42 U.S.C. § 256e — Program of payments to children’s hospitals that operate graduate medical education programs

(a) Payments. The Secretary must send each children's hospital two payments a year - one for direct costs and one for indirect costs of running an approved residency training program. This runs for fiscal years 2000 through 2005, 2007 through 2011, 2014 through 2018, and 2019 through 2023. The Secretary must write formal rules to govern these payments. (b) Amount of payments. (1) In general. Subject to paragraphs (2) and (3), a hospital gets (A) a direct expense amount, worked out under subsection (c), and (B) an indirect expense amount, worked out under subsection (d), which covers the cost of treating sicker patients and teaching residents. (2) Capped amount. (A) Total direct payments to all children's hospitals in a year cannot exceed the money Congress set aside for that purpose that year, and the same cap applies separately to indirect payments. (B) If the money set aside for direct payments falls short of what hospitals are owed, the Secretary cuts every hospital's direct payment by the same percentage. (3) Annual reporting required. (A) Starting in fiscal year 2008, a hospital's payment drops by 25% if it fails to submit the report described below with its application, or the report leaves out required information. (B) Before cutting a payment for missing information, the Secretary must warn the hospital and give it 30 days to send the missing pieces; if the hospital does, no cut happens. (B) The required annual report must cover, for the year just finished: (i) what kinds of residency programs the hospital ran; (ii) how many training slots existed, how many the hospital tried to fill, and how many it filled; (iii) what training residents got on treating underserved children, including by income, location, or rural versus urban area; (iv) what changes the hospital made to its training that year - to curricula, experiences, and program types, and to training on measuring and improving care quality and safety - and what benefits resulted; (v) how many residents who just finished training now care for children within the hospital's service area or state, broken down by pediatrics, internal medicine-pediatrics, subspecialty, and dental residents. (C) The reporting rules cover residents who train full-time in the hospital's own program, or who spend more than 75% of their training time at the hospital even if another entity sponsors their program. (D) By the end of fiscal year 2018 and again by the end of fiscal year 2022, the Secretary, through the Health Resources and Services Administration, must send Congress a report summarizing what hospitals reported, describing the program's results, and recommending improvements. (c) Amount of payment for direct graduate medical education. (1) In general. The direct payment equals an updated per-resident amount (set under paragraph (2)) multiplied by the average number of full-time-equivalent residents the hospital trained that year. (2) Updated per resident amount. The Secretary builds this amount in steps: (A) For every hospital with an approved residency program (not just children's hospitals), the Secretary computes one per-resident amount by averaging its primary-care and non-primary-care per-resident amounts from 1997 cost reports, weighted by resident numbers. (B) The Secretary estimates what share of that amount comes from wages versus other costs. (C) The Secretary splits each hospital's amount into a wage portion and a non-wage portion using that share, divides the wage portion by the 1999 area wage index, then adds the non-wage portion back. (D) The Secretary averages all these standardized amounts across hospitals, weighted by each hospital's resident count, to get one national average. (E) For each children's hospital, the Secretary splits the national average into wage and non-wage portions the same way, multiplies the wage portion by the current year's area wage index, and adds back the non-wage portion. (F) Each year the Secretary raises this amount by the rise in consumer prices since October 1997. (d) Amount of payment for indirect medical education. (1) In general. The indirect payment is whatever amount the Secretary decides is appropriate. (2) Factors. In deciding that amount, the Secretary must (A) account for how sick each hospital's patients are and the ratio of residents to hospital beds, not counting beds for healthy newborns, and (B) make sure all indirect payments together match the money Congress set aside for indirect payments that year. (e) Making of payments. (1) Interim payments. Before each fiscal year, the Secretary sets the direct and indirect payment amounts and pays them out in 12 equal monthly installments, based on the resident count from the hospital's most recent Medicare cost report, or, for a hospital that files no such report, its most recently trained resident count. (2) Withholding. The Secretary may hold back up to 25% of each monthly payment so the hospital is not overpaid. (3) Reconciliation. Before the fiscal year ends, the Secretary checks whether the hospital's reported resident count changed and sets a final payment amount, then collects any overpayment or pays any balance owed. A hospital can challenge that final amount the same way it challenges other Medicare payment decisions under section 1395oo. (f) Authorization of appropriations. (1) Direct graduate medical education. (A) Congress may spend: $90,000,000 in 2000; $95,000,000 in 2001; whatever is needed for 2002 through 2005; $110,000,000 each year from 2007 through 2011; $100,000,000 each year from 2014 through 2018; and $105,000,000 each year from 2019 through 2023. (B) Money set aside for 2000 stays available through the end of 2001. (2) Indirect medical education. Congress may spend: $190,000,000 in 2000; $190,000,000 in 2001; whatever is needed for 2002 through 2005; $220,000,000 each year from 2007 through 2011; $200,000,000 each year from 2014 through 2018; and $220,000,000 each year from 2019 through 2023. (g) Definitions. (1) "Approved graduate medical residency training program" means what section 1395ww(h)(5)(A) says it means. (2) "Children's hospital" means a hospital with a Medicare payment agreement that is excluded from Medicare's standard hospital payment system under section 1395ww(d)(1)(B)(iii). (3) "Direct graduate medical education costs" means what section 1395ww(h)(5)(C) says it means. (h) Additional provisions. (1) In general. The Secretary may use up to 25% of the money appropriated under subsection (f) that exceeds $245,000,000 - but no more than $7,000,000 total - to pay other qualifying hospitals for the direct and indirect costs of running residency programs. (2) Qualified hospitals. (A) To qualify, a hospital must be free-standing, have a Medicare agreement excluded from the standard payment system, mostly treat patients under 18, run an approved residency program, and not already qualify for payments under this section or under section 1395ww(h). (B) For a freestanding children's hospital that met these requirements as of April 7, 2014, but has no resident count set yet, the Secretary may set one. (3) Payments. These hospitals are paid the same way children's hospitals are paid under subsections (b) through (e). (4) Payment amounts. The per-resident amounts used for these hospitals cannot be higher than the amounts used under subsection (a). (5) Reporting. These hospitals must also file the annual report required under subsection (b)(3). (6) Remaining funds. (A) If payments under paragraph (1) cost less than the money set aside for them, the Secretary can give the leftover money to any hospital in this program or the main program under subsection (a). (B) The Secretary may use that leftover money to reward hospitals that meet quality standards - covering things like measuring and improving care quality, communication skills, patient-centered care, and training in integrated or community-based health systems - and must develop those standards together with accrediting bodies, certifying boards, training programs, health care organizations, purchasers, and patient and consumer groups.