To amend title XVIII of the Social Security Act to clarify Congressional intent regarding the counting of residents in a nonhospital setting under the Medicare Program.

Summary: Community and Rural Medical Residency Preservation Act of 2005 - Amends title XVIII (Medicare) of the Social Security Act with respect to the counting of time spent in outpatient settings by full-time-equivalent residents in approved medical residency training programs, for purposes of direct graduate medical education payments and indirect medical education payments. Defines all, or substantially all, of the costs for the training program in that nonhospital setting as the residents' stipends and benefits and other amounts, if any, as determined by the hospital and the entity (wholly owned or operated by the hospital) operating the nonhospital setting. Declares that the hospital is not required to pay the entity any amounts other than those determined by the hospital and the entity in order for the hospital to be considered to have incurred all, or substantially all, of the costs for ther training program in that setting.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community and Rural Medical 
Residency Preservation Act of 2005''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The Medicare program has a long history of supporting 
        residency training in ambulatory sites. These sites include 
        physician offices, nursing homes, and community health centers, 
        all of which are cornerstones of ambulatory training for 
        graduate medical education programs. Such sites provide an 
        important educational experience due to the broad range of 
        patients treated.
            (2) Training in ambulatory settings is critical to 
        residents' medical education, ensuring they will be exposed to 
        practice settings similar to those in which they may ultimately 
        practice. It is particularly important for residency programs 
        in primary care specialties.
            (3) Beginning in 1987, hospitals were allowed to count the 
        time resident physicians spent in non-hospital settings for the 
        purpose of direct graduate medical education (DGME) payments, 
        subject to agreements between the hospital and the non-hospital 
        site where training occurred. To qualify, the hospital was 
        required to incur ``all or substantially all'' of the costs 
        associated with the resident. In 1989, the Health Care 
        Financing Administration (HCFA) defined ``all or substantially 
        all'' of costs as the resident salaries and benefits.
            (4) Through the Balanced Budget Act of 1997, Congress 
        further reinforced its commitment to ambulatory training by 
        altering the financial formula to include payments for indirect 
        medical education (IME) costs. This requirement was met if the 
        hospital paid the residents' stipends and benefits. Effective 
        January 1, 1999, the Center for Medicare & Medicaid Services 
        (CMS), on its own authority, changed its regulatory definition 
        of ``all or substantially all'' to require hospitals to also 
        incur ``the portion of the cost of teaching physicians' 
        salaries and fringe benefits attributable to direct graduate 
        medical education''.
            (5) Despite the fact that CMS recognized the use of 
        volunteer supervisory physicians in the preambles of two 
        regulations and a program memorandum, CMS intermediaries have 
        begun denying, retroactively through audits, the time residents 
        spend in non-hospital settings in situations where faculty are 
        volunteering their services. This has the effect of 
        significantly reducing the IME and DGME payments a hospital or 
        teaching program receives for residents training in non-
        hospital settings.

SEC. 3. CLARIFICATION OF CONGRESSIONAL INTENT REGARDING THE COUNTING OF 
              RESIDENTS IN A NONHOSPITAL SETTING.

    (a) Direct Graduate Medical Education (DGME) Payments.--
            (1) In general.--Section 1886(h)(4)(E) of the Social 
        Security Act (42 U.S.C. 1395ww(h)(4)(E)) is amended by adding 
        at the end the following new sentences: ``For purposes of the 
        preceding sentence, the term `all, or substantially all, of the 
        costs for the training program' means the stipends and benefits 
        provided to the resident and other amounts, if any, as 
        determined by the hospital and the entity operating the 
        nonhospital setting. The hospital is not required to pay the 
        entity any amounts other than those determined by the hospital 
        and the entity in order for the hospital to be considered to 
        have incurred all, or substantially all, of the costs for the 
        training program in that setting.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to portions of cost reporting periods occurring 
        after the date of the enactment of this Act.
    (b) Indirect Medical Education (IME) Payments.--
            (1) In general.--Section 1886(d)(5)(B)(iv) of such Act (42 
        U.S.C. 1395ww(d)(5)(B)(iv)) is amended by adding at the end the 
        following new sentences: ``For purposes of the preceding 
        sentence, the term `all, or substantially all, of the costs for 
        the training program' means the stipends and benefits provided 
        to the resident and other amounts, if any, as determined by the 
        hospital and the entity operating the nonhospital setting. The 
        hospital is not required to pay the entity any amounts other 
        than those determined by the hospital and the entity in order 
        for the hospital to be considered to have incurred all, or 
        substantially all, of the costs for the training program in 
        that setting.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to discharges occurring after the date of the 
        enactment of this Act.