Health Reform WK-EDGE Medicare will not reimburse residents’ pure research activities at teaching hospitals
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Friday, October 21, 2016

Medicare will not reimburse residents’ pure research activities at teaching hospitals

By Robert B. Barnett Jr., J.D.

Teaching hospitals are not entitled to Medicare reimbursement for the time that residents spend in research activities not directly related to patient care. Some time that residents spend on non-patient care is reimbursable—attendance at conference and seminars, for example—but not research time unassociated with the treatment or diagnosis of a particular patient (Toyon 1997-2001 Intern and Resident Research FTE Group v. Noridian Healthcare Solutions, PRRB Hearing, Dec. No. 2016-D26, Case No. 09-1541G, September 29, 2016).

Case background. A Medicare contractor, Noridian Administrative Services, disallowed the portion of Medicare indirect medical education reimbursement claims for fiscal years 1997-2001 by Stanford University Hospital and UC Davis Medical Center that applied to time that residents spent in research activities. The two hospitals appealed that decision to the Provider Reimbursement Review Board.

Regulatory background. The inpatient prospective payment system that Medicare uses to reimburse hospitals is adjusted for teaching hospitals, in recognition of their higher-than-average operating costs associated with resident training. One such adjustment is the IME payment, which compensates hospitals for a portion of those higher costs. The original IME regulations permitted reimbursements for the time that residents spent in "patient care activities," without addressing non-patient care activities.

In 2001, CMS clarified the rules by adding a subparagraph to the regulations that excluded a resident’s research time not associated with the treatment or care of a particular patient. CMS noted at the time that this codified a long-standing practice. In 2010, Congress passed the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), which added a section stating that IME payments should not include time that residents spent in research activities not related to the treatment or diagnosis of a particular patient. In 2010, CMS published a Final rule implementing those ACA provisions, stating also that the rules would apply retroactively to January 1, 1983.

Reimbursable activities. The hospitals’ position was that the IME payment rules did not include the exclusion for research activities unrelated to a particular patient for the years when these reimbursement claims were made (1997-2001). It cited Board decisions and court cases upholding IME reimbursements for research time prior to 2001.

Relying on Rush University Medical Center v. Burwell, however, the Board rejected the hospitals’ argument, noting that the Seventh Circuit had concluded that Congress had delegated to CMS whether pure research activities would be included in IME payments for the years 1983-2001. It also found that CMS’ interpretation of what consisted unreimbursable non-patient care activities was reasonable. The rulings and cases the hospital had cited in support of its position were distinguishable by the fact that they were decided prior to the CMS’ implementation of the ACA provisions. As a result, the Board concluded that Noridian Administrative Services had correctly excluded from IME payments made to the hospitals those amounts representing time their residents spent in purely research activities.

Cost reporting periods ending December 31, 1997; December 31, 1998; December 31, 1999; December 31, 2000; December 31, 2001.

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