During its September 2019 public meeting, the Medicare Payment Advisory Commission (MedPAC) discussed revising the current Medicare policy on indirect medical education (IME), including options for moving to an inpatient and outpatient IME policy that maintains Medicare’s current level of support to teaching hospitals.
Background
Medicare makes two different types of additional payments to acute care teaching hospitals for providing graduate medical education: direct graduate medical education payments, which support teaching hospitals’ direct costs of sponsoring residency programs and are made outside of the inpatient PPSs, and indirect medical education payments, which support the teaching hospitals’ higher costs of inpatient care that are not otherwise accounted for in the Medicare payment policy.
Historically, IME payments to teaching hospitals are calculated as a percentage add-on to the teaching hospitals’ inpatient Medicare payments and have been above the additional indirect inpatient care costs associated with training residents.
The IME payments vary across the inpatient operating and capital PPSs. For each teaching hospital, the Centers for Medicare and Medicaid Services (CMS) calculates the hospital’s teaching intensity, which is a measure of the hospital’s residents relative to its inpatient size and is subject to caps. The teaching intensity is then converted to an IME percentage add-on, which is multiplied by the base DRG payment for a Medicare beneficiary’s inpatient stay.
Changes Ahead?
However, in recent years with the shift of patient care to more outpatient settings, some have wondered if it is appropriate to pay IME only as an inpatient add-on. Additionally, there is the possibility of keeping the aggregate IME payments initially budget neutral to current policy but distributing them across settings proportionally to the effect of teaching on costs. This would maintain Medicare’s current level of support to teaching hospitals but better align IME payments with the teaching hospitals’ additional patient care costs in each setting.
One idea mentioned about accurately calculating IME payments for hospital outpatient care provided to MA beneficiaries was for Medicare to start requiring hospitals to submit informational claims on MA beneficiaries’ use of hospital outpatient services. Then, to increase the accuracy of IME adjustments and minimize any adverse incentives, IME adjustments would only apply to payments for items, services, and locations, when teaching hospitals have additional patient care costs that are not accounted for in current payment policy. Then, to increase the accuracy of IME adjustments and minimize adverse incentives, IME adjustments should only apply to payments for items, services, and locations when teaching hospitals have additional patient care costs that are not accounted for in current payment policy. That means that a new IME adjustment should not apply to separately payable drugs and devices, nor should it apply to outpatient locations where residents do not train.
Revised IME Policy Model
To give the Commission a feel for how IME payments may change and the impact on teaching hospitals’ Medicare fee-for-service inpatient and outpatient revenue, a revised IME policy was modeled with the principles outlined above.
By making IME payments for both inpatient and outpatient care and maintaining aggregate IME payments budget neutral to current policy but distributing proportionately to teaching hospitals’ additional costs in each setting, the effect of teaching on patient care costs varied across the hospital PPSs and substantially differed from current policy.
Under the model, the median IME adjustment in 2018 would have been 2.5% for inpatient operating PPS (less than half of the median adjustment under current policy), 0% for inpatient capital PPS, and 4.7% for the outpatient PPS. Under this model, aggregate IME payments would be maintained by would shift towards outpatient care. While this type of policy would not change the aggregate IME payments, the redistribution of IME payments towards outpatient settings would redistribute IME payments towards more outpatient-centric hospitals. It is also expected that there would be shifts among other groups of hospitals, such as a decrease in IME payments at for-profit hospitals with a high share of low-income patients and increases in IME payments at small and rural teaching hospitals.