AAMC Reporter: August 2005

Funding Sources for Medical Research at U.S. Medical Schools and Universities

Teaching Hospitals to be Notified About Resident Slots

- Whitney L.J. Howell, whowell@aamc.org

Teaching hospitals that applied for additional Medicare resident cap slots are scheduled to receive their final letters from the Centers for Medicare and Medicaid Services (CMS) shortly, notifying them whether their resident caps have increased and by how much.

Resident caps limit the number of residents that hospitals can count when receiving Medicare direct graduate medical education (DGME) and indirect medical education (IME) payments. Any reductions or increases are final and cannot be appealed, according to CMS. All changes were effective July 1, 2005.

Increase notifications were the final phase of the resident limit redistribution program mandated by the 2003 Medicare Modernization Act (MMA). The program required CMS to reduce the resident caps for teaching hospitals that have not filled their resident complement. The unused slots were then reallocated to hospitals that demonstrated a need for more positions.

In 2004, Medicare spent approximately $8 billion on DGME and IME payments. However, for a variety of reasons, roughly 40 percent of all teaching hospitals function above their resident caps even though they do not receive Medicare support for the additional positions.

The University of Michigan Medical School (UMMS) operates above its cap and was pleased that CMS announced the reallocation and gave the school 25 additional resident slots, said Lisa Colletti, M.D., UMMS's associate dean and director of graduate medical education.

"It's great. It's very nice that CMS decided to reallocate slots this way," Colletti said. "It gives us more money for our residents, and even though we're still above our cap, we have more funds to supplement salaries and support the educational process."

Even with the additional resident payments, some UMMS programs were unable to expand, however. Colletti said the school is looking at additional ways to fund residents in those programs, including endowments and philanthropies.

To allocate resident limit slots, CMS prioritized hospitals based on the MMA mandate. The agency gave slots to rural teaching hospitals, then teaching hospitals in small (less than 1 million population) urban areas, and, finally, to teaching hospitals in large urban areas. Hospitals could receive a maximum of 25 slots, and facilities garnered increases only if they demonstrated that they would fill the positions.

Based on preliminary letters sent from CMS, all rural and small urban teaching hospitals received their full requests. But there were not enough resident slots to fulfill all increase requests from large, urban hospitals, and resident limit allocations were made to these facilities based on an evaluation criteria point scheme.

An increase in resident limit slots comes with a de-crease in Medicare payments associated with the new positions. For example, if a hospital had a cap of 100 and received the maximum increase, boosting the total to 125, the IME payment for the original 100 residents would be 5.8 percent in 2005 but would be only 2.7 percent for the additional 25 slots. DGME payments for the additional residents are based on a national average rather than a hospital-specific payment amount.

At press time, the AAMC did not have aggregate data about resident cap changes. The association will begin working soon to determine the overall effect of the resident redistribution, specifically looking at hospital locality and which types of institutions were most directly affected.

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