Nationwide Review of the Methodology for Identifying Medicare's Share of Graduate Medical Education Costs

This final report points out problems with the Health Care Financing Administration's (HCFA) new methodology for reimbursing teaching hospitals for graduate medical education (GME) costs. Our review of GME cost data of a sample of 120 teaching hospitals disclosed two components in the new GME payment system that will cause Medicare to share disproportionately in GME costs. The components are; (1) use of inappropriate cost centers (for example, delivery room costs) in determining Medicare reimbursement; and (2) inappropriately determined Medicare patient load percentages. We are recommending that HCFA propose legislative and regulatory changes to the new payment system to more accurately identify Medicare's share of GME costs. Our recommended changes to the new methodology will reduce Medicare's share of GME costs by an estimated $157.3 million a year.