A new proposed rule (Federal Register, Feb. 1, 2007) would change Medicare’s policies for graduate medical education payments to teaching hospitals when residents are being trained in non-hospital settings. Currently, hospitals must pay for almost all the costs for the training that residents receive in nonhospital settings in order to include these residents in their GME payment calculations.

Under the proposal, effective July 1, 2007, hospitals would be required to pay at least 90 percent of the total of the residents’ salaries and fringe benefits and the portion of the cost of teaching physicians’ salaries attributable to direct GME at the nonhospital site. To reduce the administrative burden of documenting these costs, CMS would allow hospitals to use proxies in place of actual cost data to help them determine whether they have met the 90 percent threshold. Comments on the proposed rule are due April 2, 2007.