441 G St. N.W.

Washington, DC 20548

October 31, 2017

The Honorable Lamar Alexander

Chairman 

The Honorable Patty Murray

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate 

The Honorable Greg Walden

Chairman

The Honorable Frank Pallone, Jr.

Ranking Member

Committee on Energy and Commerce

House of Representatives

Physician Workforce: Expansion of the Children’s Hospitals Graduate Medical Education 

Payment Program

Physicians are required to undergo graduate medical education (GME) training in order to 

practice independently, and the majority of federal payments to support such training are 

provided to hospitals by the Medicare program.1 These payments are based, in part, on the 

number of Medicare patients treated by a hospital. Because Medicare primarily covers 

individuals age 65 and older, children’s hospitals generally treat very few Medicare patients and 

consequently receive few GME payments from Medicare.

2 Instead, many children’s hospitals 

receive payments to support GME training through the Children’s Hospitals Graduate Medical 

Education (CHGME) Payment Program, which is administered by the Health Resources and 

Services Administration (HRSA) within the Department of Health and Human Services (HHS). 

According to HRSA, hospitals that participate in the CHGME program train nearly half (48 

percent) of all pediatric residents (physicians in GME training) and over half (53 percent) of 

pediatric subspecialty residents annually.

3

Prior to 2014, eligibility for the CHGME program was generally restricted to children’s hospitals

that were freestanding as of December 31, 1996, and for which HHS had established a payment

cap based on the number of physicians in GME training eligible for funding under Medicare

GME rules.

4 Similar to the Medicare GME program, CHGME program payments are also

1

Medicare is the federally financed health insurance program for individuals age 65 and older and individuals under 

age 65 with certain disabilities or end-stage renal disease.

2

For purposes of this report, a children’s hospital is defined as a hospital in which more than 50 percent of its 

inpatients are under age 18. 

3

Specialty programs are educational experiences following completion of medical school (e.g., pediatrics), which can 

lead to board certification. These are also known as core programs. Subspecialty programs are educational 

experiences following the completion of prerequisite specialty programs (e.g., pediatric pulmonology). These are also 

known as fellowships. 

4

Prior to 2014, in order to participate in the CHGME program, a hospital must have been excluded from the Medicare 

inpatient prospective payment system (IPPS)—the system Medicare uses to pay most hospitals for inpatient 

Page 1 GAO-18-66R Children’s Hospital Physician Training Program
Page 2 GAO-18-66R Children’s Hospital Physician Training Program

capped for most hospitals based on their number of full-time-equivalent (FTE) residents in GME 

training as of 1996, the base year.5 With the enactment of the Children’s Hospital GME Support 

Reauthorization Act of 2013 CHGME program eligibility expanded.6 Since 2014, two additional 

types of freestanding hospitals—referred to as newly qualified hospitals—may be eligible for the 

CHGME program. Newly qualified hospitals that may be eligible include the following: 

• Other freestanding hospitals excluded from the Medicare inpatient prospective payment

system (IPPS), such as psychiatric hospitals, that predominantly treat individuals under

age 18.

• Certain children’s hospitals that had not been freestanding in December 1996 and

therefore did not have a 1996 base year FTE cap.7 Under this provision, HHS is able to

establish a CHGME FTE cap for these hospitals.

Annual funding for newly qualified hospitals is capped at a total of $7 million and is only made 

available if the overall CHGME program receives annual funding above $245 million, which it 

has in each year since program eligibility was expanded in 2014.

The Protecting Access to Medicare Act of 2014 includes a provision for us to examine payments 

to and characteristics of hospitals that participated in the CHGME program under the expanded 

eligibility criteria.8 In this report, we describe (1) the number and type of newly qualified 

hospitals that applied for and received payments through the CHGME program from fiscal year 

2015 through 2017, and the amount of payments these hospitals received; and (2) how the 

newly qualified hospitals used the payments, including any potential effect of the payments on 

the number and characteristics of pediatric providers trained to address the health care needs of 

children. 

To address these objectives, we analyzed data in HRSA’s online Data Warehouse and data that 

hospitals are required to submit annually to HRSA related to their participation in the CHGME 

program.9 We also interviewed officials from HRSA, the Children’s Hospital Association, and all 

of the newly qualified hospitals. To assess the reliability of the data we used in our analysis, we 

reviewed related documentation, interviewed officials from HRSA and the newly qualified 

hospitals, and performed appropriate electronic data checks. Based on this analysis, we 

determined that the data were sufficiently reliable for the purposes of our objectives. 

services—on the basis of being a freestanding children’s hospital. A children’s teaching hospital is considered 

freestanding if it does not share a Medicare hospital provider number with a larger health care system.

5

Resident FTE counts reflect the number of residents training at the hospital complex and certain non-hospital/nonprovider settings/sites throughout the hospital’s fiscal year. Each resident may not spend enough time at the site to fill 

a full-time residency slot for the year; therefore the number of residents at a hospital is often greater than the number 

of FTEs. 

6

Pub. L. No. 113-98, 129 Stat. 1140 (2014). 

7

Prior to the reauthorization, children’s hospitals that became freestanding after December 31, 1996, could become 

eligible for the CHGME program by receiving an FTE cap through an affiliation agreement with another hospital or 

beginning a new residency training program. 

8

Pub. L. No. 113-93, § 214, 128 Stat. 1040, 1048 (2014).

9

CHGME funding recipients are required to report annually on characteristics such as the number of residents 

trained, the specialties residents trained in, and whether residents trained in medically underserved areas, among 

other things. 
Page 3 GAO-18-66R Children’s Hospital Physician Training Program

We conducted this performance audit from January 2017 through October 2017 in accordance 

with generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings based on our audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings based on our audit objectives.

Results in Brief

We found that four newly qualified hospitals joined the CHGME program under the expansion in 

2014. One of the four hospitals qualified for the program as a psychiatric children’s hospital; the 

other three hospitals qualified under the provision establishing a CHGME FTE cap for 

freestanding children’s hospitals that did not have one. Total CHGME program payments varied 

across the hospitals each year and in fiscal year 2016 (the most recent full year of data 

available) ranged from approximately $320,000 to approximately $1.6 million. The newly 

qualified hospitals used the CHGME program payments to provide training in specialties with 

physician shortages, such as pediatric psychiatry, and in underserved settings, including 

primary care settings and geographic areas that have a shortage of primary care health 

services. HHS reviewed a draft of this report and provided technical comments, which we 

incorporated.

Background

The CHGME program was established by the Healthcare Research and Quality Act of 1999.

10

Unlike Medicare GME, which is a mandatory spending program, the CHGME program relies on 

discretionary spending.

11 In fiscal year 2017, the program received $300 million (a $5 million 

increase from fiscal year 2016), and 58 hospitals received payments. Hospitals must apply to 

the program each year, and the amount of CHGME payments available to each varies from year 

to year depending on the total amount of funding made available for the program from annual 

appropriations and the number of hospitals that participate. 

CHGME program payments are based, in part, on the average number of resident FTEs 

recorded on a hospital’s three most recently filed Medicare cost reports.

12 Similar to the 

Medicare program, the CHGME program applies a cap on the number of resident FTEs that a 

 10Pub. L. No. 106-129, § 4, 113 Stat. 1653, 1671-74 (1999) (codified, as amended, at 42 U.S.C. § 256e). The 

CHGME program is currently authorized through fiscal year 2018.

11Mandatory spending is composed of budget outlays controlled by laws other than appropriations acts, including 

federal spending on entitlement programs. By contrast, discretionary spending is provided and controlled through 

appropriations acts. 

12Providers, such as hospitals, that render Medicare Part A services are required to submit cost reports annually. 

Among other things, these reports contain self-reported information on facility characteristics, utilization data, and 

financial statement data. 

Residents are generally divided into two categories: those training in a specialty in their initial residency period (i.e., 

the minimum number of years required for board eligibility) and those beyond that period (i.e., in additional 

subspecialty training). For purposes of calculating certain payments, the CHGME program, like Medicare, assigns a 

0.5 weighting factor to residents who are beyond their initial residency period. Residents are not weighted for 

purposes of determining a hospital’s FTE cap.

HRSA withholds a portion of each hospital’s CHGME payments each year until it can verify the number of FTEs 

reported by the hospital through a process referred to as reconciliation. 
Page 4 GAO-18-66R Children’s Hospital Physician Training Program

hospital may count when requesting payment for GME training. Generally, a hospital’s cap is 

the number of resident FTEs enrolled in the hospital’s residency programs during the most 

recent cost reporting period that ended on or before December 31, 1996, referred to as the base 

year FTE cap. 

A hospital can receive CHGME program payments if it is a sponsoring institution, a major 

participating site, or another rotational site that provides educational experiences or 

assignments for a GME program. A sponsoring institution is the organization that assumes the 

ultimate financial and academic responsibility for a GME program. A major participating site is 

an approved site to which all residents in at least one program rotate for a required educational 

experience, and which must have a master affiliation agreement with a sponsoring institution.

Prior to 2014, in order to participate in the CHGME program, a hospital must have been

excluded from the Medicare IPPS on the basis of being a freestanding children’s hospital. In

2014, program eligibility expanded to include additional types of freestanding hospitals excluded 

from the Medicare IPPS, including psychiatric hospitals, cancer hospitals, long-term care 

hospitals, and rehabilitation hospitals that predominantly treat individuals under age 18. CHGME 

program eligibility also expanded to certain children’s hospitals that split from other teaching 

hospitals after December 1996 and therefore did not have their own 1996 base year FTE cap. 

HHS is now authorized to establish a CHGME FTE cap for these hospitals. The CHGME FTE 

cap for these hospitals is based on the number of FTEs trained during the most recent Medicare 

cost report period completed on or before April 7, 2014, the date of enactment of the 2013 

reauthorization. Prior to 2014, the only way for these hospitals to qualify for the CHGME 

program was to establish a new residency program or establish an affiliation agreement with 

another hospital to share its cap. 

Four Newly Qualified Hospitals Joined the CHGME Program after the Expansion

Since the enactment of the Children’s Hospital GME Support Reauthorization Act of 2013, four 

hospitals applied for and became newly qualified to participate in the CHGME program. (See 

table 1.) None of the newly qualified hospitals are sponsoring institutions for GME training 

programs. All four hospitals act as major participating sites for other sponsoring institutions. 

Table 1: Newly Qualified Hospitals under the Children’s Hospitals Graduate Medical Education (CHGME) 

Payment Program

Hospital Type Location Fiscal year entered program

Emma Pendleton Bradley Hospital Psychiatric children’s hospital Riverside, R.I. 2015

El Paso Children’s Hospital Children’s hospitala El Paso, Tex. 2015

Dell Children’s Medical Center Children’s hospitala Austin, Tex. 2015

The Children’s Hospital of San 

Antonio

Children’s hospitala San Antonio, 

Tex.

2016

Source: GAO review of Health Resources and Services Administration data. | GAO-18-66R

a

These hospitals qualified for the program under the CHGME full-time-equivalent cap provision. 

One of the four newly qualified hospitals became eligible for the program as a psychiatric 

children’s hospital; the other three hospitals qualified under the CHGME FTE cap provision.

Representatives from the Children’s Hospital Association told us that there are other psychiatric 

children’s hospitals that are eligible for the program, but these hospitals have small training 

programs and might choose not to participate due to the administrative responsibilities 

associated with participation. HRSA officials told us that they are aware of other newly qualified 
Page 5 GAO-18-66R Children’s Hospital Physician Training Program

hospitals that may apply for the CHGME program in the future; however, no additional newly 

qualified hospitals applied for fiscal year 2018.

Total CHGME program payments varied across the four newly qualified hospitals each year and 

were significantly lower than the average total payment to all other CHGME program hospitals.

For example, in fiscal year 2016, total payments to the newly qualified hospitals varied from 

$323,247 to $1,587,990, reflecting, in part, differences in the number of FTEs trained by each 

hospital (see table 2). That same year, the average total payment to the newly qualified 

hospitals was $971,205, while the average total payment to the originally eligible hospitals was 

$5,124,940.

Table 2: Children’s Hospitals Graduate Medical Education (CHGME) Payment Program Funding for Newly 

Qualified Hospitals, Fiscal Years 2015-2017

Hospital 2015 2016 2017

Total 

payments 

(dollars)

Full-time 

equivalents

Total 

payments 

(dollars)

Full-time 

equivalents

Total 

payments 

(dollars)a

Full-time 

equivalents

Emma Pendleton Bradley Hospital 293,043 8.62 323,247 8.45 280,625 8.45

El Paso Children’s Hospital 1,051,394 23.56b 1,114,104 23.56b 1,463,986 23.56b

Dell Children’s Medical Center 1,310,369 27.85 1,587,990 29.40 2,033,288 33.22

The Children’s Hospital of San 

Antonio

c c 859,477 24.00 403,173 9.67

Total 2,654,806 60.03 3,884,818 85.41 4,181,072 74.90

Average 884,935 20.01 971,205 21.35 1,045,268 18.73

Source: GAO analysis of Health Resources and Services Administration data. | GAO-18-66R

Note: The CHGME program provides payments for direct medical education expenses and indirect medical education 

expenses. Direct medical education payment amounts are calculated using the 3-year rolling average of weighted 

full-time-equivalent (FTE) counts. Indirect medical education payment amounts are calculated using the 3-year rolling 

average of unweighted FTE counts. This table presents unweighted 3-year rolling average FTE counts.

a

Fiscal year 2017 total payment amounts were not yet final when we completed our report. According to Health 

Resources and Services Administration officials, hospitals will receive one additional small payment before the end of 

the fiscal year.

b

El Paso Children’s Hospital trained residents in excess of its FTE cap of 23.56 for each fiscal year, which results in 

the same FTE rolling averages for all 3 years.

c

The Children’s Hospital of San Antonio did not join the CHGME program until fiscal year 2016.

Newly Qualified Hospitals Used CHGME Payment Program Funds to Provide Training in 

Specialties with Physician Shortages or in Medically Underserved Settings

Officials from all four newly qualified hospitals stated that CHGME program payments are the 

main source of financial support for their GME training programs, which they use to provide 

resident training in medical specialties that have physician shortages or in medically 

underserved settings. For example, in addition to providing training in pediatrics—which was 

provided by all four newly qualified hospitals—one hospital provided training in psychiatry and 

child and adolescent psychiatry. According to representatives from the Children’s Hospital 

Association and 2015 data from the American Academy of Child & Adolescent Psychiatry, there 

are shortages of pediatric mental health specialists in the United States.

13 Officials from the

 13See, for example, American Academy of Child & Adolescent Psychiatry, Workforce Maps by State, accessed 

August 14, 2017, 

https://www.aacap.org/aacap/Advocacy/Federal_and_State_Initiatives/Workforce_Maps/Home.aspx. With the 
Page 6 GAO-18-66R Children’s Hospital Physician Training Program

three other newly qualified hospitals stated that they plan to increase the number of resident

training programs in the future by adding training in other pediatric subspecialties, such as

pediatric gastroenterology, neonatology, critical care, rehabilitation, neurology, infectious 

disease, and endocrinology. 

The number of residents supported by the CHGME program increased at all three newly 

qualified hospitals that participated in the program in both academic year 2014-2015 and 

academic year 2015-2016.

14 (See table 3.) During academic year 2014-2015, the average 

number of CHGME program-supported residents in newly qualified hospitals was 38; overall, 

the average number of CHGME program-supported residents in all hospitals that participated in 

the program was 205. The majority of the residents at newly qualified hospitals trained in 

specialty programs, although two of these hospitals trained a small number of residents in 

subspecialty programs as well. For example, in academic year 2015-2016, 13 of the 328 

residents were in subspecialty programs. 

Table 3: Residents Supported by the Children’s Hospitals Graduate Medical Education (CHGME) Payment 

Program at Newly Qualified Hospitals, Academic Years 2014-2015 and 2015-2016

Hospital 2014-2015 (residents) 2015-2016 (residents)

Emma Pendleton Bradley Hospital 40a 42

El Paso Children’s Hospital 44 45a

Dell Children’s Medical Center 30 50

The Children’s Hospital of San Antonio b 191

Total 114 328

Average 38 82

Source: GAO analysis of Health Resources and Services Administration (HRSA) data. | GAO-18-66R

a

The HRSA data were updated to reflect data GAO received directly from the hospital.

b

The Children’s Hospital of San Antonio did not join the CHGME program until fiscal year 2016. 

Although hospitals may receive CHGME program funds for a number of program-related 

expenses, officials from three of the four newly qualified hospitals stated that the majority of 

CHGME program payments are used to directly support residents. CHGME funding is 

determined based, in part, on the number of FTEs reported by the hospital. (See table 2 for the 

number of FTEs reported by each of the newly qualified hospitals during fiscal years 2015 

through 2017.) However, the number of residents rotating through the hospital often does not 

correspond directly to the number of FTEs because each resident may spend only a portion of 

an FTE at the hospital. For example, in academic year 2015-2016, the median award ranged 

from $2,812 to $30,719 (See table 4.). According to HRSA and hospital officials, the variation in 

resident award amounts is in part a result of how much time a resident spent rotating through 

the hospital. HRSA officials added that residents that spent closer to one FTE at a hospital 

received a larger award.

 exception of the District of Columbia, in 2015, all states experienced high or severe shortages in the number of 

practicing child and adolescent psychiatrists.

14Academic years generally start and end with the beginning and end of the school year. For example, academic 

year 2014-2015 began July 1, 2014, and ended June 30, 2015.

During fiscal years 2015 and 2016, the three newly eligible hospitals that participated in the program had a relatively 

constant number of FTEs. The Children’s Hospital of San Antonio entered the program during fiscal year 2016 and 

saw a drop in FTEs from fiscal year 2016 to 2017. According to HRSA officials, the hospital is restructuring the 

program, which may explain the reduction in FTEs. 
Page 7 GAO-18-66R Children’s Hospital Physician Training Program

Table 4: Median Award to Children’s Hospitals Graduate Medical Education (CHGME) Payment Program 

Residents Rotating at Newly Qualified Hospitals, Academic Years 2014-2015 and 2015-2016

Hospital 2014-2015 (dollars) 2015-2016 (dollars)

Emma Pendleton Bradley Hospital a 6,495

El Paso Children’s Hospital 22,313 24,220

Dell Children’s Medical Center 43,107 30,719

The Children’s Hospital of San Antonio b 2,812

Source: GAO review of Health Resources and Services Administration (HRSA) data. | GAO-18-66R

Note: HRSA officials indicated differences in counts of residents explained most of the variation in these averages. 

They said that variation in the award amount per resident is related to the number of residents that compose a fulltime-equivalent; hospitals that have residents with shorter rotations will have a smaller award per resident.

a

Hospital officials stated that the median award amount reported to HRSA was calculated incorrectly for academic 

year 2014-2015. Therefore, we did not report it. 

b

The Children’s Hospital of San Antonio did not join the CHGME program until fiscal year 2016. 

Three of the four newly qualified hospitals used CHGME program funds to support training in 

underserved settings or geographic areas. HRSA tracks whether hospitals provide training in 

three types of underserved settings or areas: (1) primary care setting, (2) Medically 

Underserved Area, and (3) rural area.15 Two of the four newly qualified hospitals had training 

sites in primary care settings, three of the four hospitals had training sites in Medically 

Underserved Areas, and none of the newly qualified hospitals had training sites in rural areas. 

(See table 5.) For comparison, in academic year 2014-2015, approximately 50 percent of all 

CHGME program-funded training sites were located in a primary care setting, 44 percent were 

located in a Medically Underserved Area, and less than 1 percent were located in a rural area.

Table 5: Characteristics of Training Sites for Newly Qualified Hospitals in the Children’s Hospitals Graduate 

Medical Education (CHGME) Payment Program, Academic Years 2014-2015 and 2015-2016

Hospital Training site characteristics

Primary care setting Medically Underserved Area Rural area

Emma Pendleton Bradley Hospital No No No

El Paso Children’s Hospital Yes Yes No

Dell Children’s Medical Center Yes Yes No

The Children’s Hospital of San 

Antonio

No Yes No

Source: GAO review of Health Resources and Services Administration data. | GAO-18-66R

Officials from the newly qualified hospitals highlighted characteristics of their hospitals and their 

residents that help address the needs of underserved communities. For example, officials from 

three newly qualified hospitals stated that they recruit GME residents that meet the 

demographic needs of their communities. Officials from two hospitals stated that they recruit 

individuals who speak Spanish or have an interest in serving a primarily Hispanic population to 

better serve their community. Additionally, officials from three hospitals stated that their 

hospitals serve underserved populations; one said that 50 percent of the community that the 

hospital serves is covered by Medicaid and another said that 75 percent or more of the 

hospital’s patients are covered by Medicaid. Officials from some newly qualified hospitals noted 

that many of their graduates continue to practice in the area and have increased the number of 

 15Medically Underserved Areas are geographic areas, such as whole counties or urban census tracts, that have a 

shortage of primary care health services for the individuals who live there.
Page 8 GAO-18-66R Children’s Hospital Physician Training Program

providers in their community: one hospital official stated that prior to the establishment of his 

hospital, community members had to drive up to 6 hours to receive specialized pediatric care.

Agency Comments 

We provided a draft of this report to HHS for comment. HHS provided technical comments, 

which we incorporated.

- - - - -

If you or your staffs have any questions about this report, please contact me at (202) 512-7114 

or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. GAO staff who made major contributions to 

this report include Christine Brudevold, Assistant Director; William Hadley, Assistant Director;

Akbar Husain; Elizabeth Morrison; Aubrey Naffis; and Jennifer Whitworth. 

James Cosgrove

Director, Health Care 

(101463)
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