Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 13515 

permit under 40 CFR part 70 or 40 CFR 

part 71’’ until the final reconsideration 

rule is published in the Federal 

Register. 

III. What are the major comments and 

responses to those comments? 

We received five comments in 

support of the proposed stay. In 

addition, four of the commenters also 

provided comments objecting to EPA 

finalizing the title V permit requirement 

as part of our reconsideration. Because 

we received no adverse comment on the 

proposed stay of the title V permitting 

requirement, we are taking final action 

to extend the stay until the final 

reconsideration rule is published in the 

Federal Register. This action deals only 

with the stay. We will discuss and 

request comment on the title V 

permitting issue in the forthcoming 

reconsideration notice. 

IV. What are the changes since 

proposal? 

No changes have been made to the 

proposed stay (75 FR 77799). Thus, the 

final rule is identical to the proposed 

rule. 

V. What are the impacts of the final 

rule? 

The stay will not change the 

estimated environmental and cost 

impacts of the rule because it does not 

apply to the control requirements in the 

rule. However, the burden associated 

with conducting activities related to 

preparing permit applications will, at a 

minimum, be delayed for the duration 

of the stay. 

VI. Statutory and Executive Order 

Reviews 

A. General Requirements 

Under Executive Order 12866 (58 FR 

51735, October 4, 1993), and Executive 

Order 13563 (76 FR 3821, January 21, 

2011), this action is not a ‘‘significant 

regulatory action,’’ and, therefore, is not 

subject to review by the Office of 

Management and Budget. For this 

reason, this action is also not subject to 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ (66 FR 28355, May 

22, 2001). In addition, this action does 

not impose any enforceable duty or 

contain any unfunded mandate as 

described in the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4), or 

require prior consultation with State 

officials, as specified by Executive 

Order 12875 (58 FR 58093, October 28, 

1993), or involve special consideration 

of environmental justice related issues, 

as required by Executive Order 12898 

(59 FR 7629, February 16, 1994). 

Pursuant to the Regulatory Flexibility 

Act, I certify that this action will not 

have a significant economic impact on 

a substantial number of small entities. 

This final rule will not impose any new 

requirements on small entities. This 

action also does not have Tribal 

implications because it will not have a 

substantial direct effect on one or more 

Indian Tribes, on the relationship 

between the Federal government and 

Indian Tribes, or on the distribution of 

power and responsibilities between the 

Federal government and Indian Tribes, 

as specified by Executive Order 13175 

(65 FR 67249, November 9, 2000). This 

action also does not have Federalism 

implications because it does not have 

substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in 

Executive Order 13132 (64 FR 43255, 

August 10, 1999). This action also is not 

subject to Executive Order 13045 

‘‘Protection of Children from 

Environmental Health Risks and Safety 

Risks’’ (62 FR 19885, April 23, 1997). 

The requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) do not apply. This action does 

not impose an information collection 

burden under the provisions of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501, et seq.). EPA’s compliance 

with these statutes and Executive 

Orders for the underlying rule is 

discussed in the October 29, 2009, 

Federal Register document. 

B. Submission to Congress and the 

Comptroller General 

The Congressional Review Act, 5 

U.S.C. 801, et seq., as added by the 

Small Business Regulatory Enforcement 

Fairness Act of 1996, generally provides 

that, before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report, which includes a 

copy of the rule, to each House of the 

Congress and to the Comptroller General 

of the United States. EPA will submit a 

report containing this notice and other 

required information to the United 

States Senate, the United States House 

of Representatives, and the Comptroller 

General of the United States prior to 

publication of the rule in the Federal 

Register. A major rule cannot take effect 

until 60 days after it is published in the 

Federal Register. The stay of these 

particular provisions in 40 CFR part 63, 

subpart VVVVVV is not a ‘‘major rule’’ 

as defined by 5 U.S.C. 804(2). This rule 

will be effective March 14, 2011. 

List of Subjects in 40 CFR Part 63 

Environmental protection, 

Administrative practice and procedure, 

Air pollution control, Reporting and 

recordkeeping requirements. 

Dated: March 8, 2011. 

Lisa P. Jackson, 

Administrator. 

For the reasons stated in the 

preamble, title 40, chapter I of the Code 

of Federal Regulations is amended as 

follows: 

PART 63—[AMENDED] 

■ 1. The authority citation for part 63 

continues to read as follows: 

Authority: 42 U.S.C. 7401, et seq. 

§ 63.11494 [STAYED IN PART] 

■ 2. In § 63.11494, paragraph (e) is 

stayed from March 14, 2011, until 

further notice. 

[FR Doc. 2011–5778 Filed 3–11–11; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 413 

[CMS–1430–IFC] 

RIN 0938–AQ92 

Medicare Program; Revisions to the 

Reductions and Increases to Hospitals’ 

FTE Resident Caps for Graduate 

Medical Education Payment Purposes 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period implements section 

203 of the Medicare and Medicaid 

Extenders Act of 2010 relating to the 

treatment of teaching hospitals that are 

members of the same Medicare graduate 

medical education affiliated groups for 

the purpose of determining possible 

full-time equivalent resident cap 

reductions. 

DATES: Effective Date: These regulations 

are effective on March 14, 2011. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

April 13, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–1430–IFC. Because of 

staff and resource limitations, we cannot 

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13516 Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed) 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1430–IFC, P.O. Box 8013, 

Baltimore, MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1430–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: Tzvi 

Hefter, (410) 786–4487. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

A. Statutory Authority 

Section 1886(h) of the Act, as added 

by section 9202 of the Consolidated 

Omnibus Budget Reconciliation Act 

(COBRA) of 1985 (Pub. L. 99–272) and 

as currently implemented in the 

regulations at 42 CFR 413.75 through 

413.83, establishes a methodology for 

determining payments to hospitals for 

the direct costs of approved graduate 

medical education (GME) programs. 

Section 1886(h)(2) of the Act sets forth 

a methodology for the determination of 

a hospital-specific base-period per 

resident amount (PRA) that is calculated 

by dividing a hospital’s allowable direct 

costs of GME in a base period by its 

number of residents in the base period. 

The base period is, for most hospitals, 

the hospital’s cost reporting period 

beginning in FY 1984 (that is, October 

1, 1983 through September 30, 1984). 

The base year PRA is updated annually 

for inflation. In general, Medicare direct 

GME payments are calculated by 

multiplying the hospital’s updated PRA 

by the weighted number of full-time 

equivalent (FTE) residents working in 

all areas of the hospital complex (and at 

nonprovider sites, when applicable), 

and the hospital’s Medicare share of 

total inpatient days. 

Section 1886(d)(5)(B) of the Act 

provides for an additional payment 

amount under the hospital inpatient 

prospective payment system (IPPS) for 

hospitals that have residents in an 

approved GME program in order to 

account for the higher indirect patient 

care costs of teaching hospitals relative 

to nonteaching hospitals. The 

regulations regarding the calculation of 

this additional payment, known as the 

indirect medical education (IME) 

adjustment, are located at 42 CFR 

412.105. The hospital’s IME adjustment 

applied to the DRG payments is 

calculated based on the ratio of the 

hospital’s number of FTE residents 

training in either the inpatient or 

outpatient departments of the IPPS 

hospital to the number of inpatient 

hospital beds. 

The Balanced Budget Act of 1997 

(Pub. L. 105–33) established a limit on 

the number of allopathic and 

osteopathic residents that a hospital 

may include in its FTE resident count 

for direct GME and IME payment 

purposes. Under section 1886(h)(4)(F) of 

the Act, for cost reporting periods 

beginning on or after October 1, 1997, a 

hospital’s unweighted FTE count of 

residents for purposes of direct GME 

may not exceed the hospital’s 

unweighted FTE count for its most 

recent cost reporting period ending on 

or before December 31, 1996. Under 

section 1886(d)(5)(B)(v) of the Act, a 

similar limit on the FTE resident count 

for IME purposes is effective for 

discharges occurring on or after October 

1, 1997. 

The recently enacted Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148), as amended by the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152) (collectively referred to in this 

document as the Affordable Care Act) 

made a number of statutory changes 

relating to the determination of a 

hospital’s FTE resident count for direct 

GME and IME payment purposes and 

the manner in which FTE resident 

limits are calculated and applied to 

hospitals under certain circumstances. 

Section 5503 of the Affordable Care Act 

added a new section 1886(h)(8) to the 

Act to provide for the reduction in FTE 

resident caps for direct GME under 

Medicare for certain hospitals, and to 

authorize the ‘‘redistribution’’ of the 

estimated number of FTE resident slots 

to other qualified hospitals. In addition, 

section 5503 amended section 

1886(d)(5)(B)(v) of the Act to require the 

application of section 1886(h)(8) of the 

Act provisions ‘‘in the same manner’’ as 

the FTE resident caps for IME. The 

regulations implementing section 5503 

of the Affordable Care Act were 

included in the Outpatient Prospective 

Payment System (PPS) Final Rule, 

published on November 24, 2010 in the 

Federal Register (75 FR 72147). The 

section below summarizes the 

provisions of section 5503 of the 

Affordable Care Act as implemented in 

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Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 13517 

the November 24, 2010 Federal 

Register. 

B. Reductions and Increases to 

Hospitals’ FTE Resident Caps for GME 

Payment Purposes Under Section 5503 

of the Affordable Care Act 

As previously discussed, the 

calculation of both direct GME and IME 

payments is affected by the number of 

FTE residents that a hospital is allowed 

to count; generally, the greater the 

number of FTE residents a hospital 

counts, the greater the amount of 

Medicare direct GME and IME payments 

the hospital will receive. In an attempt 

to end the implicit incentive for 

hospitals to increase the number of FTE 

residents, Congress instituted a cap on 

the number of allopathic and 

osteopathic residents a hospital is 

allowed to count for direct GME and 

IME purposes. Dental and podiatric 

residents are not included in this 

statutorily mandated cap. Some 

hospitals have trained a number of 

allopathic and osteopathic residents in 

excess of their FTE resident caps, while 

other hospitals have reduced their FTE 

resident counts to some level below 

their FTE resident caps. Section 5503 of 

the Affordable Care Act added a new 

section 1886(h)(8) to the Act to provide 

for reductions in the statutory FTE 

resident caps for direct GME under 

Medicare for certain hospitals, and 

authorizes a ‘‘redistribution’’ to hospitals 

of the estimated number of FTE resident 

slots resulting from the reductions. 

Section 5503 of the Affordable Care Act 

also amended section 1886(d)(5)(B)(v) of 

the Act to require application of the 

provisions of 1886(h)(8) of the Act ‘‘in 

the same manner’’ to the FTE resident 

caps for IME. 

The new section 1886(h)(8)(A) of the 

Act provides that, effective for portions 

of cost reporting periods occurring on or 

after July 1, 2011, a hospital’s FTE 

resident cap will be reduced if its 

‘‘reference resident level’’ is less than its 

‘‘otherwise applicable resident limit,’’ as 

these terms are described below. Section 

1886(h)(8)(A)(ii) of the Act and the 

November 24, 2010 Federal Register (75 

FR 72147) describes which hospitals are 

exempt from a cap reduction under 

section 5503 of the Affordable Care Act. 

Included in that group are rural 

hospitals with fewer than 250 acute care 

inpatient beds. For other hospitals, any 

such reduction will be equal to 65 

percent of the difference between the 

hospital’s ‘‘otherwise applicable resident 

limit’’ and its ‘‘reference resident level.’’ 

Under section 1886(h)(8)(B) of the 

Act, the Secretary is authorized to 

increase the FTE resident caps for 

certain categories of hospitals for 

portions of cost reporting periods 

occurring on or after July 1, 2011, by an 

aggregate number that does not exceed 

the estimated overall reduction in FTE 

resident caps for all hospitals under 

section 1886(h)(8)(A) of the Act. A 

single hospital may receive an increase 

in its FTE resident cap of no more than 

75 additional FTEs. That is, a hospital 

would be allowed to receive up to 75 

additional slots for direct GME and up 

to 75 additional slots for IME. In 

determining which hospitals would 

receive an increase in their FTE resident 

caps, sections 1886(h)(8)(C) through 

1886(h)(8)(E) of the Act directs us to do 

all of the following: 

• Take into account the demonstrated 

likelihood of the hospital filling the 

additional positions within the first 

three cost reporting periods beginning 

on or after July 1, 2011. 

• Take into account whether the 

hospital has an accredited rural training 

track program. 

• Distribute 70 percent of the resident 

slots to hospitals located in States with 

resident-to-population ratios in the 

lowest quartile. 

• Distribute 30 percent of the resident 

slots to hospitals located in a State, a 

territory of the United States, or the 

District of Columbia that are among the 

top 10 States, territories, or Districts in 

terms of the ratio of the total population 

living in an area designated as a health 

professional shortage area (HSPA), as of 

March 23, 2010, to the total population, 

and/or to hospitals located in rural 

areas. 

A comprehensive description of the 

rules implementing the cap slot 

redistribution under section 1886(h)(8) 

of the Act can be found in the November 

24, 2010 Federal Register (75 FR 

72168). 

C. Treatment of Affiliated Groups Under 

Section 5503 of the Affordable Care Act 

A previous redistribution of ‘‘unused’’ 

FTE resident slots was performed in 

2005 under section 422 of the Medicare 

Prescription Drug, Improvement and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173). Section 422 of the MMA 

provided for the redistribution of 

unused residency positions effective for 

portions of cost reporting periods 

beginning on or after July 1, 2005. While 

the redistribution under section 5503 of 

the Affordable Care Act as initially 

enacted is similar to the previous 

redistribution under section 422 of 

MMA, there are substantive differences 

between the two provisions. One of 

those differences involves the treatment 

of hospitals that were members of the 

same Medicare GME affiliated groups 

for purposes of determining whether a 

hospital should receive a cap reduction. 

The regulations governing Medicare 

GME affiliated groups and Medicare 

GME affiliation agreements are at 42 

CFR 413.75(b) and 413.79(f), 

respectively. Medicare GME affiliation 

agreements allow teaching hospitals to 

temporarily transfer cap slots to other 

hospitals in order to facilitate the cross 

training of residents. The duration of the 

temporary cap slots transfer is a 

minimum of 1 year beginning on July 1 

of a year, per the Medicare GME 

affiliation agreement. 

Under section 422 of MMA, the 

statute explicitly directed the Secretary 

to apply the provisions to hospitals that 

were members of the same Medicare 

GME affiliated group as of July 1, 2003. 

Specifically, section 1886(h)(7)(A)(iii) of 

the Act states ‘‘The provisions of clause 

(i) shall be applied to hospitals which 

are members of the same Medicare GME 

affiliated group (as defined by the 

Secretary under paragraph (4)(H)(ii)) as 

of July 1, 2003.’’ Therefore, in 

implementing section 422 of MMA, we 

based the FTE resident cap reductions 

for hospitals that were participating in 

a Medicare GME affiliated group on the 

aggregate cap and count data from all 

hospitals participating in the same 

Medicare GME affiliated group(s). If a 

hospital was training a number of 

residents below its FTE resident cap for 

the reference cost reporting period but 

the hospital was part of a Medicare GME 

affiliated group for some or all of that 

reference cost reporting period, the 

Medicare contractor determined if the 

aggregate affiliated count for all 

hospitals in the Medicare GME affiliated 

group was greater than the aggregate 

affiliated cap. If the aggregate affiliated 

count was greater than the aggregate 

cap, then there was no reduction made 

to the FTE caps of any hospital in the 

Medicare GME affiliated group (even for 

the hospital that was part of the 

Medicare GME affiliated group, but was 

training below its cap). 

However, as we noted in the 

November 24, 2010 Federal Register (75 

FR 72161), in contrast to section 422 of 

MMA, section 5503 of the Affordable 

Care Act as initially enacted did not 

include language specific to Medicare 

GME affiliated groups as was included 

in section 422 of MMA under section 

1886(h)(7)(A)(iii) of the Act. Thus, 

section 5503 of the Affordable Care Act 

as initially enacted did not provide for 

determinations based on the aggregate 

experience of a Medicare GME affiliated 

group. Therefore, we stated in the 

November 24, 2010 Federal Register (75 

FR 72161), that the determination of 

whether a hospital would receive a cap 

reduction based on that individual 

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13518 Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 

hospital’s experience and not the 

aggregate experience of the Medicare 

GME affiliated group. 

D. Section 203 of the Medicare and 

Medicaid Extenders Act of 2010 (P.L. 

111–309) 

Section 203 of the Medicare and 

Medicaid Extenders Act of 2010 

(MMEA) further amended section 

1886(h)(8) of the Act by adding the 

following new subparagraph: 

(I) Affiliation.—The provisions of this 

paragraph shall be applied to hospitals which 

are members of the same affiliated group (as 

defined by the Secretary under paragraph 

(4)(H)(ii)) and the reference resident level for 

each such hospital shall be the reference 

resident level with respect to the cost 

reporting period that results in the smallest 

difference between the reference resident 

level and the otherwise applicable resident 

limit. 

This paragraph refers to the treatment 

of hospitals that are members of the 

same Medicare GME affiliated groups, 

as described in section C of this interim 

final rule for purposes of determining a 

hospital’s possible cap reductions under 

section 1886(h)(8)(A) of the Act. Similar 

to section 422 of MMA, this amendment 

to the language at section 1886(h)(8) of 

the Act allows us to consider hospitals 

that are members of the same Medicare 

GME affiliated group in the aggregate, 

rather than only on an individual basis, 

for the purposes of determining a GME 

FTE cap reduction. 

Although this amendment allows us 

to implement section 5503 of the 

Affordable Care Act in a manner similar 

to section 422 of MMA, a key difference 

in implementation remains. One point 

of note is that section 422 of MMA, 

(section 1886(h)(7)(A)(ii)(I) of the Act) 

refers to the most recent cost reporting 

period ending on or before September 

30, 2002 as the reference cost reporting 

period. However, as stated in the August 

11, 2004 Federal Register (69 FR 

49125), if a hospital was a member of a 

Medicare GME affiliated group for the 

academic year beginning July 1, 2003, 

then its reference cost reporting period 

was the cost reporting period that 

included July 1, 2003. This differs from 

section 5503 of the Affordable Care Act 

which instructs the Secretary to choose 

the reference cost reporting period out 

of the hospital’s three most recent cost 

reporting periods ending before March 

23, 2010 for which a cost report has 

been settled or has been submitted to 

the Medicare contractor by March 23, 

2010, that has the highest FTE resident 

count section 1886(h)(8)(H)(i)) of the 

Act. 

For hospitals that were members of 

the same Medicare GME affiliated 

groups, the MMEA now allows us to 

determine the reference cost reporting 

period as the cost reporting period out 

of the hospitals three most recent cost 

reporting periods ending before March 

23, 2010 for which a cost report has 

been settled or has been submitted to 

the Medicare contractor by March 23, 

2010 with the smallest difference 

between the reference resident level and 

the otherwise applicable resident limit 

(section 1886)(h)(8)(I) of the Act). 

Therefore based on the amendment 

made to section 1886(h)(8) of the Act by 

section 203 of the MMEA adding 

subparagraph (I), we are establishing in 

this interim final rule with comment 

period, a methodology to determine 

whether a hospital is subject to a cap 

reduction under section 5503 of the 

Affordable Care Act based on that 

hospital’s participation in a Medicare 

GME affiliated group(s) or an emergency 

Medicare GME affiliated group under 42 

CFR 413.79(f). Although the MMEA 

provision applies to both regular 

Medicare GME affiliation agreements 

and emergency Medicare GME 

affiliation agreements, for ease of 

reference, we will refer in this 

discussion to both with the term 

Medicare GME affiliation agreements. 

We believe the purpose of section 203 

of MMEA is to amend section 1886(h)(8) 

of the Act in order to implement section 

5503 of the Affordable Care Act in a 

manner that is similar to section 422 of 

MMA with regard to treatment of 

hospitals that are members of the same 

Medicare GME affiliated group. 

Accordingly, we are implementing 

section 203 of the MMEA in a manner 

similar to the way in which section 422 

of MMA was implemented. The 

methodology used to determine a cap 

reduction for hospitals which are 

members of the same affiliated group is 

as follows: 

Part 1: Determine the ‘‘Reference Cost 

Reporting Period’’ 

The Medicare contractor will assess 

each hospital on an individual basis. 

First, the Medicare contractor will 

determine whether a hospital was a 

member of a Medicare GME affiliated 

group at any point during any of the 

hospital’s three most recent cost 

reporting periods ending before March 

23, 2010 for which a cost report has 

been settled or has been submitted to 

the Medicare contractor by March 23, 

2010. That is, the Medicare contractor 

will determine whether the caps during 

any of those three cost reporting periods 

were revised because the hospital was a 

member of a Medicare affiliation 

agreement. If a hospital was not a 

member of a Medicare GME affiliated 

group during any of those three cost 

reporting periods, then the Medicare 

contractor will determine if and by how 

much that hospital’s FTE resident caps 

should be reduced in accordance with 

the policy established in the November 

24, 2010 final rule (75 FR 72155 through 

72168). 

If the Medicare contractor determines 

that a hospital was a member of a 

Medicare GME affiliated group at any 

point during any of the three most 

recent cost reporting periods ending 

before March 23, 2010 for which a cost 

report has been settled or has been 

submitted to the Medicare contractor by 

March 23, 2010, then subparagraph (I) 

applies, and the Medicare contractor 

will determine a hospital’s reference 

cost reporting period by determining the 

cost reporting period from the three 

most recent cost reporting periods 

ending before March 23, 2010 for which 

a cost report has been settled or has 

been submitted to the Medicare 

contractor by March 23, 2010, that 

results in the smallest difference 

between the reference resident level and 

the otherwise applicable resident limit. 

For example, a hospital with a FYE of 

December 31 may not be a member of 

a Medicare GME affiliated group for the 

academic years beginning July 1, 2006, 

2007, or 2008, but it may be a member 

of a Medicare GME affiliated group for 

the academic year beginning July 1, 

2005. In the cost reporting period 

ending December 31, 2006, the months 

of January through June 2006 would be 

affected by the July 1, 2005 Medicare 

GME affiliation agreement. Therefore, in 

this example, the hospital is indeed a 

member of a Medicare GME affiliated 

group at some point, albeit for only a 

portion of a cost reporting period, 

during its three most recent cost 

reporting periods ending before March 

23, 2010 for which a cost report has 

been settled or has been submitted to 

the Medicare contractor by March 23, 

2010 (in this case, these cost reporting 

periods would include FYE 12/31/08, 

FYE 12/31/07, and FYE 12/31/06), and 

as such its reference cost reporting 

period would be determined as the cost 

reporting period that results in the 

smallest difference between the 

reference resident level and the 

otherwise applicable resident limit. As 

previously discussed, section 422 of the 

MMA specified a single time period that 

would be used for all hospitals that 

were members of a Medicare GME 

affiliated group; that is as of July 1, 

2003. However, section 5503 of the 

Affordable Care Act does not specify 

one cost reporting period, but rather it 

specifies that the reference cost 

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Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 13519 

reporting period is one out of three 

possible cost reporting periods. For a 

hospital that was a member of a 

Medicare GME affiliated group at any 

point during any of the three applicable 

cost reporting periods, after determining 

the cost report that is a hospital’s 

reference cost reporting period based on 

the cost report that results in the 

smallest difference between the 

reference resident level and the 

otherwise applicable resident limit, to 

determine whether there are any excess 

slots we believe it is appropriate to 

consider whether a hospital was a 

member of a Medicare GME affiliated 

group as of July 1 of that reference cost 

reporting period. The hospital may or 

may not have been a member of a 

Medicare GME affiliated group during 

that reference cost reporting period. We 

do not believe that section 1886(h)(8)(I) 

of the Act, as added by section 203 of 

the MMEA, requires that a hospital must 

be a member of a Medicare GME 

affiliated group during all 3 cost 

reporting periods, nor during the year 

determined to be the reference cost 

reporting period. Rather, being a 

member of a Medicare GME affiliated 

group at some point in just one of the 

three cost reporting periods warrants 

that a hospital’s reference cost reporting 

period be determined based on which 

cost report has the smallest difference 

between the reference resident level and 

the otherwise applicable resident limit. 

To determine if an FTE resident cap 

reduction is appropriate, if the hospital 

was a member of a Medicare GME 

affiliated group as of July 1 in the 

reference cost reporting period, we will 

look at the Medicare GME affiliated 

group in the aggregate, when we 

determine if the subject hospital has 

excess capacity for purposes of a 

reduction under sections 5503 and 203. 

If the hospital was not a member of a 

Medicare GME affiliated group as of July 

1 in the reference cost reporting period, 

excess FTEs training at other members 

of the affiliated group will not be 

considered for the purposes of a 

reduction under sections 5503 and 203 

and that hospital’s FTE resident caps 

should be reduced in accordance with 

the policy established for hospitals that 

are not members of Medicare GME 

affiliated groups in the November 24, 

2010 final rule (75 FR 72155 through 

72168). The nature of this determination 

underscores the fact that reductions to 

the FTE resident caps of hospitals that 

are members of Medicare GME affiliated 

groups must still be made on an 

individual hospital basis. The following 

is an example of a reference cost 

reporting period determination. (For 

ease of illustration, this example focuses 

on reductions to the IME FTE resident 

caps only, but the methodology is the 

same for reductions to the direct GME 

FTE resident caps): 

Hospital A has a FTE resident cap of 

10 FTE residents. Hospital A’s three 

most recent cost reports that have been 

settled or submitted to the Medicare 

contractor by March 23, 2010 include 

cost reporting periods with FYE 12/31/ 

2006, 12/31/2007, and 12/31/2008. 

During these three cost reporting 

periods, Hospital A trained 8, 9, and 9 

FTE residents, respectively. For the 

academic years beginning July 1, 2006 

and July 1, 2007, Hospital A was not a 

member of a Medicare GME affiliated 

group. However, for the academic year 

beginning July 1, 2008, Hospital A is 

affiliated with Hospital B and Hospital 

C. As a result of its Medicare GME 

affiliation agreement with Hospitals B 

and C, Hospital A’s adjusted cap or 

otherwise applicable resident limit is 12 

for the academic year beginning July 1, 

2008. Thus, when determining the 

reference cost reporting period for 

Hospital A, the Medicare contractor 

would compare the resident level for 

Hospital A with its otherwise applicable 

resident limit for each of the cost 

reporting period as indicated below: 

• Cost Reporting Period 1 (01/01/ 

2006–12/31/2006): 10 (FTE Resident 

Cap)¥8 (FTE Resident Count) = 2. 

• Cost Reporting Period 2 (01/01/ 

2007–12/31/2007): 10 (FTE Resident 

Cap)¥9 (FTE Resident Count) = 1. 

• Cost Reporting Period 3 (01/01/ 

2008–12/31/2008): 11 (Adjusted FTE 

Resident Cap)¥9 (FTE Resident 

Count) = 2. 

(Note that although Hospital A received 

an increase of 2 FTEs, from 10 to 12, 

under the Medicare GME affiliation 

agreement for the academic year 

beginning July 1, 2008, since Hospital A 

has a 12/31 fiscal year end, the actual 

cap adjustment is prorated to half of 2, 

for an increase to its FTE resident cap 

of 1, equaling 11). In this example, the 

smallest difference between the 

reference resident level and the 

otherwise applicable resident limit for 

Hospital A is 1, which occurs in the cost 

reporting period with FYE 12/31/2007. 

Thus, Hospital A’s reference cost 

reporting period is 01/01/2007–12/31/ 

2007. Note that Hospital A is not a 

member of a Medicare GME affiliated 

group during FYE 12/31/07. The 

implications of this are discussed 

below. 

Part 2: Determine the Applicable 

Reductions 

For a hospital that was a member of 

a Medicare GME affiliated group at any 

point during any of its three most recent 

cost reporting periods ending before 

March 23, 2010 for which a cost report 

has been settled or has been submitted 

to the Medicare contractor by March 23, 

2010, once the Medicare contractor 

determines that hospital’s reference cost 

reporting period (that is, the cost report 

with the smallest difference between the 

hospital’s FTE resident cap and FTE 

resident count), the Medicare contractor 

must then determine if the hospital was 

a member of a Medicare GME affiliated 

group as of the July 1 that occurs during 

that reference cost reporting period. If 

not, and the hospital’s FTE resident 

count was equal to or exceeded its FTE 

resident cap in that reference cost 

report, then no reduction to its FTE 

resident cap is made and no further 

steps are necessary. If that hospital’s 

FTE resident count was less than its 

FTE resident cap during that reference 

cost report, then the Medicare 

contractor would reduce the FTE 

resident cap by 65 percent of the 

difference between the FTE resident cap 

and the FTE resident count. 

If the hospital was a member of a 

Medicare GME affiliated group as of the 

July 1 that occurs during that reference 

cost reporting period, the Medicare 

contractor will look at the members of 

the Medicare GME affiliated group for 

that period in the aggregate, for the 

purpose of determining a reduction to 

the particular hospital’s FTE resident 

cap. In other words, assuming the 

Medicare contractor is assessing 

Hospital X, once it is determined that 

Hospital X was training residents below 

its adjusted FTE resident cap as part of 

a Medicare GME affiliation agreement 

occurring during Hospital X’s reference 

cost reporting period, the Medicare 

contractor will treat the hospitals in the 

Medicare GME affiliated group in the 

aggregate, but only for the purpose of 

determining the reduction to Hospital 

X’s FTE resident cap. The Medicare 

contractor would not actually reduce 

the FTE resident caps of the other 

hospitals that were affiliated with 

Hospital X in that year, since each 

hospital is evaluated separately, and it 

may be that the reference cost reporting 

periods for the other hospitals may not 

be the same as Hospital X’s reference 

cost reporting period. (It may be that the 

reference cost reporting period for 

another hospital is one in which that 

hospital was not part of a Medicare 

GME affiliated group, in which case, 

treatment as a group is not warranted 

when determining that hospital’s FTE 

cap reduction). 

For the hospital that was a member of 

a Medicare GME affiliated group as of 

the July 1 that occurs during that 

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13520 Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 

reference cost report, the Medicare 

contractor will determine for each 

hospital in the Medicare GME affiliated 

group respectively its FTE resident cap 

and FTE resident count (IME and direct 

GME separately). The Medicare 

contractor will add each hospital’s FTE 

resident caps (IME and direct GME 

separately) to determine the aggregate 

affiliated FTE resident cap. The 

contractor will then add each hospital’s 

FTE resident count (IME and direct 

GME separately) to determine the 

aggregate affiliated FTE resident count. 

If the aggregate FTE resident counts are 

equal to or exceed the aggregate FTE 

resident caps, then no reductions would 

be made to that particular hospital’s 

FTE resident cap under section 5503 of 

Affordable Care Act, and no further 

steps are necessary for that hospital. We 

emphasize that at this point, it has only 

been determined that the particular 

hospital will not be subject to an FTE 

resident cap reduction—as the FTE 

resident cap reduction determination is 

ultimately one that is done on an 

individual hospital basis, at this point 

the contractor has not made any 

determinations regarding the status of 

the other hospitals that are in the same 

Medicare GME affiliated group as the 

particular hospital under review. 

However, where the aggregate FTE 

resident count is below the aggregate 

FTE resident cap (IME and direct GME 

separately), a reduction to the particular 

hospital’s FTE resident cap would be 

necessary. In these cases, for each 

hospital that is a member of the same 

Medicare GME affiliated group, the 

Medicare contractor will determine the 

following FTE information from the cost 

report that includes July 1 of the 

particular hospital’s reference cost 

reporting period: 

(1) The ‘‘1996’’ FTE resident cap (as 

adjusted by new programs, if applicable) 

for the hospital under review— For IME 

from Worksheet E, Part A of the 

Medicare cost report, the sum of lines 

3.04 and 3.05. If the hospital’s IME FTE 

resident cap was reduced under section 

422 of the MMA, subtract from this sum 

the amount reported on Worksheet E–3, 

Part VI, line 13. For direct GME from 

Worksheet E–3, Part IV of the Medicare 

cost report, the sum of lines 3.01 and 

3.02. If the hospital’s direct GME FTE 

resident cap was reduced under section 

422 of the MMA, subtract from this sum 

the amount reported on Worksheet E–3, 

Part VI, line 2. 

(2) The ‘‘affiliated’’ FTE resident cap 

for the hospital being assessed—For 

IME, line 3.07. For direct GME, line 

3.04. 

(3) The total number of allopathic and 

osteopathic FTE residents for the 

hospital being assessed—For IME, line 

3.08. For direct GME, line 3.05. 

(4) The difference between the 

aggregate ‘‘affiliated’’ FTE resident cap 

and the total FTE resident counts for all 

of the affiliated hospitals—For IME, S 

line 3.08 minus S (lines 3.04 + 

3.05¥applicable section 422 reduction 

amount). For direct GME, S line 3.05 

minus S (lines 3.01 + 3.02¥applicable 

section 422 reduction amount). 

(5) For IME, for those hospitals whose 

FTE resident count from line 3.08 is 

greater than the ‘‘affiliated’’ FTE resident 

cap on line 3.07, indicate ‘‘zero.’’ For 

direct GME, for those hospitals whose 

FTE resident count from line 3.05 is 

greater than the ‘‘affiliated’’ FTE resident 

cap on line 3.04, indicate ‘‘zero.’’ For 

IME, for those hospitals whose FTE 

resident count from line 3.08 is less 

than the ‘‘affiliated’’ FTE resident cap on 

line 3.07, determine the difference 

between the hospital’s ‘‘affiliated’’ FTE 

resident cap and the hospital’s FTE 

resident count, line 3.08 minus line 

3.07. For direct GME, for those hospitals 

whose FTE resident count from line 

3.05 is less than the ‘‘affiliated’’ FTE 

resident cap on line 3.04, determine the 

difference between the hospital’s 

‘‘affiliated’’ FTE resident cap and the 

hospital’s FTE resident count, line 3.05 

minus line 3.04. 

(6) For IME and direct GME 

separately, to determine the total 

amount by which the FTE resident 

counts are below the ‘‘affiliated’’ FTE 

resident caps and add the amounts 

determined under step 5 for each 

hospital that trained fewer residents 

than its ‘‘affiliated’’ FTE resident caps. 

(7) For IME and direct GME 

separately, determine a pro rata cap 

reduction for the hospital being assessed 

by dividing the hospital-specific amount 

in step 5 by the total amount for all of 

those hospitals in step 6, and multiply 

by the amount in step 4. (that is, (step5/ 

step6) × step 4). 

(8) For IME and direct GME 

separately, determine the actual cap 

reduction for the hospital being assessed 

by multiplying the pro rata cap 

reduction from step 7 by 0.65. 

(9) For IME and direct GME 

separately, determine the reduced FTE 

resident cap for the hospital being 

assessed by subtracting the actual cap 

reduction from step 8 from the ‘‘1996’’ 

FTE resident cap from step 1. This is the 

hospital’s FTE resident cap effective 

July 1, 2011. 

The following is an example of how 

the reductions to the FTE resident caps 

will be determined where the FTE 

resident counts in the aggregate for 

hospitals that were affiliated as of July 

1 of the reference cost reporting period 

for a particular hospital are below the 

hospitals’ FTE resident caps in the 

aggregate. For ease of illustration, this 

example focuses on reductions to the 

IME caps only, but the methodology is 

the same for reductions to the direct 

GME caps. 

In this example, the Medicare 

contractor has determined, using the 

methodology from Step 1, that the 

reference cost reporting period (the 

period with smallest difference between 

the reference resident level and the 

otherwise applicable resident limit) for 

Hospital D is January 1, 2007 to 

December 31, 2007. The academic year 

that occurs in this reference cost 

reporting period begins July 1, 2007. 

Hospitals D, E, and F are members of a 

Medicare GME affiliated group for the 

academic year that begins July 1, 2007. 

Hospital D is also separately affiliated 

with Hospitals G and H for the academic 

year that begins July 1, 2007. Thus, the 

affiliated group for GME payment 

purposes, and for purposes of 

determining possible FTE cap 

reductions for Hospital D under 

subparagraph (I) consists of Hospitals D, 

E, F, G, and H. Hospital E’s cost report 

that includes July 1, 2007 is FYE June 

30, 2008. Hospital D’s, F’s, and G’s cost 

report that includes July 1, 2007 is their 

FYE December 31, 2007, and Hospital 

H’s cost report that includes July 1, 2007 

is its FYE September 30, 2007. Using 

steps 1 through 9 above, the reduction 

to the FTE resident caps for Hospital D 

is determined in the table below. 

Hospital 

1996 FTE 

Caps 

(Step 1) 

‘‘Affiliated’’ 

FTE cap 

(Step 2) 

FTE Count 

(Step 3) 

Number of 

FTEs below 

the ‘‘Affiliated’’ 

Cap 

(Step 5) 

Pro rate 

reduction 

(Step 7) 

Actual Cap 

Reduction 

(Step 8) 

Final FTE 

Cap 

(Step 9) 

D ................................... 115 90 75 ¥15 ¥8 ¥5.2 109.8 

E ................................... 80 100 125 0 N/A N/A N/A 

F ................................... 120 10 10 0 N/A N/A N/A 

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Hospital 

1996 FTE 

Caps 

(Step 1) 

‘‘Affiliated’’ 

FTE cap 

(Step 2) 

FTE Count 

(Step 3) 

Number of 

FTEs below 

the ‘‘Affiliated’’ 

Cap 

(Step 5) 

Pro rate 

reduction 

(Step 7) 

Actual Cap 

Reduction 

(Step 8) 

Final FTE 

Cap 

(Step 9) 

G .................................. 95 115 125 0 N/A N/A N/A 

H ................................... 30 125 65 ¥60 N/A N/A N/A 

Totals .................... 440 440 400 ¥75 N/A N/A N/A 

Step 4→ ¥40 Step 6↑ 

In this example, Hospital D’s FTE 

resident count of 75 was 15 less than its 

’’affiliated’’ FTE resident cap of 90, and 

Hospital H’s FTE resident count of 65 

was 60 less than its ’’affiliated’’ FTE 

resident cap of 125 (as determined 

under step 5). Hospital F’s ’’affiliated’’ 

FTE resident cap equaled its FTE 

resident count. Under this methodology, 

the fact that Hospitals E and G exceeded 

their respective ’’affiliated’’ FTE resident 

caps minimizes the reductions to 

Hospital D’s ’’1996’’ FTE resident caps 

through the calculation of a pro rata 

reduction under step 7. 

We note that although Hospital H is 

also under its cap; its cap is not reduced 

in this exercise. Under section 5503, the 

cap reduction determination is 

calculated individually for each hospital 

based on its individual reference cost 

reporting period, so each hospital would 

be evaluated for a possible reduction 

separately. Hospital H will be evaluated 

separately, and it may be that Hospital’s 

H reference cost report may not be its 

FYE September 30, 2007 cost report, 

and ultimately, Hospital H may or may 

not be subject to an FTE resident cap 

reduction. Thus, under step 8, the actual 

cap reduction of 5.2 FTEs for Hospital 

D is determined by taking 65 percent of 

8 (rather than 65 percent of 15). As a 

result, under step 9, Hospital D’s final 

FTE resident cap effective on July 1, 

2011 is determined to be 109.8 FTEs. 

We also note that the reduction to 

Hospital D’s ’’1996’’ FTE resident caps 

was minimized only because Hospitals 

E and G exceeded their ’’affiliated’’ FTE 

resident caps. If all hospitals in the 

Medicare GME affiliated group had 

trained residents below their ’’affiliated’’ 

FTE resident caps, then a pro rata 

reduction would not benefit Hospital D. 

In that case, the ’’1996’’ FTE resident 

caps of Hospital D in the Medicare GME 

affiliated group would be reduced by 65 

percent of the difference between its 

’’affiliated’’ FTE resident cap and FTE 

resident count. 

We believe this final policy is similar 

to the method used to implement 

section 422 of the MMA with regard to 

hospitals that were members of the same 

Medicare GME affiliated group in that, 

as under section 422 of the MMA, we 

are only treating a hospital as part of a 

group if the hospital was a member of 

a Medicare GME affiliation agreement 

during its reference cost reporting 

period under section 1886(h)(8) of the 

Act. In implementing section 203 of the 

MMEA in this manner, we believe we 

have addressed the concerns raised by 

commenters in response to the CY 2011 

Outpatient PPS proposed rule (75 FR 

46395 August 3, 2010) in that this 

policy could protect hospitals from a 

loss of slots if the aggregate counts equal 

to or exceed the ‘‘affiliated’’ FTE resident 

caps, and could limit the loss of slots in 

the instance where a hospital is a 

member of a Medicare GME affiliated 

group and the aggregate counts are 

below the ‘‘affiliated’’ FTE resident caps. 

II. Provisions of the Interim Final Rule 

As part of the CY 2011 Hospital 

Outpatient PPS final rule published in 

the November 24, 2010 Federal Register 

(75 FR 71800), we implemented section 

5503 of the Affordable Care Act, which 

added a new section 1886(h)(8) to the 

Act. Section 5503 of the Affordable Care 

Act provides for reductions in the 

statutory FTE resident caps for direct 

GME under Medicare for certain 

hospitals, and authorizes a 

‘‘redistribution’’ to hospitals of the 

estimated number of FTE resident slots 

resulting from the reductions. Section 

5503 of the Affordable Care Act also 

amended section 1886(d)(5)(B)(v) of the 

Act to require application of the 

provisions of 1886(h)(8) of the Act ‘‘in 

the same manner’’ to the FTE resident 

caps for IME. Section 1886(h)(8) of the 

Act requires that any such reduction to 

the FTE resident caps will be equal to 

65 percent of the difference between the 

hospital’s ‘‘otherwise applicable resident 

limit’’ and its ‘‘reference resident level.’’ 

Section 5503 of the Affordable Care Act 

as initially enacted did not include 

language specific to Medicare GME 

affiliated groups and did not provide for 

FTE resident cap reduction 

determinations based on the aggregate 

experience of a Medicare GME affiliated 

group. Accordingly, section 203 of the 

MMEA further amended section 

1886(h)(8) of the Act to specify that the 

provisions of section 1886(h)(8) of the 

Act shall be applied to hospitals which 

are members of the same Medicare GME 

affiliated group, and the ‘‘reference 

resident level’’ for each such hospital is 

the FTE resident count from the cost 

reporting period that results in the 

smallest difference between the FTE 

resident count and the FTE resident cap. 

We are revising § 413.79(m)(7) to reflect 

the changes made by section 203 of the 

MMEA. 

III. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

IV. Waiver of Proposed Rulemaking, 

60-Day Comment Period, and Delay of 

Effective Date 

Under 5 U.S.C. 553(b) of the 

Administrative Procedure Act (APA), 

we are required to publish a notice of 

proposed rulemaking (NPRM) in the 

Federal Register. Section 1871(b)(1) of 

the Act imposes a similar requirement: 

that the Secretary publish a Federal 

Register notice with not less than 60 

days for public comment. In addition, 

both authorities mandate a 30-day delay 

in effective date. 

Section 553(b)(B) of the APA provides 

for an exception from these APA 

requirements; in cases in which this 

exception applies, section 1871(b)(2)(C) 

of the Act provides an exception from 

the notice and delayed effective date 

requirements of the Act as well. Section 

553(b)(B) of the APA authorizes an 

agency to dispense with normal 

rulemaking requirements for good cause 

if the agency makes a finding that notice 

and comment procedures are 

impracticable, unnecessary, or contrary 

to the public interest. In addition, both 

section 553(d)(3) of APA and section 

1871(e)(1)(B)(ii) of the Act allow the 

agency to avoid the 30-day delay in 

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13522 Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 

effective date where such delay is 

contrary to the public interest and an 

agency includes a statement of support. 

Here, section 203 of the MMEA 

amends section 1886(h)(8) of the Act. 

Regulations implementing section 

5503(a) of the ACA were published in 

the November 24, 2010 Federal 

Register. The amendment made by 

section 203 of the MMEA is effective as 

if included in the enactment of section 

5503(a) of the Affordable Care Act. 

Specifically the amendments apply to 

portions of cost reporting periods 

occurring on or after July 1, 2011. As a 

result, given the December 15, 2010 

enactment of the MMEA, there was and 

there is a finite and, under the 

circumstances, highly compressed 

window of opportunity to complete 

implementation before the statutory 

deadline. Time pressure is acute 

because the agency must commence 

implementation substantially in 

advance of its July 1, 2011 deadline or 

risk a cascade of missed deadlines and 

failed intermediate steps, jeopardizing 

the program. Binding instructions must 

be given to Medicare contractors and 

hospitals as soon as possible to enable 

them to undertake critical first steps in 

a tight chain of business decisions that 

must precede implementation of the 

new provision. 

As we indicate in section VI.C., the 

effect of section 203 of the MMEA is 

that it benefits member hospitals of 

Medicare GME affiliated groups by 

protecting them from or mitigating their 

loss of residency slots. Prior 

implementation of section 422 of the 

MMA, which similarly redistributed 

unused FTE resident cap slots to other 

qualifying hospitals, suggests that 

significant time is required to 

implement this type of provision. The 

MMA was passed in December 2003, 

and was effective on July 1, 2005. 

Unlike section 5503 of the ACA, section 

422 of the MMA, as originally enacted, 

already included language giving 

special consideration to the treatment of 

members of Medicare GME affiliated 

groups. We published final regulations 

implementing the process for reducing 

the FTE resident caps of certain 

teaching hospitals, both members of 

Medicare GME affiliated groups and 

those that were not affiliated, by August 

1, 2004 (69 FR 49111). Since section 422 

of the MMA was effective on July 1, 

2005, the agency had 11 months 

between August 2004 and July 1, 2005 

to implement section 422 of the MMA. 

In this case, the statutory deadline 

provides the agency with significantly 

less time to implement section 5503 of 

the ACA and section 203 of the MMEA 

than it had to implement section 422 of 

the MMA. The ACA was passed on 

March 23, 2010, and we included the 

proposal for section 5503 of the ACA in 

the CY 2011 OPPS proposed rule; the 

final rule was not issued until 

November 1, 2010 (75 FR 72133). Since 

section 5503 of the ACA must be 

implemented to be effective on July 1, 

2011, this means that we have only 8 

months (as compared to the 11 months 

under section 422 of the MMA) to 

implement section 5503. Moreover, 

because the language regarding special 

treatment of hospitals that are members 

of Medicare GME affiliated groups was 

not passed as part of the MMEA until 

December 15, 2010, yet it has the same 

effective date of July 1, 2011 as section 

5503 of ACA, the amount of time 

available to implement the provision by 

July 1, 2011 has been further reduced to 

approximately 4 months. Facing this 

comparatively brief window, and based 

on historical experience, we find that it 

would be impracticable for us and our 

contractors to perform enough GME 

audits to assure the validity of assubmitted cost report data that are 

necessary for implementation— 

especially while simultaneously 

reviewing for regulatory compliance 

many hundreds of applications 

requesting additional slots. 

The implementation of section 5503 

of ACA and section 203 of the MMEA, 

as we learned when implementing 

section 422 of the MMA, requires 

significant planning, coordination, and 

investment of time and audit resources. 

There are approximately 1,100 teaching 

hospitals and more than 300 of them are 

members of Medicare GME affiliated 

groups. Many of these teaching 

hospitals have hundreds of residents, 

and it can take a Medicare contractor 

many weeks or months to audit the data 

on each as-submitted cost report. On 

January 7, 2011, we issued instructions 

to the contractors instructing them to 

begin audits for the purpose of 

implementing section 5503 of ACA. In 

those instructions, and in the CY 2011 

OPPS final rule (75 FR 72153), we stated 

that the contractors are required to 

submit their estimates of each teaching 

hospital’s FTE resident cap reduction, if 

any, to CMS by May 16, 2011. This 

would allow us to create the ‘‘pool’’ of 

slots available for redistribution, and to 

start assigning those slots to qualifying 

hospitals based on applications we 

reviewed between January 21, 2011 and 

May 2011. Even prior to May 16, 2011, 

the Medicare contractors will need time 

to notify hospitals of their tentative 

findings and allow hospitals to react to 

the potential FTE resident cap 

reductions. Unfortunately, many audits 

have yet to begin, as the Medicare 

contractors have been waiting for 

instructions regarding treatment of 

hospitals that are members of Medicare 

GME affiliated groups. 

For these reasons, that is, because we 

face an extremely compressed 

timeframe; because Medicare 

contractors and hospitals need to make 

critical business decisions and systems 

changes far in advance, each 

constituting a material change of 

position that would be costly and 

impracticable to reverse; because 

historical evidences suggests that even a 

slight delay could prevent timely 

implementation of this Congressionally 

mandated policy change; and because it 

is therefore probable that failing to act 

early would have adverse financial 

impacts for teaching hospitals and the 

Federal government—we have 

concluded that there is good cause to 

waive ordinary rulemaking provisions 

as they are impracticable and contrary 

to the public interest in this case, and 

issue interim final regulations as soon as 

possible, that being necessary to 

implementing section 203 of the MMEA 

in an accurate, comprehensive, and 

timely manner. We are providing a 30- 

day public comment period. 

V. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. (44 

U.S.C. Chapter 35) 

VI. Regulatory Impact Statement 

A. Statement of Need 

Section 5503 of the Affordable Care 

Act provides for reductions in the 

statutory FTE resident caps under 

Medicare for certain hospitals and 

authorizes a ‘‘redistribution’’ of the FTE 

resident slots resulting from the 

reduction in the FTE resident caps to 

other hospitals. The purpose of section 

5503 is to allow hospitals in certain 

states that wish to start new or expand 

existing programs in primary care or 

general surgery but are already training 

residents at or above their FTE resident 

caps to use slots from other hospitals 

that have not been using all of their 

slots. Section 203 of the Medicare and 

Medicaid Extenders Act of 2010 

amended section 1886(h)(8) of the Act 

(as added by section 5503 of the 

Affordable Care Act) to specify that the 

provisions of section 1886(h)(8)(A) of 

the Act shall be applied to hospitals 

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Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 13523 

which are members of the same 

Medicare GME affiliated group, and the 

‘‘reference resident level’’ for each 

hospital is the FTE resident count from 

the cost reporting period that has the 

smallest difference between the FTE 

resident count and the FTE resident cap. 

The purpose of section 203 is to take 

into account the unique situation of 

hospitals that are members of the same 

Medicare GME affiliated group in that 

they share FTE resident cap slots, and 

that FTE resident cap reduction 

determinations of hospitals should 

consider the shared nature of those 

slots. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (February 2, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule does not reach 

the economic threshold and thus is not 

considered a major rule. 

In the November 24, 2010 final rule 

which implemented section 5503 of the 

Affordable Care Act (75 FR 72239), we 

mentioned that we were unable to 

project how many FTE resident slots 

will be available for redistribution 

under section 5503 of the Affordable 

Care Act. Unlike section 422 of the 

MMA, which also provided for a 

redistribution of FTE resident slots but 

provided that the redistributed slots will 

be paid using the national average per 

resident amount (PRA) for direct GME 

payment purposes, section 5503 of the 

Affordable Care Act requires that 

hospitals be paid for their additional 

FTE resident slots using the hospitals’ 

specific PRAs. Because we were unable 

to determine the number of FTE 

resident slots that will be redistributed 

under section 5503 of the Affordable 

Care Act or which hospitals will be 

receiving additional FTE resident slots, 

we could not calculate a direct GME 

impact for section 5503 of the 

Affordable Care Act. Similarly, we 

cannot calculate a direct GME dollar 

impact for section 203 of the MMEA. 

Although the general effect of section 

203 of the MMEA is to protect from loss 

or mitigate the loss of slots of hospitals 

that are members of a Medicare GME 

affiliated group, there could be fewer 

direct GME and IME slots available for 

redistribution to other hospitals. For 

several reasons, we are unable to 

compute a dollar impact on the 

redistribution of those slots to other 

hospitals. First, although there are 

currently 307 hospitals that are 

members of a Medicare GME affiliated 

group, these hospitals were not 

necessarily members of Medicare GME 

affiliated groups during the reference 

cost reporting periods specified by 

section 5503 of the Affordable Care Act. 

Second, we do not know which 

hospitals, that are members of a 

Medicare GME affiliated group, will be 

at risk for losing direct GME and/or IME 

FTE resident cap slots under section 

5503 of the Affordable Care Act, as 

revised by section 203 of the MMEA. 

Third, we do not know the PRAs and 

Medicare utilization rates of hospitals 

that will be receiving additional FTE 

resident slots. With respect to 

determining an impact for IME payment 

purposes, section 5503 of the Affordable 

Care Act requires us to use an IME 

multiplier of 1.35; however, we do not 

know the intern-to-bed ratio and 

resident-to-bed ratio for the hospitals 

that will receive additional FTE resident 

slots or the volume or case mix of 

Medicare discharges at those hospitals. 

Therefore, we cannot determine a 

financial impact for purposes of direct 

GME and IME for this provision. We 

solicit comment on our analysis. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

physician practices, hospitals and other 

providers are small entities, either by 

nonprofit status or by qualifying as 

small businesses under the Small 

Business Administration’s size 

standards (revenues of less than $7.0 to 

$34.5 million in any 1 year). States and 

individuals are not included in the 

definition of a small entity. For details, 

see the Small Business Administration’s 

Web site at http://ecfr.gpoaccess.gov/

cgi/t/text/text-idx?c=ecfr&

sid=2465b064ba6965cc1fbd2

eae60854b11&rgn=div8&view=text&

node=13:1.0.1.1.16.1.266.9&idno=13) 

Individuals and States are not 

included in the definition of a small 

entity. The Regulatory Flexibility Act 

requires an agency to prepare an initial 

regulatory flexibility analysis when they 

issue a general notice of proposed rulemaking. However, HHS has maintained 

a long-standing policy of voluntarily 

preparing initial regulatory flexibility 

analyses for all rule-making. The 

Secretary has determined that this 

interim final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because the Secretary has 

determined that this interim final rule 

will not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2011, that threshold is approximately 

$136 million. This rule will have no 

consequential effect on State, local, or 

tribal governments or on the private 

sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of Executive Order 

13132 are not applicable. 

C. Anticipated Effects 

We believe the general effect of 

section 203 of the MMEA is that it could 

protect from loss or mitigate the loss of 

slots for hospitals that are members of 

a Medicare GME affiliated group, and 

therefore, there could be fewer direct 

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13524 Federal Register / Vol. 76, No. 49 / Monday, March 14, 2011 / Rules and Regulations 

GME and IME slots available for 

redistribution to other hospitals. 

D. Alternatives Considered 

Although there may be alternatives, 

the method we are finalizing in this 

interim final rule is the most consistent 

with that of a similar provision for 

hospitals that are members of Medicare 

GME affiliated groups implemented as 

part of section 422 of the MMA. 

E. Conclusion 

The analysis above, together with the 

remainder of this preamble, provides a 

Regulatory Flexibility Analysis as well 

as a Regulatory Impact Analysis. For the 

reasons outlined in the RIA, we are not 

preparing an analysis for either the RFA 

or section 1102(b) of the Act because we 

have determined that this interim final 

rule with comment would not have a 

direct significant economic impact on a 

substantial number of small entities or 

a direct significant impact on the 

operations of a substantial number of 

small rural hospitals. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in 42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Puerto Rico, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED 

PAYMENT RATES FOR SKILLED 

NURSING FACILITIES 

■ 1. The authority citation for part 413 

continues to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 

1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883, and 1886 of the Social Security 

Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 

1395g, 1395l(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Pub. L. 106–133 (113 Stat. 1501A– 

332). 

■ 2. Section 413.79 is amended by 

revising paragraph (m)(7) to read as 

follows: 

§ 413.79 Direct GME payments: 

Determination of the weighted number of 

FTE residents. 

(m) * * * 

(7) Consideration for members of 

Medicare GME affiliated groups. For a 

hospital that is a member of a Medicare 

GME affiliated group at any point 

during any of the hospital’s three most 

recent cost reporting periods ending 

before March 23, 2010 for which a cost 

report has been settled or has been 

submitted to Medicare contractor by 

March 23, 2010, in determining whether 

a hospital’s otherwise applicable 

resident FTE resident cap is reduced 

under paragraph (m) of this section, the 

Medicare contractor determines a 

hospital’s reference cost reporting 

period by finding the cost reporting 

period that results in the smallest 

difference between the reference 

resident level and the otherwise 

applicable resident limit. 

(i) If the reference resident level is 

less than the otherwise applicable 

resident limit in that reference cost 

reporting period, the Medicare 

contractor must then determine if the 

hospital was a member of a Medicare 

GME affiliated group as of the July 1 

that occurs during that reference cost 

reporting period. 

(ii) If the hospital was a member of a 

Medicare GME affiliated group as of the 

July 1 that occurs during that reference 

cost report, the Medicare contractor 

does all of the following: 

(A) Treat the members of the 

Medicare GME affiliated group as a 

group for that reference cost reporting 

period, for the purpose of determining 

a reduction to the particular hospital’s 

FTE resident cap. 

(B) Determine for each hospital in the 

Medicare GME affiliated group 

respectively the FTE resident cap and 

FTE resident count (IME and direct 

GME separately). 

(C) Add each hospital’s FTE resident 

caps (IME and direct GME separately) to 

determine the aggregate FTE resident 

cap. 

(D) Add each hospital’s FTE resident 

count (IME and direct GME separately) 

to determine the aggregate FTE resident 

count. 

(iii) If the aggregate FTE resident 

count is equal to or exceeds the 

aggregate FTE resident cap, then the 

Medicare contractor would make no 

reduction to the particular hospital’s 

otherwise applicable FTE resident cap 

under paragraph (m) of this section, and 

no further steps are necessary for that 

hospital. 

(iv) If the hospitals’ aggregate FTE 

resident count is less than the aggregate 

FTE resident cap, then the Medicare 

contractor would determine on a 

hospital-specific basis whether the 

particular hospital’s FTE resident count 

is less than its otherwise applicable FTE 

resident cap (as adjusted by affiliation 

agreement(s)) in the hospital’s reference 

cost report. 

(v) If the hospital’s FTE resident count 

exceeds its otherwise applicable FTE 

resident cap, the hospital will not have 

its otherwise applicable FTE resident 

cap reduced under paragraph (m) of this 

section. 

(vi) If the particular hospital’s FTE 

resident count is less than its otherwise 

applicable FTE resident cap, the 

Medicare contractor determines a pro 

rata cap reduction amount that is equal, 

in total, to 65 percent of the difference 

between the aggregate FTE resident cap 

and the aggregate FTE resident count for 

the Medicare GME affiliated group. 

(A) The pro rata cap reduction to the 

particular hospital’s otherwise 

applicable FTE resident cap is 

calculated by dividing the difference 

between the hospital’s otherwise 

applicable FTE resident cap and the 

hospital’s FTE resident count, by the 

total amount by which all of the 

hospitals’ individual FTE resident 

counts are below their affiliated FTE 

resident caps, multiplying the quotient 

by the difference between the aggregate 

FTE resident cap and the aggregate FTE 

resident counts for the Medicare GME 

affiliated group, and multiplying that 

result by 65 percent. 

(B) The final reduction takes into 

account the hospital’s FTE resident cap 

as reduced under the provisions of 

paragraph (c)(3) of this section. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: February 10, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: March 1, 2011. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2011–5960 Filed 3–11–11; 8:45 am] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 73 

[DA 11–324; MB Docket No. 10–189; 

RM–11611] 

Radio Broadcasting Services; Willow 

Creek, CA 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

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