Advocacy & Policy Resources

Graduate Medical Education Voluntary Reduction

Federal Register Vol. 64, No 159 p. 44841 -56 August 18, 1999

Over a year after the date specified in the Balanced Budget Act of 1997, HCFA published the rules for teaching hospitals that want to participate in the voluntary reduction program. This BBA provision allows hospitals to reduce their residents by 25 percent over a five-year period while continuing to receive a portion of GME payments.

Since the passage of the BBA, much has changed in the GME marketplace due to the effects of BBA's freeze on residents at 1996 levels, the growing disenchantment on the part of teaching hospitals participating in the New York demonstration on which this BBA provision was modeled, and the changes in job availability in the physician marketplace, where data from physicians completing residency training in 1999 suggests that new primary care doctors are not finding positions as easily as the past few years. Consequently, interest in the demonstration has waned. The highlights of the requirements for participating in the voluntary reduction program are listed below:

• In spite of late publication of the rule, applications are due November 1, 1999 as specified in the BBA. Applications must be submitted to fiscal intermediaries with a copy to HCFA. Applicants can choose their own start date.
  
  
• Applicants can be individual hospitals or affiliated hospital groups. Consortia will be treated as hospital groups, as separate definitions for them under this provision have not yet been developed.
  
  
• Applicants must submit to HCFA counts of both direct medical education (DME) and indirect medical education (IME) full-time equivalents (FTEs) (and a breakout of primary care residents) counts as of June 30, 1997. The base year for the reductions runs from July 1 - June 30 to correspond to the residency training year, but payment will correspond to the closest overlapping fiscal year. E.g., if your hospital FY starts October 1, you will be paid starting with that period, rather than the previous July 1.
  
  
• As specified by the BBA, the first five percent reduction does not count for payment purposes.
  
  
• If a hospital does not meet its reduction target in one year, it may ask for an adjustment as long as the full reduction is reached by the end of the five-year period. (End of plan count is based on unweighted FTE count.)
  
  
• If the full reduction is not met, or the hospital rebuilds the program after the period, HCFA will demand a full refund, but would not require a lump sum payment. Instead, the hospital would only be paid for up to the reduced number of residents in year five; and Medicare's share of the new (added) residents'costs would be deducted from what's owed. For example, if a hospital added five residents after completing the five-year voluntary reduction plan and Medicare was paying its share at $30,000 per resident, then $150,000 would be deducted from the amount owed to the government each year until the entire incentive payment was reduced to zero. At that time, the hospital's cap would revert to its 1996 level.
  
  
• Adjustments will not be made for new programs that the hospital opens during the period, in other words, greater reductions would have to be made in other programs to achieve the 25 percent overall reduction.

Return to Advocacy & Representation Home