Blog Post

Major Changes to Medicare GME Affiliation Agreements: Can You Optimize and Share Cap Space?

Gme Cap Space Web

CMS provides the majority of funding for graduate medical education (GME) in the United States. For cost-containment purposes, the Balanced Budget Act of 1997 imposed a limit or “cap” on the number of residency positions (or slots) the Medicare program will fund. The new teaching hospital exception, however, allows hospitals that were not training residents as of 1996 to establish a new resident cap, increasing the total number of Medicare-funded residency slots across the country.

Teaching hospitals may share cap space between organizations by entering into a Medicare GME-affiliated group agreement.

Medicare GME- Affiliated Group Relations

Two or more hospitals may form a Medicare GME-affiliated group if they have a shared rotational arrangement and meet at least one of the following criteria:

  • The hospitals are in the same area or in contiguous areas.
  • The hospitals serve as joint sponsor, primary clinical site, or major participating site for a residency program.
  • The hospitals are under common ownership.

A Medicare GME-affiliated group contract indicating the names of the participating hospitals/providers, their respective DGME and IME resident FTE caps, and the proposed adjustment to each hospital’s cap and resident FTE count must be annually submitted to CMS.

Hospitals that established a cap under the new teaching hospital exception were not historically allowed to enter a Medicare GME affiliate group agreement and receive an adjustment, which was a decrease to the hospital’s FTE cap (i.e., the new teaching hospital could receive cap slots under an affiliated group agreement but could not act as a donor in the arrangement). In its annual update to the Inpatient Prospective Payment System (IPPS) for fiscal year 2019, effective August 17, 2018, CMS changed this policy to provide new teaching hospitals more flexibility to participate in Medicare GME-affiliated groups and increase collaboration among the nation’s teaching hospitals.

Regulatory Changes

Starting July 1, 2019, new teaching hospitals will be able to enter into Medicare GME-affiliated group agreements and act as a donor for their excess cap space to other teaching hospitals; this is a change from the prior regulations in which they could only receive cap slots from existing hospitals.

  • Two or more new teaching hospitals can enter into a Medicare GME affiliation agreement, and share cap space, any time after they begin training residents.
  • A new teaching hospital entering into a Medicare GME affiliation agreement with an existing (i.e., pre-1996) teaching hospital must wait five years after establishing its cap before it can act as a donor of cap space in the affiliated group arrangement.

Next Steps

GME and finance leaders should act now to:

  • Determine if the new regulations may provide an opportunity to share Medicare GME cap space and optimize GME reimbursement.
  • Develop a process to evaluate the GME enterprise and the financial implications of this opportunity on an annual basis.

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