The Patient Protection and Affordable Care Act (PPACA) contains many provisions that affect graduate medical education (GME) and workforce policy. 

Background on Graduate Medical Education Funding

GME - known more generally as residency training - is funded primarily by Medicare through two types of payments: direct graduate medical education (DGME) and indirect medical education (IME). DGME payments largely cover the main costs of the residency program, including resident salaries and benefits, faculty salaries, and administrative expenses. The number of residents in the program and the hospital's share of Medicare patients determine the amount of money each program receives. IME payments vary depending on the features of each individual residency program, and help offset the hospital's additional costs for running a training program. Medicare pays a total of about $9 billion dollars annually, amounting to approximately $100,000 per resident trained.

GME payments are an important vehicle to successfully increasing the primary care workforce to meet current needs.  With up to 50 percent of residency programs operating in the red, additional allocations for GME are essential to meet the increasing demand for primary care providers.  

PPACA takes crucial first steps toward this goal, but additional legislation is needed to ensure access to primary care for all Americans. On this page, you will find information on the provisions of PPACA and the proposed rule from the Centers for Medicare and Medicaid Services (CMS) that govern GME. We expect CMS to issue a final rule by the end of 2010 and CAFP is watching closely.

Cost Savings for Residency Programs

Section 5504 of PPACA has many provisions that help reduce the cost of training residents.  First, it eliminates the requirement to pay for physician supervision in non-hospital settings, effective for IME on claims submitted after July 1, 2010 and for DGME cost reporting periods beginning on or after July 1, 2010.  Now all time spent by a resident in a non-provider setting will be counted if the hospital incurs the cost of the resident's stipends and fringe benefits during the time spent in that setting.

It is no longer necessary to provide a payment trail to teaching physicians providing services in non-hospital settings. For both DGME and IME full-time equivalent (FTE) counts, the hospital need only show that it is incurring the cost of the residents' salaries and benefits while residents are rotating in a non-hospital setting.

Section 5505 of PPACA also expands what may be included in the FTE count during rotations in non-provider settings for didactic time (as of July 1, 2009 for GME and January 1, 1983 for IME) and research purposes (retroactively from October 1, 2001). Specifically, PPACA allows for time spent by residents in didactic seminars and conferences to be included in calculations for FTEs, and allows time spent by an intern or resident on vacation, sick leave, or other approved leave provided it does not prolong the total time the resident participates in the approved program.   

See section 5505 of PPACA for more details and additional requirements. Regulations surrounding the implementation of these policies are expected prior to 2011 and CAFP will update this page as information become available.

Redistribution of Residency Slots

Section 5503 of PPACA allows redistribution of "unused" residency slots to primary care and general surgery residencies with a focus on rural areas. Effective July 1, 2011, hospitals with FTE counts under their cap (the total students for which they have funding), will see their caps reduced by 65 percent of the difference between the hospital's cap and the highest number of residents in the three most recent cost reports submitted before March 23, 2010.  One "off" cycle will not cause a program to lose slots, but certain programs that utilize many offsite rotations (and thus have fewer hours that can be counted toward their FTE count) may be penalized under this initiative. Certain hospitals, including rural hospitals with fewer than 250 acute care beds, will be excluded.

Slots will be redistributed through an application process. Seventy percent of the redistributed slots will go to states that have the lowest resident-to-population ratios. The last 30 percent will go to rural hospitals in one of 10 states with the highest percentage of the population living in health professional shortage areas. California will not receive preferential treatment in either category, but programs in California with rural training tracks may qualify for preferential treatment.

At least 75 percent of any redistributed slots must be reassigned to primary care or general surgery regardless of the original. Family medicine may lose residency positions in this redistribution process, with those positions going to general surgery or other specialties instead of family medicine residency programs in need of additional slots. This would leave family medicine with a net loss even if primary care as a whole gains additional slots.

PPACA also creates a process to redistribute slots from hospitals that have closed since March 23, 2008. Hospitals may now follow an application process to apply for unused or closed hospital slots-ensuring that family medicine and other specialties do not lose residency slots because of the closure of a program.

In awarding additional slots, CMS must also consider the likelihood that the hospital will be able to fill additional slots within three cost reporting periods and whether the hospital has an accredited rural track training program. CMS is expected to issue final regulations before the end of 2010 that will clarify and define how they will implement these provisions.

The application for unused resident slots will most likely be due by December 1, 2010. The application for closed hospital slots will be due January 1, 2011.  CAFP will provide links to applications as they become available.

Teaching Health Center Grants

PPACA authorizes $25 million in FY 2010, $50 million in FYs 2011 and 2012, and "such sums as may be necessary" in subsequent years to encourage "teaching health centers" (THCs) to expand or establish new primary care residency programs. A THC is a community-based clinic that also operates a primary care residency program. An example would be a residency program based in a Federally Qualified Health Clinic (FQHC). This initiative will allow THCs to establish new or expanded primary care residency programs (primary care programs are defined as: family medicine, internal medicine, pediatrics, internal medicine-pediatrics, obstetrics and gynecology, psychiatry, general dentistry, pediatric dentistry, and geriatrics). Preference will be given to applicants that have existing affiliation agreements with area health education programs.

Grants will total $125 million over the next three years with a $500,000 per award limit and may be applied to curriculum development, recruitment, training, faculty salaries, and accreditation by the Accreditation Council for Graduate Medical Education (ACGME).  Final regulations are expected this fall and applications are expected to be available shortly.

Eligibility is currently limited to residency programs whose sole sponsor is a THC. Those sponsored by hospitals, even jointly, are not eligible. Lawyers from HRSA are currently investigating if this provision of PPACA can be interpreted in ways that may allow greater flexibility in determining eligibility.

Expansion and Additional Funding for National Health Service Corps

PPACA authorizes the following amounts for the National Health Service Corps (NHSC) scholarships and loan repayment program:

For FY2016 and subsequent years, the amount authorized to be appropriated will be based on the amount appropriated for the preceding fiscal year, adjusted by both the change in health professions education costs and the number of individuals residing in health professional shortage areas (HPSAs).

PPACA allows up to 50 percent of the time (20 percent for those in general clinical practice and 50 percent for those in a THCs) spent teaching by an NHSC member to be counted towards his or her service obligation. This change is likely to have a large impact on rural programs as they both employ NHSC recipients and require them to devote some of their time to teaching.

Additional changes to the NHSC include allowing part-time work to fulfill NHSC obligations and increasing the annual maximum NHSC loan repayment award from $35,000 to $50,000.

Grant Funding For Physician Training

Under PPACA, the Medicare program can award grants for activities that support training programs in primary care - defined as family medicine, general internal medicine, or general pediatrics - and for capacity building. Entities eligible for these five year training grants include public and nonprofit hospitals, medical schools, academically-affiliated physician assistant training programs, or public or private nonprofit entities. Only medical schools are eligible for capacity building grants. The section would authorizes $125 million for FY2010, and such sums as necessary for each of FY2011 through FY2014, and require that 15 percent be allocated to physician assistant primary care training programs.  

PPACA also allows the Secretary, acting through HRSA, to award grants to medical schools to recruit and provide focused training to students likely to practice medicine in underserved rural communities. Priority would be given to medical schools with a record of training students to practice in rural communities, established community institutional partnerships, or a long-term plan for tracking program graduates. Programs receiving grants are required to use funds to establish, improve, or expand a rural-focused training program that meets certain requirements, including (1) enrolling at least 10 students annually; (2) developing admission criteria that prioritize students from rural areas or with expressed commitment to practice in a rural area; (3) providing rural-based coursework and clinical experiences; and (4) assisting program graduates with rural residency placements. Grantees have to use the funds to supplement and not replace funds received from other sources, and maintain expenditures of nonfederal amounts at levels not less than those expended in the fiscal year prior to the program's receipt of the grant.  

Establishes a Health Care Workforce Commission

PPACA establishes a National Health Care Workforce Commission to evaluate the need for specific health care workers and provide recommendations on how to ensure an adequate health care workforce. The Commission will be composed of 15 members appointed by the U.S. Comptroller General and will submit annual reports on both activities to Congress and the Administration beginning in 2011.

The report on national priorities and policies is due by October 1 each year; the report on high priority topics is due by April 1 each year.

The Commission will also review implementation progress reports and report on workforce development grants, study mechanisms for financing education for health care careers, and make recommendations on improving the health and safety of health care workers.

CAFP has been actively involved in this product of PPACA, nominating Dr. Kevin Grumbach to the federal commission. Final appointments to the Commission should be made by September 30.

State Health Care Workforce Development Grants

PPACA establishes a health care workforce development grants program to enable state partnerships that will plan and implement activities to strengthen the health care workforce at both state and local levels.

HRSA is responsible for administering the program, in consultation with the Commission. HRSA will also provide technical assistance to grantees and report performance information to the Commission. In FY 2010 there is $8 million in planning grants and $150 million in implementation grants available.  

California's state workforce work group, of which CAFP is a member, plans to submit applications for both grant types for future funding cycles.

Excludes NHSC Loan Repayment Income from Taxes

PPACA amends the Internal Revenue Code to exclude funds received under the NHSC or state loan repayment program from gross income for tax purposes. The tax exclusion would apply to amounts received by individuals in taxable years beginning after December 31, 2009 and may significantly decrease the tax burden for young physicians participating in the NHSC or state loan repayment programs.