June 21, 2007

Leslie Norwalk, Esq.
Acting Administrator
Centers for Medicare & Medicaid Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W., Room 445-G
Washington, DC 20201

Re: (CMS-2279-P) Medicaid Program; Graduate Medical Education (Vol. 72, No. 99), May 23, 2007

Dear Ms. Norwalk:

On behalf of Pennsylvania’s 225 hospitals and health care systems, The Hospital & Healthsystem Association of Pennsylvania (HAP) welcomes this opportunity to comment on the proposed rule “ Medicaid Program, Graduate Medical Education ”, published May 23, 2007.

As you know, the proposed rule is subject to a year-long moratorium secured by P.L. 110-28. To that end, HAP believes that the moratorium should preclude the Centers for Medicare & Medicaid Services (CMS) from soliciting comments and recommends that the agency withdraw this proposed rule.

Absent a withdraw of the proposed rule in conjunction with the moratorium, HAP would like to share the following comments in opposition of the proposed policy change to terminate graduate medical education (GME) programs.

The proposed rule substantially departs from long-standing Medicaid policy by no longer permitting matching federal dollars, otherwise known as federal financial participation (FFP), for hospitals’ GME costs. Although CMS claims this rule clarifies existing GME policy, it completely reverses over 40 years of agency policy recognizing GME as a covered medical assistance cost. The agency’s proposed revisions will result in payment reductions of nearly $43 million in federal funds to Pennsylvania hospitals. Such a significant loss in funding will seriously compromise hospitals that educate and train health care professionals and that serve as the safety net for providing hospital care to our state’s most vulnerable citizens.

CMS contends that FFP is unavailable for hospitals’ GME costs because GME is not specifically listed as a service in the Medicaid statute. In addition, CMS maintains that GME cannot be considered part of “hospital services” because it is not included in the rates paid to hospitals for services under the Medicare inpatient prospective payment system (PPS).

HAP suggests that even if CMS were correct in reasoning that FFP should be available only for the items and services listed in the Medicaid statute, FFP would still be available for GME because training future health care professionals is part of inpatient and outpatient hospital services.

In the proposed rule, CMS notes that the Medicaid statute permits states flexibility to develop their own methods and standards for determining payment requirements for covered hospital services within reasonable estimates of what Medicare would have paid for the services. Since Medicare pays for GME as a hospital service, state Medicaid payments for inpatient and outpatient hospital services that include GME costs have been and should remain eligible for FFP.

HAP believes that CMS’ interpretation of the Medicaid statute is inaccurate in stating that 42 C.F.R. 412.2(2)(e) excludes GME from the inpatient PPS payment rate. In fact, GME is not on the list of “excluded costs;” because it is found in C.F.R. 412.2(f) on the list of “additional payments to hospitals” along with other patient care-related costs such as outlier cases, capital and indirect medical education costs. Hospitals receive an additional Medicare payment for GME precisely because it is a patient-related cost. The fact that the GME payment is separate from the PPS payment is irrelevant to whether GME is a reimbursable hospital cost under Medicare. For example, capital costs are paid outside the inpatient operating PPS, yet no one would argue that they are not reimbursable by Medicare as a hospital cost.

Similarly, Medicare GME payments compensate teaching hospitals for the direct costs of their educational activities by measuring the number of medical residents trained. These medical residents, who work within a supervised patient care team of health care professionals, provide needed care to Medicare and Medicaid patients as part of their training programs. Research looking at interns’ and residents’ in-hospital time confirms this. In one study, residents, on average, spent 57 percent of their time on clinical or service-oriented activities (Magnusson A.R., et al.: “Resident Educational Time Study: A Tale of Three Specialties.” Academic Emergency Medicine, July 1998; 5(7): pp 718-725). In another study, house staff (interns and residents) spent a majority of their time engaged in direct patient care activities—81 percent of the interns’ workdays, and 64.5 percent of the residents’ workdays (Guarisco S., et al.: “Time Analysis of a General Medicine Service: Results from a Random Work Sampling Study.” Journal of General Internal Medicine, May 1994; 9(5): pp 272-277).

The proposed rule acknowledges that CMS must first approve hospital payment methodologies as a condition of receiving federal funds (FR Vol. 72, No. 99 p 28932). It also acknowledges a 2005 study commissioned by the Association of American Medical Colleges, which reported that Pennsylvania, along with 46 additional states and the District of Columbia, provided direct GME and/or indirect medical education payments under their Medicaid programs. We contend CMS’ approval of the state plan amendments providing for GME constitutes an official interpretation that these plan amendments met governing statutory and regulatory requirements. Thus, the agency’s proposed rule attempts to negate its prior actions and interpretations.

Finally, CMS’ public acknowledgement and approval of GME payments do not rest solely with state plan amendment review, but also extend to its own rulemaking for Medicaid managed care plans. In August 2001, CMS issued a Medicaid managed care proposed rule that declared a state Medicaid program could not make payments directly to a provider for services available by an approved managed care entity (FR vol. 66, No. 161 pp 43628, 43666). When the final rule was published in June 2002, the agency explained that, in response to public comment, it had “…modified that section to permit such payments to the extent the capitation rate has been adjusted to reflect the GME payment made directly to the hospital” (FR Vol. 67, No. 115 pp 41004, 41005, 41103). In fact, current rules (42 C.F.R. 438.60) specifically acknowledge that GME payments can be made directly to the provider as long as the GME payment amount is carved out of the managed care capitation payment, which is the case in Pennsylvania.

HAP strongly encourages CMS to reconsider its position. Further, in conjunction with the moratorium, HAP believes CMS should permanently withdraw this proposed rule. The Medicaid program has a responsibility to pay for its share of the costs associated with medical education programs, which, through their teaching function, assure the training of additional health professionals and provisions of care to some of our nation’s most vulnerable populations. If you have any questions, please contact Melissa Speck, HAP’s director of policy development at (717) 561-5356.

Sincerely,

PAULA A. BUSSARD
Senior Vice President
Policy and Regulatory Services