Skip to Content

Filter by:

Washington Highlights

CMS Releases Final Rule Implementing GME Redistribution and 2011 Outpatient Payment Changes

November 5, 2010—The Centers for Medicare and Medicaid Services (CMS) Nov. 2 released a final rule that implements the direct graduate medical education (DGME) and indirect graduate medical education (IME) provisions of the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152) and contains changes to the calendar year 2011 outpatient prospective payment system (OPPS) and payment rates for Ambulatory Surgical Centers (ASCs).  The final rule is scheduled to be published in the Nov. 24 Federal Register and will go into effect on Jan. 1, 2011.

The DGME and IME provisions in the final rule relate to the counting of resident time and the redistribution of unused resident slots and resident slots from closed hospitals.  Under the rule, CMS implements provisions of the health reform law that permit hospitals to count resident time in clinical nonprovider settings, as long as the hospital incurs the costs of the residents' salaries and fringe benefits for the time that residents spend in the nonhospital sites. The rule also implements provisions allowing hospitals to count didactic time in non-hospital settings for DGME payment purposes and didactic time in hospital settings for IME payment purposes.  New in the final rule, CMS permits hospitals to count didactic time spent in dental and medical clinics, but also eliminates the one workday administrative rule for didactic time, effective Jan. 1, 2011.

In addition, the final rule implements the resident redistribution provisions of the ACA regarding hospitals that have unused residency slots. In general, CMS will take 65 percent of the DGME and IME residency slots that have gone unused by a hospital for the past three years and redistribute them according to certain criteria. The ACA specifies that 70 percent of the unused slots must be redistributed to hospitals in states with resident-to-population ratios in the lowest quartile, and CMS determined that these states are: Montana, Idaho, Alaska, Wyoming, South Dakota, Nevada, North Dakota, Mississippi, Indiana, Puerto Rico, Florida, Georgia, and Arizona.  The health reform law requires CMS to allocate the remaining 30 percent of the redistributed slots to hospitals in rural areas and to hospitals located in the 10 states with the highest proportion of their populations living in a health professional shortage area, which CMS determined to be: Louisiana, Mississippi, Puerto Rico, New Mexico, South Dakota, the District of Columbia, Montana, North Dakota, Wyoming, and Alabama. Hospitals that do not fit within these categories will be ineligible to receive slots through the redistribution program. In the final rule, CMS modified several of its proposed priority categories and eligibility criteria for the slot distribution process and also delayed the deadline for hospitals to apply for redistributed slots from Dec. 1, 2010, to Jan. 21, 2011.  

Regarding slots from closed hospitals, the health reform law requires CMS to redistribute permanently the DGME and IME residency slots from hospitals that closed on or after March 23, 2008.  Currently, hospitals may receive temporary cap slots for training displaced residents from the closed hospital. Among other criteria, CMS will give preference in distributing these permanent slots to hospitals that assume an entire program from the closed hospital, hospitals that received slots from the closed hospital under a GME affiliation agreement and will use the slots to continue to train at least the number of residents they had trained under the affiliation agreement, and to hospitals that took in residents displaced by the hospital closure and will continue to train residents in the same programs as the displaced residents, even after the displaced residents complete their training.  In the final rule, CMS published a list of the fourteen hospitals that closed between March 23, 2008, and Aug. 3, 2010 (accounting for approximately 750 DGME and IME slots); extended the deadline to apply for these slots from Jan. 1, 2011, to April 1, 2011; and made minor changes to its proposed evaluation criteria.  CMS also included applications for both the unused resident slot redistribution program and the closed hospital resident slot redistribution programs in the final rule.

With respect to the hospital outpatient payment provisions of the final rule, CMS updated hospital base payments by a market basket update of 2.35 percent, which reflects an increase of 2.6 percent minus a 0.25 percentage point reduction required by the ACA.

CMS also finalized the measures required for the hospital outpatient quality reporting program for 2012 and 2013 payment determinations.  The new measures address emergency department and imaging efficiency as well as HIT capabilities in the hospital outpatient setting.

Under the final rule, CMS also:

  • Redefined “direct supervision” for all hospital outpatient services to require “immediate availability” without reference to the boundaries of a physical location;
  • set payment for acquisition and pharmacy overhead costs of separately payable drugs and biologicals without pass-through status furnished in hospital outpatient departments at the average sales price (ASP) plus 5 percent (compared to ASP plus 6 percent in the proposed rule);
  • decided not to finalize a payment adjustment for cancer hospitals for 2011, given that further study and deliberation is required;
  • implemented the frontier state wage provisions (applicable to hospitals in Montana, Wyoming, Nevada, North Dakota, and South Dakota) required by the ACA; and
  • waived beneficiary cost-sharing for most Medicare-covered preventive services, as required by the ACA.


Jennifer Faerberg, MHSA
Director, Clinical Transformation Unit
Telephone: 202-862-6221


envelope on a green background

Subscribe to Washington Highlights

RSS icon

Subscribe to RSS

Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

Past Issues

For More Information

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806