AAMC Comment Letter
October 28, 1997
Nancy-Ann Min DeParle
Administrator
Health Care Financing Administration
Hubert H. Humphrey Building
Room 309-G 200
Independence Avenue, Southwest
Washington, DC 20201
Reference: File Code BPD-878-FC
Dear Ms. DeParle:
The Association of American Medical Colleges (AAMC or the
Association) welcomes this opportunity to comment on the Health
Care Financing Administration's (HCFA) interim final rule
entitled Medicare Program; Changes to the Hospital Inpatient
Prospective Payment Systems and Fiscal Year 1998 Rates.
62 Fed. Reg. 45966 (August 29, 1997) (interim final rule).
The AAMC represents all 125 accredited U.S. medical schools;
approximately 400 major teaching hospitals, including 75 Veterans
Affairs medical centers; 86 professional and academic societies;
and the nation's medical students and residents.
The interim final rule implements a number of provisions
in the Balanced Budget Act of 1997 (BBA) that affect Medicare
payments to teaching hospitals. This letter addresses a number
of these provisions, focusing on issues related to Medicare
indirect medical education (IME) and direct graduate medical
education (DGME) payments. First, we will comment on the resident
limit provision, followed by the two exemptions related to
that limit: aggregation for affiliated groups and new programs.
Next, we will address a needed exemption related to residents
trained in hospitals operated by the Departments of Veterans
Affairs (VA) and Defense (DoD). We then will comment on several
other provisions in the interim final rule, including payments
to teaching hospitals for Medicare managed care enrollees,
outlier payments and direct teaching payments to nonhospital
providers. Finally, we will address provisions included in
the BBA that were not part of the August 29 regulations, but
that will require future regulatory attention.
I. Resident Limits
The IME and DGME provisions in the BBA create a limit on
the number of residents that Medicare will recognize for payment
purposes. This limit is based on the number of residents a
hospital reports on its most recent Medicare cost report ending
on or before December 31, 1996 (base year).
While we recognize that the December 31 date is a statutory,
rather than a regulatory, provision, the AAMC strongly believes
this time frame unfairly penalizes a large number of teaching
hospitals. Most residents begin their training during July
of each year. Hospitals that made an upward adjustment in
their total number of residents in July, 1997 are precluded
from receiving Medicare support for some of their residents
because of the December 31, 1996 deadline. Moreover, hospitals
with cost report periods that end June 30 will have a base
year count that does not reflect changes made in July, 1996.
Establishment of a base year resident count that penalizes
hospitals for good faith actions they took prior to passage
of the BBA raises important policy and economic issues and
must be remedied.
To ensure that hospitals are not penalized retroactively,
we believe a more reasonable cut-off date should be established
that would permit residents that began training prior to August
5, 1997 to be recognized in the resident limits.
We also would like a clarification that hospitals that participate
in a merger or acquisition may combine their resident limits
to create a new resident limit for the surviving entity.
II. Aggregation Provisions
Under the BBA, the Secretary is permitted to establish rules
to permit affiliated groups to join together for purposes
of aggregating their resident limits. In the interim final
rule, the Secretary has proposed to define an affiliated group
in two ways: 1) two or more hospitals in the same geographic
wage area, and 2) hospitals not located in the same wage area
but that are jointly listed as major participating institutions
in the Graduate Medical Education Directory (GME Directory).
We believe the aggregation provisions must be modified in
the following ways to better reflect institutional configurations
and relationships.
A. Application of Aggregation Provisions to Program Affiliations
The interim final rule currently permits aggregation of resident
limits only at the hospital level-- that is, the affiliated
hospitals must agree to combine the resident counts associated
with all of their training programs. In practice, however,
many hospitals have relationships with other facilities that
enable them to rotate residents for specific programs through
a number of different sites. These relationships are desirable
because they enable residents to experience practicing in
a wider variety of settings. They also may be a necessity
for some hospitals that rely on these relationships to comply
with accreditation or similar requirements. Depending upon
the arrangement, a hospital may have rotation relationships
with a number of hospitals, some of which do not have relationships
with each other. Aggregation of the entire resident count
among all of these hospitals is neither feasible nor practical,
and could result in a lessening of educational quality.
By providing the aggregation provision in the BBA, the Congress
recognized that residency training programs are organized
in various ways, and that the resident limit should have flexibility
to incorporate these variations, so long as a national aggregate
limit is not exceeded. Accordingly, there needs to be a provision
to allow hospitals that rotate residents for specific programs
to have their limits modified to reflect annual rotation schedules
or periodic shifts in the sites of resident training. The
combined number of residents under these arrangements should
not exceed the aggregate number of residents in the specific
programs involved.
The Health Care Financing Administration (HCFA) recognizes
that it has the authority to permit aggregations at the program
level, but states that implementing this provision would be
administratively difficult. (62 Fed. Reg. at 46007). We feel
strongly that resident training patterns dictate that some
type of provision be made for these situations. One possible
option for hospitals that wish to aggregate resident numbers
at the program level is to require the hospitals involved
to submit supporting documentation to HCFA that certifies
each of their resident counts was appropriately adjusted to
reflect the aggregated programmatic activity.
B. Aggregation for Hospitals Operating as a Single Entity
Hospitals that certify they operate as a single health care
system should be considered an affiliated group for purposes
of aggregating their resident counts, regardless of the hospitals'
geographic locations. Certain institutions operate hospitals
around the country, all of which may not be listed as "major
participating institutions" in the GME directory. These
systems functionally operate coordinated and centrally controlled
GME programs and often rotate their residents among their
various facilities, depending upon training needs and other
considerations. Accordingly, they should be permitted to aggregate
their resident counts.
C. Modifying the Geographic Area for Defining Affiliated
Hospitals
The use of the geographic wage area to define which hospitals
can aggregate their resident limits is too narrow to reflect
hospital affiliation patterns. Hospitals that decide to affiliate
make that decision based on a number of considerations, including
quality of training facilities and educational opportunities.
Some hospitals have established relationships with other hospitals
within their state. These relationships may occur because
of state mandates or initiatives, or because of other state-specific
considerations. In addition, in certain parts of the country,
relationships have been established in metropolitan areas
that cross state lines. To recognize both of these situations,
we believe the regulations should be modified to allow hospitals
that are within the same state, or that are located in contiguous
wage areas, to aggregate their resident counts. Such a modification
would better reflect hospital market and training areas without
weakening the intent of this provision.
D. Determining Resident Limits for Hospitals that Disaffiliate
The interim final rule is silent on the issue of determining
resident limits for hospitals that choose to aggregate their
resident counts for purposes of applying the resident limit
but then decide subsequently to disaffiliate. We believe hospitals
that disaffiliate should have the option to determine the
distribution of the aggregate resident count among each of
the hospitals, regardless of their resident count in their
base years, so long as the aggregated limit is not exceeded.
If the hospitals cannot reach an agreement, then the limits
could be based on their respective base year resident counts
prior to the aggregation, or an alternative methodology. We
would be happy to work with HCFA staff to assess alternatives
to resolve this issue.
III. New Program Exemption
The BBA requires the Secretary to establish an exemption
to the resident limits for programs established on or after
January 1, 1995, giving special consideration to those facilities
that "meet the needs of underserved rural areas."
The Secretary implemented this provision by establishing three
categories of exemptions: 1) hospitals that had no residents
prior to January 1, 1995, will have a limit established based
on the number of residents in the first program (or programs
if established simultaneously) that the hospital establishes;
2) teaching hospitals that had residents prior to January
1, 1995 will have their resident limits adjusted upward for
those residents in new programs that were established between
January 1, 1995 and August 5, 1997, and 3) all rural hospitals
will have their limits adjusted upward to account for all
new programs, with no time limitation attached.
While these provisions achieve several important goals, as
currently constructed they do not adequately reflect the requirements
and time frames necessary to establish new programs. We recommend
that the regulations be modified in the following ways to
reflect the historical practice of initiating new training
programs.
A. Modifying the Definition of "New Program"
The regulatory language in the interim final rule defines
a "new medical residency training program" as one
that "receives initial accreditation by the appropriate
accrediting body on or after July 1, 1995." 42 C.F.R.
§413.86(g)(7). As a procedural matter, the July date
must be changed to January. It appears that the reference
to July is a typographical error, since the legislation and
preamble indicate a January 1, 1995 date, but a correction
was not published in the two subsequent correction notices
(see 62 Fed. Reg. 47237 (Sept. 8, 199) and 62 Fed. Reg. 52034
(Oct. 6, 1997)). In addition, we would like clarification
that the documentation required under this section (42 C.F.R.
§413.86(g)(6)(iv)) relates solely to justifying the existence
of a new program.
The AAMC believes the definition of a new program is too
restrictive and will result in unfairly penalizing hospitals
that have initiated new residency training programs prior
to the BBA's enactment date. Our specific concerns include:
Programs certified by the American Board of Medical Specialties--The
definition of "new program" recognizes only residency
programs that are "accredited." For certain medical
specialty programs, however, individuals can seek certification
by a member board of the American Board of Medical Specialties
(ABMS). These programs are recognized by Medicare as "approved
programs." The regulatory language of 42 C.F.R. §413.86(g)(7)
should be modified to provide that new programs include those
that are certified by ABMS.
The interim final rule also has several references to the
Graduate Medical Education Directory, which contains
information on all accredited allopathic training programs.
Where appropriate, we believe the regulations should reflect
programs accredited by the American Osteopathic Association.
(Information on these programs is available from the American
Osteopathic Association's Department of Education.)
Programs initiated prior to August 5, 1997--Two additional
modifications to the new program exemption are necessary to
ensure that residents in new programs initiated prior to enactment
of the BBA are included under hospitals' resident limits.
First, the definition of new program must include programs
for which a hospital submitted a formal application to the
appropriate entity prior to August 5, 1997. Initiating a new
training program requires substantial time and effort from
both the institution seeking to implement the new program
and the corresponding accrediting entity. Institutions invest
significant time preparing for a program prior to submitting
a formal application. But even after a formal application
is submitted, it generally takes from 8 to 12 months before
an accreditation action is taken. The AAMC believes that the
exemption to the resident limits should, at a minimum, apply
to all new programs for which an application was submitted
to the appropriate entity prior to the August 5, 1997 enactment
of the BBA.
Second, hospitals that received program accreditation, or
approval for a new program, prior to January 1, 1995 but that
did not begin training residents until after that date, must
also be included under the new program definition. Similar
to the situation described above, the decisions made by hospitals
related to these programs were made well before passage of
the resident limits in the BBA. If the regulations are not
modified, these residents will be excluded from the hospital's
resident limits because the programs were initiated prior
to January 1, 1995.
Programs that have received provisional accreditation--The
preamble to the regulations indicates that the definition
of new programs includes those that have received "provisional
accreditation" (62 Fed. Reg. at 46006), but this language
is not included in the regulation. We believe that "provisional
accreditation" should be included in the regulatory definition
of a new program.
B. Expanding the Period for New Teaching Hospitals to
Establish Residency Programs
Generally, it is not feasible for new teaching hospitals
to begin their various residency programs on the same date
due to accreditation approval or administrative issues. Under
the regulations, however, the resident limits for new teaching
hospitals will be based on the number of residents present
on the date they establish their first program. We think a
more appropriate approach to dealing with hospitals that wish
to begin a teaching program is to give them a period of time
to establish their programs before a resident limit is established.
Given the accreditation process time frames and other preparatory
needs, we believe an appropriate window would be five years,
starting when the first resident begins training.
On a related matter, we believe that resident limits for
hospitals that previously did not have residents and decide
to become teaching institutions should be permitted to include
residents transferred from other hospitals in their resident
limit, if all parties concur. Under the interim final rule,
these programs would not be considered new if they were accredited
prior to January 1, 1995. We believe this modification is
needed to provide cooperating hospitals, or hospitals within
networks, the necessary flexibility to determine requirements
for a quality training program and how they will meet them.
For some institutions, participating in, or assuming responsibility
for, programs established by other institutions is more appropriate
than creating entirely new ones. To ensure additional resident
slots are not created from this change, hospitals transferring
the residency programs could have their resident limits correspondingly
reduced.
C. Removing the Inconsistency Between Established and
New Teaching Hospitals
The regulations must be changed to remove an inconsistency
between the new program exemption for teaching hospitals that
had residents prior to January 1, 1995 and non-teaching hospitals
that established residency programs between January 1, 1995
and August 5, 1997. Hospitals in the former category may have
their limits adjusted upward for any and all new programs
established prior to August 5, 1997. Hospitals in the latter
category are considered new teaching hospitals under the regulations.
Consequently, their resident counts are limited to the number
of residents in the first program they established; residents
in programs started subsequently are not counted, even though
the programs may have been created prior to August 5, 1997.
There is no reason to treat these two categories of hospitals
differently for this provision. To correct the inconsistency,
resident limits for these newer teaching hospitals should
be adjusted upward to reflect all programs established through
August 5, 1997.
D. New Program Exemption and Underserved Rural Areas
The interim final rule interprets the statutory provision
to give special consideration to facilities that meet the
needs of "underserved rural areas" to mean rural
hospitals only. We believe that the regulations are more limited
than the legislation intended. The legislative language focuses
on "facilities" that serve underserved rural areas.
Thus, all hospitals that serve rural areas should be eligible
for this exemption, regardless of their geographic location.
Such a situation would arise, for example, when an urban hospital
establishes a family practice residency program where a significant
component of the education occurs in rural communities.
Moreover, the BBA does not preclude the Secretary from implementing
additional new program provisions. The AAMC believes that
the intent of the legislation to recognize underserved areas
is commendable and should be extended to urban underserved
areas. Hospitals that provide services in these areas and
that wish to start new programs should also receive special
consideration. Using objective, Federally-determined criteria,
such as medically underserved areas and health professional
shortage areas, could identify those areas that meet this
requirement.
E. Adjusting the Resident Limits for New Programs
The interim final rule provides that the adjustment to the
resident limit for new programs will be based on the number
of first year residents present in the program's third year
of operation. While we agree with the intent of this provision,
in some cases this methodology may not best reflect the program's
full complement of residents. For example, for a variety of
reasons, the number of first year residents in the third year
of a new program may be less than the number present in the
program's first or second year of operation. To better reflect
a new program's resident capacity, we believe its resident
count should be determined in the third year of the program
and based on the number of residents in either the first,
second, or third residency year, whichever is highest. In
addition, as part of either methodology, we believe that the
regulations should be modified to explicitly state that the
limits will be adjusted upward for each of the first two years
of the program to permit payments for residents present during
that period.
IV. Including the Exemption Provisions in the IME Regulations
The interim final rule contains regulatory language on the
aggregation and new program exemptions to the limitation on
resident counts in the DGME payments section of the regulations
(see 62 Fed. Reg. 46034-35), but not the IME section. The
BBA provides that these exemptions apply to IME payments (42
U.S.C. § 1395ww(d)(5)(B)(viii)). The preamble discussion
on the IME adjustment acknowledges this by addressing the
new program exemption, but referencing the DGME regulatory
language. These provisions must be added to the IME regulations,
including the sections pertaining to the limits on both the
resident counts and the ratio of interns and residents to
beds (IRB ratio).
V. Determining Payments and Resident Counts for Affiliated
Hospitals and Hospitals with New Programs
There are several issues related to payments for hospitals
that have their base year resident limits adjusted because
of the aggregation and new program exemptions.
A. Determining IRB Ratios for Purposes of the IME Adjustment
The IME adjustment is based, in large part, on the ratio
of a hospital's interns and residents to its number of beds
(IRB). This ratio can change because of either a change in
the number of residents, the number of beds, or both. The
statutory language of the BBA provides that the affiliation
and new program exemptions apply to both the limit on the
number of residents, as well as the limit on the IRB. (See
42 U.S.C. §1395ww(d)(5)(B)(viii)). Consequently, the
IRB ratio for certain hospitals may change from year to year
because of a change in the number of residents due to these
provisions. At the same time, however, a hospital's bed count
may also change over this period. In these situations, we
believe that the time period used to determine the number
of beds used in the calculation of the IRB ratio should correspond
to the time period that determines the resident limit.
On a related issue, the regulations should clarify that the
limit on the IRB ratio reflects only allopathic and osteopathic
residents. This provision should parallel the resident limit,
which specifically exclude dental and podiatry residents.
B. Permitting Hospitals To Use Current Year Resident Counts
The interim final rule provides that the number of residents
used to determine IME and DGME payments will be based on a
three-year rolling average. The AAMC commends the purpose
of this provision, which is to ameliorate the financial impact
for hospitals that reduce their resident counts. At the same
time, however, this provision may penalize hospitals that
incur higher resident counts because of sanctioned activities,
such as starting new programs or choosing to aggregate their
count with another institution. Hospitals that fall into these
categories should be permitted to choose to have IME or DGME
payments based on either their current year resident count
or the three-year rolling average.
VI. Exemption for Residents Training in VA and DOD Institutions
An additional exemption is necessary for situations involving
non-federal hospitals that are associated with residency programs
in which residents train in hospitals operated by the Department
of Veterans Affairs (VA) and the Department of Defense (DoD).
Residents who rotate through VA and DoD facilities often are
part of a medical school or a non-federal hospital residency
training program. Each year more than 32,000 medical residents
rotate through VA supported positions; in addition, about
20,000 medical students receive a portion of their training
in VA facilities. The residency positions supported by the
VA make up approximately 10 percent of the residency positions
in the United States.
While residents rotate through the VA and DoD systems, these
hospitals do not receive Medicare GME payments. Consequently,
combining residency counts using the affiliation exemption
is not applicable. Yet, a VA or DoD hospital may decide to
reduce the number of residents it trains, or eliminate its
participation in a training program altogether, based on reasons
that are unrelated to its relationship with the non-federal
hospital or medical school. When this happens, non-federal
hospitals must support these additional residents, at least
on a short-term basis, because they have made a commitment
to the resident for the required residency training period.
They may also need to maintain those resident counts on a
longer-term basis for a variety of reasons, including accreditation
requirements and retaining overall educational activity.
An exemption should be allowed for those hospitals that take
on additional residents due to a decision by the VA or DoD
to reduce its training commitment. Such an exemption would
provide hospitals with the flexibility to continue to maintain
a training commitment to residents resulting from decisions
made that are beyond the control of both the hospital and
resident.
VII. Reconciling IME Regulatory Time Periods
The interim final rule states that the resident limit applies
to discharges on or after October 1, 1997 for purposes of
paying the IME adjustment and the IME rolling payment average
begins on the date of the hospital's first cost reporting
period that begins after October 1, 1997. For many hospitals,
their next cost report period will begin sometime after October
1, 1997 and may be as late as July 1, 1998. The regulations
must provide a mechanism for determining IME payments for
discharges occurring during the period between October 1,
1997 and a hospital's cost report start date.
VIII. Other Issues
A. Payments to Teaching Hospitals for Medicare Managed
Care Enrollees
Beginning January 1, 1998, IME and DGME payments will be
made to teaching hospitals that provide services to Medicare
managed care enrollees. While the interim final rule sets
forth the methodology for determining these payments, we understand
that HCFA has not yet determined the actual mechanism for
making these payments to teaching hospitals. We would be happy
to assist HCFA in identifying an administratively simple and
low cost method to distribute these payments in accord with
the provisions of the BBA.
B. Outlier Payments
The interim final rule modifies the outlier payment methodology
so that per case costs will no longer be reduced to reflect
IME and DSH payments. The result of this change is that the
actual costs a hospital incurs for a particular discharge
will be compared with the payments it receives for that case
(including IME and DSH) to determine whether the case qualifies
for outlier payments.
The AAMC will be monitoring the impact of this provision
and recommends that the Secretary review this policy after
a period of time to ensure that this change is having its
intended effect of mitigating large financial losses incurred
by hospitals for certain cases.
C. Direct Teaching Payments to Nonhospital Providers
The BBA authorizes, but does not require, HCFA to make medical
education payments to "qualified nonhospital providers"
for their direct costs of training residents. The Secretary
has requested comments on issues related to payment of these
providers.
The AAMC believes that nonhospital entities should receive
direct Medicare payments for residency training costs so long
as they incur all or substantially all of the training costs--the
same criterion applied to hospitals. We would be happy to
work with HCFA as it seeks to review this standard, including
identifying sources of financial support for training programs.
The AAMC recognizes that indirect payments to nonhospital
providers are not included in the BBA, and therefore are not
within the scope of this discussion.
We also recognize that there currently is little organized
data on the direct costs associated with training residents
in nonhospital sites, but the AAMC believes that payment policies
need to accommodate arrangements that enhance residents' training
experiences. We believe that a fundamental principle guiding
these policies must be that payment methods must not create
financial incentives that would result in the disruption of
the residency training process. We would be happy to share
our perspectives with HCFA.
D. Other Provisions in the BBA
The BBA contains several other important provisions that
were not addressed in the interim final rule. These include
the voluntary resident reduction program and the consortia
demonstration project. We urge HCFA and the Secretary to publish
information on these initiatives as soon as possible. Again,
we would be happy to work with HCFA to address issues involved
with the development of these programs.
VIII. Conclusion
The AAMC appreciates HCFA's efforts to publish the interim
final rule so quickly after the enactment of the BBA. We also
appreciate HCFA staff's willingness to discuss these issues
with us over the past two months.
We urge HCFA and the Secretary to issue a Final Rule as soon
as possible. The modifications we request provide teaching
hospitals with the flexibility they need to maintain high-quality
residency training programs while staying within the criteria
established under the BBA. If you have questions regarding
our comments, please contact Robert Dickler, rdickler@aamc.org,
Senior Vice President of the Association at (202) 828-4490
or Karen Fisher, kfisher@aamc.org,
Assistant Vice President at (202) 862-6140.
Sincerely,
Jordan J. Cohen, M.D. President
|
