[Federal Register Volume 65, Number 118 (Monday, June 19, 2000)]
[Notices]
[Pages 37985-37992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15332]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration


Children's Hospitals Graduate Medical Education Payment Program: 
Proposed Eligibility and Funding Criteria and List of Eligible 
Hospitals

AGENCY: Health Resources and Services Administration, HHS.

[[Page 37986]]


ACTION: Notice.

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SUMMARY: The Health Resources and Services Administration (HRSA) 
announces the Children's Hospitals Graduate Medical Education (CHGME) 
Payment Program, authorized under section 340E of the Public Health 
Service (PHS) Act (the Act) (42 U.S.C. 256e), as added by the 
Healthcare Research and Quality Act of 1999 (Public Law 106-129), 
enacted December 6, 1999. This notice requests comments on proposed 
eligibility criteria, funding factors and methodology, and performance 
measures for participating hospitals for the CHGME program. It includes 
a list of hospitals meeting these proposed eligibility criteria. In 
compliance with the Paperwork Reduction Act of 1995, the Department 
will obtain prior Office of Management and Budget clearance to any data 
collections imposed on the public.

DATES: Interested persons are invited to comment by July 19, 2000. All 
comments received on or before July 19, 2000 will be considered in the 
development of the criteria and methodology for the CHGME program. 
Comments will be addressed individually or by group in the final notice 
published in the Federal Register.

ADDRESSES: All written comments concerning this notice should be 
submitted to F. Lawrence Clare, Division of Medicine, Bureau of Health 
Professions, Health Resources and Services Administration, Room 9A-21, 
Parklawn Building, 5600 Fishers Lane, Rockville, Maryland 20857; or by 
e-mail to: [email protected].

FOR FURTHER INFORMATION CONTACT: F. Lawrence Clare, Division of 
Medicine; telephone (301) 443-7334.

SUPPLEMENTARY INFORMATION:

Purpose

    The Children's Hospitals Graduate Medical Education Payment Program 
provides funds to children's hospitals to support the training of 
pediatric and other residents in graduate medical education programs 
(GME). Since Federal financial support of graduate medical education is 
extensively supported by the Medicare system, this program compensates 
for the disparity in the level of Federal funding for teaching 
hospitals for pediatrics versus other types of teaching hospitals. For 
example, on average a freestanding children's hospital receives $374 
per resident in Medicare funds versus an average of $87,034 per 
resident for a non-children's hospital.
    The CHGME program is an interim measure to assist children's 
hospitals to continue their teaching programs while Congress examines 
the medical education funding system. The Secretary of HHS (the 
Secretary) has delegated the authority for the administration of the 
CHGME program to HRSA which redelegated it to the Bureau of Health 
Professions (BHPr).

Available Funds

    The Act authorizes $280 million for fiscal year (FY) 2000 and $285 
million for FY 2001. Under the FY 2000 appropriations law, $40 million 
has been appropriated for this program. The Act directs the Secretary 
to make payments for both direct and indirect expenses to each eligible 
children's hospital.

I. Dividing the CHGME Appropriation Between Direct and Indirect 
Medical Education

    The Act requires the Secretary to make payments to children's 
hospitals for both direct and indirect medical education expenses (DME 
and IME). Although the Act authorizes funds for FY 2000 and FY 2001 in 
specific amounts for each, the Appropriation Act does not similarly 
divide the appropriation between DME and IME.
    In FY 2000, section 340E(f) authorizes the appropriation of $90 
million for DME and $190 million for IME. To conform with the 
allocation of funds indicated in the Act, the Secretary will divide the 
amount appropriated between DME and IME based on the ratio set forth in 
the authorizing statute, approximately one-third of the funds to DME 
and two-thirds to IME.

II. Proposed Hospital Eligibility Criteria

    The Act requires HHS to make payments to ``children's hospitals 
that operate graduate medical education programs.'' A children's 
hospital is defined as a hospital in which more than 50 percent of its 
patients are under the age of 18, referencing the definition of 
children's hospital contained in section 1886(d)(1)(B)(iii) of the 
Social Security Act (42 U.S.C. 1395ww). Regulations at 42 CFR 412.23(d) 
use this definition in the Prospective Payment Systems (PPS) for 
Inpatient Hospital Services. The Department proposes to define a 
children's hospital eligible for funding by adopting this definition of 
children's hospital from the PPS regulations as follows:
    A children's hospital must-
    (1) Have a provider agreement with a unique Medicare provider 
number as a hospital, under Section 1886(d)(1)(B)(iii) of the Social 
Security Act;
    (2) Be engaged in furnishing services to inpatients who are 
predominantly individuals under the age of 18; and
    (3) Participate in an accredited graduate medical education 
program.
    The Congressional intent of the CHGME program is to provide funds 
only to children's hospitals that do not have access to Medicare 
payments under the PPS system to achieve some degree of parity in 
support. Fifty-nine was the number of teaching hospitals certified by 
Medicare as children's hospitals at that time.
    Accordingly, the proposed eligibility criteria exclude children's 
hospitals which are part of a hospital system, rather than 
freestanding. Even if a children's hospital is separately identified in 
the AMA Directory but shares a Medicare provider number as part of a 
health system, it still would not be considered to be an eligible 
children's hospital under these criteria. Since these hospitals have 
access to Medicare direct and indirect GME funding as part of the PPS, 
they are able to receive the higher levels of Medicare GME paid to PPS 
hospitals, by being able to (1) factor a higher Medicare patient 
proportion into the direct GME funding formula, and (2) receive, as 
part of a PPS hospital system, indirect GME funds. Thus, these 
hospitals are not within the universe of intended beneficiaries of the 
CHGME program.
    The physical characteristics or location of a children's hospital 
are irrelevant to eligibility. Even if a children's hospital is 
separated physically from its adult hospital partner, sharing a 
Medicare provider number makes the children's hospital ineligible 
because it then qualifies for Medicare GME funds for its pediatric or 
other residents under the PPS as part of the adult hospital partner.
    Payments made to a children's hospital will have no effect on 
payments received under the Medicare or Medicaid programs. The intent 
of the CHGME program is to create a degree of parity between children's 
hospitals and adult hospitals. Accordingly, the CHGME program will 
operate independently from the Medicare and Medicaid programs.
    Based on the proposed eligibility criteria, the Department has 
identified the following-listed hospitals potentially eligible for this 
program as of December 6, 1999. Any hospitals meeting the proposed 
criteria which are not included on the list may inform the Department 
of their eligibility during the comment period for this notice. The 
Secretary will then publish a revised list

[[Page 37987]]

of eligible hospitals for FY 2000 in the final Federal Register notice.

------------------------------------------------------------------------
Medicare
Provider           Facility name                  City            State
 Number
------------------------------------------------------------------------
 01-3300  Children's Hospital of Alabama  Birmingham..........  AL
 04-3300  Arkansas Children's Hospital..  Little Rock.........  AR
 05-3300  Valley Children's Hospital....  Madera..............  CA
 05-3301  Children's Hospital Medical     Oakland.............  CA
           Center.
 05-3302  Children's Hospital of Los      Los Angeles.........  CA
           Angeles.
 05-3303  Children's Hospital and Health  San Diego...........  CA
           Center.
 05-3304  Children's Hospital of Orange   Orange..............  CA
           County.
 05-3305  Lucile Salter Packard           Palo Alto...........  CA
           Children's Hospital.
 06-3301  The Children's Hospital.......  Denver..............  CO
 07-3300  Connecticut Children's Medical  Hartford............  CT
           Center.
 08-3300  Alfred I Dupont Institute.....  Wilmington..........  DE
 09-3300  Children's Hospital National    Washington..........  DC
           Medical Center.
 10-3300  All Children's Hospital.......  Saint Petersburg....  FL
 10-3301  Miami Children's Hospital.....  Miami...............  FL
 11-3300  Egleston Children's Hospital    Atlanta.............  GA
           at Emory.
 12-3300  Kapiolani Women's & Children's  Honolulu............  HI
           Medical Center.
 14-3300  Children's Memorial Hospital..  Chicago.............  IL
 14-3301  Larabida Children's Hospital..  Chicago.............  IL
 15-3300  St. Vincent's Children's        Indianapolis........  IN
           Specialty Hospital.
 19-3300  Children's Hospital...........  New Orleans.........  LA
 21-3301  Kennedy Krieger Institute.....  Baltimore...........  MD
 22-3300  Franciscan Children's Hospital  Brighton............  MA
           & Rehabilitation Center.
 22-3302  The Children's Hospital.......  Boston..............  MA
 23-3300  Children's Hospital of          Detroit.............  MI
           Michigan.
 24-3300  Gillette Children's Hospital..  Saint Paul..........  MN
 24-3301  Children's Health Care--Saint   Saint Paul..........  MN
           Paul.
 24-3302  Children's Health Care--        Minneapolis.........  MN
           Minneapolis.
 26-3301  St. Louis Children's Hospital.  Saint Louis.........  MO
 26-3302  Children's Mercy Hospital.....  Kansas City.........  MO
 28-3300  Boys Town National Research     Omaha...............  NE
           Hospital.
 28-3301  Children's Memorial Hospital..  Omaha...............  NE
 31-3300  Children's Specialized          Mountainside........  NJ
           Hospital.
 32-3307  Carrie Tingley Hospital.......  Albuquerque.........  NM
 33-3301  Blythdale Children's Hospital.  Valhalla............  NY
 36-3300  Children's Hospital Medical     Cincinnati..........  OH
           Center.
 36-3302  Rainbow Babies and Children's   Cleveland...........  OH
           Hospital.
 36-3303  Children's Hospital Medical     Akron...............  OH
           Center.
 36-3304  Cleveland Clinic Children's     Cleveland...........  OH
           Rehabilitation Hospital.
 36-3305  Children's Hospital...........  Columbus............  OH
 36-3306  Children's Medical Center.....  Dayton..............  OH
 36-3307  Northside and Tod Children's    Youngstown..........  OH
           Hospital.
 37-3301  Children's Medical Center.....  Tulsa...............  OK
 39-3307  St. Christopher's Hospital for  Philadelphia........  PA
           Children.
 39-3302  Children's Hospital of          Pittsburgh..........  PA
           Pittsburgh.
 39-3303  Children's Hospital of          Philadelphia........  PA
           Philadelphia.
 40-3301  University Pediatric Hospital.  San Juan............  PR
 44-3302  St. Jude Children's Research    Memphis.............  TN
           Hospital.
 44-3303  East Tennessee Children's       Knoxville...........  TN
           Hospital.
 45-3300  Cook Ft. Worth Children's       Fort Worth..........  TX
           Medical Center.
 45-3301  Driscoll Children's Hospital..  Corpus Christi......  TX
 45-3302  Children's Medical Center of    Dallas..............  TX
           Dallas.
 45-3304  Texas Children's Hospital.....  Houston.............  TX
 45-3305  Santa Rosa Children's Hospital  San Antonio.........  TX
 46-3301  Primary Children's Medical      Salt Lake City......  UT
           Center.
 49-3301  Children's Hospital--King's     Norfolk.............  VA
           Daughters.
 50-3300  Children's Hospital & Regional  Seattle.............  WA
           Medical Center.
 50-3301  Mary Bridge Children's Health   Tacoma..............  WA
           Center.
 52-3300  Children's Hospital of          Milwaukee...........  WI
           Wisconsin.
------------------------------------------------------------------------

Changes in Eligibility Status

    For each fiscal year, the Secretary will publish a Federal Register 
notice inviting applicants for the CHGME program and listing the 
eligible children's hospitals. Since HHS calculates the payments for 
each fiscal year by dividing the available funds by the resident count 
data submitted by the eligible hospitals, additional hospitals cannot 
be included for funding for that fiscal year after the allocation has 
been made. Newly-qualifying institutions must notify HHS as soon as 
possible to be added to the list of eligible hospitals for the next 
fiscal year.
    A children's hospital which loses its eligibility during the course 
of a fiscal year must notify HHS immediately of the change in status. 
The Department will then declare the hospital to be

[[Page 37988]]

ineligible and terminate its payments under the CHGME program. The 
hospital will remain liable for the reimbursement, with interest, of 
any money received during a period of ineligibility.
    Funds that are returned to the Department during a fiscal year by 
the termination of hospitals from the CHGME program will be distributed 
as follows: (1) Direct GME funds will be 8 placed in the direct GME 
withholding account and distributed to the remaining children's 
hospitals as part of the reconciliation process; and (2) the IME funds 
will be distributed to the remaining children's hospitals during the 
fiscal year based on the IME formula. The latter approach is necessary 
because IME funding has no reconciliation process.

III. Determining Resident Counts in the CHGME Program

    Definition. Section 340E(c)(1) of the Act provides that the amount 
of the payment to a children's hospital for direct medical expenses is 
equal to the product of the amount per resident as determined under 
paragraph (2) of that section and--

    the average number of full-time equivalent (FTE) residents in 
the hospital's approved graduate medical residency training 
programs, as determined under section 1886(h)(4) [42 U.S.C. 
1395ww(h)(4)] of the Social Security Act during the fiscal year.

    Section 340E(g)(1) of the Act defines the term ``approved graduate 
medical residency training program'' by reference to section 
1886(h)(5)(A) of the Social Security Act (42 U.S.C. 1395ww(h)(5)(A)). 
Regulations at 42 CFR 413.86 implement these provisions.
    Accordingly, the term ``approved graduate medical residency 
training program'' means a residency or other postgraduate medical 
training program in allopathic medicine, osteopathic medicine, 
dentistry, and podiatry approved by the indicated accrediting body in 
which participation may be counted toward certification in a specialty 
or subspecialty. Only residents in allopathic medicine, osteopathic 
medicine, dentistry, and podiatry will be counted to determine the 
amount of direct and indirect medical expenses paid to children's 
hospitals.

Residency FTE Reporting Period

    The Act requires the Secretary to make CHGME payments ``for each of 
fiscal years 2000 and 2001,'' (emphasis added). ``Fiscal Year'' means 
the Federal Fiscal Year from October 1 of each year through September 
30 of the following year, not to be confused with the hospital cost-
reporting periods used for Medicare GME purposes. The CHGME statute 
distinguishes ``fiscal year'' from a hospital's ``cost reporting 
period.'' ``Cost reporting period'' is used in two provisions to 
differentiate specific time periods from the Federal fiscal year. 
Accordingly, the Secretary is interpreting ``fiscal year'' to mean 
``Federal fiscal year.'' To receive CHGME funds, a hospital must submit 
the number of FTE residents at the hospital during the Federal fiscal 
year for which payments are being made.

Counting FTE Residents

    Section 340E(c)(1)(B) requires that the average number of FTE 
residents in the hospital's approved residency programs be determined 
according to section 1886(h)(4)(42 U.S.C. 1395ww(h)(4)) of the Social 
Security Act. This section is implemented by regulations at 42 CFR 
413.86(f), (g), (h), and (i). These provisions indicate: How to 
determine the total and weighted numbers of FTE residents; the required 
documentation and certification for purposes of application for 
Medicare payments by hospitals for cost reporting periods; and the 
application of the ``caps'' (described in sec. 1886(h)(4)(f) of the 
Social Security Act (42 U.S.C. 1395ww(h)(4)(f))) and ``rolling 
averages'' (described in sec. 1886(h)(4)(g) of the Social Security Act 
(42 U.S.C. 1395ww(h)(4)(g))) to FTE resident counts prior to weighting. 
Hospitals must certify the accuracy of their FTE resident counts and 
apply the Medicare cap and rolling average to this count.
    Because these requirements are closely tied to Medicare, the 
Department will be using Medicare data to assist in verifying the 
submitted counts. Comment is solicited on whether the program should 
require the standardized reporting of resident counts currently 
required in the Medicare Intern and Resident Information System (IRIS).
    The cap requires an accurate count for the last hospital cost 
reporting year ending on or before December 31, 1996. The Department 
will rely on the resident counts reported on Medicare cost reports to 
verify each hospital's count. Some hospitals may have previously 
undercounted their residents in their Medicare cost reports due to the 
insignificance of their Medicare payments. Because of the cap, 
hospitals that underreported that number should consider requesting the 
Department to reopen their Medicare cost reports, pursuant to 42 CFR 
405.1885, to revise the numbers submitted for cost reports that are 
subject to reopening.
    The regulations at 42 CFR 413.86 do not apply to a hospital which 
had not previously submitted Medicare cost reports but had been 
operating a residency training program. Hospitals must determine their 
resident counts in the cost-reporting year ending in 1996. In cases 
where this is very difficult to establish from existing records, it is 
necessary to propose an FTE counting methodology addressing this 
situation.
    For most hospitals, program size and resident rotations among the 
participating institutions are relatively stable from year to year. 
Therefore, a hospital could address missing FTE counts for earlier 
years by starting with the assumption that these counts would be the 
same as the FY 1999 count in the absence of changes in the residency 
programs after 1996. The incremental effect of any changes could be 
estimated by adjusting the FY 1999 and FY 2000 counts to determine 
resident FTE counts for FY 1996 through FY 1998. Examples of 
adjustments for incremental changes in FTE counts follow:

    Example A: The children's hospital has 24 residents in a 
pediatric residency program. The residents spend 90 percent of their 
time at the children's hospital and 10 percent rotating to other 
hospitals. The hospital's unweighted FTE count for its cost 
reporting period beginning in FY1999 is 21.6 (the unweighted FTE 
count is the FTE number of residents prior to weighting the 
residents who have exceeded the number of years of formal training 
necessary to satisfy the requirements of the appropriate approving 
body related to board certification or 5 years, whichever is less, 
by 0.5). The unweighted FTE count for its cost reporting period 
ending in calendar year 1996 is deemed to be 21.6. This becomes the 
cap, which applies to Federal fiscal years 2000 and beyond.
    Example B: The children's hospital had 24 residents in its 
pediatric residency program (8 in each of 3 residency years) until 
the program year beginning July 1, 1999, when the number of first 
year residents was increased to 10. The residents spend all their 
time at the children's hospital. The hospital's unweighted FTE count 
for its cost-reporting period ending 12/31/99 is 25, because the 
additional first year residents added 1.0 to the FTE resident count 
(two residents for 6 months each). The count for its cost reporting 
period ending in calendar year 1996, and the hospital's cap from 
that point on, is deemed to be 24.
    Example C: The children's hospital is a major participating 
institution for five residency programs. During its cost-reporting 
period ending 6/30/99, 100 residents rotated from other hospitals 
for rotations of 1 to 6 months. The hospital's unweighted FTE count 
was 25. The same affiliation agreements have been in effect since 
before 1996 and there were no significant changes in the size of the 
residency programs or rotation schedules. The hospital's unweighted 
count for its cost reporting period ending in calendar year 1996 
(which ended 6/30/96), and therefore its cap for future years, is 
deemed to be 25.

[[Page 37989]]

    Example D: The children's hospital is a major participating 
institution for five residency programs. During its cost-reporting 
period ending 6/30/99, 100 residents rotated from other hospitals 
for rotations of 1 to 6 months. The hospital's unweighted FTE count 
was 25. During the program year beginning in 1997, the hospital 
started serving as a training site for the first time for a family 
practice program which sends three residents for 3 months each for a 
continuity clinic in each of the first two family practice program 
years. The residents count as 1.5 FTE in the hospital's FTE count 
for its FY ending 6/30/99 (0.75 FTE for 1st year residents and 0.75 
for 2nd year residents). The hospital's count for its cost reporting 
period ending in calendar year 1996 (FY ending 6/30/96), and 
therefore its cap, is deemed to be 23.5.

    If no prior counts were reported, it would then only be necessary 
to determine the 1996-based cap from the FY1999 and FY2000 actual 
counts if the number of residents had increased after 1996. The cap 
would not be operative if there had been no change or a decrease since 
1996.
    Similarly, Medicare applies a ``rolling average'' to resident 
counts (42 CFR 413.86(g)(5)). Unlike the cap, the rolling average is 
applied to weighted FTE resident counts. For the hospital's first cost 
reporting period beginning on or after October 1, 1997, the weighted 
FTE count equals the average of the weighted count for that period and 
the preceding cost reporting period. For cost reporting periods 
beginning on or after October 1, 1998, the hospital's weighted FTE 
count equals the average of that reporting year and the two preceding 
cost reporting years.
    For the weighted FTE resident count for Federal fiscal years 2000 
and 2001, the hospital must determine the weighted FTE resident count 
for each Federal fiscal year beginning October 1, 1997 (which is also 
the effective date of the caps). The FTE resident counts for these 
years are needed to determine the cap and the rolling average for 
Federal fiscal years 1999 and 2000.

IV. Determining Direct Medical Education Payments

    Section 340E(a) requires the Secretary to make payments for direct 
and indirect expenses associated with operating approved graduate 
medical residency training programs for each of fiscal years 2000 and 
2001. Section 340E(b) describes direct expenses as covering the costs 
of 13 operating approved graduate medical residency training programs. 
Subsection (e)(1) requires the Secretary to determine the amount of 
direct and indirect payments for each hospital before the beginning of 
each fiscal year for which payments are made and to make these payments 
to each hospital in 26 equal installments during the fiscal year. If 
the Secretary determines that the funds appropriated for the CHGME 
program for a fiscal year are insufficient to provide the total 
payments due to hospitals for that fiscal year, the Secretary will 
reduce the amount of payments to each hospital on a pro-rata basis.
    The Act also provides a method for refining the accuracy of the 
direct payments made to each hospital. Under subsection (e)(2), the 
Secretary must withhold up to 25 percent from each direct medical 
education interim installment payable to hospitals to permit the final 
adjustment and reconciliation of the number of FTE residents for whom 
direct payments are being made. At the end of that fiscal year, each 
participating hospital must submit information to enable the Secretary 
to determine the percentage (if any) of the total amount withheld that 
is due each hospital for the fiscal year. The hospital may request a 
hearing on the Secretary's payment determination. The Secretary pays 
each hospital any balance due or recoups any overpayments made.
    Due to the time limitations in establishing a new program and the 
one year availability of the $40 million appropriated in FY 2000, for 
the CHGME program, the Secretary will obligate the entire CHGME 
appropriation in FY 2000, without the withholding of direct payments.

Determination of the Amount of Direct Medical Education Payment

    Section 340E(c)(1) requires that the payments to a children's 
hospital for direct medical education expenses for a fiscal year equal 
the product of:
     The updated per resident amount as determined under 
subsection (c)(2); and
     The average number of FTE residents in the hospital's 
graduate approved medical residency program as determined under section 
1886(h)(4) of the Social Security Act during the fiscal year.
    Section 340E(c)(2) determines the updated per resident amount for 
direct medical education using the following methodology. The Secretary 
will:
    (1) Determine the hospital's single per resident amount: Compute 
for each of every (not just children's) teaching hospital a single per 
resident amount computed equal to the weighted average of the primary 
care per resident amount and the non-primary care per resident amount 
computed under 1886(h)(2) of the Social Security Act for cost reporting 
periods ending during FY 1997;
    (2) Determine the wage and non-wage-related proportion of the 
single per resident amount: Estimate the average proportion of the 
single per resident amount that is attributable to wages and wage-
related costs;
    (3) Standardize per resident amounts: Establish a standardized per 
resident amount for each children's hospital that is adjusted for 
wages;
    (4) Determine a national average per resident amount: Compute a 
national average per resident amount equal to the average of the 
standardized amounts computed above weighted by the average number of 
FTE residents at the children's hospitals; and
    (5) Apply factors 1-4 to each hospital: Compute for each children's 
hospital the national average per resident amount after adjustment for 
wage-related costs.

Updating the Per Resident Amount

    The legislation provides for updating the per resident amount for 
each hospital by the estimated percentage increase in the consumer 
price index for all urban consumers during the period beginning October 
1997 and ending with the midpoint of the hospital's cost reporting 
period that begins in FY 2000. Since the CHGME will operate on a fiscal 
rather than a cost reporting year basis, it is inappropriate to end the 
adjustment period with the midpoint of the cost reporting year. To do 
so would create inconsistent and inequitable results, rendering the 
provision ineffective. To give effect to the intent of updating the per 
resident amount, the Secretary will update the per resident amounts to 
a common date, the midpoint of the current fiscal year.

Determining the Single Per Resident Amounts

    The Secretary proposes to use the Health Care Financing 
Administration's (HCFA's) Hospital Cost Report Information System 
(HCRIS), an electronic reporting system, to determine the hospitals 
single per resident amounts. HCRIS is organized by the cost reporting 
period beginning dates. The data base for determining the per resident 
amounts paid to children's hospitals is from all teaching hospitals, 
not just children's teaching hospitals. HCRIS files are updated 
quarterly as the cost reports move through the cost report settlement 
process. The September 30, 1999, HCRIS update file has 1206 hospitals 
reporting residents for cost reporting periods ending in FY 1997.

[[Page 37990]]

Wage Adjustment in Standardizing Per Resident Amounts

    Section 340E states that the Secretary--

shall establish a standardized per resident amount for each such 
hospital by--
    (i) Dividing the single per resident amount computed under 
subparagraph (A) into a wage-related and non-wage related portion by 
applying the proportion determined under subparagraph (B);
    (ii) Dividing the wage-related portion by the factor applied 
under section 1886(d)(3)(E) of the Social Security Act for 
discharges occurring during fiscal year 1999 for the hospital's 
area; and
    (iii) Adding the non-wage-related portion to the amount computed 
under clause (ii).
    Subparagraph (B) requires the Secretary to:
    [E]stimate the average proportion of the single per resident 
amounts computed under subparagraph (A) that is attributable to 
wages and wage-related costs.
    Under the Medicare program, direct GME expenses include intern 
and resident salaries and fringe benefits; compensation to teaching 
physicians for the teaching and supervision of residents; and other, 
allocated hospital costs. Earlier HCRIS public use files indicate 
that the labor-related share of the PPS rate for inpatient operating 
costs is at 71.1 percent. However, this figure may not be 
appropriate for the per resident amount since it includes direct 
patient care costs, such as drugs and room and board costs.
    The Department is analyzing the Medicare cost reports to develop 
a more accurate estimate of the labor-related share of the per 
resident amount. HHS intent is to complete this analysis in time for 
the final Federal Register notice. Until the analysis is completed, 
the Secretary proposes that the PPS labor-related share be used to 
standardize wages in determining the national standard per resident 
amount.

Determining Payments

    Each hospital will be requested to submit an annual application 
containing the number of weighted FTE residents in all its graduate 
training programs. Using this data, the Secretary will calculate the 
hospital's direct GME payment using the following formula:
[GRAPHIC] [TIFF OMITTED] TN19JN00.045

    Where--
    X = national average per resident amount
    Xz = national pro-rata average per resident amount 
(based on funds available)
    WI = wage index (for the area in which the hospital is located)
    FTE = weighted number of FTE residents working at the hospital
    Y = direct GME payment to a hospital
    i = indicates an individual hospital
    n = the number of children's hospitals participating in the 
program
     = sum of (the following)
    Z = the total funds available for direct payments
    The total direct GME payments to all children's teaching 
hospitals equal the sum of payments to all individual hospitals:
[GRAPHIC] [TIFF OMITTED] TN19JN00.046

    To calculate the pro rata average per resident amount based on 
the funds available (Xz) without knowing the national 
average per resident amount (X), the Secretary will use the 
following equation:
[GRAPHIC] [TIFF OMITTED] TN19JN00.047

    The final Federal Register notice will contain a computed 
national per resident amount.

V. Determining Indirect Medical Education Payments

    Sections 340E(a) and (b)(1)(B) require the Secretary to make 
payments for indirect expenses associated with operating approved 
graduate medical residency training programs for each of fiscal 
years 2000 and 2001. Section 340E(b)(1) requires that the payments 
be made for an approved program ``for a fiscal year,'' and section 
340E(b)(1)(B) describes indirect payments as covering ``expenses 
associated with the treatment of more severely ill patients and the 
additional costs relating to teaching residents in such programs.''
    Subsection (e)(1) requires the Secretary to determine the amount 
of both direct and indirect payments for each hospital before the 
beginning of each fiscal year for which payments are made and to 
make these payments to each hospital in 26 equal installments during 
the fiscal year. Subsection (d)(2)(B) provides that the indirect 
payments are equal to the amount appropriated for such expenses for 
the fiscal year under subsection (f)(2), but unlike the DME payment, 
there is no provision for withholding a portion of IME payments or 
making a final reconciliation after the close of the fiscal year.
    Section 340E(d)(2) requires the Secretary to determine the 
appropriate amount of indirect medical education payments for 
expenses associated with the treatment of more severely ill patients 
and the additional costs relating to teaching residents in such 
programs to a children's hospital by considering:
     Variations in case mix among children's hospitals; and
     The hospitals' number of FTE residents in approved 
training programs.

Determination of Case Mix

    The statute provides no guidance on the case mix measure to be 
used for determining indirect payments. Hence, the Secretary is 
seeking comments on this issue.
    Case mix information for hospitals is typically generated as a 
by-product of a billing or administrative reporting system. 
Children's hospitals currently use various DRG systems and weights. 
These include the HCFA Diagnosis-Related Group (DRG); the All-Payer 
DRG (AP-DRG); and the All-Payer Refined DRG (APR-DRG) systems. To 
require a hospital to report its case mix index using a different 
classification system from its current system would create an 
administrative burden.
    Accordingly, the Secretary proposes to:
    (1) Identify the case-mix indexes that are commonly used by 
children's hospitals; and
    (2) Explore the feasibility of adjustment factors derived from 
comparative studies that allow for approximate equilibration of the 
various case mix indexes that may be used.

Determining the Number of FTE Residents

    Section (d)(2)(A) states that in determining the amount of 
payments to a children's hospital for indirect medical education 
expenses, the Secretary shall take into account `` * * * the number 
of full-time equivalent residents'' in the hospital's approved 
residency programs. Unlike direct payments, it does not specify that 
the FTE residents be counted as determined under section 1886(h)(4) 
of the Social Security Act. FTE residents under Medicare are also 
counted differently for direct (sec. 1886(h)(4)) of the Social 
Security Act) and indirect (42 CFR 412.105(a)(1)) payments. Under 
the latter, ``full-time equivalent residents'' are counted without 
the weighting applied to the count for direct payment determination.
    The Secretary will use the number of FTE residents during the 
fiscal year as determined under 42 CFR 412.105(a)(1) to determine 
indirect payments to a hospital.

Factoring in Teaching Intensity

    The statute does not specify a factor for determining teaching 
intensity. Traditionally, the indirect expenses associated with 
teaching activity are based on costs per case. Teaching hospitals 
tend to have higher costs per case relative to other hospitals in 
the same area with a comparable case mix. The higher costs are 
generally associated with treating a more critically ill patient 
population than non-teaching hospitals and with the use of more 
resources, such as diagnostic tests, when residents are involved in 
the care of patients. A close relationship exists between higher 
costs and teaching intensity as measured by the ratio of either 
interns/residents-to-beds, or the ratio of residents to the average 
daily census of the hospital.
    The Secretary proposes to determine teaching intensity using one 
of the following factors derived from the Medicare formula:
     The ratio of residents to average daily census; or
     The ratio of residents to beds.
    In summary, the Secretary proposes to calculate IME payments for 
a hospital using the number of FTE residents; a case mix index; a 
case mix adjustment factor to correlate hospitals' case mix 
information to the case mix index selected for the CHGME program; a 
teaching intensity adjustment; and volume. Due to the time required 
to statistically model and analyze the various alternatives, the 
case mix index, case mix adjustment factor, and the teaching 
intensity adjustment are not currently available. The Secretary will 
include a detailed methodology for distribution of the IME funds in 
the final Federal Register notice to be published in July. Although 
FY 2000 IME funds must be distributed this fiscal year based on the 
IME formula published in the July notice, we will solicit comments 
and change the distribution formula for subsequent cycles if 
appropriate.

[[Page 37991]]

VI. Evaluation Criteria

    The CHGME program is subject to the Government Performance and 
Results Act of 1993 (GPRA), Public Law 103-62. GPRA provides 
Congress with information on whether and in what respects a program 
is working well or poorly to support its oversight of Federal 
agencies and their budgets. Therefore, GPRA requires each Federal 
agency to prepare an annual performance plan covering each program 
activity set forth in the budget of the agency. The Department must 
evaluate all programs for effectiveness, efficiency, and continuous 
improvement. To measure effectiveness, it must obtain performance 
information from recipients of HHS funds.

Performance Goals

    The performance goals described below are those included in the 
President's FY 2001 GPRA performance plan. These goals are still 
formative because HHS is unable to set targets until it obtains the 
necessary data. The Department requests public comment on the 
appropriateness and feasibility of these performance measures. The 
Department is particularly interested in receiving comments on the 
feasibility of each goal, in terms of the hospitals' ability to both 
provide data and measure the success of the program.
    Goals I and II listed below take into consideration that some 
information requirements may be more easily obtained for residents 
in programs sponsored by the children's hospital than for residents 
who rotate in from programs sponsored by another teaching hospital. 
Comments are requested on the practicality and value of reporting 
this information on residents who rotate in from programs sponsored 
by other hospitals, as well as those from residency programs 
sponsored by the children's hospital.

Proposed Goal I: Eliminate Barriers to Care

    A. Maintain the number of FTE residents supported by the 
children's hospitals receiving funds under the program. The health 
care workforce environment requires that sufficient numbers and 
types of physicians be appropriately and adequately trained to care 
for pediatric populations. Financial pressures common to the 
academic health center community may raise interest in reducing or 
eliminating training programs. These hospitals and their training 
programs provide a significant service to the local, regional, and 
sometimes national community. A reduction in training programs could 
impair the provision of those services as well as the production of 
one-quarter of the Nation's pediatricians and a majority of 
pediatric specialists. The following data elements provide an 
accurate accounting of and trends in the number of resident FTEs 
training in children's hospitals, and are fundamental in determining 
payments under the program.
    Proposed Required Data: While the number of trainees in a given 
hospital's training program is currently collected by the Health 
Care Financing Administration (HCFA) for freestanding children's 
hospitals that request reimbursement from Medicare, not all 
freestanding children's hospitals that are eligible for 
participation in the CHGME Program have submitted this information 
to HCFA. Generally, each hospital has a fairly good accounting of 
the number of trainees in residency programs sponsored directly by 
the hospital; but, accounting for the number of trainees rotating to 
a freestanding children's hospital for a portion of their training 
is more complicated. Not all children's hospitals have quantified 
the FTE residents rotating to their hospital from other training 
programs.
    To receive CHGME payments, hospitals must accurately report 
trainees' numbers. HHS proposes to require each hospital to submit 
on an annual application the aggregate number of FTE residents, by 
program, who are:
     In the recipient children's hospital and sponsored by 
the hospital;
     Rotating into the recipient hospital from residency 
programs sponsored by other institutions; and
     Sponsored by the hospital and rotating to other 
hospitals.
    These data should already be available now from children's 
hospitals that furnish Medicare cost report resident data and submit 
reports under the IRIS. As noted above, comment is being solicited 
on whether the program should require the standardized reporting of 
resident counts that is currently required by Medicare in cost 
reports and IRIS.
    B. Increase the percentage of residents' training that is 
supported in rural and underserved areas. Research on access to 
health care services has focused on the contribution of physicians 
treating the underserved. Residency training programs located in 
rural areas and medically underserved communities (MUCs) (as defined 
in sec. 799B(6) of the PHS Act; 42 U.S.C. 295p(6)) provide much 
needed care in their communities while residents learn the 
knowledge, skills and attitudes necessary to adequately and 
appropriately care for these rural and underserved populations.
    Proposed Required Data: The Department proposes to require each 
hospital to submit on an annual application the FTE count for 
resident time spent in training in MUCs and rural areas. The 
definition for the designation of rural areas will be taken from the 
United States Department of Agriculture's Urban-Rural County 
Continuum Code classification system.

Proposed Goal II: Improve Public Health and Health Care Systems.

    A. Monitor financial status of hospitals' total and operating 
margins.
    B. Monitor the proportion of uncompensated care patients.
    C. Monitor the proportion of Medicaid patients. Children's 
hospitals have a very high portion of Medicaid patients, at 40 
percent of gross patient revenues. Another 4 percent represent 
charity and bad debt. Children's hospitals also have on average 
poorer financial status than other teaching hospitals. In 1995, 58 
percent of children's hospitals had negative operating margins. This 
may have been aggravated by major changes in the health care system, 
including the expansion of managed care and increased enrollments in 
Medicaid managed care, and increased efforts to constrain health 
care costs. These changes in the health care system put health 
facilities that train physicians at a competitive disadvantage. A 
negative operating margin could affect the long-term viability of 
children's hospitals and their ability to continue providing a high 
proportion of care to children covered by Medicaid and uncompensated 
care. It may also affect their ability to continue training a high 
proportion of the nation's general and subspecialty pediatric and 
other residents, since, in the competitive marketplace, payers of 
health care services have few if any incentives to pay higher costs 
to sites that train health professionals.
    Proposed Required Data: The Department proposes to require each 
hospital to submit on an annual application the following:
     Total and operating margins;
     Percentage of patients served who are enrolled in 
Medicaid; and
     Percentage of uninsured patients and uncompensated 
care.

Economic and Regulatory Impact

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when rulemaking 
is necessary, to select regulatory approaches that provide the 
greatest net benefits (including potential economic, environmental, 
public health, safety distributive and equity effects). In addition, 
under the Regulatory Flexibility Act (RFA) of 1980, if a rule has a 
significant economic effect on a substantial number of small 
entities, the Secretary must specifically consider the economic 
effect of the rule on small entities and analyze regulatory options 
that could lessen the impact of the rule.
    Executive Order 12866 requires that all regulations reflect 
consideration of alternatives, of costs, of benefits, of incentives, 
of equity, and of available information. Regulations must meet 
certain standards, such as avoiding an unnecessary burden. 
Regulations which are ``significant'' because of cost, adverse 
effects of the economy, inconsistency with other agency actions, 
effects on the budget, or novel legal or policy issues, require 
special analysis.
    The Department has determined that resources to implement this 
rule are required only of the children's hospitals in submitting 
their applications and of the Department in reviewing them. 
Therefore, in accordance with the RFA of 1980, and the Small 
Business Regulatory Enforcement Fairness Act of 1996, which amended 
the RFA, the Secretary certifies that this rule will not have a 
significant impact on a substantial number of small entities. The 
Secretary has also determined that this rule does not meet the 
criteria for a major rule as defined by Executive Order 12866 and 
would have no major effect on the economy or Federal expenditures.
    We have determined that the rule is not a ``major rule'' within 
the meaning of the statute providing for Congressional Review of 
Agency Rulemaking, 5 U.S.C. 801. Similarly, it will not have effects 
on State, local, and tribal governments and on the private sector 
such as to require consultation under the Unfunded Mandates Reform 
Act of 1995.
    Further, Executive Order 13132 establishes certain requirements 
that an agency must

[[Page 37992]]

meet when it promulgates a rule that imposes substantial direct 
compliance costs on State and local governments, preempts State law, 
or otherwise has Federalism implications. We have reviewed this 
proposed action under the threshold criteria of Executive Order 
13132, Federalism, and, therefore, have determined that this action 
would not have substantial direct effects on the rights, roles, and 
responsibilities of States.

Paperwork Reduction Act of 1995

    In accordance with section 3507(a) of the Paperwork Reduction 
Act (PRA) of 1995, the Department is required to solicit public 
comments, and receive final Office of Management and Budget (OMB) 
approval, on collections of information. As indicated, in order to 
implement the Children's Hospital Graduate Medical Education Payment 
Program (CHGME), certain information is required as set forth in 
this notice in order to determine eligibility for payment.
    In accordance with the PRA, we are submitting to OMB at this 
time the following requirements for seeking emergency review of 
these provisions. HRSA has requested an emergency review because the 
data collection and reporting of this information is needed before 
the expiration of the normal time limits under OMB's regulations at 
5 CFR part 1320, to ensure the timely availability of data as 
necessary to ensure payment to eligible children's hospitals. A 30-
day notice was published in the Federal Register on May 15, 2000 to 
provide for public comment and to request an expedited review of the 
information collection associated with the CHGME. Delaying the data 
collection would delay implementation of the statutory purpose of 
providing payments by the end of the fiscal year to children's 
hospitals that support training of residents in graduate medical 
education programs.
    Collection of Information: The Children's hospital Graduate 
Medical Education Program.
    Description: Data is collected on the number of full-time 
equivalent residents in applicant children's hospital training 
programs to determine the amount of direct and indirect expense 
payments to participating children's hospitals. Indirect expense 
payments will also be derived from a formula that requires the 
reporting of case mix index information from participating 25c 
children's hospitals. Hospitals will be requested to submit such 
information in an annual application.
    Description of Respondents: Children's Hospitals operating 
approved graduate medical residency training programs.
    Estimated Annual Reporting: The estimated average annual 
reporting for this data collection is approximately 138 hours per 
hospital. The estimated annual burden is as follows:

----------------------------------------------------------------------------------------------------------------
                                                                          Responses               Hours    Total
                         Form name                             No. of        per       Total       per     hour
                                                            respondents  respondent  responses  response  burden
----------------------------------------------------------------------------------------------------------------
Form E (Short)............................................        42            1         42       99.9    4,194
Form E (Long).............................................        12            1         12       46.7      560
Form F (Short)............................................        42            1         42          8      336
Form F (Long).............................................        12            1         12          8       96
IME Data..................................................        54            1         54         14      756
Required GPRA Tables......................................        54            1         54         28    1,512
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National Health Objectives for the Year 2000

    The Public Health Service is committed to achieving the health 
promotion and disease prevention objectives of Healthy People 2000, 
and its successor, Healthy People 2010. These are Department-led 
efforts to set priorities for national attention. The CHGME program 
is related to the priority area 1 (Access to Quality Health 
Services) in Healthy People 2010, which is available online at 
http://www.health.gov/healthypeople/.

Education and Service Linkage

    As part of its long-range planning, HRSA will be targeting its 
efforts to strengthening linkages between Department education 
programs and programs which provide comprehensive primary care 
services to the underserved.

Smoke-Free Workplace

    The Department strongly encourages all award recipients to 
provide a smoke-free workplace and promote abstinence from all 
tobacco products, and Public Law 103-227, the Pro-Children Act of 
1994, prohibits smoking in certain facilities that receive Federal 
funds in which education, library, day care, health care, and early 
childhood development services are provided to children.
    This program is not subject to the Public Health Systems 
Reporting Requirements.

    Dated: May 17, 2000.
Claude Earl Fox,
Administrator, Health Resources and Services Administration.

    Dated: April 11, 2000.
Donna E. Shalala,
Secretary.
[FR Doc. 00-15332 Filed 6-16-00; 8:45 am]
BILLING CODE 4160-15-P