Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; Changes to Medicare Graduate Medical Education Payments for Teaching Hospitals; Changes to Organ Acquisition Payment Policies

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412 and 413

[CMS-1752-FC3]

RIN 0938-AU44

Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals; Changes to Medicare Graduate Medical Education Payments for Teaching Hospitals; Changes to Organ Acquisition Payment Policies

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Final rule with comment period.

SUMMARY:

This final rule with comment period finalizes certain provisions of the fiscal year 2022 IPPS/LTCH PPS proposed rule. These provisions implement policies based on legislative changes relative to Medicare graduate medical education (GME) for teaching hospitals provided by sections 126, 127, and 131 of the Consolidated Appropriations Act (CAA), 2021; and changes, clarifications, and codifications for Medicare organ acquisition payment policies relative to organ procurement organizations (OPOs), transplant hospitals, and donor community hospitals. In addition, this final rule with comment period solicits comments on certain GME issues to inform potential future rulemaking

DATES:

Effective date:

This final rule with comment period is effective February 25, 2022.

Comment date:

To be assured consideration, comments on the graduate medical education provisions discussed in sections II.B.3.b.(5), II.B.3.d.(2). and II.B.5.e. of this final rule with comment period must be received at one of the addresses provided below, by February 25, 2022.

ADDRESSES:

In commenting, please refer to file code CMS-1752-FC3.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the “Submit a comment” instructions.

2.

By regular mail.

You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1752-FC3, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.

By express or overnight mail.

You may send written comments to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1752-FC3, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-4487, Graduate Medical Education Issues.

Katie Lucas, (410) 786-7723, Amanda Michael, (410) 786-5834, and Kellie Shannon (410) 786-0416, Organ Acquisition Payment Issues.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:

http://www.regulations.gov.

Follow the search instructions on that website to view public comments. CMS will not post on

Regulations.gov

public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority

Under various statutory authorities, we either discuss continued program implementation or are making changes to the Medicare IPPS, other related payment methodologies and programs and other policies and provisions included in this rule. The purpose of and the statutory authority(ies) for these changes include, but are not limited to, the following:

• Section 1886(d) of the Social Security Act (the Act), which sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates, including indirect medical education (IME) payments under section 1886(d)(5)(B) of the Act.

• The Consolidated Appropriations Act of 2021 relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs. Section 1886(a)(4) of the Act, which specifies that costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act.

• Organ acquisition costs are reimbursed to transplant hospitals and kidney acquisition costs are reimbursed to organ procurement organizations under reasonable cost principles under section 1861(v) of the Act. Under 42 U.S.C. 273(b), organ procurement organizations must have an agreement with the Secretary to be reimbursed under title XVIII of the Social Security Act for the cost to procure kidneys.

2. Summary of the Provisions

The following is a summary of the provisions in this final rule with comment period.

a. Implementation of Sections 126, 127, and 131 of the Consolidated Appropriations Act (CAA) of 2021

We are finalizing provisions to implement sections 126, 127, and 131 of the CAA. Section 126(a) of the CAA amended section 1886(h) of the Act by adding a new section 1886(h)(9) of the Act requiring the distribution of additional residency positions to qualifying hospitals. Section 127 of the CAA amended section 1886(h)(4)(H)(iv) of the Act to specify that in the case of a hospital not located in a rural area that established or establishes a medical residency training program (or rural track) in a rural area, the hospital, and each such hospital located in a rural area that participates in such a training, is allowed to receive an adjustment to its full-time equivalent (FTE) resident limit. Section 131 of the CAA amended section 1886(h)(2)(F) of the Act to provide an opportunity to hospitals with such extremely low or $0 per resident amounts (PRAs) that meet certain criteria to reset and establish new PRAs if the hospital trains resident(s) in a cost reporting period

beginning on or after enactment (December 27, 2020) and before the date that is 5 years after enactment (December 26, 2025). Section 131 of the CAA also amended section 1886(h)(4)(H)(i) of the Act to provide an opportunity for hospitals that meet certain criteria and that have very small FTE resident caps to replace those caps if the Secretary determines the hospital begins training residents in a new program beginning on or after enactment (December 27, 2020) and before 5 years after enactment (December 26, 2025).

In addition, this final rule with comment period solicits comments on certain issues to inform potential future rulemaking. Specifically, for the implementation of section 126 of the CAA regarding distribution of residency slots, we seek comment on using a measure of health care provided outside of a Health Professional Shortage Area (HPSA) to HPSA residents (as discussed in section II.B.3.b.(5) of the preamble of this final rule with comment period). For purposes of prioritizing hospitals awarded residency positions under section 126, we seek comment on feasible alternatives to HPSA scores as a proxy for health disparities (as discussed in section II.B.3.d.(2) of the preamble of this final rule). In addition, for the implementation of section 131, we seek comment on the review process to determine eligibility for per resident amount or full-time equivalent cap resets in situations where a hospital disagrees with the information on the cost report, in particular from cost reports that are no longer within the 3-year reopening period (as discussed in section II.B.5.e. of the preamble of this final rule).

We refer readers to section II.B.2. of this final rule with comment period for a summary of the provisions of sections 126, 127, and 131 of the CAA that we are implementing in this final rule with comment period.

b. Changes to Organ Acquisition Payment Policy

We proposed changes pertaining to Medicare's share of organ acquisition costs transplanted into Medicare beneficiaries. We also proposed changes to longstanding Medicare organ acquisition payment policies and changes pertaining to charges for services provided to cadaveric organ donors by donor community hospitals. After considering the numerous public comments received, at this time, we are not finalizing our proposal with respect to the organ counting policy for Medicare's organ acquisition payment purposes and the research organ counting policy. We are finalizing other longstanding Medicare organ acquisition payment policies with some modifications. We are also finalizing rules with respect to Medicare-certified non-transplant hospitals and transplant hospitals' charges for hospital services provided to cadaveric donors, effective for cost reporting periods beginning on or after the effective date of this final rule with comment period.

3. Summary of Costs, Savings, Benefits, and Transfers

The following table provides a summary of the costs, savings, benefits associated with the provisions described in section I.A.2. of this final rule.

Provision description

Description of costs, transfers, savings, and benefits

Implementation of Sections 126, 127, and 131 of the Consolidated Appropriations Act (CAA) of 2021

Section 1886(h) of the Act, as amended by sections 126, 127, and 131 of the CAA, provides for the distribution of additional residency positions (section 126), promotes a rural hospital GME funding opportunity (section 127), and requires resetting PRAs and FTE resident caps for certain hospitals after hosting medical resident rotators for short durations (section 131). We refer readers to section II.B. of this final rule with comment period for a summary of the provisions of sections 126, 127 and 131 that we are implementing in this final rule. We estimate that our implementation of section 126 of the CAA will result in an estimated cost of approximately $1.830 billion from FY 2023 through FY 2031. We estimate that our implementation of section 127 of the CAA will result in an estimated cost of approximately $0.130 billion from FY 2024 through FY 2031. We estimate our implementation of section 131 of the CAA will result in an estimated cost of approximately $1.380 billion from FY 2022 through FY 2031.

Changes to Organ Acquisition Payment Policy

We refer readers to sections II.C.2.a. through g. and i through m. and II.C.3. of this final rule with comment period for a summary of organ acquisition payment policies we are implementing in this final rule. These final policies are not expected to have an impact on expenditures. However, the provisions in sections II.C.2.b., e. and l. of this final rule with comment period to the extent that any of these provisions may have an impact on expenditures, that impact is not estimable without the availability of the appropriate cost information to calculate such impact.

B. Background

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)

Section 1886(d) of the Act sets forth a system of payment for the operating costs of acute care hospital inpatient stays under Medicare Part A (Hospital Insurance) based on prospectively set rates. Section 1886(g) of the Act requires the Secretary to use a prospective payment system (PPS) to pay for the capital-related costs of inpatient hospital services for these “subsection (d) hospitals.” Under these PPSs, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs).

The base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. If the hospital is located in Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-living adjustment factor. This base payment rate is multiplied by the DRG relative weight.

If the hospital is training residents in an approved residency program(s), it receives a percentage add-on payment for each case paid under the IPPS, known as the indirect medical education (IME) adjustment. This percentage varies, depending on the ratio of residents to beds.

The existing regulations governing payments to hospitals under the IPPS are located in 42 CFR part 412, subparts A through M. The existing regulations governing the IME adjustment are located in § 412.105.

2. Payments for Graduate Medical Education (GME)

Under section 1886(a)(4) of the Act, costs of approved educational activities are excluded from the operating costs of inpatient hospital services. Hospitals with approved graduate medical education (GME) programs are paid for the direct costs of GME in accordance with section 1886(h) of the Act. The amount of payment for direct GME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year. The existing regulations governing direct GME payments to the various types of hospitals are located in 42 CFR part 413.

3. Issuance of Proposed Rulemaking

In the FY 2022 IPPS/LTCH PPS proposed rule appearing in the May 10, 2021

Federal Register

(86 FR 25070), we set forth proposed payment and policy changes to the Medicare IPPS for FY 2022 operating costs and capital-related costs of acute care hospitals and certain hospitals and hospital units that are excluded from IPPS. In addition, we set forth proposed changes to the payment rates, factors, and other payment and policy-related changes to programs associated with payment rate policies under the LTCH PPS for FY 2022.

The following is a general summary of the changes that we proposed to make related to the provisions addressed in this final rule with comment period.

In section V. of the preamble of the FY 2022 IPPS/LTCH PPS proposed rule, we discussed proposed changes to certain provisions of the regulations in 42 CFR parts 412 and 413, including proposals to implement provisions of the Consolidated Appropriations Act relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs.

Section X. of the preamble of the FY 2022 IPPS/LTCH PPS proposed rule included proposed changes pertaining to Medicare's share of organ acquisition costs for organs transplanted into Medicare beneficiaries and the charges for services provided to cadaveric organ donors by donor community hospitals and transplants hospitals.

In Appendix A of the FY 2022 IPPS/LTCH PPS proposed rule, we set forth an analysis of the impact the proposed changes for the provisions listed would have on affected acute care hospitals, IPPS-excluded hospitals and other entities.

We received approximately 28,000 timely pieces of correspondence in response to the FY 2022 IPPS/LTCH PPS proposed rule. Approximately 570 items of the proposed rule's correspondence are addressed in this final rule with comment period.

We also note that the FY 2022 IPPS/LTCH PPS final rule appeared in the August 13, 2021

Federal Register

(86 FR 44774) and that final rule included the vast majority of the provisions of the proposed rule. This final rule with comment period finalizes the graduate medical education and certain organ acquisition payment policy provisions of the FY 2022 IPPS/LTCH PPS proposed rule. As noted in section II.A. of this final rule with comment period, we are not addressing the proposed revisions to the regulations relating to the treatment of section 1115 waiver days for purposes of the disproportionate share hospital (DSH) adjustment in this final rule with comment period. We expect to revisit the issue of section 1115 waiver days in future rulemaking, and we encourage stakeholders to review any future proposal on this issue and to submit their comments at that time. As noted in section II.C. of this final rule with comment period, we are not addressing the proposed revisions to the Medicare organ counting policy in this final rule with comment period. We may revisit the Medicare organ counting policy in future rulemaking, and we encourage stakeholders to review any future proposal on this issue and to submit their comments at that time.

II. Provisions of the Final Rule With Comment Period

A. Medicare Disproportionate Share Hospital (DSH) Payments: Counting Days Associated With Section 1115 Demonstration Projects in the Medicaid Fraction (§ 412.106)

In the FY 2022 IPPS/LTCH PPS proposed rule, we proposed revisions to the regulation relating to the treatment of section 1115 waiver days for purposes of the DSH adjustment (86 FR 25457 through 25459). In the FY 2022 IPPS/LTCH PPS final rule, we stated that due to the number and nature of the comments that we received on our proposal, we intended to address the public comments in a separate document (86 FR 45249). We thank the commenters for their input on the proposal, but after further consideration of the issue, we have determined not to move forward with the current proposal. We expect to revisit the issue of section 1115 waiver days in future rulemaking, and we encourage stakeholders to review any future proposal on this issue and to submit their comments at that time.

B. Payment for Indirect and Direct Graduate Medical Education Costs (§§ 412.105 and 413.75 Through 413.83)

1. Background

Section 1886(h) of the Act, as added by section 9202 of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 99-272) and as currently implemented in the regulations at 42 CFR 413.75 through 413.83, establishes a methodology for determining payments to hospitals for the direct costs of approved graduate medical education (GME) programs. Section 1886(h)(2) of the Act sets forth a methodology for determining a hospital-specific base-period per resident amount (PRA) that is calculated by dividing a hospital's allowable direct costs of GME in a base period by its number of full-time equivalent (FTE) residents in the base period. The base period is, for most hospitals, the hospital's cost reporting period beginning in FY 1984 (that is, October 1, 1983 through September 30, 1984). The base year PRA is updated annually for inflation. In general, Medicare direct GME payments are calculated by multiplying the hospital's updated PRA by the weighted number of FTE residents working in all areas of the hospital complex (and at nonprovider sites, when applicable), and the hospital's Medicare share of total inpatient days.

Section 1886(d)(5)(B) of the Act provides for a payment adjustment known as the indirect medical education (IME) adjustment under the IPPS for hospitals that have residents in an approved GME program, in order to account for the higher indirect patient care costs of teaching hospitals relative to nonteaching hospitals. The regulations regarding the calculation of this additional payment are located at 42 CFR 412.105. The hospital's IME adjustment applied to the DRG payments is calculated based on the ratio of the hospital's number of FTE residents training in either the inpatient or outpatient departments of the IPPS hospital to the number of inpatient hospital beds.

The calculation of both direct GME payments and the IME payment adjustment is affected by the number of FTE residents that a hospital is allowed to count. Generally, the greater the number of FTE residents a hospital counts, the greater the amount of Medicare direct GME and IME payments the hospital will receive. In an attempt to end the implicit incentive for hospitals to increase the number of FTE residents, Congress, through the Balanced Budget Act of 1997 (Pub. L.

105-33), established a limit on the number of allopathic and osteopathic residents that a hospital could include in its FTE resident count for direct GME and IME payment purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of residents for purposes of direct GME may not exceed the hospital's unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during that cost reporting period is applied, effective for discharges occurring on or after October 1, 1997. Dental and podiatric residents are not included in this statutorily mandated cap.

Section 422 of Public Law 108-173, the Medicare Modernization Act (MMA), provided for the redistribution of unused residency positions effective for portions of cost reporting periods beginning on or after July 1, 2005. The policy implementing section 422 of the MMA was included in the August 11, 2004 FY 2005 IPPS final rule (69 FR 49112 through 49169).

The Affordable Care Act made a number of statutory changes relating to the determination of a hospital's FTE resident limit for direct GME and IME payment purposes and the manner in which FTE resident limits are calculated and applied to hospitals under certain circumstances.

Section 5503(a)(4) of the Affordable Care Act added a new section 1886(h)(8) to the Act to provide for the reduction in FTE resident caps for direct GME under Medicare for certain hospitals training fewer residents than their caps, and to authorize the redistribution of the estimated number of excess FTE resident slots to other qualified hospitals. In addition, section 5503(b) of the Affordable Care Act amended section 1886(d)(5)(B)(v) of the Act to require the application of the section 1886(h)(8) of the Act provisions in the same manner to the IME FTE resident caps. The policy implementing section 5503 of the Affordable Care Act was included in the November 24, 2010 CY 2011 OPPS/ASC final rule with comment period (75 FR 72147 through 72212) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53424 through 53434). Section 5506(a) of the Affordable Care Act amended section 1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the Secretary to establish a process by regulation under which, in the event a teaching hospital closes, the Secretary will permanently increase the FTE resident caps for hospitals that meet certain criteria up to the number of the closed hospital's FTE resident caps. The policy implementing section 5506 of the Affordable Care Act was included in the November 24, 2010 CY 2011 OPPS/ASC final rule with comment period (75 FR 72212 through 72238), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434 through 53448), and the FY 2015 IPPS/LTCH final rule (79 FR 50122 through 50140).

2. Provisions of the Consolidated Appropriations Act, 2021

The Consolidated Appropriations Act, 2021 (CAA), division CC, contained 3 provisions affecting Medicare direct GME and IME payments to teaching hospitals. Section 126 of the CAA makes available 1,000 new Medicare-funded GME positions (but not more than 200 new positions for a fiscal year), to be distributed beginning in fiscal year 2023, with priority given to hospitals in 4 statutorily-specified categories. Section 127 of the CAA makes statutory changes relating to the determination of both an urban and rural hospital's FTE resident limit for direct GME and IME payment purposes with regard to residents training in an accredited rural training track (RTT), and the 3-year rolling average set out at section 1886(h)(4)(G)(i) of the Act used to calculate payments for these hospitals. Section 131 of the CAA makes statutory changes to the determination of direct GME PRAs and direct GME and IME FTE resident limits of hospitals that hosted a small number of residents for a short duration. We provided detailed proposals for implementing these three CAA provisions in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25502 through 25523). In this section of this final rule with comment period, we discuss our proposals, respond to public comments received, and provide our final policies.

3. Distribution of Additional Residency Positions Under the Provisions of Section 126 of Division CC of the Consolidated Appropriations Act, 2021 (CAA)

a. Overview

As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25503 through 25504), section 126(a) of the CAA amended section 1886(h) of the Act by adding a new section 1886(h)(9) of the Act requiring the distribution of additional residency positions to qualifying hospitals. Section 1886(h)(9)(A) of the Act requires that for FY 2023, and for each succeeding fiscal year until the aggregate number of full-time equivalent (FTE) residency positions distributed is equal to 1,000, the Secretary shall initiate separate rounds of applications from hospitals for these additional residency positions. The Secretary is required, subject to certain provisions in the law, to increase the otherwise applicable resident limit for each qualifying hospital that submits a timely application by the number of positions that may be approved by the Secretary for that hospital. The Secretary is required to notify hospitals of the number of positions distributed to them by January 31 of the fiscal year of the increase, and the increase is effective beginning July 1 of that fiscal year. Section 1886(h)(9)(A) of the Act also limits the aggregate number of such positions made available in a single fiscal year across all hospitals to no more than 200.

In determining the qualifying hospitals for which an increase is provided, section 1886(h)(9)(B) of the Act requires the Secretary to take into account the “demonstrated likelihood” of the hospital filling the positions made available within the first 5 training years beginning after the date the increase would be effective, as determined by the Secretary.

Section 1886(h)(9)(B) of the Act also requires a minimum distribution for certain categories of hospitals. Specifically, the Secretary is required to distribute at least 10 percent of the aggregate number of total residency positions available to each of four categories of hospitals. Stated briefly, and discussed in greater detail later in this final rule with comment period, the categories are as follows: (1) Hospitals located in rural areas or that are treated as being located in a rural area (pursuant to sections 1886(d)(2)(D) and 1886(d)(8)(E) of the Act); (2) hospitals in which the reference resident level of the hospital is greater than the otherwise applicable resident limit; (3) hospitals in states with new medical schools or additional locations and branches of existing medical schools; and (4) hospitals that serve areas designated as Health Professional Shortage Areas (HPSAs). Section 1886(h)(9)(F)(ii) of the Act defines a qualifying hospital as a hospital in one of these four categories.

Section 1886(h)(9)(C) of the Act places certain limitations on the distribution of the residency positions. First, a hospital may not receive more than 25 additional FTE residency positions in total. Second, no increase in the otherwise applicable resident limit of a hospital may be made unless the hospital agrees to increase the total number of FTE residency positions under the approved medical residency

training program of the hospital by the number of positions made available to that hospital.

b. Determinations Required for the Distribution of Residency Positions

(1) Determination That a Hospital Has a “Demonstrated Likelihood” of Filling the Positions

Section 1886(h)(9)(B)(i) of the Act directs the Secretary to take into account the “demonstrated likelihood” of the hospital filling the positions made available within the first 5 training years beginning after the date the increase would be effective, as determined by the Secretary.

Section 1886(h)(9)(A)(iii)(II) of the Act requires that the increase would be effective beginning July 1 of the fiscal year of the increase. For FY 2023, this means the additional positions would be effective July 1, 2023.

In the FY 2022 IPPS/LTCH PPS proposed rule, we proposed that the application deadline for the additional positions available for a fiscal year would be January 31 of the prior fiscal year. However, as discussed later in this final rule with comment period, we are finalizing a deadline of March 31, such that the application deadline for the additional positions available for a fiscal year will be March 31 of the prior fiscal year. Accordingly, for FY 2023, all references in section II.B.3. of this final rule with comment period to the application deadline are references to the application deadline of March 31, 2022.

We proposed that a hospital would show a “demonstrated likelihood” of filling the additional positions (sometimes equivalently referred to as slots) for which it applies by demonstrating that it does not have sufficient room under its current FTE resident cap(s) to accommodate a planned new program or expansion of an existing program.

In order to demonstrate that it does not have sufficient room under its current FTE resident cap(s), we proposed that a hospital would be required to submit copies of its most recently submitted Worksheets E, Part A and E-4 from the Medicare cost report (CMS-Form-2552-10) as part of its application for an increase to its FTE resident cap.

We proposed that a hospital would demonstrate and attest to a planned new program or expansion of an existing program by meeting at least one of the following two criteria:

• “Demonstrated Likelihood” Criterion 1 (New Residency Program).

The hospital does not have sufficient room under its FTE resident cap, and the hospital intends to use the additional FTEs as part of a new residency program that it intends to establish on or after the date the increase would be effective (that is, a new program that begins training residents at any point within the hospital's first 5 training years beginning on or after the date the increase would be effective).

Under “Demonstrated Likelihood” Criterion 1, we proposed that the hospital would be required to meet at least one of the following conditions as part of its application:

□ Application for approval of the new residency program has been submitted to the ACGME or the American Board of Medical Specialties (ABMS) by the application deadline for that year.

□ The hospital has submitted an institutional review document or program information form concerning the new residency program in an application for approval of the new program by the application deadline for that year.

□ The hospital has received written correspondence by the application deadline for that year from the ACGME or ABMS acknowledging receipt of the application for the new residency program, or other types of communication from the accrediting bodies concerning the new program approval process (such as notification of site visit).

• “Demonstrated Likelihood” Criterion 2 (Expansion of an Existing Residency Program).

The hospital does not have sufficient room under its FTE resident cap, and the hospital intends to use the additional FTEs to expand an existing residency training program within the hospital's first 5 training years beginning on or after the date the increase would be effective. Under “Demonstrated Likelihood” Criterion 2, we proposed that the hospital would be required to meet at least one of the following conditions as part of its application:

□ The hospital has approval by the application deadline from an appropriate accrediting body (the ACGME or ABMS) to expand the number of FTE residents in the program.

□ The hospital has submitted by the application deadline an institutional review document or program information form for the expansion of the existing residency training program.

Under “Demonstrated Likelihood” Criterion 2, we proposed that the hospital would be applying for an increase in its FTE resident cap in order to expand an existing residency program. We proposed that this would mean that as of the application deadline the hospital was either already training residents in this program, or, if the program existed at another hospital as of that date, the residents would begin to rotate at the applying hospital on or after the effective date of the increase.

We note that section 1886(h)(9)(C)(ii) of the Act requires that if a hospital is awarded positions, that hospital must increase the number of its residency positions by the amount the hospital's FTE resident caps are increased based on the newly awarded positions under section 126 of CAA. We therefore proposed that a hospital must, as part of its application, attest to increase the number of its residency positions by the amount the hospital's FTE resident caps are increased based on any newly awarded positions.

We present a summary of the public comments and our responses to our proposals related to the determination that a hospital has a “demonstrated likelihood” of filling the positions awarded under section 126 of the CAA.

Comment:

Several commenters expressed support for our proposed “Demonstrated Likelihood” criteria.

Response:

We thank the commenters for their support.

Comment:

A commenter supported our proposal to award additional residency positions only for newly-created positions, rather than for existing positions that a hospital may already be funding in excess of its statutory FTE caps. Conversely, another commenter expressed concern that hospitals training residents over their caps are neglected by our proposed “Demonstrated Likelihood” criteria. This commenter questioned why such hospitals were not being prioritized in the distribution of additional residency positions, given the commenter's belief that there is almost certain likelihood that additional residency positions awarded to these hospitals would be immediately filled and utilized.

Response:

Section 1886(h)(9)(C)(ii) of the Act, as added by section 126 of the CAA, prohibits an increase in the otherwise applicable resident limit of a hospital unless the hospital agrees to increase its total number of FTE residency positions. Our proposed “Demonstrated Likelihood” criteria thus reflect the requirements set forth in the statute, which preclude the use of additional residency positions to fund existing positions. In response to the comment that hospitals that do not have sufficient room under their current FTE resident cap(s) (that is, hospitals that are training at or above their Medicare GME cap(s) and do not have any remaining

Medicare funding for positions to train additional FTE residents) should be prioritized in the distribution of additional residency positions, we note, as discussed in this section, that HPSA scores, while not a perfect measure, provide the best prioritization approach available at this time. In addition, and as discussed later in this section, in order to be eligible for prioritization based on HPSA scores, hospitals must first qualify under one or more of Category One, Category Two, Category Three, or Category Four. Category Two consists of hospitals in which the reference resident level of the hospital is greater than the otherwise applicable resident limit. Therefore, hospitals that do not have sufficient room under their current FTE resident caps, may qualify to be prioritized for the distribution of additional residency positions based on our prioritization of applications from hospitals based on HPSA score final policy, discussed further in this section.

Comment:

A commenter suggested that hospitals should be able to meet the “demonstrated likelihood” requirement by showing that the number of residency positions currently filled for one or more programs at the hospital is less than the number of residents for which those programs have been accredited by the ACGME. Another commenter made a similar point by requesting that the number of residency positions distributed to a hospital take into account the hospital's ability to use those residency positions immediately through existing programs. Another commenter stated that the reason a hospital has unfilled accredited residency positions may be that the hospital would be unable to train the full complement of residents without exceeding its FTE caps; the commenter added that such hospitals would not actually need to establish a new residency program or expand an existing program in order to quickly put any additional residency positions awarded to them to use.

Response:

We agree that a hospital should be able to meet the “demonstrated likelihood” requirement by showing that it has unfilled, previously accredited positions in its residency program, and that it is now seeking to fill those positions, as long as the hospital does not have sufficient room under its FTE resident cap(s) for the planned expansion. Therefore, we are modifying “Demonstrated Likelihood” Criterion 2 (Expansion of an Existing Residency Program) to include the scenario where a hospital currently has unfilled positions in its residency program that have previously been approved by the ACGME and is now seeking to fill those positions.

Comment:

Several commenters recommended that rural hospitals should only be awarded additional residency positions for the purpose of expanding existing programs, since such hospitals can already receive a cap adjustment whenever they establish a new program.

Response:

We believe rural hospitals should be given the option of receiving a permanent cap increase for a new program either under section 126 of the CAA, or under the existing 5-year cap-building process (42 CFR 413.70(e)). A rural hospital making this decision should carefully consider which option is more appropriate to its specific scenario.

Comment:

A commenter expressed concern that many small rural hospitals would be unlikely to meet the proposed requirements for residency positions under “Demonstrated Likelihood” Criterion 2 (Expansion of an Existing Residency Program), since such hospitals often restrict the size of their programs for reasons other than funding, for example, because of teaching capacity or recruiting challenges. The commenter stated that only large rural hospitals with established programs would be likely to meet the proposed requirements under “Demonstrated Likelihood” Criterion 2.

Response:

We appreciate the concerns raised by the commenter about unique challenges that may be faced by small rural hospitals. However, the statute requires us to take into account the “demonstrated likelihood” of a hospital filling the positions. Expansion of an existing program is a valid way for a hospital to demonstrate the likelihood of filling the positions. We note that since we are adopting a criterion that 50 percent of the program's training take place in the HPSA and not at the applicant hospital as proposed (which is discussed in section II.B.3.d. of this final rule with comment period), a rural hospital may be able to more easily partner with other participating training sites to meet the 50 percent criterion and be able to apply (and meet the requirements for “demonstrated likelihood”) for the amount of FTEs that will be training at its (the rural) hospital.

Comment:

Several commenters requested that we update our proposed “Demonstrated Likelihood” criteria to be consistent with the terminology currently used by the ACGME and the ABMS. Specifically, commenters noted that the ACGME “accredits” new residency programs, whereas we used the term “approval” in our proposed criteria. In addition, the ACGME no longer employs the terms “institutional review document” or “program information form.” Rather, if an existing ACGME-accredited program seeks to expand, the program director would submit a request to the relevant specialty Review Committee for a permanent complement increase. Finally, commenters noted that ACGME accreditation deadlines occur multiple times per year, whereas in our proposal we referred to requirements that must be satisfied “by the application deadline for that year”.

Response:

We thank commenters for bringing the terminology issues to our attention and are revising the language accordingly as summarized below. However, we believe that the commenters have misinterpreted our references to the “application deadline” as references to the ACGME accreditation deadlines. In the context of our proposed “Demonstrated Likelihood” criteria, the “application deadline” refers to the deadline for submitting applications to CMS for additional residency positions under section 126 of the CAA, not the deadline for submitting program materials to the ACGME or the ABMS, as the commenters stated. We are therefore also clarifying that the phrase “application deadline” used in this context refers to the deadline for submitting applications under section 126 of the CAA for a given fiscal year. (As noted previously, in this final rule with comment period we are revising this deadline to March 31 of the prior fiscal year.)

In summary, after consideration of the public comments received, we are finalizing our proposed policy regarding the determination that a hospital has demonstrated a likelihood of filling the positions for “Demonstrated Likelihood” Criterion 1 (New Residency Program) with modifications. Under the policy finalized in this final rule with comment period, as we proposed, a hospital will show a “demonstrated likelihood” of filling the additional positions (sometimes equivalently referred to as slots) for which it applies by demonstrating that it does not have sufficient room under its current FTE resident cap(s) to accommodate a planned new program or expansion of an existing program. To do so, as we proposed, we are finalizing a policy that a hospital will submit copies of its most recently submitted Worksheets E, Part A and E-4 from the Medicare cost report (CMS-Form-2552-10) as part of its application for an increase to its FTE resident cap, and will demonstrate and attest to a planned new program or

expansion of an existing program by meeting at least one of two “Demonstrated Likelihood” criteria.

Specifically, we are finalizing the following for “Demonstrated Likelihood” Criterion 1:

• “Demonstrated Likelihood” Criterion 1 (New Residency Program).

The hospital does not have sufficient room under its FTE resident cap, and the hospital intends to use the additional FTEs as part of a new residency program that it intends to establish on or after the date the increase would be effective (that is, a new program that begins training residents at any point within the hospital's first 5 training years beginning on or after the date the increase would be effective). Under “Demonstrated Likelihood” Criterion 1, the hospital will be required to meet at least one of the following conditions as part of its application:

□ Application for accreditation of the new residency program has been submitted to the ACGME (or application for approval of the new residency program has been submitted to the ABMS) by the application deadline.

□ The hospital has received written correspondence from the ACGME (or ABMS) acknowledging receipt of the application for the new residency program, or other types of communication concerning the new program accreditation or approval process (such as notification of site visit) by the application deadline.

For “Demonstrated Likelihood” Criterion 2, we are finalizing the following:

• “Demonstrated Likelihood” Criterion 2 (Expansion of an Existing Residency Program).

The hospital does not have sufficient room under its FTE resident cap, and the hospital intends to use the additional FTEs to expand an existing residency training program within the hospital's first 5 training years beginning on or after the date the increase would be effective. Under “Demonstrated Likelihood” criterion 2, the hospital will be required to meet at least one of the following conditions as part of its application:

□ The hospital has received approval by the application deadline from an appropriate accrediting body (the ACGME or ABMS) to expand the number of FTE residents in the program.

□ The hospital has submitted a request by the application deadline for a permanent complement increase of the existing residency program.

□ The hospital currently has unfilled positions in its residency program that have previously been approved by the ACGME and is now seeking to fill those positions.

We are also finalizing, as we proposed, a policy that under “Demonstrated Likelihood” Criterion 2, the hospital is applying for an increase in its FTE resident cap because it is expanding an existing residency program. This means that as of the application deadline the hospital is either already training residents in this program, or, if the program exists at another hospital as of that date, the residents will begin to rotate at the applying hospital on or after the effective date of the increase. In addition, we note that section 1886(h)(9)(C)(ii) of the Act requires that if a hospital is awarded positions, that hospital must increase the number of its residency positions by the amount the hospital's FTE resident caps will increase, based on the newly awarded positions under section 126 of CAA. Therefore, we will require that a hospital must, as part of its application, attest to increase the number of its residency positions by the amount the hospital's FTE resident caps are increased based on any newly awarded positions in accordance with the provisions of section 1886(h)(9)(B)(i) of the Act.

(2) Determination of Hospitals That Are Located in a Rural Area or Are Treated as Being Located in a Rural Area (Category One)

Section 1886(h)(9)(B)(ii) of the Act requires the Secretary to distribute not less than 10 percent of resident positions available for distribution to each of four categories of hospitals. Under section 1886(h)(9)(B)(ii)(I) of the Act, the first of these categories consists of hospitals that are located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or are treated as being located in a rural area pursuant to section 1886(d)(8)(E) of the Act. We refer to this category as Category One.

Section 1886(d)(2)(D)(ii) of the Act defines a rural area as any area outside a Metropolitan Statistical Area (MSA). Under the existing regulations at § 412.64(b)(1)(ii), an “urban area” means an MSA or a Metropolitan Division (in the case where a Metropolitan Statistical Area is divided into Metropolitan Divisions), as defined by the Office of Management and Budget. Under existing § 412.64(b)(1)(ii)(C), a “rural area” means any area outside an urban area. Since FY 2005, we no longer use the term MSA, but instead use the term Core-Based Statistical Area (CBSA). Certain CBSAs are designated as urban, while those not designated as urban are considered rural. For purposes of section 1886(h)(9)(B)(ii) of the Act, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25504), we proposed that a hospital with its main campus located in an area outside of an urban CBSA would be considered a rural hospital. We note that this definition of “rural area” is consistent with our policy concerning designation of rural areas for wage index purposes.

Similar to our historical wage index policy of cross walking counties to CBSAs, CMS proposed to use the County to CBSA Crosswalk and Urban CBSAs and Constituent Counties for Acute Care Hospitals File, or successor files containing similar information, from the most recent FY IPPS final rule (or correction notice if applicable) to determine if a hospital is a rural hospital. (This file is available on the CMS website in approximately August of the year prior to the year of the application deadline. Under the file's current format, blank cells in Columns D and E indicate an area outside of a CBSA.)

Under section 1886(d)(8)(E) of the Act, a subsection (d) hospital (that is, generally, an IPPS hospital) that is physically located in an urban area is treated as being located in a rural area for purposes of payment under the IPPS if it meets criteria specified in section 1886(d)(8)(E)(ii) of the Act, as implemented in the regulations at § 412.103. Under these regulations, a hospital may apply to CMS to be treated as located in a rural area for purposes of payment under the IPPS.

Given the fixed number of available residency positions, it is necessary to establish a deadline by which a hospital must be treated as being located in a rural area for purposes of Category One. We proposed to use Table 2, or a successor table containing similar information, posted with the most recent IPPS final rule (or correction notice if applicable) to determine whether a hospital is reclassified to rural under § 412.103. If a hospital is not listed as reclassified to rural on Table 2, but has been subsequently approved by the CMS Regional Office to be treated as being located in a rural area for purposes of payment under the IPPS as of the application deadline for additional positions for the fiscal year, we proposed that the hospital must submit its approval letter with its application in order to be treated as being located in a rural area for purposes of Category One.

In this section we present a summary of the public comments and our responses to our proposals related to the determination of hospitals that are located in a rural area or are treated as

being located in a rural area (Category One).

Comment:

Several commenters expressed support for our proposed definition of Category One hospitals.

Response:

We thank the commenters for their support.

Comment:

A commenter supported our proposed definition of a rural area, but suggested that we expand it to include certain locations within MSAs that are considered rural by the Federal Office of Rural Health Policy. The same commenter recommended that we assign a lower priority to geographically urban hospitals that have been reclassified as rural for wage index purposes, stating that this reclassification is done for payment equity purposes and does not make such facilities rural in any meaningful sense.

Response:

Our proposed definition of a rural area is consistent with how that term is employed in the context of the Medicare statute. In particular, it is consistent with section 1886(h)(9)(B)(ii)(I) of the Act, as added by section 126 of the CAA, which refers specifically to the definition of a rural area at section 1886(d)(2)(D) of the Act. Furthermore, as we stated in the FY 2022 IPPS/LTCH PPS proposed rule, our definition is consistent with our policy concerning designation of rural areas for other purposes, including the wage index. For these reasons, we are not amending our definition of rural for purposes of section 126 of the CAA.

With respect to the commenter's second point concerning rural reclassifications, we believe that the commenter may have misinterpreted our proposal. The commenter referred specifically to urban hospitals that have been reclassified as rural for wage index purposes. We believe that the commenter was referring to hospitals that have been reclassified as rural by the Medicare Geographic Classification Review Board (MGCRB). Under section 1886(d)(10) of the Act, as implemented at 42 CFR 412.230, the MGCRB may change the classification of a hospital for purposes of the wage index only. However, the legislation directs the Secretary to consider hospitals that are treated as being located in a rural area pursuant to section 1886(d)(8)(E) of the Act, which is a separate provision. Section 1886(d)(8)(E) of the Act, as implemented at § 412.103, is applicable beyond the calculation of the wage index. In particular, under § 412.103(a)(1), an urban hospital may apply to be reclassified as rural if it is located in a rural census tract of an MSA as determined by the Federal Office of Rural Health Policy. We believe that this is the same criterion that the commenter requested be consider in expanding our proposed definition of a rural area. Additionally, because section 1886(h)(9)(B)(ii)(I) of the Act references both hospitals that are located in a rural area (as defined in section 1886(d)(2)(D) of the Act) and those that are treated as being located in a rural area pursuant to section 1886(d)(8)(E) of the Act, we read the statutory language as intending for both groups of hospitals to receive equal treatment.

With respect to hospitals that have reclassified as rural under § 412.103 (section 1886(d)(8)(E) of the Act), we note that consistent with our past application of rural reclassification to GME payment policies, these hospitals are considered rural for IME payment purposes and urban for direct GME payment purposes. However, we believe the inclusion of these hospitals under section 126 of the CAA is intended only to deem these hospitals as eligible recipients of the additional slots being distributed under section 126 of the CAA. We do not believe section 126 of the CAA limits urban hospitals that have reclassified as rural to only receiving IME FTE residency positions. As such, these hospitals are eligible for both direct GME and IME FTE residency positions under section 126 of the CAA.

Comment:

Several commenters requested that we clarify whether rural referral centers are included in the definition of hospitals that are located in a rural area or are treated as being located in a rural area.

Response:

Generally, in order to qualify for rural referral center (RRC) status under the criteria set forth at 42 CFR 412.96, a hospital must be rural, that is, either located in a rural area, or treated as being located in a rural area under section 1886(d)(8)(E) of the Act. Most RRCs would therefore qualify under Category One as defined previously in this final rule with comment period. However, we permit hospitals that previously qualified as an RRC but lost their status due to the Office of Management and Budget (OMB) redesignation of the county in which they are located from rural to urban to be reinstated as an RRC (August 1, 2000 IPPS final rule (65 FR 47054, 47089)). Currently, there are a relatively small number of hospitals with RRC status that are neither located in a rural area nor treated as being located in a rural area under section 1886(d)(8)(E) of the Act (approximately 11 percent). We are clarifying that such hospitals, despite their status as RRCs, would not qualify under Category One.

Comment:

A commenter expressed concern that, as a result of our proposal to use the County to CBSA Crosswalk and Urban CBSAs and Constituent Counties for Acute Care Hospitals File, urban hospitals reclassified to rural may still be able to claim treatment as rural hospitals despite being located well within a CBSA. The same commenter also suggested what they characterized as a grammatical edit to our definition of rural for purposes of Category One. In the proposed rule, we proposed that a hospital with its main campus located in an area outside of an urban CBSA is a rural hospital. The commenter recommended that we revise this language to state that a hospital would be considered located in a rural area, or treated as such, if its main campus was located in an area outside of an urban CBSA and was classified as a rural hospital (that is, not reclassified as urban). The commenter added that this restriction would avoid allowing large urban rural referral centers to expand an existing program and take these residency positions from geographically rural hospitals, which would thwart what the commenter believes to be the legislative intent of the statute.

Response:

We believe the commenter is referring to hospitals that are located in urban CBSAs and have been reclassified as rural under section 1886(d)(8)(E) of the Act, as implemented in the regulations at 42 CFR 412.103. As discussed previously, the statute explicitly refers to such reclassified hospitals among the categories of qualifying hospitals in section 1886(h)(9)(B)(ii)(I) of the Act. The preamble language cited by the commenter, and to which a grammatical edit was suggested, is only part of our proposed definition, which also includes hospitals reclassified as rural, as required by the statute. We further note that, as we proposed, such hospitals would not be identified using the County to CBSA Crosswalk and Urban CBSAs and Constituent Counties for Acute Care Hospitals File, but rather by consulting Table 2, or a successor table containing similar information, posted with the most recent IPPS/LTCH PPS final rule (or correction notice if applicable). If a hospital is not listed as reclassified to rural on Table 2, but has been subsequently approved by the CMS Regional Office to be treated as being located in a rural area for purposes of payment under the IPPS as of the application deadline for additional positions for the fiscal year, the hospital must submit its approval letter with its application in order to be treated as being located in a rural area for purposes of Category One.

It also appears that the commenter may have conflated two distinct

categories of hospitals, namely, urban hospitals reclassified as rural under § 412.103, and RRCs, which are governed by the regulations at § 412.96. While an urban hospital reclassified as rural may elect to apply for RRC status if it meets the criteria set forth at § 412.96, such assignment is not automatic, and many RRCs are in fact geographically rural. Thus, as explained previously, many, but not all, RRCs may qualify as rural hospitals for purposes of section 126 of the CAA, depending on whether they otherwise satisfy the criteria for Category One.

Comment:

A commenter, located in an urban area within a largely rural state, requested that CMS reconsider our proposed definition of hospitals located in rural areas or treated as being located in rural areas. Another commenter, stated that despite being located in a rural area and serving a mostly rural population, they would not qualify under Category One since the zip code of the hospital itself is not located in a HPSA.

Response:

In response to the first commenter, we refer to the language of section 1886(h)(9)(B)(ii)(I) of the Act concerning rural hospitals, and note that a hospital located in an urban area cannot qualify under this category (Category One) unless it has reclassified as rural in accordance with the regulations at 42 CFR 412.103. We believe that the second commenter has conflated our proposals regarding two distinct statutory categories, namely, Category One (rural hospitals) and Category Four (hospitals that serve HPSAs). In response, we are clarifying that a hospital located in a rural area, or that is treated as being located in a rural area, qualifies under Category One whether or not it is physically located in a HPSA.

Comment:

A commenter requested that the states of Hawaii and Alaska, in addition to the U.S. territories of Guam, American Samoa, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, be recognized as rural for any federal definition. The commenter stated that these areas face significant health care challenges as they are non-contiguous and distant from the rest of the United States, and that their health care systems are isolated and vulnerable.

Response:

Designating the states of Hawaii and Alaska, in addition to the U.S. territories of Guam, American Samoa, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, as rural for any federal definition is beyond the scope of this rulemaking. We note that hospitals in these states and territories that are located in a rural area or are treated as being located in a rural area, as applicable, are eligible to apply for residency positions under section 126.

Comment:

A commenter stated that we should revise our proposed definition of Category One to include the requirement that the majority of residents' training should take place in a rural area. The commenter argued that, if the goal is to train more physicians to remain and serve in communities of need, then the greatest priority should be given to hospitals and systems that themselves are located in rural areas, and in fact serve rural communities. According to the commenter, this should include caveats that the training itself take place in a “rural MSA,” and residency positions should not be awarded to an organization that has a facility located in a rural MSA if that facility would not be the primary place of training.

Response:

We agree with the commenter that the training and retention of physicians in rural and underserved areas is an important goal. However, the law requires that hospitals that are located in a rural area (as defined in section 1886(d)(2)(D) of the Act) or are treated as being located in a rural area pursuant to section 1886(d)(8)(E) of the Act are qualifying hospitals. Prioritization of applications is a separate issue from the definition of Category One (and is discussed in section II.B.3.d. of this final rule with comment period).

After review of the public comments received, we are finalizing our proposal regarding the determination of hospitals that are located in a rural area or are treated as being located in a rural area (Category One) as proposed, without modification.

(3) Determination of Hospitals for Which the Reference Resident Level of the Hospital is Greater Than the Otherwise Applicable Resident Limit (Category Two)

Under section 1886(h)(9)(B)(ii)(II) of the Act, the second category consists of hospitals in which the reference resident level of the hospital (as specified in section 1886(h)(9)(F)(iii) of the Act) is greater than the otherwise applicable resident limit. We refer to this category as Category Two.

Under section 1886(h)(9)(F)(iii) of the Act, the term `reference resident level' means, with respect to a hospital, the resident level for the most recent cost reporting period of the hospital ending on or before the date of enactment of section 1886(h)(9) of the Act, December 27, 2020, for which a cost report has been settled (or, if not, submitted (subject to audit)), as discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25505).

Under section 1886(h)(9)(F)(iii) of the Act, the term `resident level' has the meaning given such term in paragraph (7)(C)(i). That section defines “resident level” as with respect to a hospital, the total number of full-time equivalent residents, before the application of weighting factors (as determined under paragraph (4)), in the fields of allopathic and osteopathic medicine for the hospital.

Under section 1886(h)(9)(F)(i) of the Act, the term `otherwise applicable resident limit' means, with respect to a hospital, the limit otherwise applicable under subparagraphs (F)(i) and (H) of paragraph (4) on the resident level for the hospital determined without regard to the changes made by this provision of CAA 2021, but taking into account section 1886(h)(7)(A), (7)(B), (8)(A), and (8)(B) of the Act. These paragraphs all address the distribution of positions and redistribution of unused positions.

In the CY 2011 OPPS final rule with comment period, we previously interpreted these terms when we implemented section 5503 of the Affordable Care Act. Under section 1886(h)(8)(H)(i) of the Act (as interpreted in the CY 2011 OPPS final rule (75 FR 46391)), the “reference resident level” generally refers to the number of unweighted allopathic and osteopathic FTE residents who are training at a hospital in a given cost reporting period. That is, the “reference resident level” refers to a hospital's allopathic and osteopathic FTE resident count for a specific period. The definition can vary based on what calculation is being performed to determine the correct allopathic and osteopathic FTE resident count (see, for example, 42 CFR 413.79(c)(1)(ii)). As noted previously, section 126 of the CAA, under new section 1886(h)(9)(F)(iii) of the Act defines the “reference resident level” as coming from the most recent cost reporting period of the hospital ending on or before the date of enactment of the CAA (that is, December 27, 2020).

Under new section 1886(h)(9)(F)(i) of the Act, the term “otherwise applicable resident limit” is defined as “the limit otherwise applicable under subparagraphs (F)(i) and (H) of paragraph (4) on the resident level for the hospital determined without regard to this paragraph but taking into account paragraphs (7)(A), (7)(B), (8)(A), and (8)(B).” In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25505), we proposed to define this as the hospital's 1996 cap during its reference year,

adjusted for the following: New programs as defined at § 413.79(e); participation in a Medicare GME affiliation agreement as defined at §§ 413.75(b) and 413.79(f); participation in an Emergency Medicare GME affiliation agreement as defined at § 413.79(f); participation in a hospital merger; whether an urban hospital has a separately accredited rural training track program as defined at § 413.79(k); applicable decreases or increases under section 422 of the MMA, applicable decreases or increases under section 5503 of the Affordable Care Act, and applicable increases under section 5506 of the Affordable Care Act.

Regarding the term “resident level”, in the CY 2011 OPPS final rule (75 FR 46391) we indicated that we generally refer to a hospital's number of unweighted allopathic and osteopathic FTE residents in a particular period as the hospital's resident level, which we proposed to define consistently with the definition in section 126 of the CAA; that is, the “resident level” under section 1886(h)(7)(c)(i) of the Act, which is defined as the total number of full-time equivalent residents, before the application of weighting factors (as determined under paragraph (4)), in the fields of allopathic and osteopathic medicine for the hospital.

For the purposes of section 126 of the CAA we proposed that the definitions of the terms “otherwise applicable resident level,” “reference resident level,” and “resident level” should be as similar as possible to the definitions those terms have in the regulations at § 413.79(c) as developed in the CY 2011 OPPS rulemaking.

The following is a summary of the public comments and our responses to our proposals related to the determination of hospitals for which the reference resident level of the hospital is greater than the otherwise applicable resident limit (Category Two).

Comment:

Several commenters expressed support for our proposed definition of Category Two hospitals.

Response:

We thank the commenters for their support.

Comment:

A few commenters requested that we clarify that a hospital qualifies under Category Two if it is over its direct GME cap, its IME cap, or both. Some commenters added that such an interpretation would be consistent with our implementation of the distribution process under section 5503 of Public Law 111-148.

Response:

We are clarifying that a hospital qualifies for direct GME residency positions under Category Two if it is over its direct GME cap; qualifies for IME residency positions under Category Two if it is over its IME cap; and qualifies for both direct GME and IME residency positions if it is over both its direct GME and IME caps. Furthermore, we are clarifying that a hospital may only apply for direct GME and/or IME residency positions if it does not have sufficient room to start a new program or expand an existing program under its existing direct GME and/or IME caps, respectively. For example, if a hospital has sufficient room under its IME cap to expand an existing program, but not under its direct GME cap, that hospital may only apply for direct GME residency positions, but not IME residency positions, to facilitate the planned expansion.

Comment:

A commenter expressed concern that Category Two may bias financing decisions toward larger hospitals that are more likely to be able to support residency positions in excess of their caps due to the training of more self-sustaining subspecialty physicians.

Response:

While we acknowledge the commenter's concern, we note that hospitals training residents in excess of their otherwise applicable resident limit or caps, are included among qualifying hospitals as defined by the statute, which also requires that we distribute at least 10 percent of the aggregate number of additional residency positions to hospitals that qualify under this category.

After review of the public comments received, we are finalizing our proposal regarding the determination of hospitals for which the reference resident level of the hospital is greater than the otherwise applicable resident limit (Category Two) as proposed, without modification.

(4) Determination of Hospitals Located in States With New Medical Schools, or Additional Locations and Branch Campuses (Category Three)

The third category specified in section 1886(h)(9)(B)(ii) of the Act, as added by section 126 of CAA, consists of hospitals located in States with new medical schools that received `Candidate School' status from the Liaison Committee on Medical Education (LCME) or that received `Pre-Accreditation' status from the American Osteopathic Association (AOA) Commission on Osteopathic College Accreditation (the COCA) on or after January 1, 2000, and that have achieved or continue to progress toward `Full Accreditation' status (as such term is defined by the LCME) or toward `Accreditation' status (as such term is defined by the COCA); or additional locations and branch campuses established on or after January 1, 2000, by medical schools with `Full Accreditation' status (as such term is defined by LCME) or `Accreditation' status (as such term is defined by the COCA). We note that the statutory language is specific with respect to these definitions. We refer to this category as Category Three.

Based on research and assistance received from LCME and the COCA, we understand that each accrediting body administers a multi-step process for applicant medical schools to progress to fully accredited status within the first few years after they are established and begin training students. LCME grants candidate status to an applicant medical education program after it reviews and approves the medical school's data collection instrument and planning self-study; at this point, it determines that the school is ready for a survey visit, and the preliminary accreditation survey visit is scheduled. After that visit, LCME reviews the survey team's preliminary survey report and determines whether or not sufficient progress toward compliance with accreditation standards has been made and satisfactory plans for the medical education program have been developed.

If LCME grants preliminary accreditation status, the school may begin accepting applications for enrollment. During the second year of the school's charter class, a school with preliminary accreditation status may submit information and receive a survey site visit to determine whether it meets criteria for provisional accreditation status. Finally, LCME grants full accreditation status to schools with provisional accreditation status, typically in the fourth teaching year, after determining the school is in compliance with or has made significant progress toward attaining compliance with all full accreditation standards.

LCME defines a regional campus, comparable to “additional locations and branch campuses” in section 1886(h)(9)(B)(ii)(III)(bb) of the Act, as a site distinct from the main campus of the medical school where students spend at least 1 full year of the curriculum. Regional campuses of a medical education program receive accreditation status through the main campus of the program and are not separately accredited.

The COCA may grant pre-accreditation status to a proposed college of osteopathic medicine (COM) that has achieved candidate status and meets the standards of pre-accreditation status. The pre-accreditation process starts with the submission of a pre-

accreditation self-study by a proposed COM; COCA staff then reviews the submission and conducts a site visit to examine the proposed COM's compliance with accreditation standards. Following the site visit, the COCA reviews the site visit report and other submitted information and grants pre-accreditation status to a proposed COM that meets the pre-accreditation standards. Once a proposed COM receives pre-accreditation status, it may begin to recruit, accept applications from, and admit prospective students. We note that prior to 2017, the COCA used the term “provisional status” instead of “pre-accreditation status.”

The COCA may grant accreditation status to a COM that has achieved pre-accreditation status and meets the standards for accreditation. These accreditation statuses include accreditation with exceptional outcome, accreditation, accreditation with heightened monitoring, accreditation with warning, and accreditation with probation. Any accreditation status constitutes full accreditation, in contrast to pre-accreditation status or candidate status, which do not constitute full accreditation status.

The COCA defines a branch campus as a geographically separate location apart from the COM's main campus that is: Permanent in nature; offers courses in educational programming leading to a doctorate in osteopathic medicine; has its own faculty and administrative or supervisory organization; and maintains its own budgetary and hiring authority. A COM that establishes a branch location must apply for and receive separate approval from the COCA; the application process has four steps: A written application and branch campus self-study, a progress report, a revised branch campus self-study and site visit, and a final, pre-operational site visit.

The COCA defines an additional location as a location that is geographically separate from the main campus of a COM, but unlike a branch location, shares administration, faculty, curriculum, and budgetary authority with the main campus. Additional locations receive accreditation through the main campus of the COM following the review of documents and a survey site visit, after which a COM may enroll students in the additional location.

Based on information gathered from LCME and the COCA about new medical schools, additional locations and branch campuses, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25506), we proposed that hospitals located in the following 35 States and 1 territory, referred to as Category Three States, would be considered Category Three hospitals: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin. We further stated that if a hospital is located in a state not listed here, but believes the state in which it is located should be on this list, the hospital could submit a formal comment on the proposed rule to make a change to this list, or could provide documentation with submission of its application to CMS that the state in which it is located has a medical school or additional location or branch campus of a medical school established on or after January 1, 2000. Pursuant to the statutory language, all hospitals in such states are eligible for consideration; the hospitals, themselves, do not need to meet the conditions of section 1886(h)(9)(B)(ii)(III)(aa) or (bb) of the Act in order to be considered.

Comment:

Several commenters expressed support for our proposed definition of Category Three hospitals.

Response:

We thank the commenters for their support.

In addition, we did not receive any comments requesting that a state be added to the list of Category Three states.

Therefore, after review of the public comments received, we are finalizing our proposal regarding the determination of hospitals located in states with new medical schools, or additional locations and branch campuses (Category Three) as proposed, without modification.

(5) Determination of Hospitals That Serve Areas Designated as Health Professional Shortage Areas Under Section 332(a)(1)(A) of the Public Health Service Act (Category Four)

The fourth category specified in the law consists of hospitals that serve areas designated as health professional shortage areas under section 332(a)(1)(A) of the Public Health Service Act (PHSA), as determined by the Secretary. We refer to this category as Category Four.

The Health Resources and Services Administration (HRSA) designates certain areas as health professional shortage areas (HPSAs). Section 332(a)(1)(A) of the PHSA, states that a “health professional shortage area” is “an area in an urban or rural area (which need not conform to the geographic boundaries of a political subdivision and which is a rational area for the delivery of health services) which the Secretary determines has a health manpower shortage”. HRSA designates HPSAs for primary care, mental health, and dental health.

A geographic area may be designated as a HPSA under section 332(a)(1)(A) of the PHSA only on the basis of a shortage of services for the entire population within that area (a “geographic HPSA”). Subsequent clauses of 332(a)(1) refer to other types of HPSAs, to which we will return later in this final rule with comment period. The geographic area to which a geographic HPSA is assigned may be a single county, multiple counties, a county subdivision, census tract, or a group of census tracts.

As we noted in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25506), section 126 of the CAA does not explicitly address the question of how HPSAs for different medical specialties should factor into determining which hospitals serve areas designated as HPSAs. In our consideration of this question, we began by examining the use of HPSAs in the HPSA Physician Bonus Program authorized under section 1833(m) of the Act. This program is relevant because Congress established the program as an incentive to attract new physicians to medically underserved communities and to encourage physicians in those areas to remain there (69 FR 47517 through 47518).

The HPSA Physician Bonus Program was created by Section 4043 of the Omnibus Budget Reconciliation Act (OBRA) of 1987, which added section 1833(m) to the Act. It provides incentive payments to physicians who furnish services to an individual in an area that is designated as a HPSA. Originally, under section 1833(m) of the Act, a 5 percent payment was added, beginning January 1, 1989, to the amounts otherwise payable to physicians who furnish services to Medicare patients in designated HPSAs. Section 6102 of OBRA 1989 further amended section 1833(m) of the Act to raise the amount of this incentive payment from 5 percent to 10 percent for services furnished after December 31, 1990. The OBRA 1989 amendment also expanded eligible service areas to include both rural and urban HPSAs.

We first examined the role of primary care geographic HPSAs in the HPSA Physician Bonus program. Physicians furnishing services in a primary care geographic HPSA are eligible to receive the bonus payments and the payments apply to all physicians who perform covered services within a primary care

geographic HPSA, regardless of specialty. Similarly, section 126 of the CAA does not explicitly distinguish between physician specialties for purposes of allocating the additional residency positions. Therefore, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25507), we proposed that primary care geographic HPSAs would be considered in determining what hospitals qualify under Category Four and that hospitals that have main campuses or provider-based facilities in these HPSAs may apply for additional residency positions for any specialty. We also note CMS used primary care HPSAs for the allocation of residency positions for purposes of section 5503 of the Affordable Care Act (75 FR 72147).

We next considered the use under the HPSA Physician Bonus Program of areas that are solely mental health geographic HPSAs and not also primary care geographic HPSAs. We will refer to these areas as mental health only geographic HPSAs. The HPSA Physician Bonus Program provides incentive payments for services provided in mental health only geographic HPSAs,

but only for services provided by psychiatry provider specialties.

The distinction between primary care geographic HPSAs, in which all physician provider specialties, including psychiatry provider specialties, receive the incentive payments, and mental health only geographic HPSAs, in which only psychiatry provider specialties receive the incentive payments, is relevant to the question of how mental health only geographic HPSAs should factor into determining hospitals that serve areas designated as HPSAs for purposes of section 126 of the CAA. We believe that it is appropriate to incorporate this feature of the HPSA Physician Bonus Program as well, and proposed to use mental health only geographic HPSAs for mental health providers accordingly in the determination of hospitals that serve areas designated as HPSAs. Thus, we proposed that hospitals that only have main campuses or provider-based facilities in mental health only geographic HPSAs could only apply for residency positions for psychiatry residency programs.

We next considered dental geographic HPSAs. Under section 1886(h)(4)(F) of the Act, for cost reporting periods beginning on or after October 1, 1997, a hospital's unweighted FTE count of allopathic and osteopathic residents for purposes of direct GME may not exceed the hospital's unweighted FTE count for direct GME in its most recent cost reporting period ending on or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for IME during the same cost reporting period is applied effective for discharges occurring on or after October 1, 1997. Given that dental residents are not included in this statutory cap and that section 126 of the CAA distributes additional residency positions in the context of the statutory cap, we did not propose that dental geographic HPSAs should factor into the determination of whether a hospital serves a HPSA for purposes of section 126 of the CAA.

In summary, we proposed to consider geographic HPSAs for primary care and mental health providers for purposes of determining hospitals that serve areas designated as HPSAs. We proposed that hospitals that only have campuses or provider-based facilities in mental health only geographic HPSAs could only apply for positions for psychiatry residency programs. We did not propose to consider dental HPSAs as dental FTE residents are not subject to a hospital's IME and direct GME caps.

We next considered what hospitals serving areas designated as primary care or mental health HPSAs means for purposes of Category Four. As with the question regarding the role of primary care, mental health, and dental HPSAs, section 126 of the CAA does not explicitly address this question.

As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25507), there are many possible interpretations of what hospitals that serve areas designated as primary care or mental health HPSAs means for purposes of Category Four. The most expansive interpretation might be that this refers to the universe of hospitals where each hospital provides care to at least one patient that resides in a HPSA without regard to the location of the main campus of the hospital or of its other patient care locations. This interpretation could be made less expansive by developing a relative or absolute threshold for the number of patients of the hospital that reside in HPSAs. It could also be made less expansive by considering whether the physical location of the main campus of the hospital and/or its other patient care locations are inside of or proximate to a HPSA.

In considering this issue, we prioritized objective factors that would maximize distribution of GME positions to residency programs serving underserved populations. (See section V.J.2.a.(4). of the preamble of the FY 2022 IPPS/LTCH PPS proposed rule for a further discussion of our proposals for prioritizing care to underserved populations.) To this end, we proposed that a hospital could qualify under Category Four if it had its main campus or a provider-based facility (under 42 CFR 413.65) physically located in a primary care or mental health only geographic HPSA. Additionally, as part of the qualification requirements under Category Four, in the residency program for which the hospital was applying, we proposed that at least 50 percent of the residents' training time over the duration of the program would have to occur at those locations in the HPSA. We stated in the proposed rule that we believed it was important to avoid the possibility that a hospital with provider-based facilities in multiple locations, some of which may not be located in a HPSA, uses an additional residency position mostly or entirely to serve populations that face no health service shortage.

We proposed that a Category Four hospital submit an attestation, signed and dated by an officer or administrator of the hospital who signs the hospital's Medicare cost report, that it has its main campus or a provider-based facility (under 42 CFR 413.65) physically located in a primary care or mental health only geographic HPSA, and in the program for which the hospital is applying, at least 50 percent of the residents' training time over the duration of the program occurs at those locations in the HPSA.

For example under our proposal, Hospital A applies under Category Four for a psychiatry residency program. Its main campus is located in a non-HPSA area and it has one provider-based facility located in a mental health only geographic HPSA. Hospital A must attest that residents training in the psychiatry residency program spend at least 50 percent of the duration of their training in the program at its provider-based facility located in the mental health only geographic HPSA.

As another example, Hospital B applies for a residency program. Its main campus is located in a primary care geographic HPSA and it has two provider-based facilities, one in the same geographic HPSA as the main campus and one in a non-HPSA area. Hospital B must attest that residents training in the program will spend at least 50 percent of the duration of their training in the program on the main campus or at the provider-based facility located in the geographic HPSA, combined (for example, 30 percent of the time on the main campus and 20 percent at the provider-based facility).

The following is a summary of the public comments and our responses to our proposals related to Category Four qualification requirements.

Comment:

Many commenters objected to the proposed requirement that a hospital or provider-based facilities be located in a primary care or mental health only geographic HPSA to be eligible under Category Four. Several commenters expressed concern that our proposed definition of Category Four limits hospitals from eligibility and that as a result, only a small number of hospitals would qualify for residency positions awarded under section 126 of the CAA. Other commenters argued that this constraint does not take into account that many geographic HPSA residents rely on health services provided outside of their HPSA. A commenter noted this is particularly true of certain specialty care services, such as mental health services, for which HPSA-residing patients are referred to academic medical centers located in urban areas. Several commenters suggested that it is for this reason that the statutory language describes hospitals that serve HPSAs rather than explicitly limiting eligibility under this category to hospitals physically located within the geographic boundaries of HPSAs.

Many commenters believe Category Four should be interpreted to more generally include hospitals that play a meaningful role in providing health services to residents of shortage areas. These commenters suggested we modify our proposal to include both hospitals located within HPSAs and those within a reasonable distance of one. Several commenters provided specific recommendations on what would be considered within a reasonable distance of a HPSA, such as within one mile, 10 miles, 20 miles, and 25 miles. In addition, a commenter requested that CMS revise our proposed definition of Category Four so that a hospital may be eligible for section 126 of the CAA residency positions on the basis of serving either a geographic or “population” HPSA (the following link includes a brief description of HPSAs:

https://bhw.hrsa.gov/workforce-shortage-areas/shortage-designation#hpsas

). Another commenter noted that some underserved communities do not qualify for geographic or population HPSAs because of their proximity to wealthier areas, but face provider shortages that deserve recognition under Category Four. Some commenters recommended that we define Category Four in terms of the measure of the hospital's patient population that reside within geographic HPSAs, using either an absolute or proportionate threshold. A commenter requested flexibility in the data sources that hospitals may use to demonstrate they are serving or will at some point serve HPSA populations, including data from other government agencies and non-profit organizations.

Many commenters opposed the proposed requirement that to qualify under Category Four, at least 50 percent of residents' training time in the program must occur in facilities located in the geographic HPSA. According to some commenters, this requirement would impede teaching hospitals' ability to structure programs to best meet the needs of the patients and communities they serve as well as to satisfy administrative obligations, including accreditation standards. Commenters also stated that the requirement that 50 percent or more of residents' time be spent in a HPSA, often in rural areas, would not be possible since supervising physicians and training schedules must be focused on population centers with patient and condition mixes that are necessary for training. A few commenters explained that the proposed 50 percent requirement, in addition to the proposed requirement that hospitals or their facilities be physically located in a HPSA to qualify under Category Four, is too restrictive to meet the policy goal of directing new residency positions to areas that provide services to underserved populations and does not meet congressional intent.

Several commenters, while supporting the proposed requirement that 50 percent of resident training time in programs take place in locations in the HPSA, requested that nonprovider settings where hospitals may count training time for IME and direct GME purposes be counted. Commenters stated that community settings, such as critical access hospitals, Federally Qualified Health Centers (FQHCs), and rural health clinics (RHCs), are important contributors to the provision of services in HPSAs and to residency training. Several commenters added that, in their view, it was Congress's intent that FTEs awarded under section 126 of the CAA train at nonprovider settings in addition to hospital main campuses and provider-based facilities.

Several commenters were opposed to the proposed 50 percent training time requirement because they believe it would impose a recordkeeping burden on hospitals that administer residency programs. A few commenters noted that normally, resident rotations are reported in the Intern and Resident Reporting System (IRIS) in aggregate, whereas the proposed 50 percent training time requirement would demand individual resident tracking and reporting. Commenters stated that to attest to meeting the requirement, teaching hospitals would need to develop a new system and process to document and track section 126 of the CAA funded residents that is separate from the system and process used to track residents funded by other sources.

A commenter requested clarification on whether the proposed requirement that residents spend 50 percent or more of their training time in a geographic HPSA in order for the hospital to be eligible under Category Four is based on all residents in aggregate or to individual residents.

Response:

We appreciate commenters' feedback and concerns regarding the eligibility requirements under Category Four. After further consideration, as discussed in greater detail later in this section, we are modifying certain aspects of our proposal in response to public comments. These modifications are intended to provide additional flexibilities in meeting these requirements, while still targeting Category Four eligibility to hospitals that are most clearly serving HPSAs. We are persuaded by commenters' arguments and agree that training in settings other than hospital settings is consistent with our goal of maximizing distribution of GME positions to residency programs serving underserved populations, including serving those in community settings, and should be counted toward meeting Category Four eligibility requirements. Therefore, we are modifying our proposal. Any and all program training that occurs in a geographic HPSA at scheduled program training sites that are physically located in that HPSA and treat the HPSA's population, including nonprovider settings and Veterans Affairs facilities, will count towards meeting the 50 percent training requirement to qualify under Category Four. In addition, because we are revising our proposed definition of Category Four to allow all of these settings to be qualifying training sites, an applicant hospital (including any provider-based facilities) itself will not be required to be physically located in a geographic HPSA in order to be eligible under Category Four as proposed. Rather, as long as the hospital participates in training residents in a program where at least 50 percent of the training time occurs at scheduled training site(s) that are physically located in a geographic HPSA, that hospital is considered to be eligible under Category Four. We believe these changes will provide additional flexibility for teaching hospitals to design programs to effectively serve patients and communities and meet any administrative requirements while

targeting Category Four eligibility to hospitals that are most clearly serving HPSAs.

Consider an example where Hospitals A, B, and C participate in training residents in an approved family medicine program. The program also has Training Site 1 as part of the rotation schedule (could be a nonprovider setting, a Veterans Affairs facility, or another community setting). Hospitals A and B are located in a primary care geographic HPSA as is Training Site 1. Hospital C is not located in the HPSA. Residents in the family medicine program spend 40 percent of their training time at Hospitals A and B, 40 percent of their training time at Hospital C, and 20 percent of their time training at Training Site 1. Since at least 50 percent of the program's total training time is spent training at facilities located in the primary care geographic HPSA, Hospitals A, B, and C all qualify under Category Four.

We appreciate commenters' suggestions to expand the proposed requirement for Category Four beyond a hospital's training sites that are physically located in HPSAs to include those within a certain distance of a HPSA. While we believe a distance or proximity threshold may warrant further consideration in the future for Category Four, we note the suggested distances by some commenters ranged anywhere between one mile to 25 miles. Based on these comments, a single uniform distance threshold may not always be appropriate in the context of section 126 of the CAA. For example, a single fixed mileage threshold may not equitably address tertiary care situations because hospitals providing equivalent tertiary care to residents of HPSAs may be located varying distances from those HPSAs. At this time, we believe the requirement that at least 50 percent of training time occurs at training sites that are physically located in a geographic HPSAs targets Category Four eligibility for hospitals that are most clearly serving HPSAs.

We also appreciate comments recommending that we consider the measure of a hospital's patient population that resides within a HPSA to determine whether a hospital serves a HPSA, as well as the suggestion of using different data sources to establish whether a hospital serves a HPSA. We believe there should be a consistent method used for hospitals to demonstrate that they meet the definition of Category Four. We note, simultaneously allowing the use of different data sources to establish whether a hospital serves a HPSA would mean that we might compare applications supported by different data collection methods, different definitions, or different data altogether. As discussed earlier, at this time we believe requiring that at least 50 percent of the training time of the program the hospital participates in occurs at training site(s) that are physically located in a geographic HPSA targets Category Four eligibility to hospitals that are most clearly serving HPSAs. However, we continue to welcome further feedback on the dependence of geographic HPSA residents on health services provided outside of their HPSA and are seeking comment on appropriate summary measures of where HPSA residents seek medical care as a feasible alternative for potential use in future rulemaking.

With regard to commenters' concern that the proposed definition of Category Four would limit the pool of eligible applicants relative to more expansive definitions, we appreciate the feedback. However, we do not believe the goal of Category Four should be to create the most expansive eligibility pool possible. Targeting Category Four eligibility to hospitals that are clearly serving HPSAs (as discussed previously) is entirely consistent with this statutory eligibility criterion and our policy objectives for section 126 of the CAA regarding medically underserved communities. In addition, as stated previously, we are seeking comments on potential alternative feasible definitions of Category Four to inform future rulemaking.

With regard to the request to include population HPSAs in the definition of Category Four, we note that section 1886(h)(9)(B)(ii)(IV) of the Act specifies that Category Four consists of hospitals that serve areas designated as health professional shortage areas under section 332(a)(1)(A) of the PHSA, as determined by the Secretary. Paragraph (A) of section 332(a)(1) of the PHSA describes a geographic HPSA, as explained previously and in the proposed rule (86 FR 25506). A population HPSA is described by paragraph (B) of section 332(a)(1), as explained in section II.B.3.d. of this final rule with comment period and section V.J.2.a.(4).(a). of the preamble of the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25508). Therefore, we are not revising the definition of Category Four to include population HPSAs as requested by the commenter.

In response to comments that including a training time requirement for qualification falls outside of the legislative intent of section 126 of the CAA, we disagree. The statute at 1886(h)(9)(B)(2)(IV) limits Category Four eligibility to hospitals that serve areas designated as HPSAs under section 332(a)(1)(A) of the PHSA, as determined by the Secretary. As discussed in the proposed rule and in line with the Administration's support for advancing health equity in underserved communities, targeting Category Four eligibility to hospitals serving HPSAs is consistent with this statutory eligibility criterion and our policy objectives. We also note, as stated previously, we are seeking comment on potential alternative definitions of Category Four to inform future rulemaking.

We disagree with the comments that a minimum rotation time requirement imposes a significant tracking or reporting requirement. We do not expect hospitals to establish entirely new training tracks or administrative structures to accommodate FTE slots awarded under section 126 of the CAA. Hospitals regularly develop rotation schedules to facilitate residents' training at participating sites and a program's participating site information is generally readily available on the ACGME website. As such, we are specifying that the percentage of training time that residents in the program spend in the HPSA for purposes of Category Four is required to be substantiated, utilizing resident rotation schedules (or similar documentation). Regarding IRIS, we do not expect the existing reporting requirements to change for hospitals that receive these residential slots. We note that the 50 percent requirement applies to the program in its entirety, not to individual residents. As such, hospitals would not need to track the training time of individual residents to ensure each individual resident spends 50 percent or more of their training time in a geographic HPSA, so long as the program in its entirety meets the requirement.

Comment:

Several commenters objected to our approach to address the issue of how specialties factor into determining which hospitals serve areas designated as HPSAs. Commenters stated that our use of the HPSA Physician Bonus Program as a model for addressing this question is flawed because hospitals do not respond to incentives and cannot relocate to new areas or establish new operations in the same manner as individual physicians and physician practices. Additionally, commenters stated that unlike the bonus payments in the HPSA Physician Bonus Program, the proposed size of the FTE awards will be insufficient to incentivize the establishment of new training programs in HPSAs.

Response:

While we agree that the HPSA Physician Bonus Program and the Category Four eligibility of hospitals for additional GME residency positions target different types of entities, one being physicians and the other physician training programs, as we discussed in the proposed rule the policy objective underlying each is to strengthen the physician workforce in underserved areas. We therefore disagree with the comment that one is an unsuitable template upon which to build the other. However, as discussed in greater detail later in this section, we agree with commenters that the proposed 1.0 FTE per year limitation on FTE awards with no assurance of follow-on awards would be an insufficient incentive to encourage many hospitals to expand an existing or establish a new training program. As such, we are finalizing a policy to increase maximum award sizes to 5.0 FTEs per hospital per year, which we discuss in more detail in section II.B.3.c.(2). of this final rule with comment period.

Comment:

Several commenters stated that hospital applications associated with mental health only geographic HPSAs should not be limited to psychiatry training programs. The commenters stated that provider shortages in mental health only geographic HPSAs are not limited to psychiatric services and the expansion of service availability in any specialty would help address community health care challenges.

A commenter objected to our inclusion of mental health only geographic HPSAs in the definition for Category Four. Instead, the commenter believed that eligibility under Category Four should only be met when a hospital's main campus or other facilities are in a primary care geographic HPSA. The commenter also stated that the new resident slots should only be used to fund training for primary care residents.

Response:

We appreciate the comments requesting that hospitals not be limited to psychiatry training programs for hospitals that apply under mental health only geographic HPSAs for Category Four. While we understand that such an expansion could help address health care challenges in underserved communities, we have no direct evidence of a shortage of other specialties in mental health only geographic HPSAs nor do we have a method at this time to uniformly measure a shortage of other, non-psychiatric specialty providers in mental health only geographic HPSAs. As we discussed in the proposed rule and previously, the HPSA Physician Bonus Program provides incentive payments for services provided in mental health only geographic HPSAs, but only for services provided by psychiatry provider specialties. We continue to believe that it is appropriate to use mental health only geographic HPSAs for mental health providers in the determination of hospitals that serve areas designated as HPSAs. Therefore, we disagree with the comment that we should exclude mental health only geographic HPSAs from the definition of Category Four and limit residency positions to primary care training programs. However, we also believe it is equally important to advance health equity in physical and mental health services in underserved areas. Therefore, we are therefore modifying our policy in this final rule with comment period to include psychiatric subspecialty residency programs in addition to psychiatric residency programs within the mental health only geographic HPSA category.

Therefore, in this final rule with comment period, specific to mental health only geographic HPSAs, we are finalizing the policy that if a hospital participates in training residents in a psychiatric or a psychiatric subspecialty program, where at least 50 percent of the program's training time occurs in a training site(s) in the HPSA, the hospital is eligible under Category Four.

Comment:

Several commenters expressed support for our proposed definition of Category Four hospitals.

Response:

We thank the commenters for their support.

In summary, after consideration of and in response to the public comments received, we are finalizing our proposed requirements for determining eligibility under Category Four with modification in this final rule with comment period. Under our final policy, an applicant hospital qualifies under Category Four if it participates in training residents in a program in which the residents rotate for at least 50 percent of their training time to a training site(s) physically located in a primary care or mental health only geographic HPSA. Specific to mental health only geographic HPSAs, the program must be a psychiatric or a psychiatric subspecialty program. In addition, under this final policy, as proposed, a Category Four hospital must submit an attestation, signed and dated by an officer or administrator of the hospital who signs the hospital's Medicare cost report, that it meets the 50 percent requirement. We did not receive any comments on our proposal not to consider dental HPSAs, as dental FTE residents are not subject to a hospital's IME and direct GME caps. We are finalizing that policy as proposed.

(6) Determination of Qualifying Hospitals

Section 1886(h)(9)(F)(ii) of the Act defines a qualifying hospital as a hospital described in any of the subclauses (I) through (IV) of subparagraph (B)(ii). As such, we proposed that a qualifying hospital is a Category One, Category Two, Category Three, or Category Four hospital, or one that meets the definitions of more than one of these categories.

The following is a summary of the public comments and our responses to our proposals related to the determination of qualifying hospitals.

Comment:

A commenter supported our proposal for determining which hospitals are considered qualifying hospitals. Specifically, hospitals that meet the definitions of Category One, Category Two, Category Three, or Category Four, or hospitals that meet the definitions of more than one of these categories, are eligible for section 126 of the CAA residency positions.

Response:

We thank the commenter for their support.

Comment:

A commenter stated that the Department of Veterans Affairs should be included in future planning and evaluation of a more refined distribution approach for future years.

Response:

We thank the commenter for the feedback. We note that residency positions distributed under section 126 will not be distributed to Veterans Affairs hospitals. These hospitals are eligible for GME payments through the Veterans Access, Choice, and Accountability Act GME Expansion. However, we note that when considering the percentage of program training time that occurs in a HPSA for purposes of section 126, training time occurring at a Veterans Affairs facility physically located in a HPSA will be included in that percentage.

Comment:

Several commenters recommended adding eligibility criteria that would allow hospitals not meeting any of the definitions of Categories One through Four to qualify for residency positions awarded under section 126 of the CAA. Commenters recommended including the following eligibility categories: Small hospitals with fewer than 250 beds, hospitals with single residency programs, Indian health care providers, safety-net providers, and hospitals that host residency programs whose graduates later practice in either predominantly rural states or states with a large proportion of rational service areas designated as HPSAs.

Response:

We appreciate the commenters' feedback and input on qualifying criteria. Section 1886(h)(9)(F)(ii) restricts eligibility to the four categories discussed previously. However, we agree with commenters that including hospitals with fewer than 250 beds in our final policy, may be useful in further prioritizing residency positions in certain instances. We refer commenters to the discussion in section II.B.3.d.(2). of this final rule with comment period, where we incorporate the suggested bed limit into our final policy. We also welcome further comment regarding whether the remaining priority hospitals or hospital characteristics identified by commenters should be addressed in other aspects of our policy in future years.

Comment:

A commenter requested that we issue a list of hospitals that are likeliest to obtain additional residency positions under our finalized criteria. The commenter stated that advance signaling of which hospitals are likely to receive FTE awards will help them plan for contingent expansions of existing programs or establishment of new programs.

Response:

We thank the commenter for the feedback. While we understand that significant planning resources are required to establish and expand training programs, we cannot anticipate changes to training program rotations between now and the start of the 2023 program year that will affect applications or predict which hospitals have determined that it is in their interest to expand their training programs with distributions under section 126 of the CAA and will apply. Therefore, we are unable to provide a list of hospitals that are likeliest to be awarded residency positions before awards are made. However, we intend to make available relevant information regarding the distribution of positions at the completion of the distribution process.

After consideration of comments received, we are finalizing our policy related to the determination of qualifying hospitals as proposed, without modification. Specifically, a qualifying hospital is a Category One, Category Two, Category Three, or Category Four hospital, or one that meets the definitions of more than one of these categories.

c. Number of Residency Positions Made Available to Hospitals and Limitation on Individual Hospitals

(1) Number of Residency Positions Made Available to Hospitals

Section 1886(h)(9)(A)(ii)(II) limits the aggregate number of total new residency positions made available in a single fiscal year across all hospitals to no more than 200. In order to provide these additional residency positions to hospitals as quickly as possible, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25508), we proposed to make 200 residency positions available for FY 2023 and each subsequent year.

In this section, we present a summary of the public comments and our responses to our proposals related to the number of residency positions made available to hospitals.

Comment:

A number of commenters supported our proposal to make 200 residency positions available for FY 2023 and each subsequent year. A commenter recommended that we distribute all 200 residency positions each year even if fewer than 200 facilities apply, by allowing additional FTEs to be assigned to hospitals that do not apply; the commenter stated that this would fulfill the intent of Congress that 200 residency positions are distributed in each of the years.

Response:

We thank the commenters for their support. With respect to the suggestion that we distribute all 200 residency positions each year even if fewer than 200 facilities apply, section 1886(h)(9)(A)(i) of the Act, as added by section 126 of the CAA, makes it clear that, in order to receive additional FTEs, a hospital must submit a timely application. The law does not grant us the authority to distribute residency positions to hospitals that do not apply. We also note that section 1886(h)(9)(A)(ii)(II) of the Act states that the aggregate number of residency positions made available shall not exceed 200 for a fiscal year; it does not require that all 200 residency positions to be distributed each year if there are insufficient numbers of applicant hospitals. Although we do not expect that there will be an insufficient number of applicant hospitals we intend to track progress in meeting all statutory requirements and evaluate the need for potential modifications in future rulemaking.

Comment:

A few commenters expressed support for the statutory limit on the aggregate number of residency positions. Conversely, a commenter stated that the distribution of 200 residency positions per year across potentially 50 states will likely have minimal impact, particularly after a 25-year wait given that caps were implemented based on the number of FTE residents hospitals trained in 1996.

Response:

The limit on the aggregate number of residency positions made available each year is set by the statute at 200.

Comment:

A commenter was concerned about the impact of the distribution of residency positions under section 126 of the CAA on Medicaid. The commenter stated that the immediate impact on Medicaid in its state is unclear as it is uncertain how many of the new residency positions will be awarded to hospitals in its state. However, the commenter further noted that since hospitals awarded residency positions under section 126 will likely be incurring new medical education costs, Medicaid expenditures would increase.

Response:

We are clarifying that residency positions under section 126 of the CAA are related to Medicare GME payments, not Medicaid. However, to the extent hospitals awarded residency positions under section 126 and the partial Medicare funding of new residency positions in that state might indirectly be associated with additional expenditures under that state's Medicaid program, any additional Medicaid expenditures that might occur are inestimable because it is unknown what hospitals in what states will apply and be awarded additional residency positions under section 126.

After consideration of comments received, we are finalizing our policy related to the number of residency positions made available to hospitals as proposed, without modification. Specifically, the aggregate number of total residency positions made available in a single fiscal year across all hospitals will be limited to no more than 200. Additionally, in order to provide these additional residency positions to hospitals as quickly as possible, we are making 200 residency positions available for FY 2023 and each subsequent year.

(2) Limitation on Individual Hospitals

As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25508), we expect the demand from hospitals for the aggregate number of total residency positions made available for each fiscal year to significantly exceed the 200 maximum. For example, there are currently over 300 teaching hospitals that have their main campus located in a primary care or mental health only geographic HPSA. In that same proposed rule, we stated that we expect the majority of these hospitals

would apply for additional residency positions because they would qualify under our proposed Category Four. Even if we were to exclusively allocate the maximum 200 positions permitted under the statute each year to these hospitals, which are only a subset of Category Four hospitals (and Category Four itself is only one of four categories), it would still be insufficient to award even 1.0 FTE to each hospital each year. Therefore, in order to make additional residency positions available to more hospitals each year, we proposed to limit the increase in the number of residency positions made available to each individual hospital to no more than 1.0 FTE each year. We note that the proposal was not 1.0 FTE for each program at a hospital each year, but rather 1.0 FTE for each hospital each year.

As noted earlier, section 1886(h)(9)(C)(i) of the Act places certain limitations on the distribution of the residency positions, one of which is that a hospital may not receive more than 25 additional FTE residency positions. Under our proposed 1.0 FTE limitation per hospital per year, no hospital would receive more than 25 additional FTE residency positions. Rather, under the proposed 1.0 FTE limitation, hospitals would receive a maximum of 5 additional FTE residency positions.

The following is a summary of the public comments and our responses to our proposals related to the limitation on individual hospitals.

Comment:

A commenter supported our proposal to limit the size of awards to 1.0 FTE per hospital per year. This commenter stated that the more stringent limit was warranted since the demand for additional residency positions will far exceed the total number of residency positions available, and applying a 1.0 FTE limit would promote the distribution of additional residency positions across a wider range of qualifying hospitals. Furthermore, the commenter recommended that, in subsequent distribution cycles, we prioritize applications from hospitals that have not yet received residency positions, so that no hospital would be awarded a second residency position until all other qualifying hospitals have received their first award.

Response:

We thank the commenter for their support, however, as we explain in this section, we are modifying our policy in this final rule with comment period to allow hospitals to receive up to 5.0 FTEs per year. Regarding the recommendation that in subsequent distribution cycles, we prioritize applications from hospitals that have not yet received residency positions, we will take this recommendation under consideration for potential future rulemaking.

Comment:

A commenter requested CMS clarify whether or not the proposal would distribute 1.0 FTE for the duration of a program, which equates to 3-5 residency positions per FTE, without requiring hospitals to reapply each year; for example, a hospital applying for a 3-year Family Medicine program would receive 3 residency positions total, while a hospital applying for a 5-year General Surgery program would receive 5 residency positions. Similarly, another commenter stated that they support our proposed limit and requested that in addition to the proposal, the FTE be financed for the duration of their training rather than a separate FTE being awarded for each year of training, and that this consideration be taken into account in determining the aggregate limit of 1,000 FTEs.

Response:

We believe that the commenters have misconstrued our proposal, and that they are interpreting the term “FTE” to refer to the funding necessary to support one resident in each program year of a residency training program for the length of the program. On the contrary, the term “FTE” refers to the funding necessary to support one resident during a single year of training; this is the sense in which we employed the term in our proposal as written in the FY 2022 IPPS/LTCH PPS proposed rule, as well as in previous rulemaking cycles. We did not propose to distribute additional residency positions in blocks of 3.0-5.0 FTEs in the manner requested by the commenters. However, as we explain later in this section, we are modifying our policy in this final rule with comment period to allow hospitals to receive up to 5.0 FTEs per application year.

Comment:

Many commenters strongly objected to our proposal to limit the size of awards to 1.0 FTE per hospital per year. Several commenters argued that the proposal is contrary to congressional intent, and that CMS was overstepping its authority by imposing a limit more stringent than what is specified in the law. Others stated that the proposed limit is inconsistent with the overall goal of increasing residency training levels, especially in rural areas, and that the proposal could significantly lessen the potential impact of the new legislation. A commenter worried that the nationwide physician shortage may be further exacerbated by the proposal to limit the size of awards to 1.0 FTE per year, and stated that it may not be capable of producing trained physicians to keep up with the need, if the cost burden for the residency training programs is not further shared with Medicare.

Many commenters argued that an award of 1.0 FTE per hospital per year would be insufficient to establish a new residency program or meaningfully expand an existing program. With respect to new programs, commenters observed that the ACGME Program Requirements specify a minimum complement of two to four residents in each program year for most specialties. They argued that the minimum cohort size is intended to ensure an appropriate learning environment and to provide residents with a sufficient shared clinical and educational experience that promotes peer learning, teamwork, and coordination of care. Accordingly, some commenters feared that the proposed limit would threaten program continuity and disrupt the training of residents. Moreover, a commenter observed that many programs are dependent on other specialties for the education of residents, and that the proposed limit would hinder an institution's ability to support new or expanded residency programs as a result of their inability to simultaneously expand residencies in the specialties that support those programs.

Several commenters were concerned that the proposed limit would not be economically feasible for many institutions, particularly smaller hospitals. A commenter estimated that five additional residency positions over 5 years might be sufficient to support some new fellowship programs, but would likely be insufficient to support even half of the FTEs for most new residency programs. Another commenter stated that receiving financial support for only one year of training would be untenable for most smaller institutions, and that only large hospitals with multiple programs could absorb the full cost of expanding a program by one resident per program year. Such considerations led a commenter to conclude that under our proposal the costs of starting or expanding a residency program would outweigh the benefits, while several others predicted that it would discourage small hospitals from submitting applications altogether.

Numerous commenters worried that the proposal would result in an onerous and unpredictable annual application process, which again would disproportionately burden smaller hospitals. They observed that hospitals would be forced to submit applications year after year with no guarantee of

receiving awards in subsequent rounds and thus no guarantee of being able to fund a residency position for the full length of a program. As an example, a commenter envisioned the scenario of a hospital that receives 1.0 FTE to establish a new residency program and does not qualify for additional residency positions in subsequent years; assuming a program duration of 3 years and a cohort size of four residents, such a hospital might be responsible for self-funding 11.0 additional FTEs in order to run the new program. Another commenter worried that hospitals may be forced to relocate residents if they are unable to secure funding for future years.

Several commenters also maintained that the proposed limit would particularly disadvantage hospitals in rural and underserved areas. A commenter stated that many such hospitals have consistently operated over their caps, often to their severe financial detriment; these hospitals are especially in need of financial assistance, and the proposed limit establishes a detrimental ceiling on the level of support they would be able to receive. As a result, the commenter concluded, our proposal would be likely to favor hospitals located in densely-populated urban areas. Another commenter added that an award of 1.0 FTE per year would risk limiting residency positions to existing programs, and would therefore disadvantage small institutions that are seeking to become teaching hospitals.

Commenters suggested various alternatives to our proposed limit of 1.0 FTE per hospital per year, with several saying that we should adhere to the statutory maximum of 25.0 FTEs. Among the most common recommendations was that we should tie the size of the award to the duration of the program for which a hospital is applying: For example, a hospital applying for a Family Medicine program would receive 3.0 FTEs total (1.0 FTE × 3 years of training), while a hospital applying for a General Surgery program would receive 5.0 FTEs (1.0 FTE × 5 years of training). Several commenters stated that this should be considered a minimum allocation, and expressed their preference for a maximum award of 15.0 FTEs total, which would allow a hospital to meaningfully expand one or more programs over 5 years. Other recommendations we received include: Distributing at least 3.0 FTEs per hospital per year; at least 3.0 FTEs per year for new programs, and 1.0 FTE per year for existing programs; at least 5.0 FTEs per year, with a commenter again suggesting that the amount could be different for new and existing programs; awarding residency positions in groupings or blocks of 4.0 FTEs; awarding up to 10.0 FTEs per hospital per year; and allowing hospitals to apply for up to three programs and no more than 15.0 FTEs each year.

Several commenters recommended that, if we retain the limit of 1.0 FTE per hospital per year, then we should streamline the application process to make it less burdensome and unpredictable for hospitals. All of these commenters suggested that hospitals that receive an award in a given fiscal year should be guaranteed to receive awards in subsequent application cycles, up to a certain minimum amount, which might be based on the duration of the training program. Such hospitals might be permitted to apply for all of their residency positions up front, without being required to submit further applications, or they might have the option of resubmitting less detailed applications in future years. Some commenters noted that under this model the minimum award might not be guaranteed in instances where a hospital initially applies for a program in one of the later application cycles, for example for FY 2026, assuming that all 1,000 residency positions are distributed over the course of 5 fiscal years. A commenter stated that, at a minimum, CMS should provide more clarity on the number of residency positions awarded over time to reduce the need for annual applications and to allow hospitals to better plan for their GME programs.

Response:

We disagree with commenters who asserted that our proposed limitation of 1.0 FTE per hospital per year is contrary to congressional intent. Section 1886(h)(9)(C)(i) of the Act specifies that a hospital may not receive more than 25 additional full-time equivalent residency positions under the provisions of section 126 of the CAA; it does not specify a minimum award size, and leaves the Secretary broad latitude in determining the number of residency positions that will be distributed to individual hospitals.

However, after reviewing comments received, in particular the comments which expressed concern that our proposed limitation would be insufficient to establish a new program or meaningfully expand an existing program, that it would be impractical for many institutions, and that it would result in an unpredictable and burdensome application process, we have reconsidered our proposal. Therefore, in this final rule with comment period, we are modifying our proposal to adjust the size of the award to the length of the program for which a hospital is applying. Specifically, the maximum award amount is contingent on the length of the program for which a hospital is applying, with up to 1.0 FTE being awarded per program year, not to exceed a program length of 5 years or 5.0 FTEs. For example, a hospital applying to train residents in a program in which the length of the program is 3 years may request up to 3.0 FTEs per fiscal year.

We understand that in many cases a limit of 5.0 FTEs per hospital per year may not be sufficient for a hospital to fully fund Medicare's portion of a new program or planned expansion of an existing program; however, we believe that the increased limitation will provide a meaningful level of financial support to hospitals that would otherwise have to rely solely on their own resources to develop their GME infrastructure. Based on the comments we received, we believe that a limitation of 5.0 FTEs per hospital per year will be a sufficient amount to fully fund at least one resident in each program year for most specialties.

We note that if a hospital is applying for a program which has more than one participating site, the hospital should only request the FTE amount (not to exceed 1.0 FTE per program year) associated with the training time at its facilities (including any nonprovider settings consistent with 42 CFR 413.78).

Given the limited number of residency positions available and the number of hospitals expected to apply, our focus under this modification continues to be on hospitals that are applying to establish or expand a single residency program. Therefore, we are finalizing our proposal that a hospital may not submit more than one application in any fiscal year. We continue to expect that a hospital would choose to apply for a program that serves the HPSA with the highest score among its programs, but a hospital is not required to do so. Hospitals that receive awards in a given round of applications will be able to reapply in subsequent years, either for the same program or for a different program, but with no guarantee of receiving additional residency positions.

With respect to hospitals that are seeking to become teaching hospitals, we note that such hospitals are also eligible to establish a cap(s) under 42 CFR 413.79(e). We refer these hospitals to section II.B.5. of this final rule with comment period where we discuss the implementation of section 131 of the CAA, specifically the 1.0 FTE cost reporting threshold. We note that a

hospital that trains residents for the first time in an existing program or a new program will have a per resident amount (PRA) established for direct GME payment purposes, consistent with the regulations at 42 CFR 413.77(e). Such a hospital will also have a cap(s) established if the program in which it trains residents is a new program. We refer these hospitals to the August 31, 2012

Federal Register

(77 FR 53416 through 53424), where we discuss the 5-year cap building period for new teaching hospitals.

Comment:

Several commenters recommended that the limit on the number of residency positions should be adjusted to reflect the demonstrated need of individual hospitals. For instance, a commenter believed that hospitals in areas of great medical need should be allowed to receive more than 1.0 FTE per year; another commenter argued that, since the need for residency positions and full-time employees is not uniform across HPSAs, hospitals should not be subjected to a uniform cap on the size of their awards. A commenter stated that the limit should apply only to hospitals that do not qualify under any of the four statutory priority categories.

Response:

We appreciate the commenters' concern for hospitals located in areas of high need, and believe these concerns are addressed by the statutory requirement which specifies that hospitals may qualify for additional residency positions by serving HPSAs, and that at least 10 percent of the aggregate number of residency positions should be distributed to hospitals in this category. In addition, as explained previously, we are modifying our policy in this final rule with comment period to allow hospitals to receive up to 5.0 FTEs per fiscal year.

With respect to the suggestion that the limit should apply only to hospitals that do not qualify under any of the four statutory priority categories, we note that section 1886(h)(9)(A)(i) of the Act directs the Secretary to distribute additional residency positions to qualifying hospitals, while section 1886(h)(9)(F)(ii) of the Act defines the term “qualifying hospital” as a hospital that satisfies the criteria of at least one of the four categories of hospitals described in subclauses (I) through (IV) of subparagraph (B)(ii). In other words, a hospital that does not qualify under any of the statutory categories would not be eligible to apply for and receive additional residency positions under section 126 of the CAA.

Comment:

A few commenters recommended that CMS should delay the implementation of the proposed limitation on individual hospitals and evaluate the results of the first round of applications to determine whether a limit below the statutory maximum is warranted.

Response:

As explained previously, we are modifying our policy in this final rule with comment period to allow hospitals to receive up to 5.0 FTEs per year. Under this modification to allow up to 5.0 FTEs, our focus continues to be a single program given the limited number of residency positions available and the number of hospitals we expect to apply. Therefore, we are finalizing our proposal that a hospital may not submit more than one application in any fiscal year. We continue to expect that a hospital would choose to apply for a program that serves the HPSA with the highest score among its programs, but a hospital is not required to do so. We plan to evaluate the results of the first round of applications and to consider whether any changes to the limitation on individual hospitals should be adopted in future rulemaking.

Additionally, as noted in the proposed rule and earlier in this section, section 1886(h)(9)(C)(i) of the Act places certain limitations on the distribution of the residency positions, one of which is that a hospital may not receive more than 25 additional FTE residency positions. Under our final policy to allow hospitals to receive up to 5.0 FTEs per year, no hospital would receive more than 25 additional FTE residency positions.

Comment:

In considering our proposed limit of 1.0 FTE per hospital per year, a commenter stated that our proposal to prorate residency positions in case the number of hospitals with the same HPSA score exceeds the number of remaining residency positions will diminish the value of awards and increase the likelihood that the costs of creating a new program or expanding one would outweigh the benefits. Several commenters recommended that in case of a tie, rather than prorating residency positions, we should prioritize hospitals that are training residents in excess of their statutory FTE caps.

Response:

We thank the commenters for their suggestions. As explained previously, we are modifying our policy in this final rule with comment period to allow hospitals to receive up to 5.0 FTEs per year. We refer the commenters to our discussion of our final policy to distribute residency positions, including our policy should there be a situation where the number of FTEs requested by hospitals with the same HPSA score, exceeds the number of remaining positions, in section II.B.3.d.(2). of this final rule with comment period.

In summary, we are modifying our proposal to account for the size of a hospital's award to the length of the program for which the hospital is applying, with a maximum award of 5.0 FTEs per hospital per year. We are also finalizing the portion of our proposal that a hospital may not submit more than one application in any fiscal year.

d. Prioritization of Applications From Hospitals for Residency Programs That Serve Underserved Populations

(1) Use of Geographic HPSAs and Population HPSAs

The Executive Order on “Ensuring an Equitable Pandemic Response and Recovery” noted that the COVID-19 pandemic has exposed and exacerbated severe and pervasive health and social inequities in America (see

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/21/executive-order-ensuring-an-equitable-pandemic-response-and-recovery/.

) As we stated in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25508), in order to help address these exposed health inequities longer term, we believe that it would be appropriate to prioritize the applications from hospitals that will use the additional residency positions under section 126 of the CAA in residency programs serving underserved populations.

This prioritization was already partially reflected in our proposed definition of Category Four, where we discussed maximizing the number of GME positions distributed to residency programs serving underserved populations in geographic HPSAs designated by HRSA under PHSA section 332(a)(1)(A). However, under PHSA section 332(a)(1)(B), HRSA also designates HPSAs on the basis of a shortage of services for a specific subset of the population (“population HPSAs”) rather than the entire population in an area as is the case in geographic HPSAs. These population subsets include, but are not limited to: Low-income populations, Medicaid-eligible populations, Native American populations, homeless populations, and migrant farmworker populations. (For information on the location and types of population HPSAs see

https://data.hrsa.gov/tools/shortage-area/hpsa-find

).

In order to more fully address health inequities for underserved populations, we believe that it also would be appropriate to prioritize the applications from hospitals that serve

the specific designated underserved population of a population HPSA.

We have already discussed our proposed definition in Category Four of hospitals that serve the populations of geographic HPSAs. Similar to that approach, in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25508), we proposed that a hospital would be considered to serve a population HPSA if it has its main campus or a provider-based facility (under 42 CFR 413.65) physically located in a primary care or mental health population HPSA, and any such locations serve the designated underserved population of that HPSA. Additionally, we proposed that, as part of the qualification requirements under Category Four, in the residency program for which the hospital is applying, at least 50 percent of the residents' training time over the duration of the program must occur at those locations in the HPSA. As with geographic HPSAs, we believe it is important to avoid the possibility that a hospital with provider-based facilities in multiple locations, some of which may not be located in a population HPSA or serve the designated population of that HPSA, uses an additional residency position mostly or entirely to serve populations that face no health service shortage.

Also similar to our proposed use of geographic HPSAs, we proposed that hospitals that only have main campuses or provider-based facilities in mental health only population HPSAs may only apply for positions for psychiatry residency programs.

We proposed that a hospital submit an attestation, signed and dated by an officer or administrator of the hospital who signs the hospital's Medicare cost report, that it has its main campus or a provider-based facility (under 42 CFR 413.65) physically located in a primary care or mental health population HPSA, any such locations serve the designated underserved population of that HPSA, and in the program for which the hospital is applying, the criterion that at least 50 percent of the residents' training time over the duration of the program occurs at those locations in the HPSA. We note that there is a difference between the Category Four qualification “requirement” and the prioritization “criterion” that 50 percent of a program's training time occur at training sites physically located in a HPSA. Section 1886(h)(9)(B)(ii)(IV) of the Act specifies that not less than 10 percent of the residency positions distributed shall go to hospitals that serve areas designated as HPSAs under section 332(a)(1)(A) of the Public Health Service Act, as determined by the Secretary (that is, geographic HPSAs, as discussed previously). Since section 1886(h)(9)(B)(ii)(IV) of the Act (referred to as Category Four in this preamble discussion) requires that not less than 10 percent of residency positions under section 126 of the CAA be awarded to hospitals that serve geographic HPSAs, our Category Four policy includes a “requirement” that the applicant hospital participates in training residents in a program in which the residents rotate for at least 50 percent of their training time to a training site(s) physically located in a primary care or mental health only geographic HPSA, as previously discussed. Separately, hospitals that qualify under categories One through Four are then subject to the prioritization criteria, including the “criterion” that at least 50 percent of a program's training time occur at facilities physically located in a geographic or population HPSA, as described in more detail later in this section. The HPSA training percentage under the prioritization “criterion,” while not required by statute, is consistent with the Administration's policy to prioritize training programs that have a higher likelihood of training physicians that will practice in underserved communities with the greatest need.

In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 22508 through 25509), we explained that our proposed approach for population-based HPSAs means that we potentially would be awarding a residency position for the provision of care that is not exclusively provided to the designated underserved population for which the shortage exists. However, in the context of our proposal to use HPSA scores to prioritize applications by the severity of the shortages, our proposal to limit the number of additional residency positions awarded to 1.0 FTE per hospital each year, and our proposed criterion that at least 50 percent of the training time over the duration of the program occur at locations in the HPSA that serve the designated underserved population of that HPSA, we believe it is sufficient for the residents in a program to provide care to the designated underserved population of that HPSA, and it is not necessary for residents to provide care exclusively to that population.

We note that HRSA also designates certain facilities as HPSAs under PHSA section 332(a)(1)(C) and the regulations at 42 CFR part 5. The process for facility HPSA designation is dissimilar from that for geographic and population HPSAs. Further, a HPSA score for a facility does not reflect on the adequacy of the health care workforce outside that facility in a geographic area, and so it is not comparable to geographic or population HPSAs. Therefore, we did not propose to use facility HPSA designations for the purposes of this rulemaking.

We also note that there are teaching hospitals that may not have facilities in areas designated as geographic or population HPSAs, but that under their Medicare provider agreement operate one or more facilities that serve areas for which there exists a shortage of providers. If this is the case, we recommend that a hospital interested in applying for FTE resident cap positions under this section contact its state or territorial Primary Care Office (PCO) to receive information on the HPSA designation process. HRSA maintains cooperative agreements with the 54 state and territorial PCOs, which conduct needs assessments and submit applications to HRSA to designate areas as HPSAs. We refer interested parties to 42 CFR part 5 and 57 FR 2473 for information on procedures for HPSA designation for primary care and mental health HPSAs, respectively.

In summary, we are finalizing without modification our proposal to prioritize applications from qualifying hospitals (that is, hospitals that qualify under categories One through Four, as previously described) for residency programs that serve underserved populations in geographic HPSAs or population HPSAs. In the next section we discuss our proposal and final policy for the use of HPSA scores for this purpose.

(2) Use of HPSA Scores for Prioritization

HRSA assigns HPSA scores on a scale of 0 to 25 as a measure of the severity of a primary care or mental health provider shortage in a geographic area, with higher scores indicating a more severe health professional shortage. As we observed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25509), using HPSA scores to differentiate applications from hospitals that qualify under categories One through Four would allow us to optimize the use of the limited number of additional residency positions under section 126 of the CAA and best address health inequities by focusing those residency positions on underserved populations with the most need.

In the proposed rule we stated that, in preparing its application for an additional residency position for a program, a hospital should refer to HRSA's HPSA Find Tool (

https://data.hrsa.gov/tools/shortage-area/hpsa-find

) to obtain the HPSA score of the HPSA served by the program and

include this score in its application. A HPSA is served by a program if that program meets the requirements discussed earlier. Given our proposal to limit the additional positions awarded to individual hospitals to 1.0 FTE for any given year, we proposed that a hospital may not submit more than one application in any fiscal year. Given the limited number of residency positions available and the number of hospitals we expect to apply, we expect that a hospital would choose to apply for a program that serves the HPSA with the highest score among its programs, but a hospital is not required to do so.

We proposed to allocate 1.0 FTE to each hospital with the highest HPSA score, prorating only in the event that the number of hospitals with the highest score exceeds the number of residency positions available. If the number of hospitals with the highest score is less than the number of residency positions available, each hospital with the next highest score would receive 1.0 FTE, with proration again occurring only in the event that the number of hospitals with this score exceeds the number of positions remaining. We would continue in this manner, moving on to hospitals with the next highest score until all available positions are distributed. We noted that, under this proposal, hospitals applying for residency positions for programs that do not serve HPSAs would not be categorically excluded, but those applications would have the lowest priority.

In the proposed rule we included the following as an illustrative example, assume the following hospitals apply, Hospitals A through HV. Assume there are 200 additional residency positions available. Under our proposal, Hospitals A through ET would each get 1.0 FTE, while Hospitals EU through HV would each get a prorated FTE award of 0.625, as follows:

Hospital name

HPSA score

FTEs awarded

FTEs

distributed/

remaining

A-AX (50 hospitals)

25

1.0

50/150

AY-CV (50 hospitals)

24

1.0

50/100

CW-ET (50 hospitals)

21

1.0

50/50

EU-HV (80 hospitals)

19

0.625

50/0

In summary, we proposed that additional residency positions under section 126 of the CAA would be distributed to hospitals that qualify under categories One through Four based on the HPSA score of the HPSA served by the residency program for which each hospital is applying, with programs serving higher HPSA scores receiving higher prioritization. Hospitals applying for residency positions for programs that do not serve HPSAs would not be categorically excluded, but those applications would have the lowest priority.

In this section, we present a summary of the public comments and our responses to our proposals related to the prioritization of applications from hospitals for residency programs that serve underserved populations.

Comment:

Some commenters expressed support for our proposal to use HPSA scores to prioritize applications from qualifying hospitals and the policy goal that underlies this approach, specifically that of addressing health disparities faced by underserved populations. Commenters supporting our proposal indicated that where residents train has an impact on where they practice. Some commenters stated that the proposed methodology is a fair approach to increasing access to care in rural and underserved areas. Some commenters indicated that the use of HPSA scores would help improve the distribution of physicians across the country.

Response:

We thank the commenters for their support.

Comment:

Some commenters agreed with CMS that a prioritization of applications by HPSA scores would likely result in the statutory minimum of at least 10 percent of total residency positions being awarded to each of the four categories in section 1886(h)(9)(B)(ii) of the Act. A commenter added that in the event minimum distributions to each category are not met, minor adjustments can be made to the methodology without substantially compromising the approach.

Other commenters disagreed and indicated that our proposed approach would not result in the minimum statutory distributions being met. For example, some of these commenters believed that our proposed prioritization approach might result in the minimum only being met for Category Four.

Response:

We thank the commenters for their support. In response to the commenters that disagreed that our proposed approach would result in the minimum statutory distributions being met, we are finalizing our approach, as proposed, to collect information regarding qualification for all four categories in the application to allow us to track progress in meeting all statutory requirements, and evaluate the need to modify the distribution methodology in future rulemaking. However, we continue to believe that our proposed approach will most likely result in the statutory minimum 10 percent distributions being met for all four of the statutory categories by the end of the 5-year distribution process for the 1,000 FTE slots. Therefore, as described in more detail later in this section, we are finalizing our proposal that the residency positions will be distributed to qualifying applicant hospitals using a method that prioritizes allotments based on HPSA scores.

Comment:

Many commenters objected to some or all of the aspects of the proposed criterion that at least 50 percent of a program's training time occur at applicant hospital locations inside a HPSA in order for CMS to use that HPSA's score to prioritize the section 126 of the CAA application for that program. Some of these commenters stated that nonprovider settings inside the HPSA that are not applicant hospital locations, such as FQHCs and RHCs, are important contributors to care in the HPSA and training time at these sites should count. Several of these commenters added that training time in nonprovider settings counts for other GME purposes.

Other commenters objected to the existence of a minimum training time criterion inside of a HPSA at all, regardless of what types of locations. These commenters argued that many HPSA residents rely on care provided outside of their HPSA. Some commenters noted this is particularly true for certain specialty care for which HPSA-residing patients are referred to teaching hospitals located outside the HPSA. Some of these commenters suggested we modify our proposal to include training locations within a HPSA and those within a reasonable

distance of one. Several commenters provided specific recommendations for a reasonable distance, such as within 1 mile, 10 miles, 20 miles, or 25 miles. A commenter requested that all Indian and Tribal facilities be considered for prioritization regardless of where they are located.

According to some commenters, a minimum training time inside the HPSA would impede teaching hospitals' ability to structure programs to best meet the needs of the patients and the communities they serve, as well as make it difficult to satisfy administrative obligations such as accreditation standards. For example, some commenters indicated it would be impossible for some programs to satisfy this criterion because locations in a HPSA provide insufficient training opportunities for some specialties, and we would force hospitals to operate programs in areas that are ill-suited to sustain training programs.

Some commenters were opposed to the minimum training time criterion because they believe it would impose a recordkeeping burden on hospitals. A few commenters noted that normally, resident rotations are reported in IRIS in aggregate, whereas the proposed 50 percent training time criterion would demand individual resident tracking and reporting. Commenters stated that to attest to meeting the criterion, teaching hospitals would need to develop a new system and process to document and track section 126 of the CAA funded residents that is separate from the system and process used to track residents funded by other sources.

A commenter requested clarification on whether the minimum training time criterion is based on all residents in a program in aggregate or to individual residents.

Response:

We appreciate commenters' concerns regarding the proposed criterion that at least 50 percent of a program's training time occur at applicant hospital locations inside a HPSA in order for CMS to use that HPSA's score to prioritize the section 126 of the CAA application for that program. After consideration of these comments, we are modifying certain aspects of this prioritization criterion.

After considering the comments received, we agree with commenters that training should not be limited to hospital settings physically located in the HPSA to the exclusion of other settings physically located in the HPSA. For a geographic HPSA, any and all program training based on resident rotation schedules (or similar documentation) that occurs in the HPSA at program training sites that are physically located in the HPSA and treat the HPSA's population, including nonprovider settings and Veterans Affairs facilities, will count towards meeting the 50 percent training criterion. For a population HPSA, any and all program training based on resident rotation schedules (or similar documentation) that occurs in the HPSA at program training sites that are physically located in the HPSA and treat the HPSA's designated population, including nonprovider settings and Veterans Affairs facilities, will count towards meeting the 50 percent training criterion.

We disagree with commenters who objected to the existence of a minimum training time criterion inside of a HPSA at all. We acknowledge that many HPSA residents receive care provided outside of their HPSA in areas where the physician shortages are less severe. However, with the limited FTE slots available under section 126 of the CAA we are choosing at this time to prioritize in a clear way the care provided inside of HPSAs in order to increase the likelihood of residents choosing to practice in areas with more severe shortages. We seek comment to inform potential future rulemaking on incorporating a measure of care provided outside of a HPSA to HPSA residents into the section 126 of the CAA methodology.

We have considered the comment suggesting that all Indian and Tribal facilities be considered for prioritization regardless of where they are located. Given the unique relationship between the Medicare program and Indian and Tribal facilities, and the health care disparities that exist for the Indian and Tribal populations served by these facilities, we believe it would be appropriate to also prioritize applications for programs where the residents rotate into these facilities. Specifically, for purposes of prioritization we will allow the training time spent in Indian and Tribal facilities outside of a HPSA to count towards the minimum training time criterion for that HPSA, up to a maximum of 45 percentage points of the 50 percentage points required.

We disagree with the commenters who claimed that the minimum training time criterion inside the HPSA forces a hospital to restructure its residency programs or operate programs that include training opportunities in areas that cannot support them. Section 126 of the CAA is a voluntary program. Hospitals can choose to apply for additional residency positions or not. We developed a prioritization methodology because we anticipate that the number of FTE slots requested will exceed the number available. If that were not the case the minimum training time criterion would have no effect since even applications at the lowest priority level (that is, applications for programs that do not meet the minimum training time criterion for any HPSA) would receive the number of FTE slots requested assuming all other applicable requirements were met. We understand that some commenters disagree with a prioritization method based on HPSA scores, but that is different from the prioritization method forcing a hospital to restructure residency programs or operate them in areas that cannot support them.

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