FTE caps have been a financial hurdle for US-based teaching hospitals since Medicare imposed the concept via the Balanced Budget Act of 1997. Each teaching hospital in the US has two resident FTE caps, one for direct graduate medical education (GME) and one for indirect medical education (IME). These caps determine the number of residency slots for which the hospital may claim Medicare reimbursement for the costs associated with resident training. Once established, a hospital’s caps are permanent and may only be adjusted under a limited set of circumstances.
The redistribution of cap slots is one of few opportunities for teaching hospitals to immediately improve the economics of their teaching enterprise—and the application window is narrow.
Under section 5506 of the Patient Protection and Affordable Care Act (PPACA), CMS periodically redistributes funded cap slots that become available due to the closure of a historic teaching hospital or recuperation of unused cap space from a hospital that maintains a resident FTE count below its cap. In the final rule for the fiscal year 2019 update to the inpatient prospective payment system, effective August 17, 2018, CMS announced a new round of applications due to the closure of Memorial Hospital of Rhode Island. Applications must be received by CMS no later than 5 p.m., ET, on October 31, 2018. This is only the 13th round of section 5506 cap space reallocation since passage of the PPACA.
October 31, 2018 is the deadline to apply for increased cap space.
There is a quantifiable financial benefit to securing additional reimbursable resident FTE slots. Hospitals that are training residents in excess of their resident caps are already incurring the associated expenses; with average Medicare reimbursement per awarded and funded resident FTE around $130,000 to $135,000, additional cap slots will help offset these heretofore unreimbursed costs.
In this redistribution round, there are 73.66 FTE slots available for IME and 72.62 for GME. Hospitals currently training at or above their FTE caps should consider applying for a portion of the available space. CMS will evaluate all applications on three categories: likelihood of filling the slots, priority level (geographic proximity to the closed hospital), and ranking criteria. Additional information on the evaluation process can be found in our post regarding a previous application period, here.
During previous redistributions, even hospitals that did not meet the highest-priority criteria still received some incremental slots. Therefore, the Association of American Medical Colleges has taken the position, which ECG supports based on client experience, that it is advantageous to complete an application even if a hospital does not necessarily meet the highest-priority criteria.
To apply for the available cap slots, hospitals must complete a six-page application form and submit it via hard copy to the CMS central office (the address is provided in the form). Note that the deadline pertains to CMS’s receipt of the application, not the date the application is sent/postmarked.
This is a rare opportunity for teaching hospitals, so do not miss the October 31 deadline.