[Code of Federal Regulations] [Title 42, Volume 2] [Revised as of October 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 42CFR412.105] [Page 513-519] TITLE 42--PUBLIC HEALTH CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 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: [[Page 514]] (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 Medicare GME 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 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 the 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 and dividing that number by the number of days in the cost reporting period. This count of available bed days excludes bed days associated with-- (1) Beds in a unit or ward that is not occupied to provide a level of care that would be payable under the acute care hospital inpatient prospective payment system at any time during the 3 preceding months (the beds in the unit or ward are to be excluded from the determination of available bed days during the current month); (2) Beds in a unit or ward that is otherwise occupied (to provide a level of care that would be payable under the acute care hospital inpatient prospective payment system) that could not be made available for inpatient occupancy within 24 hours for 30 consecutive days; (3) Beds in excluded distinct part hospital units; (4) Beds otherwise countable under this section used for outpatient observation services, skilled nursing swing-bed services, or ancillary labor/delivery services. This exclusion would not apply if a patient treated in an observation bed is ultimately admitted for acute inpatient care, in which case the beds and days would be included in those counts; (5) Beds or bassinets in the healthy newborn nursery; and (6) Custodial care beds. (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. [[Page 515]] (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 and before April 1, 2004, 1.35. (viii) For discharges occurring on or after April 1, 2004 and before October 1, 2004, 1.47. (ix) For discharges occurring during fiscal year 2005, 1.42. (x) For discharges occurring during fiscal year 2006, 1.37. (xi) For discharges occurring during fiscal year 2007, 1.32. (xii) For discharges occurring during fiscal year 2008 and thereafter, 1.35. (4) For discharges occurring on or after July 1, 2005, with respect to FTE residents added as a result of increases in the FTE resident cap under paragraph (f)(1)(iv)(C) of this section, the factor derived from completing steps one and two is multiplied by `c', where `c' is equal to 0.66. (e)(1) 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 factor derived in paragraph (d) of this section. (2) For discharges occurring on or after July 1, 2005, a hospital that counts additional residents as a result of an increase in its FTE resident cap under paragraph (f)(1)(iv)(C) of this section will receive indirect medical education payments based on the sum of the following two indirect medical education adjustment factors: (i) An adjustment factor that is calculated using the schedule of formula multipliers in paragraph (d)(3) of this section and the hospital's FTE resident count, not including residents attributable to an increase in its FTE cap under paragraph (f)(1)(iv)(C) under this section; and (ii) An adjustment factor that is calculated using the applicable formula multiplier under paragraph (d)(4) of this section, and the additional number of FTE residents that are attributable to the increase in the hospital's FTE resident cap under paragraph (f)(1)(iv)(C) in 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. 415.152 of this chapter. [[Page 516]] (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. 413.78(c) or Sec. 413.78(d) 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)(A) 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. (B) Effective for portions of cost reporting periods beginning on or after July 1, 2005, a hospital's otherwise applicable FTE resident cap may be reduced if its reference resident level is less than its otherwise applicable FTE resident cap in a reference cost reporting period, in accordance with the provisions of Sec. 413.79(c)(3) of this subchapter. The reduction is 75 percent of the difference between the otherwise applicable FTE resident cap and the reference resident level. (C) Effective for portions of cost reporting periods beginning on or after July 1, 2005, a hospital may qualify to receive an increase in its otherwise applicable FTE resident cap (up to 25 additional FTEs) if the criteria specified in Sec. 413.79(c)(4) of this subchapter are met. (D) A rural hospital redesignated as urban after September 30, 2004, as a result of the most recent census data and implementation of the new labor market area definitions announced by OMB on June 6, 2003, may retain the increases to its full-time equivalent resident cap that it received under paragraphs (f)(1)(iv)(A) and (f)(1)(vii) of this [[Page 517]] section while it was located in a rural area. (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 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. Subject to the provisions of paragraph (f)(1)(x) of this section, effective for cost reporting periods beginning on or after April 1, 2000, FTE residents at an urban hospital in a rural track program are included in the urban hospital's rolling average calculation described in this paragraph (f)(1)(v). (vi) Hospitals that are part of the same Medicare GME affiliated group (as defined in Sec. 413.75(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. 413.79(f) of this chapter. (vii) If a hospital establishes a new medical residency training program, as defined in Sec. 413.79(l) of this subchapter, the hospital's full-time equivalent cap may be adjusted in accordance with the provisions of Sec. Sec. 413.79(e)(1) through (e)(4) 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. 413.79(g) 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 Sec. Sec. 413.79(h)(1) and (h)(2) 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 Sec. Sec. 413.79(h)(1) and (h)(3)(ii) 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 Sec. Sec. 413.86(h)(1) and (h)(3)(i) of this subchapter are met. (x) An urban hospital that establishes a new residency program (as defined in Sec. 413.79(l) 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 [[Page 518]] accordance with the applicable provisions of Sec. 413.79(k) 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. 413.79(i) of this subchapter. (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. 413.79(j) of this subchapter. (xiii) For a hospital that was paid under Part 413 of this chapter as a hospital excluded from the hospital inpatient prospective payment system and that subsequently becomes subject to the hospital inpatient prospective payment system, the limit on the total number of FTE residents for payment purposes is determined based on the data from the hospital's most recent cost reporting period ending on or before December 31, 1996. (xiv) In the case of a merger of a hospital that is excluded from the hospital inpatient prospective payment system and an acute care hospital subject to the hospital inpatient prospective payment system, if the surviving hospital is a hospital subject to the hospital inpatient prospective payment system and no hospital unit that is excluded from the hospital inpatient prospective payment system is created as a result of the merger, the surviving hospital's number of FTE residents for payment purposes is equal to the sum of the FTE resident count of the hospital that is subject to the hospital inpatient prospective payment system as determined under paragraph (f)(1)(ii)(B) of this section and the limit on the total number of FTE residents for the excluded hospital as determined under paragraph (f)(1)(xiii) of this section. (xv) Effective for discharges occurring on or after October 1, 2005, an urban hospital that reclassifies to a rural area under Sec. 412.103 for fewer than 10 continuous years and then subsequently elects to revert back to urban classification will not be allowed to retain the adjustment to its IME FTE resident cap that it received as a result of being reclassified as rural. (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 Sec. Sec. 413.76(c)(1) through (c)(5) of this subchapter. [50 FR 12741, Mar. 29, 1985. Redesignated at 56 FR 43241, Aug. 30, 1991] [[Page 519]] 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.