[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR412.105]

[Page 419-423]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES--Table of Contents
 
Subpart G--Special Treatment of Certain Facilities Under the Prospective 
              Payment System for Inpatient Operating Costs
 
Sec. 412.105  Special treatment: Hospitals that incur indirect costs for graduate medical education programs.

    CMS makes an additional payment to hospitals for indirect medical 
education costs using the following procedures:
    (a) Basic data. CMS determines the following for each hospital:
    (1) The hospital's ratio of full-time equivalent residents (except 
as limited under paragraph (f) of this section) to the number of beds 
(as determined under paragraph (b) of this section).
    (i) Except for the special circumstances for affiliated groups and 
new programs described in paragraphs (f)(1)(vi) and (f)(1)(vii) of this 
section for cost reporting periods beginning on or after October 1, 
1997, and for the special circumstances for closed hospitals or closed 
programs described in paragraph (f)(1)(ix) of this section for cost 
reporting periods beginning on or after October 1, 2002, this ratio may 
not exceed the ratio for the hospital's most recent prior cost reporting 
period after accounting for the cap on the number of allopathic and 
osteopathic full-time

[[Page 420]]

equivalent residents as described in paragraph (f)(1)(iv) of this 
section, and adding to the capped numerator any dental and podiatric 
full-time equivalent residents.
    (ii) The exception for new programs described in paragraph 
(f)(1)(vii) of this section applies to each new program individually for 
which the full-time equivalent cap may be adjusted based on the period 
of years equal to the minimum accredited length of each new program.
    (iii) The exception for closed hospitals and closed programs 
described in paragraph (f)(1)(ix) of this section applies only through 
the end of the first 12-month cost reporting period in which the 
receiving hospital trains the displaced full-time equivalent residents.
    (iv) In the cost reporting period following the last year the 
receiving hospital's full-time equivalent cap is adjusted for the 
displaced resident(s), the resident-to-bed ratio cap in paragraph (a)(1) 
of this section is calculated as if the displaced full-time equivalent 
residents had not trained at the receiving hospital in the prior year.
    (2) The hospital's DRG revenue for inpatient operating costs based 
on DRG-adjusted prospective payment rates for inpatient operating costs, 
excluding outlier payments for inpatient operating costs determined 
under subpart F of this part and additional payments made under the 
provisions of Sec. 412.106 .
    (b) Determination of number of beds. For purposes of this section, 
the number of beds in a hospital is determined by counting the number of 
available bed days during the cost reporting period, not including beds 
or bassinets in the healthy newborn nursery, custodial care beds, or 
beds in excluded distinct part hospital units, and dividing that number 
by the number of days in the cost reporting period.
    (c) Measurement for teaching activity. The factor representing the 
effect of teaching activity on inpatient operating costs equals .405 for 
discharges occurring on or after May 1, 1986.
    (d) Determination of education adjustment factor. Each hospital's 
education adjustment factor is calculated as follows:
    (1) Step one. A factor representing the sum of 1.00 plus the 
hospital's ratio of full-time equivalent residents to beds, as 
determined under paragraph (a)(1) of this section, is raised to an 
exponential power equal to the factor set forth in paragraph (c) of this 
section.
    (2) Step two. The factor derived from step one is reduced by 1.00.
    (3) Step three. The factor derived from completing steps one and two 
is multiplied by 'c', and where `c' is equal to the following:
    (i) For discharges occurring on or after October 1, 1988, and before 
October 1, 1997, 1.89.
    (ii) For discharges occurring during fiscal year 1998, 1.72.
    (iii) For discharges occurring during fiscal year 1999, 1.6.
    (iv) For discharges occurring during fiscal year 2000, 1.47.
    (A) Each hospital receives an amount that is equal in the aggregate 
to the difference between the amount of payments made to the hospital if 
``c'' equaled 1.6, rather than 1.47.
    (B) The payment of this amount will not affect any other payments, 
determinations, or budget neutrality adjustments.
    (v) For fiscal year 2001--
    (A) For discharges occurring on or after October 1, 2000 and before 
April 1, 2001, 1.54.
    (B) For discharges occurring on or after April 1, 2001 and before 
October 1, 2001, the adjustment factor is determined as if ``c'' equaled 
1.66, rather than 1.54. This payment increase will not apply to 
discharges occurring after fiscal year 2001 and will not be taken into 
account in calculating the payment amounts applicable for discharges 
occurring after fiscal year 2001.
    (vi) For discharges occurring during fiscal year 2002, 1.6.
    (vii) For discharges occurring on or after October 1, 2002, 1.35.
    (e) Determination of payment amount. Each hospital's indirect 
medical education payment under the prospective payment system for 
inpatient operating costs is determined by multiplying the total DRG 
revenue for inpatient operating costs, as determined under paragraph 
(a)(2) of this section, by the applicable education adjustment

[[Page 421]]

factor derived in paragraph (d) of this section.
    (f) Determining the total number of full-time equivalent residents 
for cost reporting periods beginning on or after July 1, 1991. (1) For 
cost reporting periods beginning on or after July 1, 1991, the count of 
full-time equivalent residents for the purpose of determining the 
indirect medical education adjustment is determined as follows:
    (i) The resident must be enrolled in an approved teaching program. 
An approved teaching program is one that meets one of the following 
requirements:
    (A) Is approved by one of the national organizations listed in 
Sec. 415.200(a) of this chapter.
    (B) May count towards certification of the participant in a 
specialty or subspecialty listed in the current edition of either of the 
following publications:
    (1) The Directory of Graduate Medical Education Programs published 
by the American Medical Association.
    (2) The Annual Report and Reference Handbook published by the 
American Board of Medical Specialties.
    (C) Is approved by the Accreditation Council for Graduate Medical 
Education (ACGME) as a fellowship program in geriatric medicine.
    (D) Is a program that would be accredited except for the accrediting 
agency's reliance upon an accreditation standard that requires an entity 
to perform an induced abortion or require, provide, or refer for 
training in the performance of induced abortions, or make arrangements 
for such training, regardless of whether the standard provides 
exceptions or exemptions.
    (ii) In order to be counted, the resident must be assigned to one of 
the following areas:
    (A) The portion of the hospital subject to the prospective payment 
system.
    (B) The outpatient department of the hospital.
    (C) Effective for discharges occurring on or after October 1, 1997, 
the time spent by a resident in a nonhospital setting in patient care 
activities under an approved medical residency training program is 
counted towards the determination of full-time equivalency if the 
criteria set forth in Sec. 413.86(f)(3) or Sec. 413.86(f)(4) of this 
subchapter, as applicable, are met.
    (iii)(A) Full-time equivalent status is based on the total time 
necessary to fill a residency slot. No individual may be counted as more 
than one full-time equivalent. If a resident is assigned to more than 
one hospital, the resident counts as a partial full-time equivalent 
based on the proportion of time worked in any areas of the hospital 
listed in paragraph (f)(1)(ii) of this section to the total time worked 
by the resident. A hospital cannot claim the time spent by residents 
training at another hospital. A part-time resident or one working in an 
area of the hospital other than those listed under paragraph (f)(1)(ii) 
of this section (such as a freestanding family practice center or an 
excluded hospital unit) would be counted as a partial full-time 
equivalent based on the proportion of time assigned to an area of the 
hospital listed in paragraph (f)(1)(ii) of this section, compared to the 
total time necessary to fill a full-time residency slot.
    (B) The time spent by a resident in research that is not associated 
with the treatment or diagnosis of a particular patient is not 
countable.
    (iv) Effective for discharges occurring on or after October 1, 1997, 
the total number of FTE residents in the fields of allopathic and 
osteopathic medicine in either a hospital or a nonhospital setting that 
meets the criteria listed in paragraph (f)(1)(ii) of this section may 
not exceed the number of such FTE residents in the hospital (or, in the 
case of a hospital located in a rural area, effective for discharges 
occurring on or after April 1, 2000, 130 percent of that number) with 
respect to the hospital's most recent cost reporting period ending on or 
before December 31, 1996.
    (v) For a hospital's cost reporting periods beginning on or after 
October 1, 1997, and before October 1, 1998, the total number of full-
time equivalent residents for payment purposes is equal to the average 
of the actual full-time equivalent resident counts (subject to the 
requirements listed in paragraphs (f)(1)(ii)(C) and (f)(1)(iv) of this 
section) for that cost reporting period and the preceding cost reporting 
period. For a

[[Page 422]]

hospital's cost reporting periods beginning on or after October 1, 1998, 
the total number of full-time equivalent residents for payment purposes 
is equal to the average of the actual full-time equivalent resident 
count (subject to the requirements set forth in paragraphs (f)(1)(ii)(C) 
and (f)(1)(iv) of this section) for that cost reporting period and the 
preceding two cost reporting periods. If a hospital qualified for an 
adjustment to the limit established under paragraph (f)(1)(iv) of this 
section for new medical residency programs created under paragraph 
(f)(1)(vii) of this section, the count of residents participating in new 
medical residency training programs above the number included in the 
hospital's FTE count for the cost reporting period ending during 
calendar year 1996 is added after applying the averaging rules in this 
paragraph (f)(l)(v) for a period of years. Residents participating in 
new medical residency training programs are included in the hospital's 
FTE count before applying the averaging rules after the period of years 
has expired. For purposes of this paragraph, for each new program 
started, the period of years equals the minimum accredited length for 
each new program. The period of years for each new program begins when 
the first resident begins training in each new program. Subject to the 
provisions of paragraph (f)(1)(ix) of this section, FTE residents that 
are displaced by the closure of either another hospital or another 
hospital's program are added to the FTE count after applying the 
averaging rules in this paragraph (f)(l)(v) for the receiving hospital 
for the duration of time that the displaced residents are training at 
the receiving hospital.
    (vi) Hospitals that are part of the same affiliated group (as 
defined in Sec. 413.86(b) of this subchapter) may elect to apply the 
limit at paragraph (f)(1)(iv) of this section on an aggregate basis, as 
specified in Sec. 413.86(g)(7) of this chapter.
    (vii) If a hospital establishes a new medical residency training 
program, as defined in Sec. 413.86(g)(13) of this subchapter, the 
hospital's full-time equivalent cap may be adjusted in accordance with 
the provisions of Secs. 413.86(g)(6)(i) through (iv) of this subchapter.
    (viii) A hospital that began construction of its facility prior to 
August 5, 1997, and sponsored new medical residency training programs on 
or after January 1, 1995 and on or before August 5, 1997, that either 
received initial accreditation by the appropriate accrediting body or 
temporarily trained residents at another hospital(s) until the facility 
was completed, may receive an adjustment to its full-time equivalent cap 
in accordance with the provisions of Sec. 413.86(g)(8) of this 
subchapter.
    (ix) A hospital may receive a temporary adjustment to its full-time 
equivalent cap to reflect residents added because of another hospital's 
closure if the hospital meets the criteria specified in 
Secs. 413.86(g)(9)(i) and (g)(9)(ii) of this subchapter. If a hospital 
that closes its residency training program agrees to temporarily reduce 
its FTE cap according to the criteria specified in Secs. 413.86(g)(9)(i) 
and (g)(9)(iii)(B) of this subchapter, another hospital(s) may receive a 
temporary adjustment to its FTE cap to reflect residents added because 
of the closure of the residency training program if the criteria 
specified in Secs. 413.86(g)(9)(i) and (g)(9)(iii)(A) of this subchapter 
are met.
    (x) Effective for discharges occurring on or after April 1, 2000, an 
urban hospital that establishes a new residency program (as defined in 
Sec. 413.86(g)(13) of this subchapter), or has an existing residency 
program, with a rural track (or an integrated rural track) may include 
in its FTE count residents in those rural tracks in accordance with the 
provisions of Secs. 413.86(g)(12) of this subchapter.
    (xi) Effective for discharges occurring in cost reporting periods 
beginning on or after November 29, 1999, a hospital may receive an 
adjustment to its FTE cap of up to three additional FTEs to the extent 
that the additional residents would have been counted as primary care 
residents for purposes of the hospital's FTE cap but for the fact that 
the additional residents were on maternity or disability leave or a 
similar approved leave of absence, in accordance with the provisions of 
Sec. 413.86(g)(10) of this subchapter.

[[Page 423]]

    (xii) For discharges occurring on or after October 1, 1997, a non-
Veterans Affairs (VA) hospital may receive a temporary adjustment to its 
FTE cap to reflect residents who had been previously trained at a VA 
hospital and were subsequently transferred to the non-VA hospital, if 
the hospital meets the criteria and other provisions of 
Sec. 413.86(g)(11) of this subchapter.
    (2) To include a resident in the full-time equivalent count for a 
particular cost reporting period, the hospital must furnish the 
following information. The information must be certified by an official 
of the hospital and, if different, an official responsible for 
administering the residency program.
    (i) A listing, by specialty, of all residents assigned to the 
hospital and providing services to the hospital during the cost 
reporting period.
    (ii) The name and social security number of each resident.
    (iii) The dates the resident is assigned to the hospital.
    (iv) The dates the resident is assigned to other hospitals or other 
freestanding providers and any nonprovider setting during the cost 
reporting period.
    (v) The proportion of the total time necessary to fill a residency 
slot that the resident is assigned to an area of the hospital listed 
under paragraph (f)(1)(ii) of this section.
    (3) Fiscal intermediaries must verify the correct count of 
residents.
    (g) Indirect medical education payment for managed care enrollees. 
For portions of cost reporting periods occurring on or after January 1, 
1998, a payment is made to a hospital for indirect medical education 
costs, as determined under paragraph (e) of this section, for discharges 
associated with individuals who are enrolled under a risk-sharing 
contract with an eligible organization under section 1876 of the Act or 
with a Medicare+Choice organization under title XVIII, Part C of the Act 
during the period, according to the applicable payment percentages 
described in Secs. 413.86(d)(3)(i) through (d)(3)(v) of this subchapter.

[50 FR 12741, Mar. 29, 1985. Redesignated at 56 FR 43241, Aug. 30, 1991]

    Editorial Note: For Federal Register citations affecting 
Sec. 412.105, see the List of Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.