The Impact of CMS's FY 2025 IPPS Final Rule on GME Programs

The CMS FY 2025 Inpatient Prospective Payment System (IPPS) Final Rule introduces several significant updates for GME programs. These updates are significant for the GME program, as they provide new opportunities for expanding residency programs and securing funding. Effective October 1, 2024, the Final Rule focuses on distributing Medicare-funded GME residency slots, particularly in psychiatry, psychiatric subspecialties, underserved regions like Health Professional Shortage Areas (HPSAs), and rural hospitals.

One of the key provisions is the allocation of 200 new Medicare-funded residency slots under Section 4122 of the Consolidated Appropriations Act, 2023 (CAA). These slots are set to be distributed in FY 2026, with at least half designated for psychiatry or psychiatric subspecialty residencies. This focus on mental health aligns with CMS's commitment to addressing the growing shortage of healthcare professionals in this critical field. For GME program coordinators managing psychiatry or mental health residency programs, this presents an opportunity to secure vital funding and support program expansion.

Eligibility to apply for these residency slots is restricted to hospitals that fall into four categories:

1. Rural hospitals or those reclassified as rural
2. Hospitals training residents beyond their Medicare GME cap
3. Hospitals located in states with new medical schools or branch campuses after January 1, 2000
4. Hospitals training residents in HPSAs

This means program administrators at hospitals meeting these criteria should be closely involved in preparing their institution's application to maximize the chances of receiving additional residency slots. Applications are due by March 31, 2025.

How can they do this?

Program administrators can maximize their chances of securing additional residency slots by following a few key strategies:

1. Early Preparation: Begin organizing well before the March 31, 2025 deadline. Engage leadership and gather required data on program needs and community health benefits.
2. Eligibility Criteria: Ensure the institution meets CMS's specified categories, such as rural status, over-training beyond the Medicare GME cap, or HPSA location.
3. Demonstrated Likelihood: Develop a strong application showing a "demonstrated likelihood" for expansion, backed by concrete plans like ACGME submissions and necessary approvals.
4. Collaboration: Involve key stakeholders, including residency directors and hospital executives, to present a comprehensive and well-supported application.
5. HPSA Focus: If applicable, highlight the institution's role in providing training in primary care or mental health-focused HPSAs, as these areas receive prioritization.
6. Detailed Documentation: Ensure all required supporting documents, such as approvals from the ACGME, are included in the application. Submitting through the Medicare Electronic Application Request Information System (MEARIS) well before the deadline avoids last-minute issues.

Institutions can strengthen their chances of securing additional slots by meeting CMS criteria and presenting a well-documented, compelling case.

Additionally, the Final Rule modifies the distribution methodology for the final two rounds (Rounds 4 and 5) of GME slots authorized under Section 126 of the CAA, 2021. These slots are reserved for hospitals where at least 50% of resident training occurs in HPSAs. This shift places a strategic emphasis on underserved areas, meaning GME coordinators at hospitals in these regions must prioritize alignment with CMS's criteria to benefit from the additional slots.

Another critical update from the Final Rule relates to rural hospitals and cap-building. The rule restricts rural hospitals to using the new GME Cap Slots only to expand existing programs, rather than establishing new ones. Administrators in rural or newly reclassified rural hospitals should focus on growing their current residency offerings and making strategic adjustments to their program management as needed to comply with CMS's requirements.

The rule also introduces opportunities for hospitals in geographic regions where teaching hospitals have closed. Specifically, the Final Rule redistributes residency slots from closed hospitals, such as Sacred Heart Hospital in Eau Claire, Wisconsin. GME programs in nearby regions can apply for these redistributed slots, with applications due by October 30, 2024. This process, authorized under Section 5506 of the Affordable Care Act (ACA), provides a valuable mechanism for hospitals to expand without creating entirely new residency programs.

In the same vein, CMS is initiating a request for information (RFI) related to the criteria residency programs must meet to be classified as "new" for cap-building purposes. Historically, the criteria for a new program have included new residents, new program directors, and new teaching staff. CMS is revisiting these requirements to ensure clarity and consistency in determining whether a residency program is eligible for additional direct GME or IME cap slots. Program coordinators should monitor developments related to this RFI, as the outcome may have significant implications for hospitals reclassifying as rural or seeking to build their residency caps.

In summary, CMS's FY 2025 IPPS Final Rule offers many opportunities for GME program expansion, particularly for hospitals in underserved or rural areas. However, program coordinators must remain proactive, working closely with hospital leadership to ensure compliance with the new criteria, meeting application deadlines, and leveraging these changes to secure funding for residency programs. By understanding the nuances of the Final Rule and aligning their programs accordingly, GME coordinators can play a pivotal role in addressing the healthcare workforce shortages while advancing their institutions' educational goals.

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