Teaching hospitals’ full-time equivalent (FTE) resident caps dictate the maximum number or residents for which the hospital is eligible to receive graduate medical education (GME) reimbursement from the Medicare program. As teaching hospitals well know, once their FTE caps have been established, they are, for the most part, permanent. Barring very few exceptions, the caps cannot be adjusted.

Under limited circumstances, however, certain hospitals may be able to share their caps with their neighbor, partner, or sibling hospitals, as described below. Thus, two or more hospitals that are part of a “Medicare GME affiliated group” can share a combined FTE cap—contractually reapportioning their collective FTE cap slots among themselves—by entering into a “Medicare GME affiliation agreement.” Note, many teaching hospitals and residency program sponsors use the term “affiliation agreement” generally to refer to agreements between partnering training institutions (often universities and teaching hospitals) to jointly administer, sponsor, or support a particular residency program. A “Medicare GME affiliation agreement,” however, is a special agreement authorized by the Medicare regulations to facilitate certain cap-sharing arrangements.

So, who can enter into a Medicare GME affiliation agreement? As mentioned above, the hospital parties to a Medicare GME affiliation agreement must be members of an “affiliated group.” This means that they must be located in the same geographic area (neighbors); jointly listed as the sponsor, primary clinical site, or major participating institution for one or more programs (partners); or under common ownership (siblings).

In a Medicare GME affiliation agreement, one hospital that has unused cap slots—meaning it is training fewer residents than permitted under its FTE caps—can lend its extra cap slots to another member of its affiliated group that is training over its cap for direct and/or indirect medical education purposes. The aggregate number of FTE cap slots for direct and indirect medical education purposes for all hospitals in the affiliated group remains unchanged. Medicare GME affiliation agreements remain in place for the duration of an academic year and must be submitted to CMS by June 30, in advance of the academic year to which they apply.

Medicare GME affiliation agreements are intended to provide flexibility for hospitals that have a rotational relationship, where residents in a particular program (or programs) rotate between the affiliated hospitals, and each hospital’s FTE counts may vary from year to year. Thus, it is a requirement for entering into a Medicare GME affiliation agreement that each hospital in the affiliated group must maintain a “shared rotational arrangement” with at least one other hospital in the group. This requirement is sometimes called a “cross-training” requirement. So, cap slots can only be shared if the lending and receiving hospitals actually share residents.

Medicare GME affiliation agreements cannot solve all teaching hospitals’ FTE cap woes, but they may offer some relief to some providers.