Breaking Down the GME Payment: Medicare Utilization
January 14, 2020
Breaking Down the GME Payment: Per Resident Amount explained important factors in the Direct Graduate Medical Education (DGME) payment formula. This article will take a step further and discuss another important factor in the Medicare DGME payment, a hospital’s Medicare utilization.
Medicare DGME Payment Formula
The Medicare DGME payment reimburses teaching hospitals for the cost of resident salaries and fringe benefits, teaching physician salaries and fringe benefits, and overhead costs from teaching programs. The simplified formula to determine a hospital’s Medicare DGME payment is as follows:
The Balanced Budget Act of 1997 complicated the formula by adding limits, including a cap on the Full-Time Equivalent (FTE) count based on a three-year rolling average. With this said, the “Allowable Weighted FTE” is the average number over three years (i.e. current year, prior year and penultimate year) of FTE residents reported on the hospital’s Intern and Resident Information System (IRIS). If the FTE exceeds its cap on any of the years reported on the IRIS, the FTE for that year is adjusted by applying the FTE cap.
Medicare does not pay for the entire costs of training residents; Medicare is only willing to pay its share in training residents. The factor that determines Medicare’s share of the total direct costs of training residents is called Medicare utilization. Medicare utilization is the percentage of Medicare patients to the total hospital patient population. This is represented in the above formula as “Medicare Inpatient Days/Total Inpatient Days”.
Impact on Teaching Hospitals
If your hospital has a high percentage of Medicare patients to the total hospital patient population, the hospital will receive a larger portion of the residents’ costs (i.e. Updated Per Resident Amount x Allowable Weighted FTE) from Medicare. Conversely, if your hospital has a low percentage of Medicare patients to the total hospital patient population, you may be quite disappointed in its Direct Graduate Medical Education payment.