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Rare Opportunity for Expanded GME Funding

Rare Opportunity For Expanded Gme Funding Web

As healthcare executives unpack what the Consolidated Appropriations Act of 2021 (CAA) means for their organizations, they will find three opportunities for graduate medical education (GME) expansion. It may be easy to miss them—they don’t appear until nearly page 1,800—but they represent the first significant GME expansion opportunity in nearly two decades. Time limits for some key provisions mean that teaching hospitals must act quickly to benefit from this new law.

Since the passage of the Balanced Budget Act of 1997 and the resident FTE caps it imposed for reimbursement purposes, teaching hospitals have been limited in their ability to increase funded GME training. Exceptions to this rule are limited to historically nonteaching hospitals and rural hospitals. CMS has allowed some redistribution of existing cap space over the past 25 years, but such occasions have been infrequent—most notably through the Medicare Modernization Act in 2005 and then in changes enacted in the Patient Protection and Accountable Care Act in 2010 that provided for the retention and redistribution of resident FTE cap space from closed teaching hospitals.

The new legislation includes three GME provisions that teaching hospital executives must understand:

  • New reimbursement for 1,000 additional residency slots over five years (Section 126)
  • Expansion of funding for rural training (Section 127)
  • Chance to reset hospital FTE caps and per resident amounts (PRAs) (Section 131)

1. New Reimbursement for 1,000 Additional Residency Slots

Section 126 provides CMS reimbursement for an additional 200 FTEs per year for five years. Eligible hospitals may receive up to a maximum of 25 FTEs each, and at least 10% of the new positions will be awarded within each of following priority categories:

  • Rural hospitals (including hospitals with a rural reclassification for CMS reimbursement purposes)
  • Hospitals in need of cap relief (i.e., those that are already over their respective FTE caps)
  • Hospitals in states with new medical schools and/or new branch campuses since 2000
  • Hospitals located in designated health professional shortage areas

The implementation process still needs to be defined, but experience suggests that primary care specialties will be prioritized, and ECG anticipates an open comment period on proposed distribution criteria later this year.

2. Expansion of Funding for Rural Training

Section 127 encourages additional residency training to take place in rural settings. Heretofore, rural teaching hospitals could increase their FTE caps by developing new teaching programs, and their urban hospital partners could, too—but only if the residents were in a new and separately accredited rural training program. However, historically, family medicine was the only specialty that met the criteria. The CAA eliminates the requirement for a separately accredited program and grants the exception so long as residents spend at least 50% of their training time in the rural setting. Furthermore, it allows both the urban and rural teaching hospitals to increase their respective FTE caps related to rural training even when expanding existing training programs at capped teaching hospitals.

3. Chance to Reset Hospital FTE Caps and PRAs

Perhaps the most intriguing aspect of the CAA as it relates to GME is the ability for selected hospitals to reset their FTE cap and/or PRA.

  • Following imposition of the resident FTE caps in 1997, a number of historically nonteaching hospitals established very low permanent resident FTE caps, in some cases unknowingly or inadvertently.
  • Similarly, some hospitals have been disadvantaged by extremely low PRAs that severely limit their access to direct GME reimbursement under current regulations.

GME leaders have long argued that such small caps and low PRAs hinder the expansion of GME training to meet the country’s physician workforce needs. Based on a review of Medicare cost report data, there are approximately 230 hospitals with a cap of 10 FTEs or fewer and about 240 hospitals with a PRA of $90,000 or less (i.e., the bottom quartile). Section 131 allows hospitals to reset these values within five years (i.e., until December 2025) if they meet certain criteria.

Additional clarity will be forthcoming as CMS works to implement these changes, but the CAA provides the following details:




Hospital has an original cap and/or PRA set prior to October 1997 based on less than 1.0 FTE

Cap can be reset when the hospital trains at least 1.0 FTE in a new program per current regulations for new teaching hospitals

PRA can be reset when the hospital trains at least 1.0 FTE in any program per current regulations

Hospital has a cap and/or PRA that was set between October 1997 and December 2020 based on no more than 3.0 FTEs

Cap can be reset when the hospital trains at least 3.0 FTEs in a new program per current regulations for new teaching hospitals

PRA can be reset when the hospital trains at least 3.0 FTEs in any program per current regulations

Hospital currently has no cap and/or PRA

Cap will not be set until the hospital trains at least 1.0 FTE in a new program per current regulations for new teaching hospitals

PRA will not be set until the hospital trains at least 1.0 FTE in any program per current regulations

What Should Teaching Hospitals Do Now?

The CAA offers an exciting and rare opportunity for GME program expansion through access to additional federal funding. Because of the time limit on the cap and PRA reset aspects of the CAA, it is critical to begin preparation efforts quickly. When considering the prerequisite steps needed to start new programs (as is required for the cap-resetting component), planning efforts must start immediately to ensure that training occurs within the prescribed window.

There are still open questions regarding the implementation that CMS must clarify. In the meantime, thoughtful planning is necessary to benefit from this opportunity and support the training of additional residents as a pipeline for the physician workforce. Experience shows us that changes to GME funding such as this do not come along very often, and organizations that act quickly will be able to support the long-term financial sustainability of their GME programs.

How can your ogranization take advantage of these changes?

Connect with our GME experts to start a conversation about how your organization can use this rare opportunity to create financial sustainability for your programs.

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