When a teaching hospital closes, there are several factors the hospital must consider. While there are many financial factors the hospital must figure out, including how to pay outstanding debts or whether to declare bankruptcy, they also have to understand the impact on residents who were being taught at that Hospital. These residents must find a new hospital to continue their education and residency program.
Section 5506 of the Affordable Care Act (ACA) allows CMS to redistribute these residents to hospitals in the same Core Based Statistical Area (CBSA). When a hospital closes, any hospital that would like to claim displaced residents should apply within the 90-day window following notification of the hospital’s closure. The hospitals that are granted these displaced residents must meet certain criteria to claim these resident slots. One criterion in the application is whether the hospital that is requesting the residents’ slots has an affiliation agreement with the closing hospital. Having an affiliation agreement with the closing hospital gives the requesting hospital a chance of receiving additional slots for their IME or GME cap.
The receiving hospital must identify the residents they would add to their programs, along with the residency program and the years required. This affects how many years the Hospital’s FTE cap will be temporarily adjusted. The regulation for the temporary cap adjustment can be found at 42 C.F.R. § 413.79(h)(3). CMS can grant temporary cap adjustments for multiple years for the displaced residents. The FTE adjustment does not have to be the same amount for each year CMS has granted the hospital additional FTE slots. One of the qualifications a hospital must meet to be granted the displaced residents is the “Demonstrated Likelihood Criterion (DLC)”. There are three ways to meet these criteria:
The first is whether the hospital is establishing a new program. If the hospital can show that it has applied to and received approval from the Accreditation Council for Graduate Medical Education (ACGME), it must include the letter in the submission for the displaced residents.
The second DLC is whether the hospital requesting the displaced residents has absorbed the closed Hospital’s program. When a hospital closes, another local hospital usually takes on the program until CMS permanently places the residents at their new hospital. Any hospital that has had to adjust its program to accommodate the closed hospital program would apply under DLC2. The three subcategories for DLC2 are if the hospital permanently took over the closed program, if the hospital must expand its program due to taking over the closed program, or if the hospital is choosing to permanently expand its program.
The third DLC is whether the hospital has an affiliation agreement with the closing hospital. Most affiliation agreements will include language stating the protocols the hospitals have agreed upon for these situations. Based on the DLC the Hospital applies with, they will be ranked compared to other hospitals that have requested displaced residents. This ranking will determine the order in which the requesting hospitals receive the additional FTE slots.
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Blue & Co. has extensive experience assisting hospitals in submitting these applications for displaced residents. If your hospital requires assistance with compiling the required documentation, navigating the application process, or completing applications in a timely manner, reach out to one of our experts today.
Jordan Rose, CPA, CHFP, CHCRS, Senior Manager
