Health Reform WK-EDGE A proportional share of GME, IME program costs is not ‘all or substantially all’
Wednesday, August 8, 2018

A proportional share of GME, IME program costs is not ‘all or substantially all’

By Patricia K. Ruiz, J.D.

The CMS Administrator held that the Provider Reimbursement Review Board’s (PRRB’s) determinations that a provider does not meet the "all or substantially all" threshold when it pays a proportional share of the program costs. The Administrator also held that there is no provision allowing retroactive application of a Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) reducing the costs that hospitals must incur for residents training in nonprovider settings for GME purposes. Thus, the Administrator found that the Medicare administrative contractor (MAC) was correct in reducing a provider’s direct graduate medical education (GME) and indirect graduate medical education (IME) counts to exclude full time equivalent (FTE) resident training time in nonhospital settings (Providence Sacred Heart Medical Center vs. Noridian Healthcare Solutions, LLC, CMS Administrator Decision, Review of PRRB Dec. No. 2018-D28, May 22, 2018.

Procedural history. Inland Empire Hospital Services Association (IEHSA) operated two clinical facilities (Family Medicine Spokane and Internal Medicine Spokane), considered non-hospital settings, on Providence’s campus in Spokane, Washington (see FTE resident counts properly reduced to exclude work in non-hospital settings, March 23, 2018). IEHSA employed and paid all residents training in its residency programs, including those training with Providence and at the two non-hospital clinical facilities, and billed Providence and other hospitals monthly for these costs. Providence’s share of IEHSA’s budgeted residency training program-related costs for the family medicine facility was approximately 60 percent for fiscal years 2004, 2005, and 2006. Two other hospitals shared the remainder of the costs. Providence’s share of IEHSA’s budgeted residency training program-related costs for the internal medicine facility was approximately 50 percent for the same time frame. Another hospital covered the remaining 50 percent.

Previously, the PRRB sought to determine whether the MAC properly disallowed reimbursement for direct GME and IME costs in the non-hospital setting by reducing the provider’s FTE resident counts to exclude resident time spent in the non-hospital settings. In finding that the MAC properly excluded FTE resident training time in nonhospital settings, the PRRB disagreed with the provider’s argument that, because it paid and claimed a proportional share of the costs of the family medicine and internal medicine programs, it incurred "all or substantially all" of the program costs. Further, the PRRB determined that the ACA did not provide for retroactive relief.

"All or substantially all." The Administrator noted that the definition of "all or substantially all" is codified under 42 C.F.R. 413.75(b)(1) and was clarified for the 1999 and 2004 inpatient prospective payment system (IPPS) final rules, as well as in other documents. The implementing regulations require that there must be a written agreement between the hospital and the nonhospital site, in addition to incurring all or substantially all of the costs of the program at the nonhospital setting. The Administrator agreed with the PRRB’s conclusion that the provider did not pay "all or substantially all" of the costs because it paid a proportional share. The administrator also determined that the related regulations do not provide an exception to the criteria under the related party rule, which might have allowed the provider to include a related party’s payments in the calculation of its costs.

ACA. Section 5504(a) of the ACA amended the Social Security Act to reduce the costs that hospitals must incur for residents training in nonprovider sites to count the FTE residents for direct GME payments on a prospective basis. It made similar changes for IME payment purposes. Section 5504(C) states that amendments made by the section may not be applied in a manner that requires reopening of any settled hospital cost reports for which there is not a jurisdictionally proper appeal pending as of the date of enactment. The Administrator held that the board was correct in determining that the ACA does not allow for retroactive application.

Companies: Inland Empire Hospital Services Association; Family Medicine Spokane; Internal Medicine Spokane; Noridian Healthcare Solutions, LLC

AdministrativeDecisions: AgencyDecisions AgencyNews MedicarePartANews ProgramIntegrityNews NewsFeed

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