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Starting New Osteopathic GME Programs

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Starting New Osteopathic GME Programs Powered By Docstoc
					   CMS Issues: Funding, New
Sources of Funding, New Program
    Development, Audits and
           Inspections
         OME Panel Discussion
               1-8-09
    CMS Issues: Funding, New Sources of
 Funding, New Program Development, Audits
              and Inspections

The objectives are to:
1) Understand the disconnect between hospital entities
   who handle GME reimbursement filings/reports
2) Understand the new guidelines for GME funding
3) Identify the most common violations found on CMS
   audits
4) Know what key systems must be in place to avoid
   audits
5) Understand best practices in Aggregation Agreements
            Panel Overview
 Introductions and background information
   – Topics directed by conference planners
 Overview of GME Laws, Regulations, and
  Interpretation
 Operations and Business Plans
   – New programs
   – Existing programs
 GME Policy Implications for the future of OGME
 Panel will field Q and A
How does „trainee time‟ REALLY get counted for
                the IRIS report?

 KW Duty
  Hours                 Non Provider
                        Agreements




           Master




                                        OPTI
                    Vacations          Ed Days
     GME Hospital Cost Report
             Med Ed Office                   GME Billing Specialist

   Generally understand the             Generally understand „the
    parameters of DME/IME                 report‟ (IRIS)
    reimbursement
           1
    Generally Do NOT
    understand rules about
                                         Generally do NOT
                                                  2
                                          understand rules on how
                                          „block education times,‟
    non-provider agreements,              „out time‟ or fine schedule
    specifics in the CMS                  details can be maximized
    funding formulas, etc.               Often work with
                                          incomplete understanding
CEO and CFO are increasingly              of GME functions/roles
working from a ‘contribution to
margin’ concept ($ only).
                                  3       etc.
 Overview of GME Laws, Regulations
        and Interpretations
 What are   the new guidelines on GME funding?
 How does CMS define a new „virgin‟ program?
 Which CMS rules have demonstrated significant
  variability in intermediary interpretations?
 What are the most common violations found on
  CMS audits?
 How can we better manage existing caps?
 How can Aggregation Agreements be best
  utilized?
                Speakers
 Kenneth   R. Marcus, J.D., M.H.S.A
 Honigman Miller Schwartz and Cohn LLP




 Margaret J.   Hardy, JD
 Director, Hospital & Medical Educator Affairs
 American Osteopathic Association
    Legal Overview
Medicare Payment For Medical
         Education


       Kenneth R. Marcus, J.D., M.H.S.A.
    Honigman Miller Schwartz and Cohn LLP
               January 8, 2009



                                            9
Topics
 Legal Principles Regarding Medicare
  Payment For Medical Education
 Resident rotation to the nonprovider setting
 Establishment of New Programs




                                                 10
Leal Principles Regarding Medicare
Payment for Medical Education
 Medicare Makes Two Education Payments:
 Indirect Medical Education (IME)
      Compensates for higher indirect patient
      care costs in teaching hospital
 Direct Graduate Medical Education (GME)
      Compensates for residency education
      costs



                                                11
Leal Principles Regarding Medicare
Payment for Medical Education

 Indirect Medical Education (“IME”)
  The IME is designed to pay PPS teaching hospitals
  for the indirect costs relating to the participation of
  interns and residents in patient care. The IME
  payment formula computes a percentage increase in
  the DRG payment based on teaching intensity, as
  measured by a hospital's intern and resident-to-bed
  ratio.



                                                            12
Leal Principles Regarding Medicare
Payment for Medical Education

 Direct Graduate Medical Education (“GME”)
 Prospectively determined per-resident amount (PRA),
  determined in a 1984 base year. The PRA is
  multiplied by the number of full-time equivalent
  residents working in all areas of the hospital complex
  (and nonprovider sites, where applicable), and the
  product is then multiplied by the hospital's Medicare
  share of total inpatient days to determine Medicare's
  direct GME payment (“Medicare Patient Load”).
  Beginning in Federal Fiscal Year 2001, floors an
  ceilings on PRA established.


                                                           13
Leal Principles Regarding Medicare
Payment for Medical Education
 Beginning in Federal Fiscal Year 2001, floors
  and ceilings on PRA were established.
 Compare to locality adjusted national
  average
 If less than 70%, increased to 70% for FY
  2001 and 85% for FY 2002.
 If greater than 140%, frozen FY 2001 and
  2002, in 2003 updated CPI minus 2%, for
  2004-2013, rate frozen

                                                  14
Leal Principles Regarding Medicare
Payment for Medical Education
GME
  42 C.F.R. Sec. 413.75 through 413.83.
  A Separate Payment
  Payment = (Weighted FTE‟s) x (Per Resident
  Amount) x (Medicare Patient Load)
IME
  42 C.F.R. Sec. 412.105
  An Add On To PPS DRG Payment
  Adjustment: Based On Ratio No. FTE‟s/Available
  Beds

                                                   15
Leal Principles Regarding Medicare
Payment for Medical Education
 Caps On FTE Residents
    The BBA imposed a cap based on number of FTE‟s in
     a hospital‟s 1996 fiscal year
    Caps differ for IME and GME
    Affiliation Agreement: Permits hospitals to “pool” their
     caps if one is over and the other is under the cap
    In 2005 a national “redistribution” occurred: cap was
     lowered for hospitals under cap, and cap was raised
     for hospitals above their cap.




                                                                16
Leal Principles Regarding Medicare
Payment for Medical Education
Limited Exceptions to Adjust Caps
 Urban hospitals: 1/1/1995-8/5/1997 upward
  adjustment was available. After this period,
  the caps cannot be increased to reflect new
  programs or expansion of programs unless
  the training occurs in a rural setting.
 Rural hospitals: cap was increase 130% or
  original 1996 cap; subject to upward
  adjustment to include new residency
  programs

                                                 17
Leal Principles Regarding Medicare
Payment for Medical Education
Limited Exceptions to Adjust Caps
 Temporary increase to assume closed
  hospitals or closed programs
 Establishment new programs if hospital had
  no program in 1996 and thus had a cap of
  zero.




                                               18
Leal Principles Regarding Medicare
Payment for Medical Education
 GME Affiliation Agreement
 Two or more hospitals may form an affiliated
  group.
 An aggregate cap: hospital that has extra
  slots can share with hospital that have
  exceeded their cap.
 Regulation details the strict requirements and
  procedures 42 C.F.R. § 413.75


                                                 19
Claiming Fellows
 Fellows are considered “residents” for
  Medicare purposes.
 Generally have completed a residency, and
  are training in a sub-specialty
 Must have rotation schedules, or other
  documentation.
     Where and when working
     What are their duties?



                                              20
Claiming Fellows
 Must be working in an approved training
  program (defined by 42 CFR 413.75).
     Either accredited by one of the organizations
      listed in 413.75 (e.g., AOA), or
     The American Board of Medical Specialties
      (ABMS) issues a certificate in the specific sub-
      specialty.




                                                     21
Leal Principles Regarding Medicare
Payment for Medical Education
 FTE Weighing For GME
     Initial residency period = 1 FTE
          ACGME standards applied
          Beyond initial residency period = 0.5 FTE




                                                       22
Leal Principles Regarding Medicare
Payment for Medical Education
 The number of FTE‟s for purposes of IME and GME
  payment, and thus the amount of IME and GME
  payment, is determined annually
      Note: Rolling average of current and two previous
       years.
 Hospital files a cost report, which is audited.
 The audit is completed several years after the fiscal
  year is over: notice of program reimbursement (NPR)
 Appeal right triggered by NPR
      Appeal presented to Provider Reimbursement Review
       Board (“PRRB”)

                                                           23
Leal Principles Regarding Medicare
Payment for Medical Education
 Increase In Number of FTE‟s =
  Increase GME and IME
 Decrease In Number of FTE‟s =
  Decrease GME and IME




                                     24
Medicare Payment To Providers
Only
 “Provider” is a term of art: E.g., hospital,
  SNF, HHA, etc.
 Medicare payment for medical education is
  available only to providers, entities that have
  a provider agreement with the Medicare
  Program.
 Thus, a physician practice or other entity is
  referred to as “nonprovider” setting



                                                    25
Out - Rotations
 Provider To Provider
 The site of service governs which provider may count
 the rotation in its FTE count. Payment is not a
 factor. Rotation schedule is audited.
 Provider To Nonprovider (e.g., physician clinic): The
 provider is eligible for GME and IME payment only if
 specific statutory and regulatory requirements are
 satisfied.
 A facility is a “nonprovider” if it is not part of the
 hospital or it is not recognized as a provider based
 facility under 42 C.F.R. Sec. 413.65


                                                      26
Provider To Provider Rotations
 Issues have arisen due to a hospital‟s failure
  to document the number of FTE residents
  claimed on its cost report
      A rotation schedule is the primary
       documentation that can support the direct
       GME and IME resident counts but other
       similar documentation may be acceptable.




                                                   27
Provider To Provider Rotations

 The IRIS does not serve as the
  evidence/documentation that supports the accuracy
  of the FTE resident counts reported in the cost report
      Mainly used to identify duplicates
 The FTE resident counts computed using the IRIS
  information does not always match the FTE resident
  counts reported in the related cost reports.




                                                       28
Provider To Provider Rotations
 The rotation schedules or other similar
  documentation should serve as the primary evidence
  to support hospitals‟ FTE resident counts.
 Therefore, in addition to submitting the IRIS report,
  the hospital must submit the other documentation
  elements specified in §413.75(d), and those must be
  certified by a hospital or GME program official.




                                                          29
Provider To Provider Rotations
 Hospitals are not permitted to decide among
  themselves how their FTEs will be counted
      A hospital may not count a greater number of FTE
       residents than is actually training at the hospital (or its
       nonhospital sites) during the year.
      Each hospital must maintain its own records which
       demonstrate, for the entire cost reporting period, the
       amount of time that the resident trained at the hospital
       and, if applicable, a nonhospital site




                                                                     30
Rotation To Nonprovider Setting
Two Statutory Requirements:
 Activities Related To Patient Care
 Hospital Must Incur All, Or Substantially All,
  Training Costs Of The Training Setting
IME: SSA Sec. 1886(d)(5)(B)(iv)
GME: SSA Sec.1886(h)(4)(e)




                                                   31
Rotation To Nonprovider Setting
Medicare Regulation Adds Complexities Resulting In
  Disallowances Of FTE‟s:

   Activities Related To Patient Care
   Direct Training Costs
   Costs of Supervising/Teaching Physician
   “Written Agreement” Requirement; Optional As Of
    10/1/2004




                                                      32
Rotation To Nonprovider Setting:
Activities Related To Patient Care
 Activities Related To Patient Care
 Until recently, this requirement was not
  controversial.
 CMS has clarified that beginning 10/1/2006
  nonpatient care activities time cannot be
  included in FTE count for IME or GME.




                                             33
Note Regarding Inpatient Setting:
Activities Related To Patient Care
 Note: The distinction between patient care
  activities and nonpatient care activities is not
  relevant to direct GME FTE count
  determinations when the residents are
  training in the hospital complex.
     § 413.78(a), „„residents in an approved
      program working in all areas of the hospital
      complex may be counted.‟‟



                                                     34
Note Regarding Inpatient Setting :
Activities Related To Patient Care
 Riverside Methodist Hospital v Thompson
  (S.D. Ohio, 7/31/2003, CCH ¶ 301,441) (2003
  WL 22658129)
 Held: Residents in activities unrelated to
  patient care could be included in IME
 This decision predated a 2001 revised
  regulation
 See also, Rhode Island Hospital v Leavitt
  (D. Rhode Island, 8/9/2007, CCH ¶ 302,168)
                                            35
Rotation To Nonprovider Setting
Activities Related To Patient Care
 Activities Related To Patient Care
 The care and treatment of particular patients,
  including services for which a physician or
  other practitioner may bill.
 42 C.F.R. Sec. 413.75(b) (7/1/2007)




                                                   36
Rotation To Nonprovider Setting:
Activities Related To Patient Care
 The “One Workday” Threshold
 Effective for cost reporting periods beginning
  on or after 10/1/2006
 The hospital must annotate the rotation
  schedule to identify any workdays spent
  entirely in non-patient care activity
 Such workdays must be subtracted from the
  FTE count



                                                   37
Rotation To Nonprovider Setting:
“All Or Substantially All”
“All or Substantially All” Costs: Intern and Residents

 Direct Costs of Intern and Resident Salary and
  Benefits – Generally not a controversy

 It is recommended, however, that W-2 and other
  direct cost documentation be maintained to support
  that the provider incurred these costs if a question
  arises upon audit.




                                                         38
Rotation To Nonprovider Setting:
“All Or Substantially All”
“All or Substantially All” Costs:
  Training/Supervision Costs
 Highly Controversial; Difficult To Comply
 CMS 1998 Regulation Recognized Voluntary
  Supervision Costs (63 Fed. Reg.40993). See
  also12/1/98 Program Memorandum A-98-44
 8/1/2003; 8/11/2004 Rule: CMS “Clarifies”
  That Hospital Must Bear Supervision Costs


                                               39
Rotation To Nonprovider Setting:
“All Or Substantially All”
 CMS Guidance Regarding
  Supervision/Training Cost:
 Is there a cost? If yes, hospital must pay
 How to determine if a cost?
      Cost if predetermined compensation
      No cost if compensation based solely on
       billings for services furnished to patients



                                                     40
Rotation To Nonprovider Setting:
“All Or Substantially All”
 CMS Guidance: Are Costs Incurred?
 Solo Practitioner: No Cost
    Comp. based solely on billings for services
    Does not receive payment for other duties
 Member of Group: Typically A Cost
    Predetermined payment without regard to number of
     patients
    Payment reflects all responsibilities, including
     supervision and training
    Physician Cannot Agree To Serve Voluntarily




                                                         41
 Rotation To Nonprovider Setting:
 “All Or Substantially All”
Statutory Moratorium For Family Practice
 Section 713 Medicare Prescription Drug,
  Improvement and Modernization Act of 2003
 Payment to nonprovider setting not required
  for family practice training for:
 Cost Reports Settled 1/1/2004 – 12/31/2004
 Training In Nonhospital Settings Between
  1/1/2004 –1/31/2004


                                                42
Rotation To Nonprovider Setting:
“All Or Substantially All”
 CMS Guidance: Computing Costs
 Hospital must compensate nonprovider for
  training and supervision outside of the scope
  of patient care
 Cost Determination:
   (% time devoted to Leal Principles Regarding
  training) x (physician‟s salary)



                                              43
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Revised Regulation Effective For Cost
  Reporting Periods Beginning On or After
  7/1/2007
 Defines “All or Substantially All”
 42 C.F.R. § 413.75(b)
 Federal Register / Vol. 72, No. 91 / Friday,
  May 11, 2007 / Final Rule Beginning on page
  26949



                                                 44
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Modification of the Definition of „„All or Substantially
  All of the Costs for the Training Program in the
  Nonhospital Setting‟‟
      A hospital is required to pay at least 90
       percent of the total of the residents‟ salaries
       and fringe benefits (including travel and
       lodging where applicable) and the portion of
       the teaching physicians‟ costs attributable to
       direct GME for a program at the nonhospital
       site

                                                             45
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Implementation of a 90 Percent Cost
  Threshold
 0.90 × [(sum of each FTE resident’s salary
  + fringe benefits (including travel and
  lodging where applicable)) plus the
  portion of the teaching physician’s
  compensation attributable to direct GME
  activities.]


                                               46
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Implementation of a 90 Percent Cost
  Threshold
     The portion of the teaching physician’s
      compensation attributable to direct GME
      activities may be calculated as follows:
      (3/number of hours nonhospital site is
      open per week) × (national average salary
      for each teaching physician*)
          Subject to a 1:1 teaching ratio (discussed Fed
           Reg 5/11/2007 on page 26959)


                                                        47
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Implementation of a 90 Percent Cost Threshold
    What is interesting about the implementation of this
     threshold is that only one element of “all or
     substantially all” of the costs can be used to determine
     the threshold; i.e., if the hospital pays all of the
     residents‟ salaries and fringe benefits, and that than
     90% of the cost computed from the previous slides, the
     provider meets the criteria.
          Discussed Fed Reg 5/11/2007 Page 26951, third
           column, top of page



                                                            48
Rotation To Nonprovider Setting: “All
Or Substantially All”
 CMS “Guidance”: In Kind Compensation
 CMS recognizes in-kind (i.e.nonmonetary)
  compensation and uses as examples continuing
  education and office space.
 Must be quantifiable and related to training
 In-kind compensation must be provided or made
  available by the end of the third month following the
  month in which the training occurred.
 Still, it remains necessary to show that the in-kind
  equates to the cost incurred by the nonprovider
  setting in providing training and supervision



                                                      49
Rotation To Nonprovider Setting:
“All Or Substantially All”
 The Paradox:
 Although the hospital is required to demonstrate that
  it compensates the nonprovider setting for training
  and supervision occurring outside of the scope of
  patient care, the hospital cannot include in the FTE
  count the time spent in nonpatient care activity in the
  nonprovider setting.




                                                            50
Rotation To Nonprovider Setting:
“All Or Substantially All”
 A Single Hospital Must Be Responsible “Full
  Complement” Of Costs Of “Program”
  “A hospital cannot count any FTE residents if it incurs „all or
  substantially all of the costs‟ for only a portion of the FTE
  residents in that program setting.”
  68 Fed. Reg. 45439.(August 2004)

 Note this principle is implicated if two or more
  hospitals fund a “third party entity” that employs
  residents




                                                                    51
Rotation To Nonprovider Setting:
“All Or Substantially All”
 Some hospitals do not directly employ residents.
 What CMS refers to as a “third party” may employ
    and compensate the residents, and hold the
    accreditations
   Two or more hospitals may fund the “third party.”
   The “single hospital” issue may arise in this setting.
   It is necessary for the hospital to demonstrate that it
    funds the third party entity, and thus that it
    compensates the residents through such funding.
   Covenant Healthcare v BCBSA/NGS; PRRB Dec.No.
    2007-D55 (8/2/2007; CCH ¶ 81,762), rev‟d CMS
    Administrator (10/3/2007; CCH ¶ 81,790)
                                                          52
Rotation To Nonprovider Setting:
Written Agreement
Note: Required By Regulation, not Statute
 Requirement Became Effective 1/1/1999
 Optional 10/1/2004
 Issues Regarding Written Agreement: Does It
  Exist? Is It Signed? Is It Dated? Can It Be
  Retroactive? What Should It Say? Suppose
  There Already Is An Employment Contract?



                                            53
Rotation To Nonprovider Setting:
Written Agreement
 Ideally the written agreement is:
 Signed by both parties
    Signed by the nonprovider setting, not the
     individual physician
 Dated during the fiscal year in which the
  rotations occurred
 In place even if there is an employment
  contract with the physician



                                                  54
Rotation To Nonprovider Setting:
Written Agreement
 State that provider incurring cost of residents‟
  salaries and benefits at nonprovider setting
 State that provider compensating nonprovider
  for costs incurred outside of scope of patient
  care
 State the amount of compensation to
  nonprovider




                                                     55
Rotation To Nonprovider Setting:
Written Agreement
 Some providers include a statement that the
  nonprovider setting is a solo practice or that it
  is a group practice that compensates its
  members in direct proportion to their fee for
  service billings
 Note Intermediary reserves the right to
  conduct an audit to verify the accuracy of the
  statement


                                                  56
Rotation To Nonprovider Setting:
Written Agreement
 Except for the solo or the group exclusively
  compensated by fee for service, CMS has
  stated that the nonprovider setting incurs a
  cost.
 Thus, if the written agreement states that the
  nonprovider is volunteering its time, the
  Intermediary most likely will disallow the
  FTE‟s relating to the rotation.


                                                   57
Rotation To Nonprovider Setting:
Written Agreement
 For Written Agreements For Cost Reporting
  Periods Beginning On/After 7/1/2007:
  Indicate that the hospital will incur at least 90
  percent of the total of the costs of the
  resident‟s salary and fringe benefits (including
  travel and lodging where applicable) while the
  resident is training in the nonhospital site and
  the portion of the cost of the teaching
  physician‟s salary attributable to direct GME.

                                                  58
Rotation To Nonprovider Setting:
Written Agreement
 For Written Agreements For Cost Reporting Periods
  Beginning On/After 7/1/2007:
  The written agreement should specify the total
  compensation amount the hospital will incur to the
  nonhospital site to meet the 90 percent „„all or
  substantially all‟‟ threshold, and whether this amount
  reflects only residents‟ salaries and fringe benefits
  (including travel and lodging where applicable), or
  reflects an amount for teaching physician
  compensation as well.



                                                           59
Rotation To Nonprovider Setting:
Written Agreement
“Written Agreement”
For Portions Of Cost Reporting Periods
    On/After
10/1/2004, Hospital Has Option:
(1) Written Agreement OR
(2) Pay Costs Associated With Training No
    Later Than End Of Third Month Following A
    Month In Which Rotation Occurred
(See 42 C.R.R. Sec. 413.78(e))
                                            60
Rotation To Nonprovider Setting:
Written Agreement
    To date, on appeal the PRRB has upheld written agreement
    requirement in several cases, including the following:
   Natividad Medical Center, Dec. No. 2003-D17, March 6,2003,
    CCH 80,968
   Chestnut Hill Hospital , Dec. No. 2004-D22, May 6, 2004, CCH
    81,157
   Immanuel St. Joseph’s, Dec. No. 2006-D12, CCH 81,460
   E.W. Sparrow Hospital v. Blue Cross
    BlueShieldAssociation/United Government Services, LLC
    PRRB Dec. 2007-D93 (May 31, 2007) (CCH¶ 81,736)




                                                                   61
Rotation To Nonprovider Setting:
Written Agreement
 Although the written agreement requirement
  became optional as of 10/1/2004:
     best practice is to have a written agreement
      when compensation is paid to physicians who
      are in a position to refer patients to the
      provider to avoid exposure to liability under
      federal and state law prohibiting referrals
      where there is a financial relationship.
     It also seems easier to have a written
      agreement than to demonstrate compliance
      with the alternative.

                                                      62
Establishment of New Programs
 CMS Definition of New Program
      a medical residency that receives initial
      accreditation by the appropriate accrediting
      body or begins training residents on or after
      January 1, 1995. (42 C.F.R. §413.79(l))
      (emphasis added)
     Initial accreditation is the key element
     “Begins training residents on or after” 1/1/1995
      refers to programs accredited prior to that date


                                                     63
Establishment of New Programs
 Whether a program is “new” according to
  CMS is far from clear and requires more than
  a showing that the AOA or the ACGME
  issued an initial accreditation letter
 For CMS, there must be a clear showing that
  the program does not replace a prior program




                                             64
Establishment of New Programs
 CMS Considers Several Factors
     Characterized as “replacement” or “new”
     Whether another program terminated during
      the same period at a related hospital
     Whether residents transferred from the “old” to
      the “new” program to complete training
     Whether and to what extent the same program
      director, teaching physicians and
      administrative staff

                                                    65
Establishment of New Programs
 CMS Considers Several Factors (Cont‟d)
     Whether rotations to other hospitals and
      nonhospital sites change
     Geography: distance between “old” and “new”
     Curricula differences
     Whether the new program assumes the
      resident cap of the old program, i.e., is there a
      “scheme” to increase the cap?



                                                      66
Establishment of New Programs:
Hospital With No Prior Programs
 If a hospital had no residents in its most recent cost
   reporting period ending on or before 10/1/1996, and it
   establishes a new program on or after 1/1/1995:
   “[t]he hospital's unweighted FTE resident cap under paragraph (c)
   of this section may be adjusted based on the product of the highest
   number of residents in any program year during the third year of
   the first program's existence for all new residency training
   programs and the number of years in which residents are expected
   to complete the program based on the minimum accredited length
   for the type of program. The adjustment to the cap may not exceed
   the number of accredited slots available to the hospital for the new
   program.

42 CFR § 413.79(e)(1)



                                                                          67
Establishment of New Programs:
Hospital With Prior Programs
 If a hospital had residents in its most recent cost
  reporting period ending on or before 12/31/1996, and
  it establishes a new program on or after 1/1/1995 but
  on or before 8/5/1997:
  “The adjustment to the hospital's FTE resident limit
  for the new program is based on the product of the
  highest number of residents in any program year
  during the third year of the newly established
  program and the number of years in which residents
  are expected to complete each program based on the
  minimum accredited length for the type of program.”
42 CFR § 413.79(e)(2)


                                                        68
Establishment of New Programs:
Rotation To Multiple Hospitals
 “If the residents are spending an entire program year
  (or years) at one hospital and the remainder of the
  program at another hospital, the adjustment to each
  respective hospital's cap is equal to the product of the
  highest number of residents in any program year
  during the third year of the first program's existence
  and the number of years the residents are training at
  each respective hospital.”




                                                          69
“New” GME Programs
   Margaret J. Hardy, JD
      January 2009
   CMS “New Program” Policy

Pending audits in several hospitals indicate that the
  Centers for Medicare and Medicaid Services
  (CMS) has adopted a new, unwritten policy on
  what constitutes a “new” graduate medical
  education program
   “New Program” Definition
According to current CMS regulations, a “new
 medical residency training program” is

  “a medical residency that receives accreditation
  by the appropriate accrediting body or begins
  training residents on or after January 1, 1995.”
                              42 CFR §413.79(l)
               “New Program”

•   CMS‟ new policy makes it clear that this
    definition does not include a hospital that
    begins training for the first time on or after
    January 1, 1995, if the program existed at
    another hospital prior to that time
            “New Program”

As a result of this policy,
  A program likely will not be regarded as
 “new” even though the hospital receives initial
 accreditation from the AOA and/or ACGME
 after January 1, 1995 if that residency program
 simply was moved from one hospital to another
 Hospital or Program Closure
If a hospital or GME program closes, the residents
   may be transferred to another hospital to
   complete their training if
• The first hospital agrees to reduce its cap and
   notifies the FI within 60 days of the time the
   residents begin training in the accepting hospital
• The hospital accepting the residents requests a
   temporary cap adjustment within 60 days of
   the time it begins training the residents
    Hospital or Program Closure


•   When the residents finish their training, the
    temporary adjustment ends and the “accepting”
    hospital‟s cap reverts to its original number
      Is It a “New” Program?
Although CMS has issued no guidance on its new
  policy, these factors might be considered in
  determining “new program” status:
• How did the hospitals characterize their actions?
  Their programs?
• Are the hospitals related institutions?
• Have the hospitals communicated with each
  other and, if so, to what effect?
       Is It a “New Program”
Does the program have:
• The same residents?
• The same number of slots?
• The same faculty?
• The same hospital and nonhospital rotations?
• The same curricula?
• The same geographic location or shared service
  area?
            Critical Questions
•   Can residents finish their training if a hospital
    or program closes?
•   Can a teaching hospital accept residents from a
    closing hospital/program?
•   Will Medicare pay for those residents?
•   Can a nonteaching hospital accept residents
    from a closing hospital/program?
•   Should it?
           Critical Questions
•   What constitutes a “new” program?
•   Can a nonteaching hospital accept residents
    from a closing hospital/program at the same
    time that it starts its own “new program?”
     Same specialty?
     Different specialty?
•   Can a GME program be transferred from one
    hospital to another?
GME Operations and Business
          Plans
   New Programs
     – Discuss Business Plans for new program
       establishment
     – Discuss federal funding during startup
     – What key systems need to be in place to avoid
       audits?
   Existing Programs
     – Explore how to operate „outside‟ your cap
     – Identify new sources of funding for GME programs
     – Discuss successful funding strategies for programs
       that are mostly ambulatory
                  Speakers
 Margaret J.   Hardy, JD
    – Director, Hospital & Medical Educator
      Affairs, American Osteopathic Association

 Christopher L.    Francazio
    – Hinckley Allen Tringale

   Ken Johnson, DO
    – Associate Dean for Clinical Education
      UNECOM
Strategies for New Program
       Development
      Margaret J. Hardy, JD
         January 2009
    Trends Affecting Hospitals

•   Physician Workforce Shortages
•   New Colleges of Osteopathic Medicine &
    Medical Schools
•   Increasing Number of Medical Graduates
    = Increased Interest in Starting New
    Osteopathic GME Programs
           Hospital Concerns
•   Competition for best-reimbursed services
•   Increased cost for physician services
•   ER coverage
•   Patient safety & cost effective care
•   Quality tied to payment
•   Workforce shortages
•   Recruiting
      Strategic Considerations

•   Value of GME to the Community & the
    Hospital
     Internal and external environment
•   Hospital‟s mission, vision, values & goals
     How will GME contribute?
      Strategic Considerations

•   Community benefits
•   Patient care benefits
•   Medical staff benefits
•   Hospital benefits
•   Recruiting benefits
•   Bottom line benefits
        Developing a Strategy
•   Champions
•   Integration with mission, vision & values
•   Commitment
•   Program selection
•   Costs & payment
•   Accreditation
•   Collaboration
       Contact Information
Margaret J. Hardy, JD
Director, Hospital & Medical Educator Affairs
American Osteopathic Association
1090 Vermont Avenue, NW, Suite 510
Washington, DC 20005
Phone: (800) 621-1773, ext. 8655
Phone: 202-414-0155
E-mail: mhardy@osteopathic.org
A suggested framework to assess the viability of starting new
programs addresses both qualitative and quantitative measures.

       Economic                 Programmatic                  Operational                  Strategic

 What are the sources of     What programs should       Where will residents be    What is the rationale
  reimbursement?               we consider to pursue?      deployed?                   for having GME
 How do we optimize          What is the process to         Affiliations with       programs?
  future reimbursement?        achieve approval of              other hospitals       How do we compete
 How much will it cost to     recommended                How will we                 with other programs?
  support GME?                 programs?                   accommodate clinic         Are there any related
     Resident costs                                       rotations?                  benefits of having
     Physician costs                                     Who will oversee and        GME programs?
     Infrastructure costs                                 train the residents?




                        It is imperative that hospitals work with their
                      intermediaries to discuss programmatic planning
                       and to ensure that programs developed are truly
                                               new.




                                                        90
An economic analysis should be performed to assess the
required investment in GME and associated infrastructure costs.

                                          Projections of reimbursement levels over a seven year
        Economic
                                           period.
  What are the sources of                Estimates of per resident amounts.
   reimbursement?                             Based on cost build-ups and area averages
  How do we optimize                     Infrastructure costs, in particular faculty arrangements
   future reimbursement?
                                           and teaching costs.
  How much will it cost to
   support GME?                           Administrative and facility costs.
      Resident costs                     Resident stipend estimates by PGY level based on
      Physician costs                     national/regional data.
      Infrastructure costs




                     A key focus during an analysis should be an estimate
                              of GME start-up costs and how much
                      reimbursement may be claimed during the first year
                                    to two years of training.



                                                91
Programs to be pursued can be influenced by ability to sustain
training, current and future hospital needs, and market forces.

                                          As part of our project we will review:
    Programmatic
                                             Faculty required and infrastructure in place to
  What programs should                       administer any programs contemplated
   we consider to pursue?                    Clinical volume/services necessary to support the
  What is the process to                     program
   achieve approval of
                                             Community needs, now and in the future
   recommended
   programs?                                 The potential to optimize resident caps
      allopathic                            Where residents will be deployed
      osteopathic                           Market trends, program fill rates, and programs in
                                              existence at competitor hospitals



                         An initial step is to convene a group of key
                       physicians and hospital leaders to perform a more
                        in-depth assessment of potential programmatic
                        compatibility within a hospital or health system.




                                                92
Where residents are deployed can influence both program
economics and ability of a hospital to meet program requirements.

                                         Some rotations may need to be performed at
     Operational
                                          hospitals not part of health system.
 Where will residents be                Off-site, continuity of care rotations may result in
  deployed?                               increased faculty costs or the need to establish new
     Affiliations with                   clinic space.
       other hospitals                   We will need to consider how and who will train the
 How will we                             residents:
  accommodate clinic
  rotations?                                 Core faculty
 Who will oversee and                       Volunteer faculty
  train the residents?                       Hospitalists?



                    Though some rotations may need to be performed at
                      other hospitals, by establishing training a hospital
                         can claim residents who rotate in from other
                     approved GME programs, potentially offsetting that
                                             cost.



                                               93
Beyond the financing of GME, a strategic assessment can serve as
the rationale for developing new programs.
                                       3rd and 4th year medical student clerkships can serve
      Strategic
                                        as a “feeder” into postdoctoral training programs.
 What is the rationale                Focus on education vs. services, enhanced quality.
  for having GME                       Physician succession planning and recruitment, and
  programs?                             ability to retain physicians.
 How do we compete
                                       Enhanced faculty skills.
  with other programs?
 Are there any related                Strengthen or create academic affiliations, and an
  benefits of having                    environment of scholarly activity that can lead to
  GME programs?                         research funding.
                                       Call and coverage.




                   Beyond the core economics of GME, a hospital needs
                     to take into account how the development of any
                     program(s) could enhance the delivery of care and
                                services to the community.



                                             94
Throughout the business planning process there are a number of
risks to consider when moving forward.

  • There are a number of factors that could adversely impact projected
    margins for GME, including:
     – Competition with established osteopathic and allopathic programs
     – Additional physician costs associated with training and oversight
     – Shift in market trends resulting in poor match and fill rates
         • Goal is to optimize establishment of resident caps in IME and DME
     – Regulatory changes that reduce federal dollars to GME
     – Capital costs related to space requirements (call, didactics, GME
       administration, library, clinic space, etc.)


                These and other unforeseen factors need to be
              incorporated into the analysis to continue to assess
                 the feasibility of starting any new program(s).



                                           95
Contact Information




                      Christopher L. Francazio
                           Hinckley Allen
                           28 State Street
                         Boston, MA 02109
                            617 345-9000
                      cfrancazio@haslaw.com

                               96
Operations and Business
         Plans
  Existing Programs

         Chris Francazio
        Ken Johnson, DO
  Associate Dean for Clinical Education
              UNECOM
          Areas Covered
 Value
 Successful funding strategies for
  programs, especially ambulatory
 Avoiding program closure
Developing the Value
    Proposition


 “The Double Bottom Line”
      The Double Bottom Line
   Direct and Tangible benefits:
    – Quantifying revenue and expenses generated by
      teaching and patient care activities
   Indirect and intangible benefits:
    – contribution that a program makes to the "mission,
      vision and value" of the sponsoring institution
    – the money the sponsoring institution saves by
      having to recruit fewer physicians.
                                STATS
   Fiscal year 2003 to 2004, 56 community-
    based family medicine residency programs
   A median of dollar 194,125 was invested in
    training each resident annually.
   The bulk of funding stemmed from
    sponsoring institution support and clinical
    care revenues.
   The majority of programs did not receive Title
    VII funds, state, local, or philanthropic
    support.
Financing and budgeting of community-based family medicine residency programs.
Carlisle R. South Med J. 2006 Jun;99(6):576-8.
                    STATS
   Clinical care activity continued a
    historical trend of increases.
    – 1,076 patient visits per resident full-time
      equivalent, producing 39.5% of program
      financing.
    – The percentage of visits provided to those
      with Medicaid was 35.9%.
            The First Bottom Line



Determining the True Value of a Family Practice Residency Program
Pugno, PA et al. Fam Prac Management, June 2000
        Direct revenue and
            expenses
Direct revenue
 Outpatient charges and Inpatient charges
 "Cap" revenue ("cap" allocation x proportion
  of patient days)
 Cost recovery
 Contracts
 Grant revenue
 State line-item funding
       Direct revenue and
           expenses
Direct expenses
 Salaries, wages and benefits
 Medical fees
 Purchased services
 Rents and leases
 Equipment, Utilities
 Insurance
 Interest expense
 Depreciation
  Direct revenue and expenses
Direct expenses
 Travel
 Training, orientation, continuing education
 Trainee expenses
 Recruitment
 Direct support (books, etc.)
 Educational materials
 Educational fees (e.g., accreditation,
  examination)
The Second Bottom Line
 Indirect revenue and expenses

Indirect revenue
 Interest income
 GME revenue (Medicare)
 Medicaid
 Charitable revenue
 Direct gifts
 Share of unrestricted gifts
 Endowment revenue
 Indirect revenue and expenses

Indirect revenue
 Contribution margin to fixed costs by inpatient
  admissions from residency program
 Contribution margin from ancillaries, lab, X-
  rays, etc.
 Revenue support from university affiliates
 Actual cost of providing care to inpatients
  admitted from residency family practice
  program
 Indirect revenue and expenses

Indirect expenses
 Actual cost of providing care to inpatients
  admitted from residency family practice
  program
 Affiliation expense
 Specifics (e.g., consolidated applications,
  brochures, etc.)
 Step-down allocations (administration, human
  resources, security, finance)
 Indirect revenue and expenses

Indirect expenses
 Proportional cost of graduate medical
  education office (director of medical
  education, staff, etc.)
 Marketing
 Legal support
        Intangible benefits

Revenue adjustments
 Contributions to program sponsor by
  graduates (multiplier effect)
 Contribution to fixed costs by admissions
  from local referrals
 Contribution to fixed costs by admissions
  from regional referrals
 Cost avoidance from physician recruitment
 Cost avoidance from "no-doc" patient care
  (not pay for coverage)
        Intangible benefits

Revenue adjustments
 Cost avoidance from services to system
  priorities
 Cost avoidance from favorable care
  management initiatives (e.g., lower average
  length of hospital stay)
 Cost avoidance from favorable impact on risk
  management exposure
 Cost avoidance from employee health
  services provided
        Intangible benefits

Intangible revenues
 Contribution to social accountability
  budget (for institutions with not-for-profit
  tax status)
 Image impact
 Strategic support to hospital/health
  system
 "New business" impact to facility
       Preventing Program Closure
    Between July 1, 2000, and July 1, 2002,
     voluntary withdrawal from 27 ACGME FP
     residency programs.
    A significant increase in the rate of program
     closure over previous years.
    Descriptive program data were collected
     using a semi-structured interview to discuss
     factors contributing to the closure of their
     program.
Fam Med 2003;35(10):706-10.)
    Preventing Program Closure
   Seventy-five percent of closing programs
    were community based
    – median program age was 11 years
    – board pass rate averaged 98%
    – 69% cared for underserved communities.
      Financial,
   Political and institutional leadership changes
    were most frequently cited by program
    directors as primary reasons for program
    closure
        Program Directors‟ Advice
    to Strengthen Residency Standing
Financial standpoint
 Keep comprehensive records of the
  program‟s financial contributions to the host
  institution
    – grant money, Medicare graduate medical
      education payments, referral and downstream
      revenue, inpatient and outpatient care
      reimbursement.
   Keep the leadership apprised of the
    program‟s financial contributions and
    community importance
    – indigent care and improved community relations
      as a result of program‟s presence.
      Program Directors‟ Advice
  to Strengthen Residency Standing

Financial standpoint
 Expand the program‟s patient base.
 Increase clinic and faculty productivity while
  carefully assuring an appropriate
  service/education balance.
 Seek additional sources of new revenue
  through outside grants and contracts.
 Lobby for state funding parity through
  legislation.
 Develop proactive strategies to cut program
  costs where possible.
     Program Directors‟ Advice
 to Strengthen Residency Standing

Financial standpoint
 Consider other potential host institution
  options and arrange to move Medicare-
  funded positions, if eligible, at least 1
  year prior to closure.
      Program Directors‟ Advice
  to Strengthen Residency Standing

Political issues and leadership changes
 Meet with the institutional leadership
  regularly.
 Remind the institution‟s governing body that
  the reasons why they decided to begin a
  residency program are still valid.
 Develop a working relationship before you
  need one.
        Program Directors‟ Advice
    to Strengthen Residency Standing

Political issues and leadership changes
 Report the benefits of the program to the host
  institution and community
    – program‟s role in improving patient satisfaction,
      improved community perception of quality care,
      and volunteer activities such as team coaches,
      health fairs, etc).
   Create a local community advisory board that
    can respond if the program is threatened.
      Program Directors‟ Advice
  to Strengthen Residency Standing
Political issues and leadership changes
 Remind medical staff of the role residents
  play in accepting new patients and providing
  support for subspecialists (referrals).
 Integrate faculty in committees and
  leadership of the host institution and in
  prominent and powerful local organizations
 Avoid affiliations with unsupportive
  universities. (It is preferable to be unaffiliated
  and independent.)
  Policy Implications for the
       future of OGME
 What‟s coming?
 How   will the balance between Medicare
  reductions for GME funding and the
  proposed trend toward increased
  reimbursement for primary care physicians
  affect OGME?
 How will this impact program development
  that is designed to address the looming
  physician shortage?
               Speaker
 Richard Stefanacci,   DO, MGH, MBA,
 AGSF, CMD

 CMS Health Policy Scholar 2003-04
 The Institute for Geriatric Studies
 Center for Medicare Medication Management
 (cm³ )
     Medicare’s Focus


 Richard Stefanacci, DO,
     MGH, MBA, AGSF, CMD
       CMS Health Policy Scholar 2003-04
          The Institute for Geriatric Studies
Center for Medicare Medication Management (cm³ )
Medicare        1965           2008


Age of          65 years old   65 years old
Eligibility
Av Lifespan @   4 years        20 years
65y/o
Ratio Taxpayers 10:1           3:1
to CMS
Beneficiaries
# of 65+        <10 million    44 million
             Medicare’s Focus
•   Pay-for-Performance
•   Back to Basics
•   Benefit Following the Patient
•   Shifting the Financial Risk
    –   Means Testing
 Medicare Coverage Basics
               Part A
         (Hospital Insurance)

              Part B
         (Medical Insurance)

              Part C
     (Medicare Advantage Plan)

               Part D
(Medicare Prescription Drug Coverage)
                Hospital Readmissions

                Within 7 days    6.2%

                Within 30 days   17.6%




MedPAC April 2007
                     Bundling A & B
• CMS announced plans to launch a three-year Medicare pilot
  project in 2009 that will test a bundled-payment system in which
  physicians and hospitals are paid a single amount for all services
  associated with surgical procedures.
.
• In an effort to explain its reasoning behind the pilot project, CMS said that
   "the physicians who care for the patient during
   the stay are paid separately under the Medicare
   Physician Fee Schedule for each service they
   perform [and] the separate payment systems can
   lead to conflicting incentives that may affect
   decisions about what care will be provided."
     Heading                   Percentage         Action
                                 Increase         Needed
                            2008       2009
     Medicare Provider 0.5%             1.1%      No action
     Reimbursement                                required

     ePrescribing                       2.0%      Use of qualified
                                                  ePrescribing
                                                  system

     PQRI                   1.5%        2.0%      Positive submission
                                                  of 80% PQRI data
                                                  in 3 categories

     TOTAL                  2.0%        5.1%

Medicare Improvements for Patients and Providers Act of 2008
             2007 PQRI Results
• CMS paid out $36M to 56,700 providers
   – $634.92 per provider on average
• 15.74% of eligible physicians attempted to
  participate in the program.
• The average number of measures attempted is
  greater than 3 (3.38).
• CMS declined to provide data by specialty, but did
  note that ophthalmology, anesthesiology, and
  emergency medicine had above average
  participation rates.
             Medicare Advantage Plans
     • Adjustment to the Medicare Advantage Stabilization Fund
       which removes $1.8 billion from the stabilization fund for
       regional preferred provider organizations in 2012

     • Phase-out of indirect medical education (IME) which
       phases out an adjustment to Medicare Advantage payment
       rates for indirect medical education by a maximum of .6
       percentage points per year. These sections will effectively
       decrease the reimbursement to Medicare Advantage Plans
       which is feared to have a negative effect on benefits and
       thus plan expansion.


Medicare Improvements for Patients and Providers Act of 2008
Resources
2009
Richard G. Stefanacci, DO, MGH, MBA, AGSF, CMD
                r.stefan@usip.edu
 Panel Question and Answer


Any Questions?

				
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