[Federal Register: January 12, 2001 (Volume 66, Number 9)]
[Rules and Regulations]
[Page 3357-3376]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja01-22]
[[Page 3357]]
-----------------------------------------------------------------------
Part XI
Department of Health and Human Services
-----------------------------------------------------------------------
Health Care Financing Administration
-----------------------------------------------------------------------
42 CFR Parts 413 and 422
Medicare Program; Payment for Nursing and Allied Health Education;
Final Rule
Medicare Program; Payment for Clinical Psychology Training Programs;
Proposed Rule
[[Page 3358]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 413 and 422
[HCFA-1685-F, previously BPD-685-F]
RIN 0938-AE79
Medicare Program; Payment for Nursing and Allied Health Education
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule sets forth in regulations Medicare policy for
the payment of costs of approved nursing and allied health education
programs. In addition, the rule clarifies the payment methodology for
certified registered nurse anesthetist education programs.
In general, the final rule clarifies and restates payment policies
previously established in the Provider Reimbursement Manual and other
documents, but never specifically addressed in regulations. The final
rule carries out a directive made in the Omnibus Budget Reconciliation
Act of 1989 and addresses changes required by the Omnibus Budget
Reconciliation Act of 1990.
DATES: These regulations are effective on March 13, 2001.
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954.
Please specify the date of the issue requested and enclose a check
or money order payable to the Superintendent of Documents, or enclose
your Visa or Master Card number and expiration date. Credit card orders
can also be placed by calling the order desk at (202) 512-1800 or by
faxing to (202) 512-2250. The cost for each copy is $8. As an
alternative, you can view and photocopy the Federal Register document
at most libraries designated as Federal Depository Libraries and at
many other public and academic libraries throughout the country that
receive the Federal Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web. The home page of the Superintendent of Documents is
http://www.access.gpo.gov/nara/. Utilizing local WAIS client software,
or telnet, enter swais.access.gpo.gov, then log in as guest (no
password required). Dial-in users should use communications software
and modem to call (202) 512-1661; enter swais, then log in as guest (no
password required).
FOR FURTHER INFORMATION CONTACT: Rebecca Hirshorn, (410) 786-3411.
SUPPLEMENTARY INFORMATION: The sections contained within this document
have been constructed according to the framework outlined in the table
of contents that follows. We have summarized pertinent material from
our proposed rule followed by public comments and our responses, along
with explanations of the provisions of the final rule. Other tools to
assist the reader in navigating the document include a crosswalk of
reorganized text for Sec. 413.85 and a list of frequently used
acronyms.
Table of Contents
I. Background
A. Legislative Summary
B. The Omnibus Budget Reconciliation Act of 1989
C. The Omnibus Budget Reconciliation Act of 1990
II. Provisions of the Proposed Rule and Responses to Public Comments
A. Determining Provider-Operated Programs
B. Nursing and Allied Health Education Specialties and
Accrediting Bodies
C. Determination of Net Costs
D. Payment for Certain Nonprovider-Operated Programs under
Public Law 101-508
E. Costs of Education Activities Considered to be Normal
Operating Costs
F. Net Costs of Approved Certified Registered Nurse Anesthetist
(CRNA) Educational Programs
III. Provisions of the Final Rule
IV. Regulatory Impact Analysis
V. Information Collection Requirements Regulations Text
Alphabetical List of Acronyms Appearing in the Final Rule
AMA American Medical Association
APTA American Physical Therapy Association
CAHEA Committee on Allied Health Education and Accreditation
CAAHEP Commission on Accreditation of Allied Health Education
Programs
CRNA Certified Registered Nurse Anesthetist
EMT-P Emergency Medical Technician and Paramedic Programs
GME Graduate Medical Education
HHA Home Health Agency
MSA Metropolitan Statistical Area
NAACLS National Accrediting Agency for Clinical Laboratory Sciences
SNF Skilled Nursing Facility
OBRA Omnibus Budget Reconciliation Act
OMB Office of Management and Budget
RFA Regulatory Flexibility Act
WAIS Wide Area Information Server
I. Background
In 1992, we issued a proposed rule in the Federal Register (57 FR
43659) that addressed Medicare payment for costs of approved nursing
and allied health education programs, including the requirements
imposed by the provisions of the Omnibus Budget Reconciliation Act of
1989 (Public Law 101-239) and the Omnibus Budget Reconciliation Act of
1990 (Public Law 101-508).
Since the inception of Medicare in 1965, we have
recognized an obligation to share in the costs of educational
activities sponsored by participating providers until the community at
large chose to bear them in some other manner. Medicare has
historically reimbursed providers for the program's share of costs
associated with approved educational activities. The activities may be
broken down into three general categories, each with distinct payment
policies:
Approved graduate medical education (GME) programs in
medicine, osteopathy, dentistry, and podiatry. Medicare makes direct
and indirect GME payment to hospitals for the training of interns and
residents. The existing rules for direct GME payment policy are found
at 42 CFR 413.86; the rules for indirect GME payment policy are found
at 42 CFR 412.105.
Approved nursing and allied health (paramedical) education
programs operated by the provider. (In this document, we use the term
``allied health'' rather than ``paramedical,'' since Medicare currently
allows the costs of approved training programs for medical records
librarians, medical technologists, and other disciplines for which the
term ``allied health'' is more appropriate. ``Allied health'' is the
term most commonly used to refer to these health care profession
specialties.) Costs for these programs are excluded from inpatient
operating cost definitions, payment rate calculations under the
prospective payment system, and target amount calculations subject to
rate-of-increase ceilings for hospitals and hospital units excluded
from the prospective payment system. These costs are separately
identified and ``passed through'' (that is, paid separately on a
reasonable cost basis).
Other educational programs and activities. All other costs
that can be categorized as educational programs and activities are
considered to be part of normal operating costs and are covered on a
per-case basis for hospitals subject to the inpatient prospective
payment system, or on a reasonable cost basis
[[Page 3359]]
subject to the rate-of-increase limits for hospitals and hospital units
excluded from the prospective payment system.
A. Legislative Summary
The following milestones offer a brief historical perspective of
the regulations, Congressional actions, court decisions, and manual
revisions that have led to our current policy concerning the costs of
nursing and allied health education:
The first regulation to address HCFA's obligation to share
in the costs of nursing and allied health education was published in
the Federal Register on November 22, 1966 (31 FR 14814) at 20 CFR
405.421 (redesignated as 42 CFR 405.421 on September 30, 1977, and
further redesignated as 42 CFR 413.85 on September 30, 1986). In that
regulation, the net cost of approved educational programs was defined
as ``the cost of approved educational activities (including stipends of
trainees, compensation of teachers, and other costs), less any
reimbursement from grants, tuition, and specific donations.'' The
regulation also defined approved educational activities as ``formally
organized or planned programs of study usually engaged in by providers
in order to enhance the quality of patient care in an institution'' (20
CFR 405.421(b)(1)).
The types of costs that were allowable as costs of
approved educational activities were set forth in both the regulations
and the Provider Reimbursement Manual (Chapter 4). Both the regulations
and the manual repeated the Congressional Committee Report language
from the Social Security Amendments of 1965 (Public Law 89-97) that
Medicare would share in the costs of educational activities until
communities bore them in some other way (S. Rep. No. 404, 89th Cong.,
1st Sess., 36 (1965) and H.R. Rept. No. 213, 89th Cong., 1st Sess., 32
(1965)). In addition, both sources clearly stated that it was not
intended that Medicare should pay for increased costs resulting from a
redistribution of costs from educational institutions to providers (20
CFR 405.421(c) and section 404.2 of the manual).
The Social Security Amendments of 1972 (Public Law 92-603)
authorized the Secretary to set prospective limits on the costs
reimbursed by Medicare. At that time, the costs of approved educational
activities were not excluded from costs subject to the limits. Instead,
the regulations allowed a provider to apply for an exception to the
limits for costs attributable to the operation of an approved medical
education program (20 CFR 405.460(f)(2)).
Section 404.2 of the Provider Reimbursement Manual was
revised in November 1975 to specify that in order for costs to be
allowable for approved educational activities, an approved nursing or
allied health education program had to be operated by a provider.
Over the next several years, attempts by intermediaries to
apply this policy were consistently overruled by the Provider
Reimbursement Review Board. These Board decisions were consistently
reversed by the Administrator of HCFA. Several of these cases were then
litigated in the Federal courts, and in each case that went to a
decision on the merits, the courts upheld the Board.
The most significant of these cases was generally
considered to be St. John's Hickey Memorial Hospital, Inc. v. Califano,
599 F.2d 803 (7th Cir. 1979). In that case, the U.S. Court of Appeals
for the Seventh Circuit sustained the decision of the Provider
Reimbursement Review Board that Sec. 405.421(c), as it existed at that
time, did not require the provider to be the operator of the associate
degree nursing program, but only required the provider to engage in
such activity. On October 1, 1979, Medicare policy was amended to
correspond with the ruling of the court in the HCFA Administrator's
decision on Provider Reimbursement Review Board Decision No. 79-D50.
A final Federal Register notice (44 FR 31806) issued on
June 1, 1979, established the schedule of limits on hospital inpatient
general routine operating costs, effective for cost reporting periods
beginning on or after July 1, 1979. In that notice, the costs of
``approved medical education programs'' were excluded from the costs
subject to the limits.
The Tax Equity and Fiscal Responsibility Act of 1982
(Public Law 97-248) was enacted on September 3, 1982. Section 101 of
that law replaced the existing cost limits with an expanded overall
limit on hospital inpatient operating costs and a limit on the rate of
increase of these costs for cost reporting periods beginning on or
after October 1, 1982. Section 1886(a)(2)(A) of the Social Security Act
(the Act), as added by section 101 of Public Law 97-248, requires the
Secretary to provide for such exemptions from, and exceptions and
adjustments to, the hospital cost limits as the Secretary deems
appropriate to take into account ``medical and paramedical education
costs'' in implementing these limits.
HCFA revised Chapter 4 of the Provider Reimbursement
Manual in January 1983 to reflect policy changes resulting from the St.
John's Hickey decision. Revised Sec. 404.2 specified that provider
costs incurred for clinical training associated with an approved
program operated by an entity other than a provider could be allowable.
Further, it specified that costs incurred by a provider associated with
the classroom portion of the program could be allowable if they did not
constitute a redistribution of nonprovider costs to the provider, the
provider received a benefit for the support furnished, and the cost of
the provider's support was less than the cost the provider would incur
in operating its own program.
The Social Security Amendments of 1983 (Public Law 98-21)
provided for Medicare payment for the operating costs of hospital
inpatient services under a prospective payment system rather than on a
reasonable cost basis. Section 601(a)(2) of that law amended section
1886(a)(4) of the Act to specify that costs of approved educational
activities were excluded from the definition of inpatient hospital
operating costs under the prospective payment system and the target
amount for hospitals excluded from that system. Instead, these costs
were to be separately identified and ``passed through.''
In the September 1, 1983 interim final rule that
implemented the prospective payment system (48 FR 39752),
Sec. 405.421(d) was amended to provide that costs relating to six types
of activities were outside the scope of the pass-through provision.
Included among those costs were those related to ``other activities
which do not involve the actual operation or support (except through
tuition or similar payments) of an approved education program.'' Thus,
effective with cost reporting periods beginning on or after October 1,
1983, the costs of only those programs operated directly by the
hospital were excluded from the prospective payment system and the
target amount for excluded hospitals and paid on a reasonable cost
basis.
The January 3, 1984 prospective payment system final rule
(49 FR 234) clarified that only the costs of programs operated directly
by providers were excluded from the prospective payment system and
eligible for payment on a pass-through basis and that the cost of
clinical training for students enrolled in programs operated outside
the provider were normal operating costs.
B. The Omnibus Budget Reconciliation Act of 1989
The Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239)
[[Page 3360]]
contained three provisions concerning nursing and allied health
education. Section 6205(a) created a temporary category of ``hospital-
based nursing schools.'' Costs incurred by hospitals for training
nursing students in these schools are to be paid on the basis of
reasonable cost as though the hospital met the criteria set forth at
Sec. 413.85, ``Cost of educational activities.'' This provision was
effective for cost reporting periods beginning on or after December 19,
1989, and before the issuance of a final rule as required by section
6205(b)(2) of Public Law 101-239. We implemented this provision in a
final rule with comment period published in the Federal Register on
April 20, 1990 (55 FR 15159) and made further revisions in the final
rule that implemented changes to the hospital inpatient prospective
payment system for fiscal year 1991, which was published on September
4, 1990 (55 FR 35998).
Under this provision, a hospital may claim as pass-through costs
the costs incurred in training students from a nursing school if all of
the following criteria are met:
The hospital incurs at least 50 percent of the net costs,
that is, the costs after deduction of tuition revenues incurred for
classroom and clinical training provided to students enrolled in an
approved nursing education program at the hospital-based nursing
school.
At least 50 percent of the board of directors of either
the hospital or the nursing school, whichever board has the fewer
members, are also members of the board of the other entity. If
application of this criterion requires either board to have more than
four common board members, the hospital will meet this criterion by
having at least four common board members.
All instruction is provided at the hospital, or on the
immediate grounds.
The preceding three criteria were met on June 15, 1989,
and have been met continuously since that date.
Section 6205(b)(1) of Public Law 101-239 imposed a moratorium for
the period on or after December 19, 1989, and before October 1, 1990,
on the recoupment of overpayments attributable to a determination by a
provider's intermediary that costs claimed by a provider for the
operation of a school of nursing or allied health are not eligible for
payment on a reasonable cost basis. The basis for this determination is
generally that a neighboring or related college or university, not the
hospital, is the operator of the program. We announced the provisions
of the moratorium in a program memorandum issued to our fiscal
intermediaries (Transmittal No. A-90-9, June 1990).
Section 6205(b)(2) of Public Law 101-239 directed the Secretary to
publish regulations clarifying the rules governing which costs of
approved educational activities are allowable and when those costs are
eligible for pass-through under the prospective payment system,
including--
The relationship required between an approved nursing or
allied health education program and a hospital in order for the
program's costs to be attributed to the hospital;
The types of costs related to nursing or allied health
education programs that are allowable by Medicare;
The distinction between costs of approved educational
activities as recognized under section 1886(a)(4) of the Act and
educational costs treated as operating costs of inpatient hospital
services; and
The treatment of other funding sources for the program.
C. The Omnibus Budget Reconciliation Act of 1990
On November 5, 1990, before the issuance of the proposed
regulations required by section 6205(b)(2) of Public Law 101-239,
Congress enacted the Omnibus Budget Reconciliation Act of 1990 (Public
Law 101-508). Section 4004(b) of Public Law 101-508 contained several
provisions addressing Medicare payment for nursing and allied health
education costs on a reasonable cost basis under Medicare Part A.
Section 4159(b) of Public Law 101-508 set forth parallel provisions
concerning payment on a reasonable cost basis under Medicare Part B for
these costs. (The language in section 4159(b) is identical to the
language in section 4004(b), except that section 4004(b) applies to
Part A and section 4159(b) applies to Part B. For ease of reference in
this document, we refer solely to the provisions of section 4004(b);
however, each of these references is deemed to be a reference to the
corresponding provision of section 4159(b)).
Section 4004(b)(1) provides that, effective with cost reporting
periods beginning on or after October 1, 1990, if certain conditions
are met, the costs incurred by a hospital (or by an educational
institution related to the hospital by common ownership or control) for
clinical training (as defined by the Secretary) conducted on the
premises of the hospital under an approved nursing or allied health
education program that is not operated by the hospital are treated as
pass-through costs and paid on the basis of reasonable cost. Section
4004(b)(2) sets forth the following conditions that a hospital must
meet to receive payment on a reasonable cost basis under this
provision:
The hospital must have claimed and have been paid for
clinical training costs as described in section 4004(b)(1) during its
latest cost reporting period that ended on or before October 1, 1989.
The proportion of the hospital's total allowable costs
attributable to the clinical training costs of the approved program and
allowable under section 4004(b)(1) during a cost reporting period does
not exceed the proportion of total allowable costs that were
attributable to the clinical training costs during the hospital's
latest cost reporting period that ended on or before October 1, 1989.
The hospital receives a benefit for the support it
furnishes to the education program through the provision of clinical
services by nursing and allied health students participating in the
program.
The costs incurred by the hospital for the program do not
exceed the costs that would have been incurred by the hospital if it
had operated the program.
We published a proposed rule in the Federal Register on September
22, 1992, which set forth proposed regulations to satisfy the
requirements of section 6205(b)(2) of Public Law 101-239, as well as
the provisions of sections 4004(b)(1) and (2) of Public Law 101-508 (57
FR 43659).
In addition to the new payment provision under sections 4004(b)(1)
and (b)(2) of Public Law 101-508, section 4004(b)(3) prohibited
recoupment of Medicare overpayments made to hospitals for pass-through
costs related to approved nursing and allied health education programs
for cost reporting periods beginning on or after October 1, 1983 and
before October 1, 1990. This section also required us to refund
previously recouped overpayments for these costs. We issued a program
memorandum (Transmittal No. A-91-3, May 1991) and amended section 404.2
of the Provider Reimbursement Manual (Transmittal No. 368, September
1992) to instruct our fiscal intermediaries on implementing the
provisions of section 4004(b)(3) of Public Law 101-508.
II. Provisions of the Proposed Rule and Responses to Public
Comments
In accordance with the mandate of section 6205(b)(2) of Public Law
101-239, the September 22, 1992 proposed rule addressed the Medicare
rules governing which costs of nursing and allied health educational
programs are allowable and when these costs are
[[Page 3361]]
eligible for the pass-through payment to a hospital paid under the
prospective payment system.
In general, we proposed to continue our existing policies with
respect to payment to providers for provider-operated approved nursing
and allied health education programs on a reasonable cost basis. That
is, we proposed to retain the provisions in existing regulations under
Sec. 413.85 that Medicare payments be determined on a reasonable cost
basis for a provider's net costs of approved nursing and allied health
educational programs and proposed the conditions under which we would
make these payments. We proposed to amend Sec. 413.85 to explicitly set
forth criteria that define approved nursing and allied health
educational programs considered provider-operated, and rules for
determining the net costs of provider-operated nursing and allied
health educational programs. We also proposed to allow reasonable cost
payment for the clinical training costs of certain nonprovider-operated
programs to comply with the requirements of section 4004(b) of Public
Law 101-508, and addressed the conditions for payment for the net costs
of approved certified registered nurse anesthetist (CRNA) educational
programs. Finally, we proposed to clarify our policy on the nursing and
allied health educational activities we consider as normal operating
costs.
We received 31 timely items of correspondence from the public and
other interested parties in response to the proposed rule. The specific
comments and our responses are set forth below following each section
describing the specific provisions of the proposed rule.
A. Determining Provider-Operated Programs
We proposed to revise Sec. 413.85 (``Cost of educational
activities.'') to clarify our policies on paying providers for the
costs incurred for nursing and allied health education activities. We
proposed to retain the general rule specified under existing
Sec. 413.85 that payment for a provider's net cost of approved
educational activities is made on a reasonable cost basis. We also
proposed to set forth at Sec. 413.85(e) criteria we would use to
identify programs operated by a provider. The proposed regulations
reflected that, except as provided in section 4004(b) of Public Law
101-508, the key factor to be considered in determining whether the
classroom instruction and clinical training costs of approved nursing
and allied health educational programs are eligible to be passed
through is the degree to which the provider controls all aspects of the
program. For example, we proposed that if a clear separation of
function exists, such as when a college or university directs and
operates the classroom portion of the program and the provider
furnishes only the setting for clinical training, then the educational
program costs would not be eligible to be paid on a pass-through basis.
In these cases, clinical training would flow from the part of the
program conducted by the institution other than the provider. Thus, the
majority of the training costs would be borne by the college or
university and not by the provider. While the provider may incur some
costs associated with its provision of clinical training to students
enrolled in a nearby institution, the provider would also gain in
return. For example, it would obtain the services of the trainee, often
at no direct cost to itself.
In addition to the value of the services of students in an approved
program, providers would receive a number of other benefits from
participation in a nursing and allied health educational program
operated by another entity. One benefit is the fact that a significant
percentage of the graduates of these programs become employees of the
provider at which they trained. This would allow the provider to avoid
costs it would otherwise have to incur for recruitment.
We proposed that, for purposes of determining the operator of an
approved nursing or allied health education program, the fact that a
provider and a college or university are considered related
organizations under Sec. 413.17 (``Cost to related organizations.'')
would not be sufficient to allow a university-operated program to be
considered provider operated. As we explain in section II.C. of this
preamble, our policy concerning related organizations was established
to avoid program recognition of costs of a provider for goods or
services furnished by a related organization in excess of the costs
incurred by the related organization.
We proposed that all of the following criteria must be met to be
considered the operator of a nursing or allied health education
program:
The provider must incur the costs associated with both the
clinical training and classroom instruction portions of the programs,
where the classroom instruction is a requirement for completion of the
program. For example, the provider must incur the costs for books,
supplies, and faculty salaries, where such costs are applicable.
The provider must directly control the program curriculum,
that is, the provider must determine the requirements to be met for
graduation. In meeting this requirement, a provider may enter into an
agreement with a college or university to provide the basic academic
course requirements leading to a degree, diploma, or other certificate,
while the provider is directly responsible for providing the courses
relating to the theory and practice of the nursing or allied health
profession that are required for the degree, diploma, or certificate
awarded at completion of the program.
The provider must control the administrative duties
relating to the program. These duties include the collection of tuition
(where applicable), maintaining payroll records of the teaching staff
or students, or both (where applicable), and being responsible for the
day-to-day operation of the entire training program.
The provider must employ the faculty.
The provider must provide and control both classroom
instruction and clinical training, (where the classroom instruction is
a requirement for the completion of the program), subject to the
provision in the second criterion of provider-operated programs above
that a provider may enter into an agreement with a college or
university to provide the basic academic course requirements leading to
a degree, diploma, or other certificate, while the provider is directly
responsible for providing the courses relating to the theory and
practice of the nursing or allied health profession that are required
for the degree, diploma, or certificate awarded at completion of the
program.
We note that proposed Sec. 413.85(e)(2) (Sec. 413.85(f)(2) in this
final rule) reflected a special rule that a provider that is licensed
or accredited to (1) operate the program and (2) issue degrees,
diplomas, or certificates to its students upon graduation is assumed,
absent evidence to the contrary, to meet the criteria listed above and
to be the operator of the program.
In certain situations, providers are entering into arrangements
with colleges and universities that, in many cases, have involved
provider representation on a joint committee with certain oversight
responsibilities. Under these provider/college educational arrangements
the provider might not have direct responsibility for the curriculum
and control of day-to-day operation of the training programs. We
proposed that unless the provider can demonstrate that it meets the
requirements enumerated above, the
[[Page 3362]]
costs incurred by the provider in connection with such joint programs
would not be paid as separate pass-through costs.
There are other situations, however, that involve sequential
operation of a program by an educational institution and a provider.
These situations frequently involve providers that are changing from
offering a certificate or diploma program to offering an associate or
baccalaureate degree. The provider may create a program leading to a
degree in which instruction in general academic requirements is
provided by a college or university and subsequent specialized
classroom instruction and clinical training are given by the provider.
We proposed that if the provider establishes and controls the
curriculum and requirements for graduation, the provider would be
considered to be the operator of the program for purposes of receiving
pass-through payment under Sec. 413.85. However, no costs incurred by
the college may be claimed as provider costs.
As stated above, we proposed that a provider must provide and
control both clinical training and classroom instruction in order to
meet the criteria of provider-operated under proposed Sec. 413.85(e).
Since publication of the proposed rule, it has come to our attention
that some nursing and allied health education specialties do not have
classroom instruction components. We are therefore clarifying in this
final rule that, in such instances, the provider must only provide and
control the clinical training, subject to the other conditions
specified in redesignated Sec. 413.85(d)(1). Thus, the language at
Sec. 413.85(f)(1) of this final rule accounts for situations where the
nursing and allied health program does not have a classroom instruction
as part of the program. For example, at Sec. 413.85(f)(1)(v), instead
of indicating that the provider is required to provide both clinical
training and classroom instruction as we had specified in the proposed
rule, we now state that the provider must ``provide and control both
classroom instruction and clinical training (where the classroom
instruction is a requirement for the completion of the program).''
Where the nursing and allied health program has a classroom instruction
component in addition to a clinical training component, the provider
must provide and control both components in order to receive pass-
through payment. In addition, as discussed below, we note that we are
further clarifying in this final rule proposed Sec. 413.85(e)(1)(v) in
order to address a public comment on sequentially operated nursing and
allied health education programs by specifying at Sec. 413.85(f)(1)(v)
of this final rule that this paragraph is subject to the parenthetical
sentence in the second criterion of the provider-operated criteria
(Sec. 413.85(f)(1)(ii) of this final rule) which states that a provider
may enter into an agreement with a college or university to provide the
basic academic course requirements leading to a degree, diploma, or
other certificate, while the provider is directly responsible for
providing all of the courses relating to the theory and practice of the
nursing or allied health profession that are required for the degree,
diploma, or certificate awarded at completion of the program.
In proposed Sec. 413.85(c)(3) and (4), we proposed separate
specific definitions of clinical training and classroom instruction
costs to allow providers and intermediaries to differentiate between
clinical training and classroom instruction. These definitions (as
modified slightly for purely editorial changes in this final rule) are
as follows:
Clinical training costs involves costs associated with the
acquisition and use of the skills of a nursing or allied health
profession or trade in the actual environment in which these skills
will be used by the student upon graduation. While clinical training
may involve occasional or periodic meetings to discuss or analyze
cases, critique performance, or discuss specific skills or techniques,
it involves no classroom instruction.
Classroom instruction costs are costs associated with the
formal, didactic instruction on a specific topic or subject provided in
a class that meets at regular, scheduled intervals over a specific time
period (for example, semester or quarter) and for which a student
receives a grade.
We received many comments on our proposed criteria for provider-
operated programs. The majority of the commenters believed the criteria
are too restrictive and would result in the exclusion of many nursing
and allied health education programs from receiving pass-through
payment.
Comment: The majority of those who commented on this provision were
concerned that the criteria do not appear to allow reasonable cost
payment to programs operated by both a provider and an educational
institution. These arrangements, which have become common as the
industry moves away from provider-operated education programs to those
based at colleges and universities, would not meet the proposed
criteria. The commenters indicated that providers have often been
forced to create these arrangements because accrediting agencies would
not approve programs operated solely under the control of the provider.
They believed that, in some cases, HCFA has been providing payment
under the pass-through for these programs based at educational
institutions under the theory that the provider controls and wholly
owns the subsidiary college. In other cases, hospitals have entered
into joint programs with already established educational institutions.
The commenters requested that the final rule clearly delineate which of
these programs would be considered to be operated by the provider and,
thus, eligible for the pass-through, and which would not be eligible.
One commenter stated that, although the proposed rule is intended
to be a codification in regulations of current policy, we did not
include a current list of hospital-based nursing programs that meet the
criteria set forth in section 6205(b)(2) of Public Law 101-239. The
commenter believed that, to be consistent, the final regulations need
to provide that these programs meet the definition of provider-
operated.
Response: Except as provided in OBRA 1990, we do not make pass-
through payments to a hospital for the costs of a nursing and allied
health education program not operated by a hospital because the costs
are considered normal operating costs and the hospital receives payment
for those costs through the inpatient prospective payment system
payments. We believe that, in the case of programs that are not
operated by a hospital, the majority of the training costs of the
program are incurred by an entity (the college or university) other
than the hospital; to the extent that a hospital incurs costs for a
nonprovider-operated program, the inpatient PPS payment encompasses
payment for those costs.
In addition, as indicated in the proposed rule, the hospital
benefits in a number of ways from its participating in a nonprovider-
operated educational program: the hospital obtains services of the
trainee during the training; the hospital might receive payments from
the college or university for the costs incurred by the hospital; and
the hospital might save staffing costs, as well as recruiting costs
(many of the trainees ultimately become employees of the hospital).
Furthermore, the distinction between provider-operated programs and
nonprovider-operated programs is consistent with the provisions of OBRA
1989 and OBRA 1990.
In the case where a hospital enters into a joint program with an
educational
[[Page 3363]]
institution, the distinction between provider-operated and nonprovider-
operated programs also reflects the community support principle,
because the program has moved away from the provider-operated mode and
into the community assumption of costs. The House and Senate Committee
reports accompanying Public Law 89-97 reflect that Congress
contemplated that Medicare would share the costs of educational
activities until the community assumed the costs. If the university
undertakes the classroom education of the students, including the
collection of the tuition, the employment of the faculty, the control
of the curriculum, and the awarding of the degree, the community has
undertaken the responsibility for training nurses and allied health
personnel and relieved the hospital of this cost. Again, to the extent
that the hospital incurs costs for the nonprovider-operated program,
the hospital receives payment for these costs through the inpatient PPS
payments.
Concerning those hospitals that have established their own
educational institution to meet accrediting standards, we believe that,
in some cases, these providers can be eligible to receive payment for
the classroom and clinical training of students in approved programs.
If the provider demonstrates that the educational institution it has
established is wholly within the provider's control and ownership and
that the provider continues to incur the costs of both the classroom
and clinical training portions of the program, the costs would continue
to be paid on a reasonable cost basis. An independent college would not
meet these criteria.
An example of a program that could be considered provider-operated
would be one in which the hospital is the sole corporate member of the
college, elects the board of trustees, has board members in common,
employs the faculty and pays the salaries, controls the administration
of the program and the curriculum, and provides the site for the
clinical and classroom training on the premises of the hospital. We
believe that, in these situations, the community has not undertaken to
finance the training of health professionals; the provider has merely
restructured its provider-operated program to meet certain State or
accrediting requirements. In most cases, providers have aligned
themselves with already established educational institutions. We note
that a program operated by an educational institution that is related
to the provider through common ownership or control would not be
considered to meet the criteria for provider operated.
In response to the commenter who was concerned that the proposed
regulations did not incorporate those programs receiving reasonable
cost payment under the provisions of section 6205(a)(1) of Public Law
101-239, we note that Congress clearly recognized this provision to be
temporary. The provision is to expire 30 days after publication of the
final rule required by section 6205(b)(2), that is, this final rule.
Comment: One commenter stated that HCFA should not treat provider-
operated and nonprovider-operated programs differently. Providers that
are providing support to another institution by providing clinical
training are incurring costs and these costs should be eligible to be
paid under the pass-through payment. The commenter believed that it is
highly unlikely that a university would allow a hospital to have sole
control of the curriculum or graduation requirements or to employ the
faculty. Thus, it would be impossible for these programs to meet the
provider-operated criteria. However, HCFA should allow the clinical
training costs in all situations.
Response: Please see our response to the previous comment. The
proposed criteria set forth in Sec. 413.85(e) (Sec. 413.85(f)(1) in the
final rule) are those to be used in identifying those nursing and
allied health programs operated by providers. The commenter appears to
be describing programs that are operated by educational institutions
for which a provider offers support in clinical training. As discussed
in detail above, we believe that Congress intended to support nursing
and allied health education programs operated by hospitals only until
the community undertakes the costs of the programs itself. Nursing and
allied health education programs operated by colleges and universities
are considered to be programs in which the costs are borne by the
community, since much of the costs of operating the programs are
incurred by the colleges and universities. Therefore, we believe it is
contrary to Congressional intent for Medicare to provide pass-through
payments to providers, in addition to inpatient PPS payments, for the
costs of non-provider operated programs (that do not meet the criteria
under OBRA 1990).
Comment: One commenter described a CRNA program in which the
hospital is allowed to grant a certificate to a student upon completion
of the program. This may occur when an affiliated university also
grants a degree to the same student. According to the commenter, the
Council on Accreditation of Nurse Anesthetist Programs does not
prohibit the awarding of an ``anesthesia certificate'' in addition to
the award of the master's degree for a hospital-based program. The
commenter believed that this could be interpreted as the hospital
meeting the criteria to be the operator of the program since the
hospital awards a certificate, and requested that we clarify this in
the final rule.
Response: The program described above where the hospital awards a
certificate and an affiliated university confers a degree upon the same
student appears to be a university-controlled nursing or allied health
program. The certificate awarded by the hospital seems to be an adjunct
to the actual degree awarded by the educational institution. In fact,
as indicated by the commenter, the certificate is awarded ``in
addition'' to the master's degree awarded by the university. This
indicates the program is under the control of the university and the
hospital has merely provided support to that program. We note, however,
that if the hospital described by the commenter can show that it, in
fact, meets the criteria of Sec. 413.85(e) (Sec. 413.85(f) in this
final rule) of operating the program, it may receive pass-through
payment.
Comment: One commenter requested that we include the language
concerning sequentially conducted education programs in the regulation
text. Also, the commenter believed that we need to expand on this
discussion. For example, the commenter asked whether a program would be
considered provider-operated if a hospital employs only the faculty for
the clinical portion of the program.
Response: As noted above, and also in the preamble to the proposed
rule, sequential operation of a nursing and allied health education
program involves providers that enter into agreements with a college or
university in which instruction in general academic requirements
leading to a degree is provided by the educational institution, and
subsequent specialized didactic and clinical training is given by the
provider. The provider may receive pass-through payment for the costs
of the program that the provider incurs if the provider meets all of
the criteria for operating the program, including the requirement at
proposed Sec. 413.85(e)(1)(ii) (Sec. 413.85(f)(1)(ii) of this final
rule) that the provider must directly control the curriculum. We note
that under this section of the regulations, there is a provision (also
cited at Sec. 413.85(f)(1)(v) of this final
[[Page 3364]]
rule) which states that a provider may enter into an agreement with an
educational institution to furnish basic academic courses required for
completion of the program, but the provider must provide all of the
courses related to the theory and practice of the nursing or allied
health profession involved that are required for the degree, diploma,
or certificate awarded at the completion of the program. No costs
incurred by the college or university may be claimed as provider costs.
In regard to the commenter's question about employment of the
teaching faculty, providers that employ faculty only for the clinical
training portion of the program, where there is a classroom component
relating to the theory and practice of the nursing and allied health
profession involved, would not be considered as a provider operating
the program.
Comment: One commenter argued that, through these regulations, the
Federal Government is encouraging the provision of nursing and allied
health education through provider-operated programs, which is contrary
to the movement of these training programs to academic settings. The
commenter believed that Medicare costs would be reduced if hospitals
provided only clinical training and allowed educational institutions to
provide the classroom instruction. Another commenter stated that very
few nurses currently graduate from provider-operated programs and that
the proposed regulations do not reflect the current state of nursing
and allied health education. Rather than erect barriers to receiving
funding, the rules should be revised to allow hospitals to claim
clinical training costs as a pass-through regardless of operation.
Finally, one commenter stated that the clinical training for all
programs should be eligible for the pass-through without a
corresponding reduction in the prospective payment system standardized
amounts.
Response: Our payment policies are designed to make appropriate
payments for provider-operated programs and nonprovider-operated
programs, not to encourage one type of program over another. We
recognize the impact of the current policy of paying on a pass-through
basis only for provider-operated nursing and allied health programs
(except the narrowly defined nonprovider-operated programs specified at
Sec. 413.85(g) of this final rule) when there is a movement of these
training programs towards academic settings. We accept the comments
that Medicare will provide pass-through payment to hospitals for the
classroom and clinical costs of programs only when the programs are
provider-operated, while nursing education has been increasingly
occurring in baccalaureate and advanced-level nurse training programs
in colleges and universities. However, as explained above, we believe
hospitals should only receive pass-through Medicare payments for
training students in provider-operated programs. We note Congress'
implicit acceptance of our longstanding provider-operated policy via
its enactment of a narrow exception to the provider-operated policy as
set forth by section 4004(b)(2) of Public Law 101-508 of the
nonprovider-operated nursing and allied health education programs.
The commenters encouraged HCFA to allow for pass-through payments
for the clinical portion of all nursing and allied health education
programs, even all of those programs that are nonprovider-operated
programs in addition to those that meet the criteria under section
4004(b) of Public Law 101-508. However, under the current inpatient
hospital prospective payment system, costs incurred by hospitals for
clinical training in nonprovider-operated programs are paid within the
prospective payment system per discharge payments. If a legislative
change provided for pass-through payment for a hospital's clinical
training in all nonprovider-operated programs, we believe an adjustment
would be necessary to carve out those costs from the Federal rate.
Comment: Two commenters were concerned that no hospitals control
their own curriculum and, therefore, no hospitals could meet the
criterion set forth in the proposed regulations. One commenter stated
that the accrediting agencies dictate which courses a student must
complete in order to obtain a degree or certificate. Another commenter
stated that, in today's educational programs, the curriculum is
determined by the institution of higher learning.
Response: We understand that a teaching hospital must provide
certain required courses and training in order to be accredited. This
does not mean that these requirements prohibit a provider from directly
controlling the curriculum. Although many courses are required by the
accrediting agencies, there are other courses generally provided by the
providers. Also, the provider determines in what manner its students
will accomplish the course work that will allow them to be accredited.
In addition, control of the curriculum also means the provider actually
provides all the courses or arranges for an outside organization to
provide those academic courses necessary to complete the course work.
Comment: One commenter believed that the definitions of ``clinical
training costs'' and ``classroom costs'' are too inflexible and do not
account for the classroom time needed to review and discuss clinical
assignments and engage in group learning. Classroom activity related to
clinical experience should not be separated from clinical training.
Response: We believe that the definitions of classroom instruction
and clinical training costs are necessary so that they can be
differentiated in relation to the payment policies that apply to them.
For example, hospitals that operate nursing or allied health education
programs would be eligible to receive pass-through payment for both the
clinical training and classroom instruction costs of the program.
However, under OBRA 1990, certain nonprovider-operated programs are
eligible to receive pass-through payment for only the clinical training
costs of the programs. Clinical training does encompass some occasional
or periodic meetings that relate to the acquisition of clinical
training skills. However, these meetings are not formal, didactic
classroom instruction. Classroom instruction consists of classes that
meet at regularly scheduled intervals over a specific period of time
and the students' participation is graded by the instructor. Costs
incurred in meetings or discussions held between students' and clinical
trainers are covered costs to the extent they meet the definition of
incremental costs incurred because of the provider's participation in
the clinical training program.
B. Nursing and Allied Health Education Specialties and Accrediting
Bodies
Under existing regulations, one condition that must be met in order
for a provider to receive reasonable cost payment for the net costs of
its nursing or allied health educational program is that the program
must be recognized by a national approving body or State licensing
organization. A nursing and allied health education program that wanted
to be paid on a reasonable cost basis, in addition to being a provider-
operated program, either needed to be included on the list of approved
programs under existing Sec. 413.85(e) or needed to qualify to be an
approved program under existing Sec. 413.85(f). Recently, it has come
to our attention that the list of approved programs contained in
existing Sec. 413.85(e) is inaccurate to the extent some of the names
of the specialties, as well as their
[[Page 3365]]
respective accrediting bodies, have changed. In addition, some
specialties listed at existing Sec. 413.85(e), while previously meeting
the criteria of programs that are provider operated, may no longer meet
these criteria. Because we find that nursing and allied health
education is a constantly evolving field, we are clarifying our policy
on approved nursing and allied health education programs by removing
the current specific list of approved nursing and allied health
programs and, instead, framing the issue in general terms by
considering a nursing or allied health education program eligible for
pass-through payment if the program is recognized by a national
approving body or State licensing authority and it meets the other
criteria under Sec. 413.85(d) of this final rule. By requiring the
nursing and allied health education activity to be recognized by either
of these bodies, we ensure that the programs we pay for under Medicare
meet at least a minimum standard of accreditation.
We note that this requirement that the nursing and allied health
program be accredited by one of these approving bodies is simply one of
the requirements under the general payment rule under Sec. 413.85(d) of
this final rule for a provider to receive reasonable cost payment for
the net cost of nursing and allied health education activities. That
is, accreditation by a national approving body or State licensing
organization for a particular nursing and allied health education
activity does not mean that the activity qualifies for pass-through
payments; in order to qualify for pass-through payments, the provider
must meet the other general payment rule requirements (including the
provider-operated criteria). In addition to requiring the program to be
recognized by a national approving body or State licensing authority,
we also give examples under Sec. 413.85(f) of this final rule of
national nursing and allied health approving bodies. The examples we
list are: the Commission on Accreditation of Allied Health Education
Programs; the National League of Nursing Accrediting Commission; the
Association for Clinical Pastoral Education, Inc.; and the American
Dietetic Association. In addition, our research has shown that there
are currently other national approving bodies of nursing and allied
health programs that also meet at least a minimum standard of
accreditation. They are: the American Society of Hospital Pharmacists;
the National Accrediting Agency for Clinical Laboratory Sciences; the
Council on Accreditation of Nurse Anesthesia Educational Programs; the
American College of Nurse-Midwives; the Joint Review Committee for
Education of Radiologic Technology; the Joint Review Committee on
Nuclear Technology; and the American Physical Therapy Association.
In the September 1992 proposed rule, we proposed to update the
listing of approved nursing and allied health programs. We solicited
and received many comments about additions and deletions to the list.
Because in this final rule we are deleting the specific list of
programs and replacing it with a general requirement that the program
must be recognized by a national or State licensing approving body, our
responses to the comments on the specialties note whether or not we
consider the specialty as an approved nursing and allied program, and
do not address whether we should add the specialty to or delete the
specialty from a list of approved programs.
We also proposed that only those nursing and allied health
education programs listed in the regulations may be paid as approved
educational activities. We proposed to add a redesignated provision to
the regulations (proposed Sec. 413.85(d)) that would provide for other
national approving bodies or State licensing authorities to apply to
HCFA for inclusion on our list of approved programs. Because we are
clarifying our policy in Sec. 413.85(e) of this final rule by
eliminating the list of accrediting organizations from our regulations,
this proposed provision is no longer necessary. In addition, we
proposed to revise the list of approved programs to include the
specific title or titles used by the appropriate accrediting
organization. The Committee on Allied Health Education and
Accreditation (CAHEA), now called the Commission on Accreditation of
Allied Health Education Programs (CAAHEP), cooperates with many
committees and collaborates with academies, associations, boards, and
societies in its accreditation process. In the interest of brevity, and
for the convenience of those entities seeking approval for those
programs accredited by CAAHEP in collaboration with other
organizations, we listed only CAAHEP in the proposed regulations.
Some of the programs that had been previously accredited by CAAHEP
are now accredited by the National Accrediting Agency for Clinical
Laboratory Sciences (NAACLS), the Joint Review Committee for Education
of Nuclear Medicine Technology, the Joint Review Committee for
Education of Radiologic Technology, and the American Occupational
Therapy Association. For the convenience of those programs seeking
accreditation, we also note that the name of the accrediting
organization, the Commission on Accreditation in Physical Therapy
Education (CAPTE), has been changed by the organization to the American
Physical Therapy Association (APTA). Lastly, we will acknowledge the
American College of Nurse Midwives as a national approving body, for
reasons that are explained below.
Comment: We received several comments requesting that we expand our
list of approved programs to include nonprovider-operated programs that
do not qualify for pass-through payment.
Response: As stated above, we are clarifying our policy of not
paying on a pass-through basis for nonprovider-operated programs in
this final rule and, to avoid confusion as to which programs are
currently being paid for, we have eliminated the specific listing and
replaced it with a general requirement for accreditation or State
licensure.
Comment: One commenter asserted that the proposed rule clearly
allows nonprovider-operated programs to receive payment under the OBRA
1990 pass-through; therefore, restricting the list to programs operated
by providers is inconsistent. Another commenter believed that this
requirement unnecessarily restricts new programs at nonprovider sites.
Response: As noted above, we have eliminated the specific listing
and replaced it with a general requirement for accreditation or State
licensure; therefore, comments regarding additions to or the nature of
the approved list of programs are no longer relevant. However, as
reflected in 42 CFR 413.85(g) of this final rule, any nonprovider-
operated programs that meet the requirements under OBRA 1990 and also
meet accreditation requirements, may be eligible to receive pass-
through payments.
Comment: One commenter stated that the Higher Education Act
Amendments of 1992 (Public Law 102-235) require that the American
Medical Association (AMA) separate itself from the CAHEA. As a result,
that organization may cease to exist. The final regulations should
provide for the successor organization. Another commenter stated that
since the AMA may withdraw support from the CAHEA, the regulations
should list the actual accrediting agencies.
Response: In late October 1992, the AMA announced that the CAHEA
would be phased out at the close of 1994 and that it would support the
[[Page 3366]]
establishment of a successor agency. By May 1994, the Commission on
Accreditation of Allied Health Education Programs (CAAHEP) was
established to assume the accreditation programs previously associated
with CAHEA. This final rule reflects this change; we list CAAHEP as an
example of a national approving body under Sec. 413.85(e). Since an
actual successor agency has been established, we do not believe that it
is necessary to list the individual agencies that cooperate with this
new organization.
Comment: The American College of Nurse-Midwives and the American
Academy of Physicians Assistants formally requested that their allied
health education programs be included in our list of approved programs.
Response: These comments are no longer applicable because we are
clarifying our policy in this final rule by stating a general
requirement rather than including a specific listing.
Comment: We received several comments protesting our proposal to
exclude emergency medical technician and paramedic programs (EMT-P)
from the list of approved education programs. These commenters disagree
with our conclusion that there is a tenuous relationship between the
care provided by these individuals and the quality of patient care in a
hospital. All of the commenters urged that we pay for these programs
because the care and services provided by these personnel prior to
admission are often vital in determining the patient's condition and
prognosis and, thus, there is an essential link between these personnel
and inpatient care. One commenter believed that the preadmission
services provided by paramedics are crucial to patient outcomes through
early intervention and delivery to the appropriate hospital. Another
commenter stated that the care provided en route to the hospital has a
direct result on the condition of the patient's condition when
admitted, which has an impact on the amount and intensity of inpatient
services required. Also, hospital emergency room care is a coordinated
effort. The emergency medical technicians and paramedics are in
communication with and often receive direction from the emergency room
physician while en route to the hospital. Several commenters indicated
that emergency medical technicians and paramedics often provide
services in the emergency room and are used elsewhere in the hospital
in areas such as the operating room, the intensive care units, and
labor and delivery. Therefore, they do contribute to patient care.
Finally, one commenter stated that, since HCFA provides payment for
EMT-P under the existing regulations, excluding them from the list as
proposed is contrary to the statement in the proposed rule that HCFA is
merely codifying existing policy into regulations.
Response: As we indicated earlier, we are deleting the listing of
approved programs in the final regulations. However, after
consideration of these comments and other information we have learned
about EMT-P education programs since publication of the proposed rule,
we are persuaded that there is a sufficient relationship between the
services of EMT-P education programs and the quality of inpatient care.
As the commenters indicated, EMT-P trainees provide essential
preadmission services to (potential) hospital inpatients, and the
trainees work in several inpatient care areas of the hospital. We note
that there may be some EMT-P education programs that might meet the
provider-operated criteria and thus would qualify for pass-through
payment under the nursing and allied health education provider-operated
provisions. We also note that the accrediting organization is the Joint
Review Committee on Educational Programs for the EMT-Paramedic in
collaboration with the CAAHEP.
Comment: One commenter disagreed with our inclusion of clinical
pastoral counseling in the list of approved programs. The commenter
believed that this policy violates the separation of church and state.
In addition, the commenter asserted that such a major use of the
Medicare Trust Fund should occur only after notice and public comment
as provided in the Administrative Procedure Act. Finally, the commenter
did not believe that pastoral counseling qualifies as direct patient
care since these services are not medical services and Medicare does
not pay directly for the care provided by pastoral counselors.
Response: The existing regulations at Sec. 413.85(e) list several
approved nursing and allied health education programs that are eligible
for the pass-through payment. Paragraph (f) of that section states that
the fiscal intermediary and HCFA will give appropriate consideration to
programs not listed in paragraph (e) that a provider conducts that come
within the purview of the principle of the regulations. Thus, the
regulation in effect when these programs were approved was subject to
appropriate notice and public comment. Over the years, we have approved
many types of allied health education programs under the authority of
this section.
Although there is no direct payment by Medicare for the services of
pastoral counselors, the services they provide to hospital inpatients
are included in the hospital's allowable costs under the Medicare
program. The costs are included in the administrative and general (A&G)
cost center. As early as the mid-1970s, Medicare recognized pastoral
care as having a beneficial and therapeutic effect on the medical
condition of a patient, and, therefore, the costs a provider incurs to
furnish such care to its patients are considered patient care related
costs. Therefore, we do not agree with the commenter that these
programs should be excluded from receiving education payments.
Comment: We received requests from several commenters to expand our
list of approved programs. These programs include: nurse practitioners,
nurse-midwives, clinical nurse specialists, physician assistants,
phlebotomists, central supply technicians, social workers, and
biomedical engineering.
Response: In the proposed regulations, we stated that national
approving bodies or State licensing authorities may apply to HCFA for
inclusion in the list of approved programs. As discussed above, we are
no longer including a list of approved programs in our regulations. We
note, however, that hospitals with programs approved by national
approving bodies or State licensing organizations may submit a request
to receive Medicare payments on a reasonable cost basis, and the fiscal
intermediary will determine whether the program meets the definition as
an approved program.
Comment: One commenter requested that we add the phrase ``operated
by providers'' to proposed Sec. 413.85(d) (Sec. 413.85(e) in this final
rule) to make it clear that we will approve programs only if they are
the type operated by providers.
Response: This comment is no longer applicable since we are
clarifying our policy under Sec. 413.85(e) in this final rule to
provide that a program must be approved by the appropriate accrediting
body in order to receive Medicare payment for nursing and allied health
education activities on a reasonable cost basis. We note that it is no
longer necessary to address the issue of other programs not listed in
the regulation (which was previously addressed by proposed
Sec. 413.85(d)) because we are now stating that all programs must be
recognized, or continue to be recognized by the appropriate accrediting
body, in addition to meeting the other general payment requirements
listed under Sec. 413.85(d) of this final rule in order to
[[Page 3367]]
receive Medicare payment on a reasonable cost basis.
C. Determination of Net Costs
We proposed to revise our policy for determining the net costs of
approved nursing and allied health education programs in proposed
Sec. 413.85(c)(1) (Sec. 413.85(d)(2) of this final rule). The formula
for determining the net costs at existing Sec. 413.85(g) states that
``Net costs of approved educational activities are determined by
deducting, from a provider's total costs of these activities, revenues
it receives from tuition.''
When the existing regulation was drafted, we assumed that the
tuition paid by students enrolled in approved nursing and allied health
educational programs was intended to cover all facilities and services
for which a provider would incur costs. It was not our intention to
imply that costs for which a provider charges a separate fee, in
addition to tuition, were not to be considered as part of the cost of
the approved nursing and allied health educational activity. Two
examples of these costs are the purchase of textbooks for resale to
students and the provision of housing or room and board in exchange for
an additional fee.
We clarified in the proposed regulations that the term ``tuition''
includes these additional charges and fees and specified a proposed
formula for determining the net costs to indicate that ``total costs''
includes only direct and indirect costs incurred by a provider that are
directly attributable to the operation of an approved educational
activity. These costs do not include usual patient care costs that
would be incurred in the absence of the educational activity, such as
the salary costs for nursing supervisors who oversee the floor nurses
and student nurses. Moreover, these costs do not include costs incurred
by a related organization.
The existing regulation concerning related organizations set forth
at Sec. 413.17 was established to avoid program recognition of
artificially inflated costs that might be generated from less than
arm's length transaction. This policy was not intended to expand the
range of items and services for which a provider could claim payment.
With respect to educational costs (with the limited exception for
certain graduate medical education costs incurred by a related medical
school as provided in Intermediary Letter 78-7) our policy has been
that the provider, rather than the related organization, must directly
incur the costs on its books and records before the costs will be
recognized for Medicare payment purposes. Otherwise, the principle that
Medicare payment for medical education costs should not result in a
redistribution of costs from the educational institution to the
provider would be violated.
Whereas providers that operate their own programs may receive
reasonable cost reimbursement for both the classroom instruction and
the clinical training costs, but no reimbursement for costs incurred by
a related educational institution, providers that would qualify under
section 4004(b) of Public Law 101-508 may receive reasonable cost
reimbursement for the clinical training costs only, and for the
clinical training costs incurred by a related educational institution.
We believe that the language included in the Committee Report that
accompanied Public Law 101-508 supports this distinction between total
allowable costs for provider-operated and nonprovider-operated
programs. In that report, the conferees noted that--
``in the case of hospital-operated nursing and allied health
education programs, the Secretary does not recognize costs incurred
by a related educational organization as allowable educational costs
since such costs are a redistribution of costs from the educational
institution to the hospital. Although [section 4004 of Public Law
101-508] provides for recognition of the costs incurred by a related
educational organization for clinical training on the hospital's
premises in the case of a hospital-supported program, the conferees
intend that nothing in [section 4004 of Public Law 101-508] should
be construed as requiring the Secretary to modify his current policy
in regard to the determination of reasonable costs for a hospital-
operated program'' (H.R. Rept. No. 964, 101st Cong., 2d Sess. 719
(1990)).
We note that this clear statement of Congressional intent is also
consistent with our policy on provider-operated programs stated above
of not recognizing the costs of related organizations in determining a
provider's total costs of approved educational programs.
In the January 3, 1984 final rule, the definition of net costs
(proposed Sec. 413.85(g)) was revised by eliminating grants and
donations from revenues that were to be offset against the cost of
approved educational activities. This revision was made in response to
a public comment to ensure that the policy on net costs of educational
activity would be consistent with the policy that deals with the
treatment of grants, gifts, and income from endowments under reasonable
cost payment under Sec. 413.5(c)(3). However, in the proposed rule, we
stated that we were reconsidering our position on this issue. As a
result, we requested public comment on whether the net costs of
approved educational activities should be defined as the costs
determined by deducting the revenues that a provider receives from
tuition, student fees, and the allocable amounts from any donations and
grants from the provider's total allowable costs that are directly
related to approved educational activities.
Also, in our discussion in the preamble of the September 1992
proposed rule relating to what types of revenues a provider receives
that should be deducted from the provider's total allowable costs to
determine the net cost of approved educational activities, we
inadvertently included ``non-Medicare public funding''. This inclusion
erroneously implied that Medicare's policy has been to consider State
appropriations as grants or donations that are not offset from a
provider's allowable costs. Our response to a comment in a final
regulation concerning Medicare GME policy, published on September 22,
1989 (54 FR 40302), also had been mistakenly interpreted as including
State appropriations in the definition of grants. In the response to a
comment about whether there is a redistribution of GME costs when State
appropriations or other funding sources are sufficient to cover the
cost of operating, we explained our policy and section 1134 of the Act
as it relates to offsets from allowable costs of gifts, grants, and
donations. Our response was intended to describe private philanthropy
and other grants but not to include State appropriations in the
definition of grants. In administrative, legal, and policy matters, we
have consistently maintained that State appropriations for the cost of
medical education activities constitute community support that is to be
offset from a provider's allowable costs.
We note that several courts have upheld Medicare's policy of
including State appropriations in the definition of community support.
On May 3, 1991, the U.S. District Court for the Southern District of
Mississippi ruled that the Secretary's offset of nursing and allied
health costs of State appropriations was appropriate. Additionally, the
U.S. District Court for the Eastern District of Pennsylvania in Thomas
Jefferson University (993 F.2d. 879 (1993)) in a decision affirmed by a
U.S. Appeals Court stated that the Secretary's definition of community
support, which includes ``State-funded support,'' is reasonable. This
decision was upheld by the U.S. Supreme Court on the redistribution
principle discussed
[[Page 3368]]
elsewhere in this preamble (114 S. Ct. 2381 (1994)).
We note that the proposed revisions in the proposed rule
inadvertently did not include community support as the basis for an
offset from the allowed cost of a GME or nursing and allied health
program. In this final rule, we restate our longstanding policy that
Medicare will only share in the costs of educational activities of
providers where communities have not assumed responsibility for
financing these programs. Medicare's policy is to offset from otherwise
allowable education costs, community funding for these activities.
Comment: We received all unfavorable comments on our
reconsideration of existing policy that excludes grants and donations
from the revenues that are used to offset the cost of approved
educational activities. One commenter stated that it seeks outside
support in the form of grants for the purpose of recruiting students.
The commenter indicated that these monies, which are used to help
alleviate current shortages of trained professionals, should not be
deducted in determining net costs. Another commenter stated that we did
not provide any rationale for changing our policy on grants and
donations. An additional commenter believed that if we adopted the
revised policy, only those grants and donations that are specifically
restricted to supporting education programs should be deducted.
Response: We are persuaded by the commenters that, in this time of
shrinking revenues, hospitals should not be discouraged from seeking
additional support through grants and donations. Therefore, we are not
adopting the proposed revision in this final rule. We will retain the
existing policy.
Comment: One commenter requested that student fees that are used to
cover costs that are not included in Medicare allowable costs should
not be deducted from a provider's total costs. Another commenter
believed that since the revenues a provider obtains for housing costs
and textbook purchase for resale are not used to offset clinical
instruction costs, they should not be included in the definition of
tuition and used to offset total costs.
Response: We believe that the total amount of payments made to a
provider on behalf of a student it is training should be deducted from
the allowable costs the provider is claiming. If the provider operates
the program, it is claiming the cost of student stipends, student
housing, and the purchase of books and materials for student use. If
the provider receives revenues in exchange for the provision of these
services, those revenues should be deducted from total costs,
regardless of the name given to the fee. If the provider collects a fee
from students that does not involve any allowable cost, such as monies
used for recreational activities for which the provider does not seek
Medicare payment, these revenues need not be deducted. However, any
general fund for student activities would probably be required to be
deducted. A provider that does not operate the nursing or allied health
education program and is claiming only clinical costs would not be
including housing fees in that cost. Any housing fees should be the
responsibility of the educational institution.
Comment: One commenter disagreed with the proposed policy that
providers that do not operate their own education programs but receive
reasonable cost payments under the provisions of section 4004(b) of
Public Law 101-508 may include costs of the educational institution
related to the provider. These costs are excluded from the total costs
of a provider that operates its own programs. The commenter believed
that it is unfair to make this distinction.
Response: As we explained in the proposed rule (57 FR 43668), when
Congress included a provision in Public Law 101-508 that the costs of a
related educational institution should be allowed as part of total
costs for those providers that are eligible to receive reasonable cost
payment for education programs they do not operate, specific language
in the Conference Report made clear that this provision did not
prohibit the Secretary from continuing to consider these costs as
redistribution costs and excluding them from allowable costs of
provider-operated programs.
D. Payment for Certain Nonprovider-Operated Programs Under Public Law
101-508
In accordance with the provisions of sections 4004(b)(1) and (b)(2)
of Public Law 101-508, proposed Sec. 413.85(f) (Sec. 413.85(g)(1) and
(2) of this final rule) provided that the net costs incurred by a
provider, or by an educational institution that is related to the
provider by common ownership or control (that is, a related
organization as defined in Sec. 413.17(b)), for the clinical training
of students enrolled in an approved nursing or allied health program
that is not operated by the provider would be paid on a reasonable cost
basis if the following conditions are met:
The clinical training must occur on the premises of the
provider.
The provider must have claimed and been paid for clinical
training costs on a reasonable cost basis during its most recent cost
reporting period that ended on or before October 1, 1989. (We proposed
that, in this context, we would consider a provider to be ``paid'' for
clinical training costs if, for its most recent cost reporting period
ending on or before October 1, 1989, the provider's intermediary
included the clinical training costs in the allowable costs used to
determine the interim payment rate for that cost reporting period, and
the provider subsequently claimed the clinical training costs as a
pass-through cost on its initially submitted cost report for that
period.)
In any cost reporting period, the percentage of total
allowable provider cost attributable to allowable clinical training
cost cannot exceed the percentage of total allowable cost attributable
to clinical training in the provider's most recent cost reporting
period ending on or before October 1, 1989.
The students in the educational program must provide a
benefit to the provider through the provision of clinical services to
patients of the provider.
The clinical training costs must be incurred by the
provider or by an educational institution related to the provider by
common control on ownership as defined in Sec. 413.17(b). Costs
incurred by a third party, regardless of its relationship to either the
provider or the educational institution, would not be allowed.
The costs incurred by a provider do not exceed the costs
the provider would incur if it operated the program itself.
Section 4004(b)(1) of Public Law 101-508 also required that we
define allowable clinical training costs under this provision for
payment for certain nonprovider-operated programs. At 57 FR 43667 in
the September 22, 1992 proposed rule, we proposed to define these costs
as the incremental costs that, in the absence of the students, would
not be incurred by the provider. These incremental costs would include
the costs of clinical instructors and administrative and clerical
support staff whose function is to coordinate rotations with a nursing
school and to schedule clinical rotation for each student nurse. They
would not, however, include the costs of a charge or floor supervisor
nurse who may spend a portion of his or her time supervising student
nurses but who, in the absence of the students, would still have to be
employed by the provider. In general, these costs are payroll and
related salary costs. Although some
[[Page 3369]]
provider-incurred overhead costs directly related to the cost of the
students would be allowable, overhead costs incurred by the related
organization generally would not be considered allowable.
In the proposed rule, we stated that, if, after implementation of
the provisions of sections 4004(b)(1) and (b)(2) of Public Law 101-508,
we found a wide variation in the clinical cost per student among
different hospitals' nursing and allied health programs, we would
consider methods to narrow that variation under the definition of
reasonable cost as set forth in section 1861(v)(1) of the Act. We
specifically requested public comment on how we could best evaluate the
reasonable cost of these programs. We received the following comments
on our proposed implementation of the provisions of Public Law 101-508.
Comment: Many commenters objected to the retroactive nature of the
special exception for providers to receive pass-through payment for the
clinical training they provide in support of nonprovider-operated
programs. These commenters believed that allowing ongoing payment only
for those programs for which providers claimed and were paid costs for
cost reporting periods that ended on or before October 1, 1989,
discriminates against newer programs. They believed this criterion
unjustly penalizes those providers that did not claim pass-through
costs in the past due to lack of clear guidelines or because they were
following the direction provided by HCFA in the preamble of the January
3, 1984 final rule. One commenter requested that the rule should be
based on cost reports filed after the effective date of the final rule
or allow providers to reopen their fiscal year 1989 cost reports to
include nursing and allied health education costs. Another commenter
suggested that hospitals be allowed to claim clinical training costs in
future years if they had claimed them in their capital base year cost
report.
Response: The October 1, 1989 cost reporting period date set forth
in the proposed rule was mandated by section 4004(b)(2)(A) of Public
Law 101-508. The practical effect of this provision is that providers
may receive payment on a reasonable cost basis under this provision for
the clinical training of students enrolled in a nonprovider-operated
program only if they had claimed and received payment for periods prior
to the enactment of the statute. This protects those providers that
were relying on the payments.
Comment: Other commenters disagreed with the requirement that, for
cost reporting periods ending after October 1, 1989, the percentage of
allowable clinical training costs is limited to the percentage
allowable for the provider's previous cost reporting period. Again,
commenters view this provision as a limitation on the development of
new programs and as a disincentive to hospitals' participation as
clinical training sites.
Response: The proposed regulations incorporated the provisions of
section 4004(b)(2)(A) of Public Law 101-508 concerning which providers
can claim pass-through payment for clinical training and how much they
may claim. The commenters are correct in their assessment that, under
these rules, providers that expand the magnitude of the support they
provide to educational institutions would not receive a corresponding
increase in Medicare pass-through payment. However, the rules merely
limit the percentage of the costs, so if a provider expands some
programs and decreases others, then there might be no adverse Medicare
payment impact. Again, we believe that the Congressional intent was to
protect providers who had come to rely on Medicare payments for
nonprovider-operated education programs without increasing Medicare
expenditures.
Comment: One commenter believed that the language at proposed
Sec. 413.85(f)(1) (Sec. 413.85(g)(2)(i) of this final rule) implies
that in order for clinical training to be eligible for the pass-
through, all training must take place at the provider. The commenter
believed that providers should be limited to claiming the costs for
training that takes place solely on the premises of the provider, but
that the students should be allowed to spend time in training in other
settings as long as the costs are not claimed by the provider.
Response: The language set forth at proposed paragraph (f)(1) is
intended to limit providers to claiming as clinical training pass-
through costs only those costs associated with training that takes
place on the premises of the provider. It is not our intention to
prevent students enrolled in educational institutions from obtaining
clinical training at more than one provider setting. However, if that
off-site training is part of the education program, it would be subject
to the rules specified earlier defining a provider-operated program.
Comment: Several commenters objected to our proposal that clinical
training costs would be allowable only if they were costs that the
provider would not have incurred in the absence of the students. That
is, only incremental costs would be recognized under the pass through.
The commenters believed this to be inequitable. For example, even if
the floor charge nurse directs the training of the students as part of
the nurse's usual duties, it may be necessary for the hospital to hire
additional support personnel to perform duties previously provided by
the floor nurse or there may be an increase in overtime to compensate
for time devoted to students. One commenter believed that this
restriction will encourage providers to increase their allowable costs
through the hiring of additional staff dedicated to clinical training
instead of allocating a portion of existing staff time. The commenters
recommended that the final rule allow providers to claim the portion of
the employee's salary or related costs associated with the time devoted
to clinical training.
Response: We believe that allowable clinical training costs should
be limited to those incremental costs that the provider actually incurs
in the course of training nursing or allied health students. If a
provider must hire additional staff or increase the salaried hours of
existing staff to accomplish the clinical training, the costs of the
staff time for providing the training would be considered allowable
costs. These staff could include clinical training instructors and
administrative and clerical support. However, if the provider merely
adds the supervision of students to a floor nurse's list of duties and
this is accomplished without the provider incurring additional costs,
there is no incremental cost to be claimed.
Comment: Several commenters objected to our statement in the
preamble to the proposed rule that, in the future, we might consider
methods to narrow variation in the clinical cost per student among
hospital programs. The commenters stated that the complexity of care in
different programs and the mandates imposed by States may contribute to
a great deal of variation. Thus, they believed that it would be
extremely difficult to determine an appropriate limit on the per
student costs. One commenter requested that, before such a limit is
imposed, HCFA should define a list of components for cost per student.
These elements should be separately assigned a cost and then averaged
to create a range of reasonable cost. The commenter encouraged us to
include adjustments for type of facility, region, and type of facility
ownership to make the range as accurate as possible.
Response: We agree with the commenters that determining an
appropriate limit on per student costs
[[Page 3370]]
would be a difficult undertaking and it is not a policy that we will
pursue at this time. If, in the future, we decide that it is necessary,
we will not implement any change in policy without first publishing it
under the notice and public comment procedure.
Comment: One commenter was concerned that the proposal does not
allow a hospital to claim costs incurred by a third party. The
commenter's hospital sends its CRNA students to other hospitals to
receive training that the commenter's hospital cannot provide. These
other hospitals employ a CRNA clinical coordinator. The commenter
requested clarification on whether the other hospitals can claim
reasonable cost payment for the coordinator.
Response: The pass-through payment can be made to any provider that
trains students in a nursing and allied health program as long as the
program is operated by the provider, whether the provider is the
originator of the program or whether the provider is one to which the
students are rotated. However, the original provider of the program (or
any other provider) may not claim the costs of training the students in
the program while the students are rotating to another provider--only
the provider actually training the students and incurring the clinical
training costs may be paid on a reasonable cost basis. That is, a
provider may not claim the costs of a third party provider.
Comment: One commenter requested that we clarify our policy that
clinical training must be provided on ``the premises of the provider.''
Response: We will consider that the training is on the hospital's
premises if it is in the physical area immediately adjacent to the
provider's main buildings, other areas and structures that are not
strictly contiguous to the main buildings but are located within 250
yards of the main buildings. This clarification would encompass not
only institutions that are located in self-contained, well-defined
settings, but other locations, such as in central city areas, where
there may be a group of buildings that function as a campus but are not
strictly contiguous and may even be crossed by public streets. We are
clarifying Sec. 413.85(f)(1) (Sec. 413.85(g)(2)(i) in this final rule)
accordingly.
E. Costs of Educational Activities Considered To Be Normal Operating
Costs
As we have previously discussed, the final hospital inpatient
prospective payment system rule published January 3, 1984, attempted to
clarify the Medicare policy on the classification of training costs
incurred by providers as costs of approved educational activities paid
on a reasonable cost basis. Since that time, questions have arisen
about some types of training programs that are neither listed as
approved programs under existing Sec. 413.85(e) nor readily
identifiable under existing Sec. 413.85(d) as activities not within the
scope of approved educational activities.
The programs that had been included in our list of approved
programs were generally programs of long duration designed to develop
trained practitioners in a nursing or allied health discipline, such as
professional nursing or occupational therapy. This is contrasted with a
continuing education program of a month to a year in duration in which
a practitioner, such as a registered nurse, receives training in a
specialized skill, such as enterostomal therapy. While such training is
undoubtedly valuable in enabling the nurse to treat patients with
special needs and in improving the level of patient care in a provider,
the nurse, upon completion of the program, continues to function as a
registered nurse, albeit one with special skills. Further distinction
can be drawn between this situation and one in which a registered nurse
undergoes years of training to become a CRNA. The costs of continuing
education training programs are not classified as costs of approved
educational activities that are passed through and paid on a reasonable
cost basis. Rather, they are classified as normal operating costs
covered by the prospective payment rate or, for providers excluded from
the prospective payment system, as costs subject to the target rate-of-
increase limits. In proposed Sec. 413.85(g)(3) (Sec. 413.85(h)(3) of
this final rule), we proposed to revise the regulations to include
continuing educational programs in the same category as ``educational
seminars and workshops that increase the quality of medical care or
operating efficiency of the provider.''
Proposed Sec. 413.85(g), like existing Sec. 413.85(d), stated that
the costs of certain activities are recognized as normal operating
costs and are paid in accordance with applicable principles.
Comment: One commenter questioned the language in proposed
Sec. 413.85(g)(6) which describes the allowable costs of the clinical
training and classroom instruction of students enrolled in an approved
educational program that is not operated by the provider. The commenter
requested clarification as to whether these costs are allowable as
normal operating costs or as pass-through costs.
Response: The title of proposed paragraph (g) is ``Activities
treated as normal operating costs.'' All costs listed in this paragraph
(paragraph (h) in this final rule) are costs that are recognized as
normal operating costs and, as such, are not eligible to be paid under
the pass-through. Although we believe that the language in the proposed
rule is clear, we are revising paragraph (h)(6) in this final rule for
better comprehension.
Comment: In the existing regulations, the costs of residents in
anesthesiology who are employed to replace anesthetists are
specifically included in normal operating costs and excluded from the
pass-through. One commenter was concerned that this language was
deleted from the proposed regulations.
Response: The language concerning residents working in a hospital
and not participating in a medical education program was added as a
part of the original hospital inpatient prospective payment system
regulations in order to ensure that hospitals that hired residents to
replace anesthetists in an attempt to circumvent the rebundling
provision did not attempt to include the costs of those residents as
education costs. Since that time, revised regulations governing
Medicare payment for the direct medical education of residents have
been published. These regulations are set forth in Sec. 413.86. Those
regulations clearly exclude residents not in an approved program from
receiving payment under the medical education provisions. We believe
that it is no longer necessary to include this language in the
regulations governing nursing and allied health education programs, and
therefore proposed to delete it from the regulations. We are adopting
this deletion in this final rule. We note that this action does not
signify a change in our policy.
Comment: One commenter stated that HCFA should consider allowing
outpatient, nonacute care clinical training as eligible for the
reasonable cost payment. Many of these auxiliary service sites are
operated by a Medicare provider or under an agreement with such a
provider. The commenter urged HCFA to consider the advantages to
Medicare beneficiaries, health system costs, and future health
professionals in allowing as reasonable costs the clinical training
costs occurring outside the inpatient, acute care facility.
Response: Based on this comment and others we received, we believe
that there is a fair amount of confusion surrounding Medicare payment
for medical education, which we will attempt to clarify. The following
is a brief overview of Medicare payment for
[[Page 3371]]
graduate medical education and payment for nursing and allied health
education.
Payment for Graduate Medical Education (GME)
Regulations governing Medicare payment for the direct cost of GME
programs are set forth in Sec. 413.86. In general, Medicare payment for
the direct costs of GME is based on the hospital's historical per
resident costs in a base year (fiscal year 1984), updated for
inflation. Payment to the hospital in the current year is determined
based on the product of the hospital's updated per resident amount, the
actual number of residents (capped by the number of allopathic and
osteopathic residents in a hospital's most recent cost reporting period
ending on or before December 31, 1996), and Medicare's inpatient
utilization in that year.
Under regulations at Sec. 409.26(a), the Medicare Skilled nursing
facility (SNF) benefit includes coverage of medical services that are
furnished by an intern or resident (who is training in a hospital
teaching program approved in accordance with the provisions of
Sec. 409.15), if the resident is in a participating hospital with which
the SNF has in effect a transfer agreement. Payment for these services
is included in the SNF prospective payment system per diem global
payment. In addition, under regulations at Sec. 409.45(g), the Medicare
home health benefit includes services provided by interns and
residents. To the extent that these services were paid on a reasonable
cost basis and covered under the home health benefit, there cannot be
separate payment for these services under the home health prospective
payment system. These services will be subject to the consolidated
billing requirements. However, the home health prospective payment
system rates and consolidated billing requirements do not affect
Medicare payments to hospitals for graduate medical education or
physician billing requirements under the fee schedule.
Payment for Other Medical Education (Nursing and Allied
Health Education)
The direct costs of all other medical education in which providers
engage are covered by the regulations at Sec. 413.85. Hospitals may
receive payment for nursing and allied health education programs they
operate on a reasonable cost basis. For hospitals subject to the
prospective payment system, these costs are paid on a reasonable cost
basis. For hospitals excluded from that system and paid on a reasonable
cost basis subject to cost limits, the medical education costs are
excluded from application of the limits. Hospitals that participate in
a nursing and allied health program that is a nonprovider-operated
program may receive pass-through payment if they meet the criteria set
forth at Sec. 413.85(g)(2) in this final rule.
Provider-Operated Requirement for Nursing and Allied
Health Education
One of the main distinctions between payment for GME and nursing
and allied health education is that, generally, a facility can only
receive separate payment for nursing and allied health education if the
program is provider-operated. Hospitals, however, can receive payment
for residents participating in approved programs regardless of whether
the program is operated by a provider. We have consistently applied
this policy since the inception of the Medicare program.
The January 3, 1984 prospective payment system final rule (49 FR
267) states that only the costs of provider-operated approved medical
education programs are excluded from the prospective payment system and
paid on a reasonable cost basis. This language only applied to nursing
and allied health education. That final rule states the following:
``If a program is operated by another institution, such as a
nearby college or university, it must be noted that by far the
majority of the costs of that program are borne by that other
institution, and not by the hospital. While it is true that the
hospital may incur some costs associated with the provision of
clinical training to students enrolled in a nearby institution, the
hospital also gains in return.'' (Emphasis added.)
The reference to students and not residents indicates our intention
to apply this language only to nursing and allied health education.
Furthermore, we believe hospitals do incur significant costs associated
with providing a clinical setting for training residents even when they
do not operate an approved program. Thus, the statement that the
majority of costs are borne by that other institution reflects our
views only with respect to nursing and allied health education.
We have always recognized costs associated with GME programs
regardless of whether or not they are provider operated. The September
29, 1989 (54 FR 40286) regulations implemented a GME payment system
based on per resident amounts, provided that the hospital's per
resident amount would be based on its GME costs divided by the number
of full-time equivalent residents working in all areas of the hospital
complex. We provided a specific example of how to determine the
hospital's per resident amount when the approved program is operated by
another institution. In addition, we noted that, in accordance with
section 1886(h)(5)(A) of the Act, the definition of an approved medical
residency program at Sec. 413.86(b) does not provide that the program
must be provider-operated. In contrast, Sec. 413.85, which set forth
regulations governing payment of nursing and allied health education,
included a definition of ``approved educational activities'' which
refers to programs that ``can be operated by providers.''
Concerning the commenters' more specific comment that providers be
allowed to claim the costs incurred when students receive clinical
training in outpatient, nonacute care or nonhospital settings, we
believe that the issue regarding allowing pass-through payment for the
costs of training nursing and allied health students in these settings
does not revolve around whether the hospital operates the program and
incurs the costs, but, rather, whether training in these settings
enhances the quality of inpatient care. Current nursing and allied
health policy at Sec. 413.85(2)(b) defines ``approved educational
activities'', in part, as enhancing the quality of patient care in an
institution. We have further clarified this definition as a requirement
under the general payment rule at Sec. 413.85(d)(1)(i)(C) of this final
rule; that is, a program must ``enhance the quality of inpatient care''
to be considered an approved educational activity. This phrase refers
only to training while providing care directly to hospital inpatients.
Thus, we feel it is inappropriate to allow pass-through payment for the
time students train in outpatient departments, nonacute care, or
nonhospital settings.
F. Net Costs of Approved Certified Registered Nurse Anesthetist (CRNA)
Educational Programs
On January 26, 1989, we published a proposed rule (54 FR 3803) to
implement section 9320 of the Omnibus Budget Reconciliation Act of 1986
(Pub. L. 99-509). That rule proposed to change the classification of
patient care services of CRNAs to permit payment under the Medicare
Part B fee schedule for such services furnished on or after January 1,
1989. This policy created difficulties in distinguishing between the
training and patient care activities of teaching CRNAs. To minimize the
possibility of duplicate payments, we proposed to modify the
regulations at Sec. 413.85(b)(3) (Sec. 413.85(d)(2)(iii) of this final
rule) to recognize the special circumstances that exist with regard to
the costs of approved CRNA training programs. While, for the most part,
the
[[Page 3372]]
costs of these programs would continue to be paid under the generally
applicable rules set forth at Sec. 413.85, we proposed to exclude from
allowable costs the costs providers incur in connection with
compensating teaching CRNAs for the time spent with student
anesthetists in clinical training during surgical procedures. These
activities involve the provision of patient care services that are
payable under Medicare Part B under the CRNA fee schedule.
In developing the proposed rule, we considered requiring that all
teaching CRNAs complete allocation agreements, similar to those
completed for provider-compensated physicians, detailing how the CRNAs
spend their time at the provider. In the interest of administrative
simplicity and reducing provider recordkeeping burden, we proposed that
it would be sufficient that providers present auditable documentation
to intermediaries justifying CRNA faculty compensation costs related to
hours spent in classroom instruction or in administrative activities
related to the approved program. No other compensation costs for CRNA
faculty members would be allowable. Compensation costs for faculty
members who are not CRNAs would continue to be allowable since the
duplicate payment potential would not exist for these personnel. We
specifically sought comments on whether the proposal was an equitable
way to deal with the problems arising from the change in the payment
method for the services of CRNAs. We received a number of comments
regarding this proposal.
Comment: In general, commenters did not believe that it would be
equitable to have different rules for CRNA clinical training costs. One
commenter stated that CRNAs are providing double service when they
supervise students in anesthesia procedures and deserve the additional
Part B payment. Other commenters stated that CRNAs are not always
allowed to bill under Part B for the services they provide. One
commenter pointed out that CRNAs who work under the direction of a
physician cannot bill under Part B unless the physician is directing
two or more cases. Another commenter noted that CRNAs can bill under
Part B only when they are supervising no more than one student. The
hospital at which the commenter provides services generally requires
CRNAs to supervise two or more students and the CRNA cannot bill under
Part B under these circumstances. These latter two commenters, as well
as others, indicated support for allowing the clinical costs of CRNAs
supervising students to be included in the pass-through payment as long
as the CRNA cannot bill under Part B.
Response: Under the provisions of the existing regulation that
implemented the CRNA fee schedule, a CRNA who is supervising student
anesthetists cannot receive payment under Part B when supervising more
than one student because supervision of more than one student is
considered to be a teaching activity (42 CFR 414.46). In addition, this
regulation also stated that if an anesthesiologist and a CRNA are
involved in a single procedure, the procedure is considered to be
personally performed by the physician. However, this policy was revised
in the December 8, 1995 Federal Register (60 FR 63152), (as implemented
in Sec. 414.46), effective for services furnished on or after January
1, 1998, to specify that the ``medical direction payment'' rules apply
if an anesthesiologist and a CRNA are both involved in a single
anesthesia case. The payment for both the CRNA service and the
physician medical direction service are paid at 50 percent of the fee
otherwise recognized for the anesthesiologist who performs the case
alone.
We are revising the regulations at Sec. 413.85(d)(2)(iii)
(previously proposed Sec. 413.85(b)(3)) to state that the clinical
training costs of a CRNA who is continuously supervising one student
anesthetist are not allowable under the pass-through because the CRNA
may bill for this service under the Medicare Part B fee schedule. The
clinical training costs of a CRNA are also not allowable under the
pass-through when the CRNA may bill for fifty percent of a service
under the Part B fee schedule. We expect that the fiscal intermediaries
will be careful to review the documentation the hospital maintains to
support its request for payment under the pass-through for CRNA
clinical training. In general, the teaching portion of the pass-through
is not allowed in situations where any practitioner (including CRNAs)
can bill for the service under the Medicare Part B fee schedule.
Comment: Three commenters stated that CRNAs should be required to
complete allocation agreements, like those completed by provider-
compensated physicians, that detail the way the physicians spend their
time at the provider. This would allow a consistent set of rules under
Medicare. Another commenter, who believed that the requirements for
physicians are more precise, requested that the final rule present
examples of what we would consider to be ``adequate documentation.''
Response: We do not agree with the commenters' suggestion that we
impose elaborate recordkeeping requirements on providers concerning the
allocation of a CRNA's time spent in the clinical training of students.
A provider is free to require that the CRNAs that it employs complete
allocation agreements or similar documents that detail the CRNAs
services. However, we believe that there are less burdensome ways in
which the provider can keep track of a CRNA's time in order to support
the costs that the provider is claiming under the Medicare Part A pass-
through. Examples of documentation may include operating room
assignments, schedules, or any other information indicating the portion
of time the CRNA spends in activities which are billable under Medicare
Part B. We do not believe we need to include these examples as part of
the regulation text.
III. Provisions of the Final Rule
In this final rule, we are adopting the provisions of approved
nursing and allied health education activities as proposed with the
following changes to Sec. 413.85. For the sake of clarity, we are
reorganizing the text of Sec. 413.85. For ease of reference, a
crosswalk appears below:
------------------------------------------------------------------------
Proposed Final
------------------------------------------------------------------------
Paragraph (a)............................. Paragraph (d)
Paragraph (b)(1).......................... Paragraph (b)(2)
Paragraph (b)(2).......................... Paragraph (b)(3)
Paragraph (b)(3).......................... Paragraph (d)(2)(iii)
Paragraph (c)(1).......................... Paragraph (d)(2)(i), (ii)
and (iv)
Paragraph (c)(2).......................... Paragraph (c), definition
Paragraph (c)(3).......................... Paragraph (c), definition
Paragraph (c)(4).......................... Paragraph (c), definition
Paragraph (c)(5).......................... Paragraphs (c) definition,
and (e)
Paragraph (d)............................. Paragraph (e)
Paragraph (e)(1).......................... Paragraph (f)(1)
Paragraph (e)(2).......................... Paragraph (f)(2)
Paragraph (f)............................. Paragraph (g)
Paragraph (g)............................. Paragraph (h)
------------------------------------------------------------------------
All substantive revisions made to the section are summarized below.
We are renaming Sec. 413.85 to read ``Cost of approved
nursing and allied health education activities,'' instead of ``Cost of
approved educational activities,'' and generally refer to ``approved
educational activities'' as ``approved nursing and allied health
education activities'' under this section. We are using the phrase
``nursing and allied health education activities'' in connection with
``approved educational activities'' because it clarifies that this
section addresses only nursing and
[[Page 3373]]
allied health education activities, and no other types of educational
activities, such as graduate medical education.
We are revising paragraphs (c) and (e) to reflect our
clarification in policy that, as part of a provider's requirements for
receiving Medicare payment on a reasonable cost basis for the net costs
of its nursing and allied health education activities, the activities
must be recognized by a national approving body or State licensing
organization.
We are revising and reorganizing proposed Sec. 413.85, and
are making editorial revisions where necessary, to clarify our policy
on approved nursing and allied health education activities. The
reorganized editorial revisions do not reflect a change from the
proposed policy on approved nursing and allied health education
programs.
We are redesignating the existing paragraph (h) of
Sec. 413.85 as Sec. 422.270 (with appropriate revision of the paragraph
codes) because paragraph (h) more properly belongs in the
Medicare+Choice sections of the Medicare regulation.
We are revising paragraph (a) to include the statutory
basis for implementing this policy on nursing and allied health
education programs.
We are revising redesignated paragraph (g)(2)(i) to
clarify the meaning of ``on the premises of the provider.''
We are revising redesignated paragraph (d)(2)(iii) to
provide that the clinical training costs of CRNAs who are medically
directing student anesthetists are not allowable under the pass through
if the CRNA may bill for the services under the Part B fee schedule.
We are revising redesignated paragraph (h) to clarify
those costs that are allowable as normal operating costs.
We are revising one of the criteria for identifying
programs operated by a provider to indicate that the provider must
provide and control both classroom instruction and clinical training
``where the classroom instruction is a requirement for program
completion.'' In addition, we are further revising this criterion that
it is subject to the parenthetical sentence in paragraph (f)(1)(ii) of
this final rule.
IV. Regulatory Impact Analysis
We have examined the impacts of this rule as required by Executive
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more annually).
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612) unless we certify that a final rule will not have a
significant impact on a substantial number of small entities. For
purposes of the RFA, all providers are treated as small entities.
In general, the provisions that are set forth in this final rule
conform the regulations to the statute and to our existing policy as
set forth in the Provider Reimbursement Manual and other instructions.
These provisions have no impact on those providers that operate their
own nursing and allied health education program. We note, however that
section 6205(b)(1) of Public Law 101-239 imposed a moratorium for the
period on or after December 19, 1989, and before October 1, 1990, on
the recoupment of overpayments attributable to a determination by a
provider's intermediary that costs claimed by a provider for the
operation of a school of nursing or allied health are not eligible for
payment on a reasonable cost basis. The basis for this determination is
generally that a neighboring or related college or university, not the
hospital, is the operator of the program.
As discussed earlier in this preamble, some hospitals that do not
operate their own nursing and allied health education programs received
overpayments for nursing and allied health education costs for cost
reporting periods beginning on or after October 1, 1983 and ending
before October 1, 1990. However, we were prohibited from collecting
these overpayments and were required to refund previously collected
overpayments under section 4004(b)(3) of Public Law 101-508. The
statute did not substantially alter payments to hospitals that did not
operate their own programs prior to Public Law 101-508. Sections
4004(b)(1) and (2) of Public Law 101-508 required the Secretary to
continue making pass-through payments to these hospitals for the
clinical training costs of nursing and allied health education
programs. Funding for nursing and allied health education for these
hospitals has only been affected to the extent that prior overpayments
included payment for classroom education which are not provided for
under Public Law 101-508. If Medicare had not made pass-through
payments hospitals prior to Public Law 101-508 for programs they do not
operate, there would have been no subsequent pass-through payment under
OBRA 1990 for any of these nursing and allied health programs. Thus,
relative to Medicare's policy prior to enactment of Public Law 101-508,
Public Law 101-508 substantially benefited a small number of hospitals
that do not operate their own programs.
Although we have data on Medicare's expenditures for nursing and
allied health education both before and after enactment of Public Law
101-508, we do not have data broken down on the respective shares
accounted for by provider and nonprovider-operated programs. For this
reason, we cannot make an accurate estimate of the impact of Public Law
101-508 and this final rule on payment for nursing and allied health
education. However, we note that this provision only affected a small
number of hospitals with existing nonprovider-operated programs.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a final rule will have significant impact on the
operations of a substantial number of small rural hospitals. Such an
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area (MSA) and has fewer than 50 beds. We are not preparing
a rural impact statement, since we have determined, and certify, that
this final rule will not have a significant economic impact on the
operations of a substantial number of small rural hospitals.
We have reviewed this final rule under the threshold criteria of
Executive Order 13132, Federalism, and have determined that the final
rule will not have any negative impact on the rights, roles, and
responsibilities of State, local, or tribal governments.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in an expenditure in any one year by
State, local or tribal governments, in the aggregate, or by the private
sector, of $100 million. This final rule does not mandate any
requirements for State, local, or tribal governments.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
V. Information Collection Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and
[[Page 3374]]
solicit public comment before a collection of information requirement
is submitted to the Office of Management and Budget (OMB) for review
and approval. In order to fairly evaluate whether an information
collection should be approved by OMB, section 3506(c)(2)(A) of the
Paperwork Reduction Act of 1995 requires that we solicit comment on the
following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In this final rule, Sec. 413.85(e) requires that, in order for an
activity to be considered an approved nursing and allied health
education activity, the activity must be recognized by a national
approving body or State licensing authority (in addition to meeting the
other requirements listed in paragraph (d)(1) of this section). For
example, such national accrediting bodies include, but are not limited
to, the Commission on Accreditation of Allied Health Education
Programs, the National League of Nursing Accrediting Commission, the
Association for Clinical Pastoral Education, Inc., and the American
Dietetic Association. The burden associated with this requirement is
the time necessary for the provider to maintain documentation
demonstrating that this requirement has been met. We estimate that
1,400 providers will be required to maintain documentation and that it
will take each organization 5 minutes on an annual basis to maintain
the documentation, for a total burden of 117 hours.
We have submitted a copy of this final rule to OMB for its review
of the information collection requirement in Sec. 413.85(e). Compliance
with this requirement is not required until it has been approved by
OMB.
List of Subjects
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Reporting and record-
keeping requirements.
42 CFR Part 422
Health maintenance organizations (HMO), Medicare+Choice, Provider
sponsored organizations (PSO).
42 CFR Chapter IV is amended as set forth below:
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES
A. Part 413 is amended as follows:
1. The authority citation for part 413 continues to read as
follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395f(b), 1395g, 1395l, 1395l(a), (i), and (n),
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).
2. In Sec. 413.85, the section heading is revised, paragraph (h) is
redesignated as a new Sec. 422.270, and the remainder of the section is
revised to read as follows:
Sec. 413.85 Cost of approved nursing and allied health education
activities.
(a) Statutory basis. This section implements section 1861(v)(1)(A)
of the Act and section 4004(b) of the Omnibus Budget Reconciliation Act
of 1990 (Public Law 101-508) by establishing the methodology for
Medicare payment of the costs of approved nursing and allied health
education activities.
(b) Scope. (1) This section sets forth the rules for determining
Medicare payments to hospitals for the costs of nursing and allied
health education activities.
(2) This section does not address Medicare payments for the direct
and indirect costs of graduate medical education (that is, approved
residency programs in medicine, osteopathy, dentistry, and podiatry).
Medicare payment for these costs is determined as provided in
Sec. 412.105 of this subchapter and Sec. 413.86.
(3) The rules under this section do not apply to activities that
are specified in paragraph (h) of this section and identified as normal
operating costs.
(c) Definitions. For purposes of this section, the following
definitions apply:
Approved educational activities means formally organized or planned
programs of study of the type that:
(1) Are operated by providers as specified in paragraph (f) of this
section;
(2) Enhance the quality of inpatient care at the provider; and
(3) Meet the requirements of paragraph (e) of this section for
State licensure or accreditation.
Classroom instruction costs are those costs associated with formal,
didactic instruction on a specific topic or subject in a class that
meets at regular, scheduled intervals over a specific time period (for
example, semester or quarter), and for which a student receives a
grade.
Clinical training costs means costs of training for the acquisition
and use of the skills of a nursing or allied health profession or trade
in the actual environment in which these skills will be used by the
student upon graduation. Clinical training may involve occasional or
periodic meetings to discuss or analyze cases, critique performance, or
discuss specific skills or techniques; it involves no classroom
instruction.
Community support means funding that is provided by the community
and generally includes all non-Medicare sources of funding (other than
payments made for furnishing services to individual patients),
including State and local government appropriations. Community support
does not include grants, gifts, and endowments of the kind that are not
to be offset in accordance with section 1134 of the Act.
Redistribution of costs means an attempt by a provider to increase
the amount, or to expand the types, of the costs of educational
activities that are allowed for Medicare payment purposes by claiming
costs that previously were not claimed by the provider and were
considered costs of an educational institution. For example, costs for
a school of nursing or allied health education or a medical school that
were incurred by an educational institution and were not allowable to
the provider in its prospective payment or rate-of-increase limit base
year cost report, or graduate medical education per resident amount
calculated under Sec. 413.86, are not allowable costs in subsequent
fiscal years.
(d) General payment rules. (1) Payment for a provider's net cost of
nursing and allied health education activities is determined on a
reasonable cost basis, subject to the following conditions and
limitations:
(i) An approved educational activity--
(A) Is recognized by a national approving body or State licensing
authority as specified in paragraph (e) of this section;
(B) Meets the criteria specified in paragraph (f) of this section
for identification as an operator of an approved education program.
(C) Enhances the quality of inpatient care at the provider.
(ii) The cost for certain nonprovider-operated programs are
reimbursable on a reasonable cost basis if the programs meet the
criteria specified in paragraph (g)(2) of this section.
(2) Determination of net cost. (i) Subject to the provisions of
paragraph (d)(2)(iii) of this section, the net cost of approved
educational activities is
[[Page 3375]]
determined by deducting the revenues that a provider receives from
tuition and student fees from the provider's total allowable
educational costs that are directly related to approved educational
activities.
(ii) A provider's total allowable educational costs are those costs
incurred by the provider for trainee stipends, compensation of
teachers, and other costs of the activities as determined under the
Medicare cost-finding principles in Sec. 413.24. These costs do not
include patient care costs, costs incurred by a related organization,
or costs that constitute a redistribution of costs from an educational
institution to a provider or costs that have been or are currently
being provided through community support.
(iii) The net costs of approved certified registered nurse
anesthetist (CRNA) education programs that are determined on a
reasonable cost basis are subject to the additional condition that
allowable compensation costs for faculty members who are CRNAs are
limited to the compensation costs for administrative activities related
to the educational program, the compensation costs directly related to
hours spent in classroom instruction, and the costs related to the
clinical training of students for which the CRNA may not receive
payment under the CRNA fee schedule. No pass-through compensation costs
are allowable for the time a CRNA spends in the clinical training of a
student anesthetist during a surgical procedure in the operating room
for which the CRNA may receive payment under the CRNA fee schedule. As
specified at Sec. 414.46 of this chapter, if the CRNA continuously
supervises the services of a single student nurse anesthetist, or where
the medical direction rules allow a CRNA to bill for the service,
payment can be made under the CRNA fee schedule.
(iv) Net costs are subject to apportionment for Medicare
utilization as described in Sec. 413.50.
(e) Approved nursing and allied health education programs. HCFA
will consider an activity an approved nursing and allied health
education program if the program is a planned program of study that is
licensed by State law, or if licensing is not required, is accredited
by the recognized national professional organization for the particular
activity. Such national accrediting bodies include, but are not limited
to, the Commission on Accreditation of Allied Health Education
Programs, the National League of Nursing Accrediting Commission, the
Association for Clinical Pastoral Education Inc., and the American
Dietetic Association.
(f) Criteria for identifying programs operated by a provider. (1)
Except as provided in paragraph (f)(2) of this section, for cost
reporting periods beginning on or after October 1, 1983, in order to be
considered the operator of an approved nursing or allied health
education program, a provider must meet all of the following
requirements:
(i) Directly incur the training costs.
(ii) Have direct control of the program curriculum. (A provider may
enter into an agreement with an educational institution to furnish
basic academic courses required for completion of the program, but the
provider must provide all of the courses relating to the theory and
practice of the nursing or allied health profession involved that are
required for the degree, diploma, or certificate awarded at the
completion of the program.)
(iii) Control the administration of the program, including
collection of tuition (where applicable), control the maintenance of
payroll records of teaching staff or students, or both (where
applicable), and be responsible for day-to-day program operation. (A
provider may contract with another entity to perform some
administrative functions, but the provider must maintain control over
all aspects of the contracted functions.)
(iv) Employ the teaching staff.
(v) Provide and control both classroom instruction and clinical
training (where classroom instruction is a requirement for program
completion), subject to the parenthetical sentence in paragraph
(f)(1)(ii) of this section.
(2) Absent evidence to the contrary, the provider that issues the
degree, diploma, or other certificate upon successful completion of an
approved education program is assumed to meet all of the criteria set
forth in paragraph (f)(1) of this section and to be the operator of the
program.
(g) Payment for certain nonprovider-operated programs. (1) Payment
rule. Costs incurred by a provider, or by an educational institution
that is related to the provider by common ownership or control (that
is, a related organization as defined in Sec. 413.17(b)), for the
clinical training of students enrolled in an approved nursing or allied
health education program that is not operated by the provider, are paid
on a reasonable cost basis if the conditions specified in paragraph
(g)(2) of this section are met.
(2) Criteria for identification of nonprovider-operated education
programs. Payment for the incurred costs of educational activities
identified in paragraph (g)(1) of this section will be made if the
following conditions are met:
(i) The clinical training must occur on the premises of the
provider, that is, in the hospital itself or in the physical area
immediately adjacent to the provider's main buildings, or in other
areas and structures that are not strictly contiguous to the main
buildings but are located within 250 yards of the main buildings.
(ii) The provider must have claimed and been paid for clinical
training costs on a reasonable cost basis during the most recent cost
reporting period that ended on or before October 1, 1989. This
condition is met if a notice of program reimbursement (NPR) was issued
for that cost reporting period by November 5, 1990, and the clinical
training costs were included as pass-through costs. If an NPR was not
issued by that date, or an NPR was issued but did not treat the
clinical training costs as pass-through costs, the condition is met
if--
(A) The intermediary included the clinical training costs in the
allowable costs used to determine the interim rate for the most recent
cost reporting period ending on or before October 1, 1989; or
(B) The provider claimed the clinical training costs as pass-
through costs when the cost report for the most recent cost reporting
period ending on or before October 1, 1989, was initially submitted.
(iii) In any cost reporting period, the percentage of total
allowable provider cost attributable to allowable clinical training
cost does not exceed the percentage of total cost for clinical training
in the provider's most recent cost reporting period ending on or before
October 1, 1989.
(iv) The students in the educational program must provide a benefit
to the provider through the provision of clinical services to patients
of the provider.
(v) The clinical training costs must be incurred by the provider or
by an educational institution related to the provider by common control
or ownership as defined in Sec. 413.17(b) (``Cost to related
organizations.'') Costs incurred by a third-party, regardless of its
relationship to either the provider or the educational institution, are
not allowed.
(vi) The costs incurred by a provider does not exceed the costs the
provider would have incurred if it was the sole operator of the
program.
(h) Cost of educational activities treated as normal operating
costs. The costs of the following educational activities incurred by a
provider but not
[[Page 3376]]
operated by that provider are recognized only as normal operating costs
and paid in accordance with the reimbursement principles specified in
Part 412 of this subchapter. They include:
(1) Orientation and on-the-job training.
(2) Part-time education for bona fide full-time employees at
properly accredited academic or technical institutions (including other
providers) devoted to undergraduate or graduate work.
(3) Educational seminars, workshops, and continuing education
programs in which the employees participate that enhance the quality of
medical care or operating efficiency of the provider.
(4) Maintenance of a medical library.
(5) Training of a patient or patient's family in the use of medical
appliances or other treatments.
(6) Except as provided in paragraph (g) of this section, clinical
training and classroom instruction of students enrolled in an
educational program that is not operated by the provider. The following
are clinical training and classroom instruction costs that are
allowable as normal operating costs:
(i) Costs incurred in the clinical training of students, including
the clinical training or clerkship of undergraduate medical school
students that takes place in a provider.
(ii) Classroom instruction costs incurred by a provider that meet
the following criteria:
(A) The provider's support does not constitute a redistribution of
nonprovider costs to the provider. The support must be in addition to
the costs already being incurred by the nonprovider-operated program.
If the nonprovider entity reduces its costs due to receiving provider
support, this reduction constitutes a redistribution of costs from an
educational institution to a patient care institution and is a
nonallowable provider cost.
(B) The provider receives a benefit for the support it furnishes.
(C) The cost of the provider's support is less than the cost the
provider would incur were it to operate the program.
(7) Other activities that do not involve the actual operation of an
approved educational program.
PART 422--MEDICARE+CHOICE PROGRAM
B. Part 422 is amended as follows:
1. The authority citation for part 422 is revised to read as
follows:
Authority: Secs. 1851 and 1855 of the Social Security Act (42
U.S.C. 1395w-21 and 1395w-25).
2. Newly designated Sec. 422.270 is revised to read as follows:
Sec. 422.270 Payments to M+C organizations for graduate medical
education costs.
(a) Effective January 1, 1999, Medicare+Choice organizations may
receive direct graduate medical education payments for the time that
residents spend in nonhospital provider settings such as freestanding
clinics, nursing homes, and physicians' offices in connection with
approved programs.
(b) Medicare+Choice organizations may receive direct graduate
medical education payments if all of the following conditions are met:
(1) The resident spends his or her time assigned to patient care
activities.
(2) The Medicare+Choice organization incurs ``all or substantially
all'' of the costs for the training program in the nonhospital setting
as defined in Sec. 413.86(b) of this subchapter.
(3) There is a written agreement between the Medicare+Choice
organization and the nonhospital site that indicates the
Medicare+Choice organization will incur the costs of the resident's
salary and fringe benefits and provide reasonable compensation to the
nonhospital site for teaching activities.
(c) A Medicare+Choice organization's allowable direct graduate
medical education costs, subject to the redistribution and community
support principles specified in Sec. 413.85(c) of this subchapter,
consist of--
(1) Residents' salaries and fringe benefits (including travel and
lodging where applicable); and
(2) Reasonable compensation to the nonhospital site for teaching
activities related to the training of medical residents.
(d) The direct graduate medical education payment is equal to the
product of--
(1) The lower of--
(i) The Medicare+Choice organization's allowable costs per resident
as defined in paragraph (c) of this section; or
(ii) The national average per resident amount; and
(2) Medicare's share, which is equal to the ratio of the number of
Medicare beneficiaries enrolled to the total number of individuals
enrolled in the Medicare+Choice organization.
(e) Direct graduate medical education payments made to
Medicare+Choice organizations under this section are made from the
Federal Supplementary Medical Insurance Trust Fund.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance and Program No. 93.774, Medicare--
Supplementary Medical Insurance)
Dated: January 5, 2001.
Robert A. Berenson,
Acting Deputy Administrator,, Health Care Financing Administration.
Dated: January 5, 2001.
Donna E. Shalala,
Secretary.
[FR Doc. 01-909 Filed 1-9-01; 10:21 am]
BILLING CODE 4120-01-P