Provided applicable requirements are met, the Medicare program reimburses teaching hospitals for resident training that occurs both at the hospital itself and at clinical nonprovider locations, including, for example, freestanding medical and dental clinics and physicians' offices. Nonprovider site training programs represent an opportunity for providers to partner with other healthcare entities to expand primary care training in underserved areas and in care settings that are underrepresented within the universe of residency programs. Even hospitals that are currently training at or over their full-time equivalent resident caps can receive additional Medicare graduate medical education (GME) reimbursement for creating new dental or podiatric programs, for which the majority of training often takes place in a nonprovider setting.

In order to count time spent by residents training at nonprovider sites, Medicare rules require that the hospital incur certain program costs. Historically, hospitals were required to incur "substantially all" of the costs of the training program, including teaching physician costs. Since the passage of the Affordable Care Act, however, hospitals that claim Medicare reimbursement for nonprovider site training are required only to incur the full costs of the residents' salaries and benefits during the time the residents train at the nonprovider site. 

The Medicare rules do not dictate the manner in which these costs must be incurred by the hospital. For example, the residents could be paid directly by the hospital, or the hospital could reimburse its training partner for the salary and benefit costs. Ideally, though, the hospital should incur these costs within three months of the nonprovider site resident rotations that are being claimed by the hospital. Otherwise, Medicare rules require the hospital to have a prospectively executed written agreement with the nonprovider site obligating the hospital to pay the requisite costs.

Other written agreements that frequently arise in the context of nonprovider site training programs include:

  • Required agreements between hospitals that share the costs of residents' salaries and benefits and claim proportional amounts of training time on their cost reports;
  • Agreements between training partners that may be required by accreditation organizations allocating responsibilities and ensuring that basic program accreditation requirements are met;
  • Other agreements between hospital, university, and nonprovider site training partners laying out administrative and educational duties with respect to the program; and
  • Financial agreements between training partners to share some amount of GME reimbursement received by the hospital with respect to the program.