39–010 

Calendar No. 98 

109TH CONGRESS REPORT " ! SENATE 1st Session 109–66 

CHILDREN’S HOSPITALS EDUCATIONAL EQUITY AND 

RESEARCH ACT 

MAY 11, 2005.—Ordered to be printed 

Mr. ENZI, from the Committee on Health, Education, Labor, and 

Pensions, submitted the following 

R E P O R T 

[To accompany S. 285] 

The Committee on Health, Education, Labor, and Pensions, to 

which was referred the bill (S. 285) to reauthorize the Children’s 

Hospitals Education Medical Education Program, having considered the same, reports favorably thereon with an amendment in 

the nature of a substitute and recommends that the bill (as amended) do pass. 

CONTENTS 

Page 

I. Purpose and need for legislation .................................................................. 1 

II. Summary ........................................................................................................ 2 

III. History of legislation and votes in committee ............................................. 2 

IV. Explanation of bill and committee views ..................................................... 2 

V. Cost estimate .................................................................................................. 3 

VI. Regulatory impact statement ........................................................................ 4 

VII. Application of law to the legislative branch ................................................ 4 

VIII. Section-by-section analysis ............................................................................ 4 

IX. Changes in existing law ................................................................................ 5 

I. PURPOSE AND NEED FOR LEGISLATION

First enacted as part of the Healthcare Research and Quality Act 

of 1999 (P.L. 106–129), the Children’s Hospitals Education and Research Act of 1999 authorized the Children’s Hospitals Graduate 

Medical Education (CHGME) program for 2 years. The program 

was reauthorized for an additional 5 years as part of the Children’s 

Health Act of 2000 (P.L. 106–310). 

Graduate medical education is funded through Medicare payments to full service teaching hospitals. Prior to the enactment of 

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this program, the independent children’s teaching hospitals did not 

have a similar program to fund resident training programs for physicians. Congress recognized this inequity and the financial disadvantage it was placing on children’s hospitals. 

The Children’s Hospitals Educational Equity and Research Act 

extends the authorization of the Children’s Hospitals Graduate 

Medical Education Program to fiscal year 2010 and provides independent children’s hospitals with Federal assistance similar to that 

provided to other teaching hospitals through Medicare. 

II. SUMMARY

S. 285 reauthorizes the Children’s Hospitals Graduate Medical 

Education Program from 2006 to 2010 and increases the authorization level in fiscal year 2006 to $330 million. In fiscal year 2007 

to fiscal year 2010 the legislation authorizes such sums as are necessary. The bill also makes technical changes to the underlying 

statute including reversing an oversight in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 with regard to resident physician allotments. 

III. HISTORY OF LEGISLATION AND VOTES IN COMMITTEE

On February 3, 2005, Senator Bond, for himself and Senators 

Kennedy, DeWine, and Murray, introduced S. 285 to reauthorize 

the Children’s Hospitals Graduate Medical Education Program. 

On February 9, 2005, the committee held an executive session 

and approved S. 285, with an amendment in the nature of a substitute, by unanimous voice vote. 

IV. EXPLANATION OF BILL AND COMMITTEE VIEWS

S. 285 as amended reauthorizes the Children’s Hospitals Graduate Medical Education Program for 5 years through 2010 and authorizes $330 million to fund residency programs in children’s hospitals in fiscal year 2006 and such sums as are necessary in fiscal 

year 2007 through fiscal year 2010. 

The committee made a few small technical changes to the program and includes one provision necessary to reflect Congressional 

intent by clarifying that the provision for redistribution of unused 

residency positions included in the Medicare Modernization Act 

(P.L. 108–173) does not apply to the CHGME program. The committee does not believe the original provision was appropriately applied to the CHGME program. The CHGME program is separate 

and distinct from the Medicare-financed GME programs. In addition, pediatrics is experiencing significant shortages in many pediatric subspecialties. 

The committee believes that children’s hospitals should have 

more time to grow their programs, as well as to have the opportunity to redistribute any unused resident slots within the CHGME 

program. 

The committee corrects an unintended error in the underlying 

statute to allow direct medical education payments under CHGME 

to be adjusted by the current area wage index adjustment, for discharges in the preceding year. The statute now provides for no area 

wage index adjustment beyond fiscal year 2000. The committee 

also corrects other small technical errors in the statute. 

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V. COST ESTIMATE

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, April 6, 2005. 

Hon. MICHAEL ENZI, 

Chairman, Committee on Health, Education, Labor, and Pensions, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 285, the Children’s Hospitals Educational Equity and Research Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Tim Gronniger. 

Sincerely, 

ELIZABETH M. ROBINSON, 

(For Douglas Holtz-Eakin, Director). 

Enclosure. 

S. 285—Children’s Hospitals Educational Equity and Research Act 

Summary: S. 285 would amend the Public Health Service Act to 

authorize payments to children’s hospitals that operate graduate 

medical education programs. Payments would be made to such hospitals for both ‘‘direct’’ and ‘‘indirect’’ costs related to graduate medical education. Direct costs are related to the cost of operating a 

medical education program, such as the salaries of medical residents, while indirect costs are intended to compensate hospitals for 

patient care costs that are expected to be higher in teaching hospitals than in non-teaching hospitals. CBO estimates that implementing the bill would cost $248 mil- lion in 2006 and $1.6 billion over the 2006–2010 period, assuming 

the appropriation of the necessary amounts. 

S. 285 contains no intergovernmental or private-sector mandates 

as defined in the Unfunded Mandates Reform Act (UMRA) and 

would impose no costs on state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 285 is shown in the following table. The costs 

of this legislation fall within budget function 550 (health). 

By fiscal year, in millions of dollars— 

2005 2006 2007 2008 2009 2010 

SPENDING SUBJECT TO APPROPRIATION 

Spending Under Current Law: 

Budget Authority 1 ............................................................... 303 0 0 0 0 0 

Estimated Outlays ............................................................... 303 76 0 0 0 0 

Proposed Changes: 

Estimated Authorization Level ............................................. 0 330 335 342 348 354 

Estimated Outlays ............................................................... 0 248 334 340 347 353 

Spending Under S. 285: 

Estimated Authorization Level 1 .......................................... 303 330 335 342 348 354 

Estimated Outlays ............................................................... 303 324 334 340 347 353 

1 The 2005 level is the amount appropriated for that year for payments to children’s hospitals that operate graduate medical education programs. 

Basis of estimate: The Health Resources and Services Administration (HRSA) administers a program that provides payments to 

children’s hospitals that operate graduate medical education programs. Authorization for that program will expire in 2005. 

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S. 285 would reauthorize funding for that program through 2010. 

The bill would authorize the appropriation of specific amounts in 

2006 and such sums as may be necessary for 2007 through 2010. 

For this estimate, CBO assumes that S. 285 will be enacted before 

the end of this fiscal year, that the appropriated amount in the 

years 2007 through 2010 will be the 2006 authorization level adjusted for expected inflation, and that the estimated amounts will 

be appropriated for each year. 

S. 285 would authorize appropriation of $110 million in 2006 and 

such sums as are necessary for 2007 through 2010 for payment towards the direct costs of graduate medical education in children’s 

hospitals. Those funds would be allocated across eligible hospitals 

according to a formula that takes into account the number of residents each hospital employs and its cost per resident as reported 

in 1997. 

The bill also would authorize $220 million in 2006 and such 

sums as are necessary for 2007 through 2010 for payment towards 

the indirect costs of graduate medical education programs. Those 

payments would be made to hospitals on the basis of a formula 

that takes into account the hospital’s number of discharges, the relative costliness of those cases as measured by a case-mix index, 

and the number of residents at the hospital. 

Based on historical patterns of spending for graduate medical 

education programs, CBO estimates that implementing the bill 

would cost $248 million in 2006 and $1.6 billion over the 2006–

2010 period, assuming appropriation of the necessary amounts. 

Intergovernmental and private-sector impact: S. 285 contains no 

intergovernmental or private-sector mandates as defined in UMRA 

and would impose no costs on state, local, or tribal governments. 

Estimate prepared by: Federal Costs: Tim Gronniger. Impact on 

State, Local, and Tribal Governments: Leo Lex. Impact on the Private Sector: Meena Fernandes. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

VI. REGULATORY IMPACT STATEMENT

The committee has determined that there will be de minimus 

changes in the regulatory burden imposed by the bill. 

VII. APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1, the Congressional Accountability Act (CAA) requires a description of the application of 

this bill to the legislative branch. This bill does not amend any act 

that applies to the legislative branch. 

VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

Section 1 provides the short title of the bill, the ‘‘Children’s Hospitals Educational Equity and Research Act’’ or the ‘‘CHEER Act.’’

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Section 2. Reauthorization of Children’s Hospitals Graduate Medical Education Program 

a. Amends Section 340E of the Public Health Service Act to extend the authorization of the CHGME program from fiscal year 

2006 through fiscal year 2010. 

b. Provides that the redistribution of unused residency positions 

provision in the Medicare Modernization Act (P.L. 108–173) shall 

not apply to the CHGME program. It also provides that the direct 

medical education payments under CHGME be adjusted by the 

hospitals current area wage adjustment, as applied under Medicare 

for discharges occurring in the preceding fiscal year. 

c. Corrects a technical error in the underlying statute. 

d. Provides authorization of appropriations for direct medical 

education (DME) payments and indirect medical education (IME) 

payments under CHGME through fiscal year 2010, providing 

$110,000,000 for DME and $220,000,000 for IME for fiscal year 

2006 and such sums as may be necessary for remaining fiscal 

years. 

e. Deletes a repeated sentence in the underlying statute. 

Section 3. Sense of the Senate 

Section 3 recognizes the importance of perinatal hospitals in both 

treating seriously ill newborns and training the providers who are 

essential to their care, as well as to the care of healthy mothers 

and babies. 

IX. CHANGES IN EXISTING LAW

In compliance with rule XXVI paragraph 12 of the Standing 

Rules of the Senate, the following provides a print of the statute 

or the part or section thereof to be amended or replaced (existing 

law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed 

is shown in roman): 

PUBLIC HEALTH SERVICE ACT 

* * * * * * * 

Subpart IX—Support of Graduate Medical Education Programs in 

Children’s Hospitals 

SEC. 340E. PROGRAM OF PAYMENTS TO CHILDREN’S HOSPITALS THAT 

OPERATE GRADUATE MEDICAL EDUCATION PROGRAMS. 

(a) PAYMENTS.—The Secretary shall make two payments under 

this section to each children’s hospital for each of fiscal years 2000 

through ø2005¿ 2010, one for the direct expenses and the other for 

indirect expenses associated with operating approved graduate 

medical residency training programs. The Secretary shall promulgate regulations pursuant to the rulemaking requirements of title 

5, United States Code, which shall govern payments made under 

this subpart. 

(b) AMOUNT OF PAYMENTS.— (1) IN GENERAL.—* * * 

* * * * * * * 

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(c) AMOUNT OF PAYMENT FOR DIRECT GRADUATE MEDICAL EDU- CATION.—

(1) IN GENERAL.—* * * 

(A) * * * 

(B) the average number of full-time equivalent residents 

in the hospital’s graduate approved medical residency 

training programs (as determined under section 1886(h)(4) 

of the Social Security Act but without giving effect to section 1886(h)(7) of such Act) during the fiscal year. 

(2) UPDATED PER RESIDENT AMOUNT FOR DIRECT GRADUATE

MEDICAL EDUCATION.—* * * 

(A) * * * 

* * * * * * * 

(E) APPLICATION TO INDIVIDUAL HOSPITALS.—* * * 

(i) * * * 

(ii) by multiplying the wage-related portion by the 

factor ødescribed in subparagraph (C)(ii)¿ applied 

under section 1886(d)(3)(E) of the Social Security Act 

for discharges occurring during the preceding fiscal 

year for the hospitals area; and 

* * * * * * * 

(e) MAKING OF PAYMENTS.— (1) INTERIM PAYMENTS.—* * * 

(2) WITHHOLDING.—øThe Secretary shall withhold up to 25 

percent from each interim installment for direct and indirect 

graduate medical education paid under paragraph (1).¿ The 

Secretary shall withhold up to 25 percent from each interim installment for direct and indirect graduate medical education 

paid under paragraph (1) as necessary to ensure a hospital will 

not be overpaid on an interim basis. 

(3) RECONCILIATION.—Prior to the end of each fiscal year, the 

Secretary shall determine any changes to the number of residents reported by a hospital in the application of the hospital 

for the current fiscal year to determine the final amount payable to the hospital for the current fiscal year for both direct 

expense and indirect expense amounts. Based on such determination, the Secretary shall recoup any overpayments ømade 

to pay¿ made and pay any balance due to the extent possible. 

The final amount so determined shall be considered a final 

intermediary determination for the purposes of section 1878 of 

the Social Security Act and shall be subject to administrative 

and judicial review under that section in the same manner as 

the amount of payment under section 1186(d) of such Act is 

subject to review under such section. 

(f) AUTHORIZATION OF APPROPRIATIONS.—

(1) DIRECT GRADUATE MEDICAL EDUCATION.—

(A) IN GENERAL.—There are hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, for payments under subsection 

(b)(1)(A)—

(i) for fiscal year 2000, $90,000,000; 

(ii) for fiscal year 2001, $95,000,000; øand¿ 

(iii) for each of the fiscal years 2002 through 2005, 

such sums as may be necessaryø.¿; 

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(iv) for fiscal year 2006, $110,000,000; and 

(v) for each of fiscal years 2007 through 2010, such 

sums as may be necessary. 

* * * * * * * 

(2) INDIRECT MEDICAL EDUCATION.—øThere are hereby authorized¿ There are authorized to be appropriated, out of any 

money in the Treasury not otherwise appropriated, for payments under subsection ø(b)(1)(A)—¿ (b)(1)(B)—

(A) for fiscal year 2000, $190,000,000; 

(B) for fiscal year 2001, $190,000,000; øand¿ 

(C) for each of the fiscal years 2002 through 2005, such 

sums as may be necessaryø.¿; 

(D) for fiscal year 2006, $220,000,000; and 

(E) for each of fiscal years 2007 through 2010, such sums 

as may be necessary. 

* * * * * * * 

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