In this episode, we’re pleased to welcome back Tim Powell, Senior Reimbursement Consultant at BESLER. Tim will give us a glimpse into the upcoming BESLER webinar in our Reimbursement Best Practices webinar series on IME and GME.Learn how to listen to The Hospital Finance Podcast® on your mobile device.
Highlights of this episode include:
- Types of reimbursement for interns and residents
- What costs IME and DG payments cover
- What drives the payments
- Who is an intern or resident covered by IME and DGME
- Recent court case that impacted DGME payments
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Tim Powell, Senior Reimbursement Consultant here at BESLER. In this episode, Tim will give us a glimpse into the upcoming BESLER webinar, the next in our reimbursement best practices webinar series on IME and GME that we’re hosting on Wednesday, March 8th at 1:00 PM Eastern Time. Thank you for joining us today, Tim.
Tim Powell: Well, thank you very much, Kelly. And I’m looking forward to the webinar. I’ve been doing a lot of work on it. I think it will be informative. And hopefully, it’ll be helpful.
Kelly: Awesome. Well, let’s jump into today’s podcast. So, the webinar is called IME and GME reimbursement. Is there more than one type of reimbursement for interns and residents?
Tim: Well, we’re actually going to define interns and residents a little more in-depth, but in terms of graduate medical interns and residents, there are two types of payments made to hospitals that train them. First, there is what we call the Direct Graduate Medical Education or DGME payment. And next, there’s what is called the Indirect Medical Education or IME payment. And as we were discussing earlier, I think that most folks are more familiar with the IME than the DGME. But we’ll make that clear as we go on.
Kelly: Sounds great. And what are the costs for IME and DG payments designed to cover?
Tim: Well, DGME compensates hospitals’ Medicare portion for expenses incurred for salaries of interns and residents and the teaching faculty and the overhead expenses of training residents to become physicians or training for approved subspecialty designations. So, at its inception in 1965, the Medicare Program reimbursed each hospital for the reasonable cost of operating a capital cost attributed to the treatment of Medicare patients. And in addition, Medicare paid the program’s share of direct operating costs for each hospital’s teaching program. And this payment was intended to recognize the broader social benefit of GME. IME compensates hospitals for the impact of residents have and the overall efficiency of the hospital. The idea is that having the interns and residents in the hospital cause more indirect costs like medical supplies, things that are not directly associated with the residents. So here I’m going to give you a couple of statistics that may surprise you. For the government fiscal year-ended 9/30/2021, hospitals were paid or requested to be paid before audit, a little over $15 billion in total IME and GME reimbursement. Of this amount, almost $12 billion was not for reimbursement of DGME, but for the reimbursement of IME. So actually, the payment for making the hospitals less efficient is much larger than the payment of the actual cost. And for a number of teaching hospitals with a large number of residents, the reimbursement for DGME and IME combined exceeds the payments for that hospital’s care provided through the Standard Perspective Payment System.
Kelly: Wow, those are some big numbers there, Tim. Can you briefly explain what drives the payments for IME and DGME payments?
Tim: Well, DGME payments are based on these following drivers. And first, there is what we call the average per resident amount or APRA, and then we have an updating inflation factor for the APRA because the APRA was calculated back in 1996. Next, we have the number of interns and residents FTEs computed on special DGME rules. And then finally, we have the ratio of Medicare days to total days. So we start this computation by taking the APRA and updating it for inflation. And then we multiply the APRA times the number of interns and residents subject to a cap that we’re going to discuss in more detail on the webinar. And finally, we take the total computed cost and determine Medicare’s portion based on the ratio of Medicare days to total days. IME payments are based on these drivers. First is the available number of bed days for the current year. And the available number of bad days is a weighted average based on midnight census of the number of beds in the hospital, and they are also affected by things like observation and how we treat certain beds. We also have to make sure that we remove beds from the calculation that are not subject to perspective payments like maybe you have a nursing unit or a rehab unit. So those number of beds would be removed. Next is account of interns and residents based on IME rules. Now, I would like to preface that the IME rules for calculating the FDA is slightly different from the DGME. So that amount is a little bit different. And then finally, we’re going to use the actual amount of DRG payments that are subject to PPS, multiplied by a very complicated formula that we’re going to address in more detail during the webinar.
Kelly: Sounds good. And so hospitals have pharmacy interns, medical students, and others considered interns or residents. Can you more carefully define who is an intern or resident covered by IME and DGME payments?
Tim: Well, IME and DGME reimbursement only cover the cost of interns and residents in the following programs, Allopathic Residency Programs approved by the Accreditation Council for Graduate Medical Education, the Osteopathic Residency Programs approved by the American Osteopathic Association, Podiatric Residents approved by the Council of Podiatry Education of the American Podiatry Association, and Dental Residents that are approved by the Commission of Dental Accreditation. Now, we talked about some of these other types of residency. So, these other Allied Health Program Residencies are treated by Medicare as pass-through, and you do get an additional reimbursement provided that they meet certain requirements. So the requirements are that it has to be an Allied Health Program that is required by state law, or is approved by a recognized national professional organization like the National League of Nursing Accreditation Commission, or the American Dietetics Association. And we may be addressing Allied Health reimbursement in another webinar.
Kelly: Sounds good. And I’ve heard that there was a recent court case that impacted DGME payments. Can you explain the issue and the change in reimbursement?
Tim: Well, the case involves Milton S. Hershey Medical Center, and it was a group appeal. So, it’s Milton S. Hershey Medical Center et al. versus CMS. And the core was dealing with two competing computations relating to interns and residents. So first, for DGME purposes, residents that have completed more years of residency than Medicare allows are down-weighted to count only 50% of an FDE. Now, many times this is because the resident had already completed a residency and went on to complete a specialty training program called a Fellowship. So let’s say that you have a resident that was originally a surgical residency, and he goes on to do a specialty residency within surgery. And as long as it’s covered by one of the above organizations, those are allowed to be counted in the cap. But Medicare has a limitation of how many years it will allow you to claim full reimbursement for a resident based on what your initial residency period was. And I think this is something that leads to a lot of questions is when a resident is very first reimbursed by Medicare or first goes in the system, they have what they call an initial residency.
And the number of years allowed for that program follow them along as they go through the system and hospitals file them on their cost reports in order to get reimbursement. So many of the times that there’s down-waiting, a resident is completed a residency and went on to a fellowship, but sometimes a resident has decided that they’re going to change residencies. So, let’s say that they started out as an Internal Medicine Resident or Family Practice Resident. And then they decided that they were going to go into surgery, and they went into a Surgical Residency. The Surgical Residency is longer than what’s allowed for the Family Practice waiting period. And so that would result in a down-waiting. Because Medicare computed the cap for DGME based on the ratio of the cap number of residents to the current unweighted resident count, the combination of both the cap and this computation often resulted in the down-weighted residents being counted as less than half of an FDE. So luckily for teaching hospitals, the court sided with the hospitals, and now CMS must reopen and adjust the DGME reimbursement now for all impacted hospitals. And while we hope the CMS does this computation properly, we foresee that hospitals will need help with all the complex computations around these issues. And additionally, it’s not entirely clear how the corrective computation should be made based on the ruling. So please look for more information in the webinar and with that back to you, Kelly.
Kelly: Well, great. Thank you so much for joining us today, Tim, and for sharing this great information leading up to the upcoming webinar and BESLER’s Reimbursement Best Practices series on IME and GME. And don’t forget to join Tim on March 8th, 1:00 PM Eastern Time, and you can also earn CPE. Thanks again, Tim.
Tim: Thanks, Kelly.
Kelly: And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time.
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