Medical residency training programs close for a variety of reasons. Some face accreditation challenges, or fall victim to a natural or other disaster. Some programs close for financial reasons, or because the hospital that served as a training site for the residency program closed its doors entirely. The Medicare statute and GME regulations provide guidance to hospitals facing these types of program closures.

When a residency program closes, a hospital's first concern is usually with assisting so-called "displaced" residents, whose training is interrupted as a result of program closure. In this instance, the Medicare program permits (though does not require) a hospital with funded Medicare DGME and IME cap positions (or "slots") to temporarily loan the slots to other hospitals for the duration of the displaced residents' training. For a resident to be considered "displaced," and therefore eligible for a slot transfer on her or his behalf, CMS requires that the resident must have performed activities on the last day of the program that are countable for Medicare GME purposes by the hospital that closed the program. In other words, a resident position is not eligible for a temporary cap transfer if the individual resident was rotating at another hospital on the date of program closure. Both the hospital that closed the program and the hospital accepting the displaced resident must also file certain documents with their Medicare Administrative Contractors (MACs) within 60 days of when the displaced resident begins training at the new hospital.

Beyond the temporary transfer of slots to accommodate displaced residents, Section 5506 of the Affordable Care Act provides for the permanent transfer of funded GME positions in the event that an entire hospital closes and its Medicare provider number is retired. These slot redistributions occur through an application process that favors hospitals in the same geographic area as the closed hospital, among other factors. For example, a hospital that took on displaced residents from a closed hospital is better positioned than others to be awarded such positions on a permanent basis.