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Fiscal Year 1999 Medicare Prospective Payment System: Final Rule

			Related Resources CMS (formerly HCFA) AAMC Documents AAMC Comment Letter AAMC Summary and Analysis

Current Status as of October 15, 1998

The AAMC has sent a letter to the Administrator of HCFA requesting that the effective date for the change in the definition of "all or substantially all" residency training costs be delayed until July 1, 1999. HCFA has not yet responded to this request.

Summary

On July 31, 1998, the Health Care Financing Administration (HCFA) published the Final Rule setting forth changes to the Prospective Payment System (PPS) for hospital inpatient services for fiscal year 1999.

Among other items, the final rule provides that for fiscal year 1999, hospitals will receive an update to their Medicare standardized PPS payment amounts of 0.5 percent. This increase reflects the provision in the Balanced Budget Act of 1997 to increase the standardized rate by the estimated increase in the hospital market basket of 2.4 percent less 1.9 percentage points.

The July 31 regulation also finalized two proposals that are of particular interest to teaching hospitals and that will take effect January 1, 1999:

• A change in the definition of “all or substantially all” resident training costs to require hospitals that want to receive Medicare direct and indirect graduate medical education (GME) reimbursement for residents training in nonhospital sites to demonstrate that they have incurred “the residents’ salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physicians’ salaries and fringe benefits attributable to direct graduate medical education.” 42 C.F.R. §413.86(b). Prior to this final rule, hospitals had to demonstrate only that they incurred the costs of residents’ salaries and fringe benefits.
• The following nonhospital providers may receive direct GME payments from Medicare if they incur “all or substantially all”of the resident training costs: Federally qualified health centers (FQHCs), rural health clinics (RHCs) and Medicare+Choice organizations. The definition of “all or substantially all” is the same definition as used for hospital (see first bullet, above). Consequently, if a resident is training in one of these three designated sites, either the hospital or that site, but not both, may receive the direct GME payment, depending upon which entity incurs “all or substantially all” of the resident training costs.

AAMC Action

The AAMC submitted comments on the proposed rule. We have also prepared detailed summary and analysis of the final rule. The AAMC has sent a letter to the Administrator of HCFA requesting that the effective date for the change in the definition of "all or substantially all" residency training costs be delayed until July 1, 1999. HCFA has not yet responded to this request.

Contacts

The Final Rule, published July 31, 1998 in the Federal Register, is available 4 parts in text format and Portable Document Format(PDF):

42 CFR Parts 405, 412, and 413 Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1999 Rates;
Final Rule

• Part I [pp. 40954-41002]: Text | PDF
• Part II [pp. 41003-41052]: Text | PDF
• Part III [pp. 41053-41102]: Text | PDF
• Part IV [pp. 41103-41131]: Text | PDF

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