On April 14, 2026, the Facilities for Medicare & Medicaid Companies (“CMS”) printed the Fiscal Yr (“FY”) 2027 Inpatient Potential Fee System (“IPPS”) Proposed Rule (the “Proposed Rule”), which may be discovered right here. Amongst different issues, the Proposed Rule would make updates to Graduate Medical Training (“GME”) insurance policies for educating hospitals underneath the Medicare program. These updates embrace (i) modifications to the factors by which a program is deemed a “new program” for Medicare funding functions; (ii) clarification of the methodology for calculating direct GME (“DGME”) and Oblique Medical Training (“IME”) funds following a educating hospital merger; and (iii) a proposed requirement to ban unlawful discrimination in GME packages. The Proposed Rule additionally features a discover of closure of two educating hospitals and alternatives to use for accessible slots.
Proposed Modifications to the Standards for New Residency Applications
Below related provisions of the Social Safety Act, CMS is accountable for establishing guidelines to use the DGME cap and IME adjustment for residency packages established after January 1, 1995. In its FY 2025 IPPS proposed rule printed Might 2, 2024, after which once more within the FY 2025 IPPS remaining rule printed August 28, 2024, CMS initiated RFIs by way of which CMS sought enter on standards for figuring out whether or not program administrators, educating workers and comingled residents impart the which means of “new” for functions of defining a “new program.” Primarily based on the CMS evaluation of the responses to the RFIs, the Proposed Rule proposes the next standards for figuring out program newness:
- As a basic rule, program newness determinations are contingent upon (i) this system having obtained preliminary accreditation from the relevant accrediting physique and (ii) not less than 90% of the person residents (not full-time equivalents (“FTEs”)) through the five-year FTE cap constructing interval should not have earlier coaching in the identical specialty as the brand new program.
- Below prior CMS rulemaking, “preliminary accreditation” implies that this system doesn’t have any antecedent packages from which it advanced, however some discretion does stay with the MAC and CMS to make the preliminary accreditation willpower.
- 90% of the person residents, not FTEs, should be each new to this system and the specialty of this system, measured over the five-year FTE cap constructing interval. For city hospitals, which means the one-time five-year FTE cap constructing interval, and for rural hospitals, which means the five-year FTE cap constructing for every new program.
- Given issues voiced in response to the RFI that “CMS shouldn’t limit the power of recent residency packages to rent skilled school and program administrators,” underneath the Proposed Rule, CMS is proposing to now not keep in mind the earlier experiences of the college or program director in figuring out program newness. Since 2009, CMS has assessed this system school and program director in assessing newness, so this can be a very constructive proposed change.
- The Proposed Rule additionally introduces a number of exceptions to the overall requirement that 90% of particular person residents not have earlier coaching in the identical specialty. These are:
- Any program accredited for 16 or fewer residents is exempt from the 90% requirement. Applications accredited for 16 or fewer residents could also be deemed a brand new program based mostly solely upon the preliminary accreditation criterion. So, for brand spanking new packages accredited for 16 or fewer residents, the main target needs to be on avoiding or excluding any info that might point out that this system is someway associated to a program that existed beforehand.
- Any residents who enter a program by way of the MATCH or one other binding third-party matching program with earlier coaching in one other program in the identical specialty who enter this system as first-year (PGY-1) residents are excluded from each the numerator and denominator for functions of calculating the 90% threshold. In different phrases, trainees with prior specialty coaching who enter a program through MATCH or comparable matching packages aren’t counted for figuring out whether or not the 90% threshold is met. CMS additionally clarified that, however the exclusion of the residents from the brand new program willpower, these residents do rely for functions of FTE cap constructing.
- “Displaced residents” (as outlined in 42 CFR 413.79(h)(1)(iii)) from packages or hospitals that shut are additionally excluded from each the numerator and denominator for functions of calculating the 90% threshold. Nonetheless, not like residents who enter a brand new program by way of the MATCH, displaced residents are excluded from the brand new program’s FTE cap calculations and should be reported as displaced residents on the Medicare price report.
If finalized, these proposed adjustments to the “new program” classification would take impact on October 1, 2026, and would apply to new packages beginning on or after that date. In different phrases, these adjustments is not going to apply retroactively to residency packages that had “began” previous to October 1, 2026. However what constitutes the “begin date” for a brand new program: the date set by the accrediting physique because the “preliminary accreditation” date for this system, or the date when residents first start medical coaching? The willpower of the which means of a brand new program’s preliminary “begin date” shall be subject for feedback to be submitted.
Clarification Concerning Calculating Medicare GME Funds Following a Merger
Though CMS didn’t suggest new insurance policies concerning Medicare GME funds following a merger of two or extra educating hospitals, it did make clear the methodology for calculating DGME and IME funds for the surviving hospital following a merger. Whereas comparable in strategy, CMS describes two completely different hospital merger-based calculations for DGME and IME, given the variations in how the DGME and IME calculations work.
Within the Proposed Rule for DGME, CMS clarifies that if the merger happens through the surviving hospital’s price reporting interval, the relevant MAC performs a collection of off-the-cost-report calculations, treating the pre-merger and post-merger intervals of the surviving hospital as if they have been separate price reporting intervals. Whereas the pre-merger interval calculation accounts just for the surviving hospital’s pre-merger FTE counts and different GME traits, the post-merger interval calculations embrace the traits of each the surviving and merged hospitals. The calculations of those two intervals are then mixed with the next two price reporting intervals to find out the three-year rolling common FTE rely.
The method for figuring out IME is comparable: the MAC conducts an off-the-cost report, separate calculation for the pre- and post-merger intervals inside the price reporting interval, together with the speed, resident rely, Earnings-Primarily based Compensation cap, rolling common and mattress rely of the surviving hospital alone pre-merger and the surviving hospital and merged hospital(s) collectively, for the post-merger interval.
For the reason that Medicare DGME and IME cost calculations are very complicated, the CMS methodologies used and described to calculate the Medicare GME funds ensuing from a hospital merger are equally complicated. Any educating hospitals contemplating a merger and hospitals which have lately accomplished a merger are properly suggested to make a detailed evaluation of the pattern calculations described by CMS at 91 FR pages 19510 to 19517. And since CMS considers this info as a clarification of present willpower methodologies and never a brand new coverage, even hospitals that merged prior to now might profit from assessing the clarified calculations.
Proposed Requirement to Prohibit Illegal Discrimination in Residency Applications
In its 2026 OPPS/ASC remaining rule, CMS added a requirement, relevant to GME accrediting our bodies, which prohibits the usage of accrediting standards “that promote or encourage discrimination on the premise of race, colour, nationwide origin, intercourse, age, incapacity, or faith, together with the usage of these traits or intentional proxies for these traits as a variety criterion for employment, program participation, useful resource allocation, or comparable actions, alternatives, or advantages.”
The Proposed Rule extends this prohibition to residency packages instantly and would require that, along with assembly all different relevant necessities, an accredited residency program should not discriminate based mostly on the traits listed above or on intentional proxies thereof. If finalized, this prohibition would take impact on October 1, 2026.
Closure of Delaware County Memorial Hospital (Drexel Hill, PA) and Crozer-Chester Medical Middle (Chester, PA)
CMS supplied discover that it could quickly start the method of redistributing DGME and IME caps ensuing from the closures of Delaware County Memorial Hospital in Drexel Hill, Pennsylvania, and Crozer-Chester Medical Middle in Chester, Pennsylvania.
In whole, Delaware County Memorial Hospital has 28.6 IME and 27.96 DGME FTE slots accessible for distribution, and Crozer-Chester Medical Middle has 101.32 IME and 100.89 DGME FTE slots accessible for distribution. The slots relative to every closure shall be distributed in accordance with the applying course of for redistributing FTE slots following the closure of a educating hospital established underneath Part 5506 of the Reasonably priced Care Act. The appliance interval for hospitals to use for these FTE slots is open, and purposes should be submitted by July 9, 2026. Functions for Rounds 27 and 28 may be submitted by way of the MEARIS portal. Coverage and process for doing so may be discovered right here, underneath the Part 5506: Preservation of Resident Cap Positions from Closed Hospitals heading.
Sensible Takeaways
- Educating hospitals ought to fastidiously evaluation DEI and different residency-related insurance policies and procedures to find out compliance with the Proposed Rule and plan for any wanted adjustments by October 1, 2026, within the occasion the proposal is finalized.
- Hospitals, significantly these contemplating establishing new residency packages, ought to monitor for the ultimate rule.
- In gentle of the redistribution of the FTE resident caps following the closure of the Delaware County and Crozer-Chester hospitals, educating hospitals seeking to develop GME ought to think about making use of earlier than July 9, 2026.
- Hospitals contemplating mergers and even hospitals which have merged prior to now might profit from intently reviewing the methodology for calculating the DGME and IME outcomes of the merger, given the complexity of the determinations and the examples printed by CMS.
- Contemplate submitting feedback: CMS will settle for feedback on the Proposed Rule till 5:00 PM ET, June 9, 2026.
For extra info on the Proposed Rule or if you need help with submitting feedback or making use of for FTE slots, please contact:
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