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From Health Law Daily, October 17, 2016

Residents’ didactic time is not included in Medicare IME payments

By Robert B. Barnett Jr., J.D.

Didactic time for medical and dental residents (conferences and seminars, case presentations, literature reviews, etc.) should not be included in the indirect medical education (IME) payment that Medicare makes to teaching hospitals to compensate them for the extra costs associated with teaching programs. In partially reversing a decision by the Provider Reimbursement Review Board (PRRB), the CMS Administrator reiterated that only those activities that constitute "patient care activities" are to be included, which has been defined as "the care and treatment of particular patients, including services for which a physician or other practitioner may bill" (University of Louisville Hospital v. CGS Administrators, LLC, Review of PRRB Dec. No. 2016-D11, August 1, 2016).

Case history. A Medicare contractor, CGS Administrator, LLC, excluded didactic time, in this case for dental residents, from the Medicare reimbursement sought by a teaching hospital, the University of Louisville Hospital. The hospital appealed the decision to the PRRB, which found that the rules on didactic activities for purposes of determining the number of graduate medical education full-time equivalents (FTEs) had changed, which meant that didactic time was no longer included in the IME payment as of October 1, 2006. Thus, the PRRB ruled that the medical contractor erred in excluding didactic time prior to October 1, 2006, but was correct in excluding didactic time after that date (see Mid-year regulation change results in payment discrepancy, August 8, 2016).

Two other issues were raised in the decision. First, the PRRB upheld the Medicare contractor’s determination that time spent by foreign dental graduate students should not be included in the FTE count. Their time was excluded, the PRRB ruled, because they had not passed the United States Medical Licensing Examination, as required by Medicare regulations. Second, the PRRB ordered the Medicare contractor to update the prior year resident-to-bed ratios in cost reports for fiscal years 2000 to 2003 and 2005 to 2006 to reflect the adjustments in those years affected by this PRRB decision on didactic time.

On review before the CMS Administrator, the Intermediary and CMS’ Center for Medicare asked that the PRRB decision on didactic time and the resident-to-bed ratio adjustment both be reversed, while asking that the decision on foreign dental graduate students be affirmed.

Didactic time. The PRRB’s decision to treat didactic time differently beginning on October 1, 2006, was based on its interpretation of the HHS Secretary’s clarification of the IME regulations in a Final rule (71 FR 47870, August 18, 2006). The Administrator, however, determined that the Secretary’s clarification was merely a reiteration of longstanding policy rather than a change to existing policy. The rule had always been, the Administrator said, that costs not associated with the diagnosis and treatment of a particular patient are not reimbursable as part of the IME payment. The purpose of the IME payment is to address the additional costs that teaching hospitals incur in treating patients; it is not intended to cover the entire cost of medical education. Thus, the PRRB erred when it ruled that didactic time prior to October 1, 2006, was to be included. The Medicare contractor, on the other hand, was correct when it initially excluded all such time from the FTE IME calculation.

Foreign residents. The Medicare regulations require certification from the Educational Committee for Foreign Medical Graduates (42 C.F.R. §413.86). As a result, only foreign medical graduate residents who have passed the United State Medical Licensing Examination are permitted to be included in the FTE resident count. The fact that the foreign dental graduate residents were ineligible to take the exam because it was offered only to foreign graduates of medical schools is unfortunate but irrelevant. If they did not have the certification, they could not be counted. As a result, the PRRB decision upholding the Medicare contractor’s exclusion of that time was affirmed.

Resident-to-bed ratio. Because the Administrator ruled that no didactic time was compensable, as the Medicare contractor initially concluded, the resident-to-bed ratio issue was moot because the contractor no longer had adjustments to make. Furthermore, each resident-to-bed ratio would have to have been separately and timely appealed in order to change them, which did not occur. As a result, the PRRB order requiring the adjustments was vacated.

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