Health Reform WK-EDGE FTE resident counts properly reduced to exclude work in non-hospital settings
Monday, April 2, 2018

FTE resident counts properly reduced to exclude work in non-hospital settings

By Jessica Y. Washington, J.D.

The Provider Reimbursement Review Board (PRRB) sided with Noridian Healthcare Solutions, LLC (Medicare contractor) in an appeal matter involving the latter’s reduction of Providence Sacred Heart Medical Center’s (Providence) full-time equivalent (FTE) resident counts to exclude the time spent by medical residents training in non-hospital settings. The PRRB found that the Medicare contractor properly disallowed reimbursement to Providence for direct graduate medical education (GME) and indirect medical education (IME) costs associated with two clinical facilities considered to be non-hospital settings, because Providence did not incur "all or substantially all" of the costs of the two residency training programs (Providence Sacred Heart Medical Center (Spokane, Washington) v. Noridian Healthcare Solutions, LLC, PRRB Hearing, Dec. No. 2018-D28, Case Nos.08-1553, 09-1533, 09-2222, March 20, 2018).

Background. 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. 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.

Providence’s arguments. Providence proffered several arguments on appeal: (1) that the statutes in place during the relevant cost-reporting periods permitted reimbursement to hospitals for medical residency expenses related to patient care in non-hospital settings, even when those costs are shared among two or more hospitals, and that the Medicare contractor misinterpreted the governing statute to require a "single hospital" to incur all or substantially all of the cost in a non-hospital setting; (2) that Congress allowed reimbursement of graduate medical costs in non-hospital settings to provide a financial incentive (i.e., additional reimbursement) to provide hands-on, primary care medical training, by moving residency training outside of the hospital and into private practice or clinical settings; (3) that the Medicare contractor allowed Providence to claim non-hospital resident FTEs at IEHSA sites for the last 10 years and that no changes in the applicable statutes or rules justifies the Medicare contractor’s new position on the issue; and (4) that Congress expressly revoked the single hospital policy when it enacted sections 5504(a) and (b) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), and explicitly permitted this change to apply to all then-pending, jurisdictionally proper appeals. Providence’s contended that its appeal was a jurisdictionally proper pending appeal before the PRRB on the date of the ACA enactment, and that it was entitled to relief under the law.

PRRB findings. The PRRB disagreed with Providence’s contention that because it paid a proportional share of the non-hospital, clinical facilities’ residency training programs, it met "all or substantially all" of the costs, as required by statute. For GME and IME reimbursement purposes, the PRRB relied on 42 U.S.C. §§ 1395ww(h)(4)(E) and 1395ww(d)(5)(B)(iv), which entitle a hospital to count the time its residents spend on patient care activities in non-hospital settings, if the hospital incurs all or substantially all, of the costs associated with the training program in the non-hospital setting. The PRRB noted that during the fiscal years in question, federal regulations (42 C.F.R. sec. 413.86(b)) defined "all or substantially all" of the costs for training programs in non-hospital settings to mean "the residents’ salaries and fringe benefits (including travel and lodging) and the portion of costs of teaching physicians’ salaries and fringe benefits attributable to direct graduate medical education." In the matter at hand, as stipulated by Providence, IEHSA paid the medical education expenses incurred in connection with the two non-hospital, clinical residency training programs and that Providence and other hospitals were billed monthly for these costs. The PRRB found that this type of financial arrangement did not strictly comply with longstanding federal statute and regulation and, therefore, the Medicare contractor’s adjustments for resident training at non-hospital facilities was, indeed, proper. Moreover, the PRRB pointed to several court opinions that support the notion that Providence cannot split these costs with other hospitals and obtain Medicare reimbursement. The PRRB, ultimately, held that Providence’s proportional share of the residency training program costs did not meet statutory requirements.

In response to the ACA argument, the PRRB noted that the introductory regulatory language of 42 C.F.R. sec. 413.78(g) explicitly stated that paragraph (g) governs only cost reporting periods beginning on or after July 1, 2010. The PRRB also noted that sections 5504(a)(3) and (b)(2) of the ACA are not intended to apply retroactively prior to July 1, 2010, regardless of whether a hospital had a jurisdictionally proper appeal pending as of March 23, 2010 on a GME or IME matter from a cost reporting period occurring before July 1, 2010. Thus, the PRRB found that the ACA is not applicable to Providence’s appeal because the fiscal years in question commenced prior to July 1, 2010. In making its finding, the PRRB acknowledged that its determination in the current case conflicts with its own decision in an earlier 2014 case. The PRRB noted, however, that CMS did not provide clarification of the regulation until after its decision in the 2014 matter and that subsequent case law supports the PRRB’s determination in Providence’s appeal.

Cost reporting periods ending December 31, 2004; December 31, 2005; December 31, 2006.

Companies: Providence Sacred Heart Medical Center; Noridian Healthcare Solutions, LLC; Family Medicine Spokane; Internal Medicine Spokane; Inland Empire Hospital Services Association; Deaconess Medical Center; Valley Hospital and Medical Center; Cottage Health System; Borgess Medical Center; Covenant Medical Center, Inc.; Eastern Maine Medical Center; Blue Cross Blue Shield Association; Lutheran Hospital of Fort Wayne Indiana; Wisconsin Physicians Services; Novitas Solutions, Inc.

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