Hospitals still LOSE LOTS of $$ on
their Medicare business
GOOD NEWS / BAD NEWS PART II

Good News – the Medicaid GME funding
helps get us reimbursed at nearly 100% of
our costs of providing Medicaid services

Bad News – it only helps us to get to
nearly 100% of our costs – no profit
margin
What does Tricare pay for GME?

Very little but it’s because we have a very low
Tricare utilization (business)

GME Funding from this source is approximately
$.8M annually (DGME only, no IME)

As a result of this scant funding, we will largely
focus on Medicare & Medicaid funding
How are the Resident FTE counts
done for DGME?
New Innovations (may sound familiar)
Residents may be “weighted” meaning some can
only count as half an FTE, one can never be
more than an FTE
 Examples – Residents that switch residencies, do
a second residency or do a fellowship
 Resident time is allowed for patient care,
didactics or research while rotating in the
hospital, up to a program’s initial residency
period
 Resident can be claimed in a non-provider
setting but research time is excluded


The FTE “CAPS”

Based on FY96’s Cost Report, CMS
established FTE CAP’s for both DGME &
IME (idea – limit how much CMS had to
pay for growing GME programs)

For DGME, CMS took all the “weighted”
countable FTE’s of that year and
“unweighted” them (i.e. made them a full
FTE) to come up with a CAP of 401.51
FTE CAPS – Part II

The DGME “unweighted” FTE CAP is then
compared every year to the “unweighted”
FTE count of the current year and that
ratio is applied to the current year’s
“weighted” FTE count

The IME FTE CAP (since no one is
“weighted”) is much simpler – it came
from the FY96 Cost Report and is 367.72
FTE CAPS – Part III

Hospital Based “Dental” Residencies are
excluded from both DGME & IME CAPS

Affiliated Agreements with other hospitals
that are under their FTE CAPS help
hospitals that are over their CAPS by
allowing more GME reimbursement to be
claimed (Example: Howard University
Hospital)
DGME Formulary Components





FTE counts according to DGME counting rules, broken
down into Primary Care & Non-Primary Care FTE’s
Three Year Rolling Average (Current, Prior &
Penultimate)
Per Resident Amounts (PRA) – established in 1985 for
each teaching hospital based on their Direct teaching
costs and increased each year for inflation
To encourage Teaching Hospitals to produce more
primary care doctors, a higher PRA was given to that
group versus groups considered non-primary care
MCR FFS & MCO Inpatient Utilizations (Patient Days)
Medicare DGME Formula
Part I
(Very Simplified)
# of FTE’s rotating at hospital
395
(3 year rolling avg, Dental & Cap Adj)
Blended Per Resident Amount $88,753
Subtotal
$35,057,435
Medicare FFS Utilization
.2564
Medicare FFS DGME Pmt
$8,988,726
Medicare DGME Formula
Part II
(Awarded Slots - MMA)
# of DGME Slots Awarded
18.21
Claimable Slots After Formulary
16.38
Nat’l Avg Per Resident Amt
$86,993
Subtotal
$1,424,945
Medicare FFS Utilization
.2564
Medicare FFS DGME Payment
$365,356
Medicare MCO Utilization
.0463
Medicare MCO DGME Payment
$65,975
Medicare DGME Formula
Part III
(Medicare Managed Care Organizations)
# of FTE’s rotating at hospital
395
(3 year rolling avg, Dental & Cap Adj)
Per Resident Amount
$88,753
Subtotal
$35,057,435
Medicare MCO Utilization
.0463
Medicare MCO DGME Pmt
$1,623,159
Total MCR DGME Reimbursement
MCR FFS Payment $ 8,988,726
 MCR MMA FFS Payment
$ 365,356
 MCR MMA MCO Payment $
65,975
 MCR MCO Payment
$ 1,623,159
 Total MCR DGME Payment $11,043,216

To see Actual DGME Calculations

The DGME Formularies are found on a
teaching hospital’s Medicare Cost Report,
Worksheet E-3, Part IV, Lines 3.01 - 25
AND Worksheet E-3, Part VI, Lines 5 - 12
GME Salary & Benefits, FY11
I&R Salary & Benefits - $39,152,007
 Refunds from hospitals - $ 7,334,825
 Net VCUHS I&R Costs - $31,817,182


This is one component of CMS’s view of a
hospital’s DGME costs
Federal Regulations

There have been a lot over the years, a lot
of acronyms such as BBA, BBRA, BIPA,
MMA and most recently ACA (Affordable
Care Act)

Discussion of all these would need to be
it’s own presentation but suffice it to say,
all these regulations were intended to cut
GME funding in some way, shape or form
Most Relevant GME Regulations

FTE Caps were established for both DGME &
IME counts to limit payments in case teaching
hospitals expanded their programs (BBA’97)

The IME Federal Formulary began undergoing
significant alterations – all negative – which
began with the BBA and goes thru today’s ACA

Clarifications on what residents can be doing
and where they can be doing it in order to be
counted for either DGME or IME
Examples of a “Clarification” Part I

ACA Regulation for DGME counts

In the Hospital, Resident can be counted for
doing patient care, vacation/sick, didactic &
research

In a Non-hospital/Provider Setting, resident can
be doing all of the above with the exception of
research. Didactics was just recently “clarified”
as allowed effective 7/1/09. Prior to that, it was
not allowed.
Examples of a “Clarification” Part II

ACA Regulation for IME counts

In the Hospital, a resident can be counted for
doing patient care, vacation/sick, & didactic.
Research time however CANNOT be counted
effective 10/1/01 – no word on if it could have
counted prior to 10/1/01

In a Non-hospital/Provider Setting, a resident
can only be counted while doing patient care or
vacation/sick. Didactics and Research are NOT
countable time.
IME Formulary Components
FTE’s according to the IME rules &
clarifications
 Three Year Rolling Average
 Acute Bed Days Available (number of
staffed beds in acute areas of the hospital
times the number of days they are open in
a year divided by 365 days)
 DRG (inpatient) payments on FFS & MCO

Medicare IME Formula Part
I
# of IME I&R (cap adj + dental + 3 yr avg) 404.66
Acute Bed Days Available
629.88
IRB Ratio
.642446
Plus
1.00
1.642446
Power to .405
1.222570
Minus
1.00
.222570
Times
1.35 (IME Factor)
.300470
MCR FFS DRG payments
$66,324,839
MCR FFS IME payment (Factor X DRG) $19,928,632
Medicare IME Formula Part
II
(Awarded Slots - MMA)
# of IME CAP Slots
3.02
Acute Bed Days Available
629.88
IRB Ratio
.004795
Plus
1.00
1.004795
Power to .405
1.001939
Minus
1.00
.001939
Times
.66 (IME Factor)
.001280
MCR FFS DRG payments
$66,324,839
MCR FFS IME payment (Factor X DRG)
$84,880
Medicare IME Formula Part
III
(Medicare MCO’s / Shadow Bills)
# of IME I&R (cap adj + dental + 3 yr avg) 404.66
Acute Bed Days Available
629.88
IRB Ratio
.642446
Plus
1.00
1.642446
Power to .405
1.222570
Minus
1.00
.222570
Times
1.35 (IME Factor)
.300470
MCR FFS DRG payments on MCO Cases $7,510,320
MCR IME pmt for MCO’s (Factor X DRG) $2,256,626
Total MCR IME Reimbursement
MCR FFS Payment  MCR MMA Payment
 MCR MCO Payment
Total MCR IME Payment

$19,928,632
$
84,880
$ 2,256,626
$22,270,138
To see Actual IME Calculations

The IME Formularies are found on a
teaching hospital’s Medicare Cost Report,
Worksheet E Part A, Lines 3 – 3.24 AND
Worksheet E-3, Part VI, Lines 16 - 23
CONCLUSION
Although we receive millions of dollars for GME
costs, it only represents a portion of our overall
teaching costs
 Despite these additional payments from our
governmental payers, we still lose significant
money on Medicare & Tricare business and only
receive up to our costs on Medicaid business
 When the Federal government is looking to
either save money or be “budget neutral” for a
new Program, you can bet that GME will always
be up on the proverbial Chopping Block

QUESTIONS???
C. Todd Gardner / Acacia Pulliam
Dept of Reimbursement, VCUHS
828.4733 or 827.5374