On April 18, 2016, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2017 proposed rule updating the Inpatient Prospective Payment System (IPPS) and the Long Term Acute Care Hospital Prospective Payment System (LTCH PPS). The proposed rule will affect discharges occurring on or after October 1, 2016, and comments on the rule are due June 17, 2016. For an overview of other key proposals contained in the rule, see "CMS issues IPPS proposed rule, permanently removes 0.2 percent offset for Two Midnight Rule."

With respect to graduate medical education (GME), CMS proposes to revise the regulations related to rural training track programs to increase from three years to five years the period of time urban hospitals are granted to establish rural training track direct and indirect GME caps (RTT caps). For a more detailed analysis on the Medicare payment rules for rural training track programs, see our previous GME @ Dentons article, "Rural Training Tracks: An opportunity for additional GME slots through a little known exception."

CMS has previously amended its regulations to provide for a five-year new program growth period and cap-building window (an increase from the prior three-year period). Subsequently, the agency made resulting full-time equivalent (FTE) resident cap adjustments effective with the applicable hospital’s cost-reporting period that coincides with or follows the start of the sixth program year. CMS now explains that, in making these changes, it "inadvertently" failed to change the growth window and effective date of FTE limitations for rural training tracks.

Under the proposed revisions to the rural training track regulations, an urban hospital's RTT cap would take effect beginning with the hospital’s cost-reporting period that coincides with or follows the start of the sixth program year of the rural training track’s existence. Unless the hospital is a brand new teaching hospital, however, the three-year rolling average and indirect medical education intern-and-resident-to-bed (IRB) ratio cap will continue to apply to resident FTEs training in the rural track program, even during the five-year RTT cap-building window.

CMS proposes that the revised policy would take effect for any urban hospital that began an RTT program on or after October 1, 2012. The agency estimates that the proposal would cost approximately US$1 million by the end of the 10-year period, calling it a "negligible cost" given the "relatively small size of rural track programs."

The only other GME-related proposal in the rule is CMS's decision not to include GME costs in the numerator of the cost-to-charge ratio on Line 1 of Worksheet S-10, a worksheet CMS is proposing to use (on a phased-in basis) for purposes of calculating uncompensated care payments.