PHYSICIAN 

WORKFORCE

HHS Needs Better 

Information to 

Comprehensively 

Evaluate Graduate 

Medical Education 

Funding

Report to Congressional Requesters

March 2018

GAO-18-240

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-240, a report to 

congressional requesters

March 2018

PHYSICIAN WORKFORCE

HHS Needs Better Information to Comprehensively 

Evaluate Graduate Medical Education Funding

What GAO Found

Federal agencies and state Medicaid agencies spent over $16.3 billion in 2015 to 

fund graduate medical education (GME) training for physicians—commonly 

known as residency training. The federal government spent $14.5 billion through 

five programs, and 45 state Medicaid agencies spent $1.8 billion. About half of 

teaching sites that received funding—such as teaching hospitals—received 

funds from more than one of the five programs.

Federal Spending on Graduate Medical Education (GME) Training, 2015

Program

Total GME spending 

(dollars in millions)

Percent of total spending 

(percent)

HHS programs

Medicare 10,335 71

Medicaid (federal share) 2,351 16

Children’s Hospital GME Payment 

Program 249 2

Teaching Health Center GME 

Program 76 1

VA program 1,499 10

Total 14,509 100

Source: GAO analysis of Departments of Health and Human Services (HHS) and Veterans Affairs 

(VA) data; and GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

GME training costs vary due to the characteristics of teaching sites, such as the

number of residents trained and their specialty, which can make it difficult to

compare training costs across sites. Further, challenges exist in measuring

training costs because some costs, such as faculty teaching time, are difficult to

identify. Also, there is no standard method for identifying and capturing training

costs, and each teaching site may vary in how it does so.

While federal agencies generally collect information needed to manage their 

individual programs, this information is not sufficient to comprehensively 

understand whether the federal investment in GME training meets national 

physician workforce needs. The information agencies collect is not always 

complete or consistent within or across programs. For example, national data on 

GME training costs are not systematically collected, and some agencies lacked 

data to understand the total amount spent, or the outcomes of their programs, 

such as where supported residents went on to practice. GAO recommended in 

2015 that the Department of Health and Human Services (HHS) develop a 

comprehensive planning approach to identify and address areas of health care 

workforce need. HHS concurred and identified steps it could take. While HHS 

has yet to take these steps, the information currently available is also insufficient 

for such planning. Comprehensive information is needed to identify gaps 

between federal GME programs and national physician workforce needs—

particularly the distribution of physicians geographically or across specialties—

and to make or recommend to Congress changes to improve the efficient and 

effective use of federal funds to meet those needs. View GAO-18-240. For more information, 

contact James Cosgrove at (202) 512-7114 or 

cosgrovej@gao.gov.

Why GAO Did This Study

An adequate, well-trained physician 

workforce is essential for providing 

access to quality health care. While a 

number of factors affect the supply and 

distribution of physicians, GME is a 

significant determinant. A significant 

portion of GME training funds come 

from federal programs and states. 

This report (1) describes the amount 

and distribution of federal government 

and state Medicaid agency spending

on GME; (2) describes what is known 

about GME costs; and (3) examines

the extent to which the federal 

government collects information to 

understand its investment in GME. 

GAO reviewed reports, agency 

websites, and interviewed agency 

officials to identify federal programs 

that fund the clinical training of 

residents and were authorized through 

2017. GAO analyzed 2015 data—the 

most recent data available at the time 

of GAO’s analysis—including from a 

state survey. All 50 states and the 

District of Columbia responded to the 

survey. GAO reviewed literature,

interviewed experts from seven

organizations knowledgeable about 

GME costs, and analyzed Medicare 

data. GAO also reviewed 

documentation from HHS and the 

Department of Veterans Affairs (VA) 

and interviewed agency officials. 

What GAO Recommends

GAO recommends that HHS 

coordinate with federal agencies, 

including VA, to (1) identify information 

needed to evaluate federal GME 

programs, and (2) identify opportunities 

to improve the quality and consistency 

of information, and implement these 

improvements. HHS concurred with 

both recommendations.
Page i GAO-18-240 Spending on Physician Training

Letter 1

Background 7

Federal Agencies and State Medicaid Agencies Spent Over $16.3 

Billion on GME Training in 2015, and the Amount Spent Per 

FTE Resident Varied 17

GME Training Costs Vary by Residency Program Characteristics, 

and Teaching Sites Face Challenges in Measuring These Costs 28

Information the Federal Government Collects to Manage 

Programs Is Not Sufficient to Comprehensively Understand Its 

Investment in GME Training 40

Conclusions 50

Recommendation for Executive Action 50

Agency Comments and Our Evaluation 51

Appendix I State Medicaid Agency and Other State and Private Sources of 

Graduate Medical Education Funding 55

Appendix II Information that Federal Programs Collect about Funding for Graduate 

Medical Education Training 66

Appendix III Comments from the Department of Health and Human Services 69

Appendix IV Comments from the Department of Veterans Affairs 72

Appendix V GAO Contact and Staff Acknowledgments 74

Tables

Table 1: Examples of Direct and Indirect Graduate Medical 

Education Costs that Teaching Sites May Incur 9

Table 2: Federal Spending on Graduate Medical Education (GME) 

Training and Number of Recipients and Residents 

Supported by Program, 2015 18

Contents
Page ii GAO-18-240 Spending on Physician Training

Table 3: Federal and State Spending on Graduate Medical 

Education (GME) Resident Training by Region, 2015 20

Table 4: Graduate Medical Education (GME) Program Spending 

per Full-Time Equivalent (FTE) Resident, Adjusted and 

Unadjusted for Geographic Differences in the Cost of 

Labor by Federal Program, 2015 23

Table 5: Average Medicare Graduate Medical Education (GME) 

Payment Per Full-Time Equivalent (FTE) Resident by 

Region, 2015 24

Table 6: Factors Used to Calculate the Medicare Direct Graduate 

Medical Education (GME) Payment by Region, 2015 26

Table 7: Provider Participation in Multiple Graduate Medical 

Education (GME) Programs and Average Percentage of 

Total Funding Received by Program, 2015 27

Table 8: Summary of Identified Studies that Estimate Graduate 

Medical Education (GME) Training Costs, 2000-2016 31

Table 9: Teaching Hospitals’ Direct Costs of Graduate Medical 

Education (GME) Training Programs Reported on Their 

Annual Medicare Cost Reports, 2015 33

Table 10: Teaching Hospitals’ per Resident Amounts (PRA) Used 

to Calculate their Medicare Direct Graduate Medical 

Education (GME) Payments, Relative to their Reported 

Training Costs, 2015 38

Table 11: Summary of How Federal Agencies Use Information 

Collected about Funding for Graduate Medical Education 

(GME) Training 41

Table 12: Information that Agencies Collect about the Number and 

Type of Residents Supported by Federal Funding for 

Graduate Medical Education (GME) Training 47

Table 13: Amount of Medicaid Graduate Medical Education (GME) 

Spending (Federal and State Share) and Percentage Paid 

through Fee-for-Service or Managed Care by State, 2015 56

Table 14: Medicaid Spending (Federal and State Share) on 

Graduate Medical Education (GME) Training per FullTime Equivalent (FTE) Resident by State, 2015 59

Table 15: Health Care Professionals Training Eligible for Medicaid 

Graduate Medical Education (GME) Payments by State, 

201562

Table 16: Reporting Requirements for Medicaid Graduate Medical 

Education (GME) Training by State, 2015 63

Table 17: Recipient and Resident Data Available for State 

Medicaid Graduate Medical Education (GME) Payments 64
Page iii GAO-18-240 Spending on Physician Training

Table 18: Selected Information that Federal Agencies Collect 

about Funding for Graduate Medical Education (GME) 

Training 66

Figure

Figure 1: Average Medicare Payment per Full-Time Equivalent 

Graduate Medical Education Resident, 2015 25

Abbreviations

CMS Centers for Medicare & Medicaid Services

CHGME Children’s Hospitals Graduate Medical Education Payment

Program

DGME Direct Graduate Medical Education 

GME graduate medical education

FTE full-time equivalent

GPRA Government Performance and Results Act of 1993

GPRAMA GPRA Modernization Act of 2010

HHS Department of Health and Human Services

HRSA Health Resources and Services Administration

IME Indirect Medical Education

IRIS Intern and Resident Information System

MAC Medicare Administrative Contractor

PRA per resident amount

THCGME Teaching Health Center Graduate Medical Education

Program

VA Department of Veterans Affairs

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Page 1 GAO-18-240 Spending on Physician Training

441 G St. N.W.

Washington, DC 20548

March 9, 2018

Congressional Requesters

An adequate, well-trained, and diverse physician workforce is essential 

for providing Americans with access to quality health care services. 

However, studies have identified shortages of certain types of physicians, 

and rural areas may be more likely to experience shortages.1 While a 

number of factors affect the supply and distribution of physicians, their 

graduate medical education (GME)—commonly known as residency

training—is a significant determinant.

GME training is funded through both public and private sources, with a 

significant amount coming through a number of federal programs and 

states. The federal programs are managed by multiple agencies—largely 

through the Department of Health and Human Services (HHS). HHS 

funding for GME training is distributed by the Centers for Medicare & 

Medicaid Services (CMS) through the Medicare program, and states may 

choose to make payments for GME training with state Medicaid funds, 

which are matched by federal Medicaid funding. Other, smaller sources of 

federal funding include the Children’s Hospitals GME (CHGME) Payment 

Program and the Teaching Health Center GME (THCGME) Program—

payment programs administered by HHS’s Health Resources and 

Services Administration (HRSA)—as well as funding from the Department 

of Veterans Affairs (VA) for GME training that occurs in its medical 

facilities.

However, we and other experts have raised concerns about the ability of 

federal programs that fund GME training, especially Medicare, to address 

current and future physician workforce needs.2 In a 2015 report, we found 

that HHS cannot target Medicare GME funding to specific areas of 

workforce need because funds are disbursed based on a statutory 

 1

See, for example, S.M. Petterson, et al., Unequal Distribution of the U.S. Primary Care 

Workforce (2013), accessed November 14, 2017, 

http://www.aafp.org/afp/2013/06D1/od1.pdf. 

2

See, for example, National Academy of Medicine, Graduate Medical Education that 

Meets the Nation’s Health Needs (Washington, D.C.: The National Academies Press, 

2014).

Letter
Page 2 GAO-18-240 Spending on Physician Training

formula that is unrelated to projected needs.3 As a result of this and other 

factors, stakeholders have long raised concerns about the distribution of 

residents geographically.4 In a 2017 report, we found that there is an 

uneven distribution of residents across the country, with most 

concentrating in certain urban centers and the northeast, where GME 

training programs have historically been located.5 The distribution of 

residents is particularly important given evidence that physicians tend to 

practice in geographic areas similar to those where they complete their 

GME training.6

We and others have also raised concerns about a lack of comprehensive 

planning for the federal investment in GME training and have called for 

increased accountability and transparency of federal GME funding.7 For 

example, the National Academy of Medicine found that there is no single 

entity that oversees the GME system, especially federal financing, and 

that information about how federal funding, especially Medicare and 

Medicaid GME payments, is used to support GME training is lacking. In a 

2015 report, we found that HHS conducts limited ongoing, comprehensive 

assessments of the performance of federal health care workforce 

programs, including those that fund GME training, in meeting the national 

health care workforce needs.8 In addition, we recommended that, to 

 3

GAO, Health Care Workforce: Comprehensive Planning by HHS Needed to Meet 

National Needs, GAO-16-17 (Washington, D.C.: Dec. 11, 2015).

4

See, for example, F. Mullan, C. Chen, and E. Steinmetz, “The Geography of Graduate 

Medical Education: Imbalances Signal Need for New Distribution Policies,” Health Affairs, 

vol. 32, no. 11 (2013): 1914-1921.

5

See GAO, Physician Workforce: Locations and Types of Graduate Training Were Largely 

Unchanged, and Federal Efforts May Not Be Sufficient to Meet Needs, GAO-17-411 

(Washington, D.C.: May 2017). 

6

See S.D. Seifer, K. Vranizan, and K. Grumbach, “Graduate Medical Education and 

Physician Practice Location: Implications for Physician Workforce Policy,” JAMA, vol. 274, 

no. 9 (1995): 685-691; and K.J. Quinn, et al., “Influencing Residency Choice and Practice 

Location through a Longitudinal Rural Pipeline Program,” Academic Medicine, vol. 86, no. 

11 (November 2011): 1397-1406.

7

See, for example, National Academy of Medicine, Graduate Medical Education, 2014; 

Council on Graduate Medical Education, Towards the Development of a National Strategic 

Plan for Graduate Medical Education (Rockville, Md.: April 2017); Council on Graduate 

Medical Education, Enhanced Flexibility in Graduate Medical Education (Rockville, Md.: 

September 2007); and Medicare Payment Advisory Commission, “Ch. 4: Graduate 

medical education financing: Focusing on education priorities,” Report to the Congress: 

Aligning Incentives in Medicare (Washington, D.C.: June 2010). 

8

GAO-16-17. 
Page 3 GAO-18-240 Spending on Physician Training

ensure that HHS workforce efforts meet national needs, HHS should 

develop a comprehensive and coordinated planning approach to guide its 

health care workforce development programs. In making this 

recommendation we noted that, without such planning, HHS cannot fully 

identify the gaps between existing programs and national needs as well 

as the actions needed to address these gaps.9

Given the significant role of the federal government in supporting GME 

training, you asked us to review aspects of this spending and related 

federal oversight. In this report, we:

1. Describe how much the federal agencies and state Medicaid agencies 

spent on GME training and the distribution of spending by geographic 

area;

2. Describe what is known about the costs of GME training programs; 

and

3. Examine the extent to which the federal government collects 

information to understand its investment in GME training.

To describe the amount the federal agencies and state Medicaid 

agencies spent on GME training and how that spending varied by 

geographic area, we reviewed prior GAO reports, searched federal 

agency websites, and interviewed agency officials to identify federal 

programs that fund GME training. We analyzed 2015 data, the most 

recent reliable data available at the time of our analysis, on the five 

federal programs that fund GME training—HHS’s Medicare, Medicaid, 

CHGME, and THCGME programs and VA’s physician GME training 

 9

In response, HHS concurred with our recommendation and identified steps that it would 

take toward a more comprehensive and coordinated approach to workforce planning. HHS 

noted that, among other things, it could convene an interagency group to assess such 

things as gaps in workforce programs and potential requests to the Congress for modified 

or expanded legislative authority. In a May 2017 report, we noted that HHS officials said 

the agency had not taken steps to convene this group, but said that it is still considering 

doing so in the future. See GAO-16-17 and GAO-17-411.
Page 4 GAO-18-240 Spending on Physician Training

program.10 Specifically, we analyzed 2015 data on the amount spent and 

number of full-time equivalent (FTE) residents supported by each 

recipient of funding from Medicare, CHGME, THCGME, and the VA 

program.11 Comprehensive data on Medicaid GME spending and FTE 

residents supported were not available from CMS, so we collected 2015 

federal and state data using a survey of state Medicaid agencies from 50 

states and the District of Columbia.12 All agencies responded to the 

survey. We merged data from the five programs based on each funding 

recipient’s Medicare identification number.13 For each funding recipient, 

we calculated the total amount of federal, as well as state Medicaid, 

funding received for GME training and, where FTE resident data were 

available, the amount of funding received per FTE resident adjusted for 

 10We included in our review programs that were authorized through at least fiscal year 

2017 and supported the clinical training of physicians in GME programs that were 

administered by civilian teaching sites. Other federal programs that fund GME training but 

did not meet our inclusion criteria include HRSA’s Primary Care Residency Expansion 

Program and its Preventive Medicine Residency Program; the Centers for Disease Control 

and Prevention’s Preventive Medicine Residency and Fellowship program; the National 

Institutes of Health’s GME training programs; and the Department of Defense’s GME 

training program. GAO previously found that four federal departments—HHS, VA, 

Department of Defense, and the Department of Education—administered programs that 

supported postsecondary training or education specifically for physician and other direct 

health care professionals. See GAO, Health Care Workforce: Federally Funded Training 

Programs in Fiscal Year 2012, GAO-13-709R (Washington, D.C.: Aug. 15, 2013).

11HRSA provided THCGME program data for two academic years spanning from July 

2014 through June 2016. We used this data to approximate the amount it spent on GME 

training that occurred in fiscal year 2015. VA was unable to provide the total amount it 

paid each affiliate for resident rotations in a VA medical center, so we estimated these 

amounts based on the number of FTEs trained by the affiliate and the VA medical center’s 

average payment rates.

12The time period defined as “2015” varied by agency. Specifically, Medicare cost report 

data that we used were for hospitals’ 2015 cost reporting period, which can vary by 

hospital. We used federal fiscal year 2015 data for HRSA’s CHGME and THCGME 

programs and for VA’s physician GME program. And, state Medicaid agencies varied in 

the time period for which data were provided. Most states (39) provided data by state 

fiscal year 2015, which varied by state, while 4 states provided data for calendar year 

2015, and 2 states provided data for federal fiscal year 2015.

13Funding recipients included teaching hospitals, teaching health centers, medical 

schools, and other health care facilities. 
Page 5 GAO-18-240 Spending on Physician Training

geographic differences in the cost of labor.14 We also calculated the 

extent to which recipients received funding from more than one federal 

source.15 To assess the reliability of each of these sources of data, we 

reviewed documentation, interviewed agency officials, and checked the 

data for obvious errors. While we discuss CMS data collection efforts later 

in this report, we found the data to be sufficiently reliable for the purposes 

of our reporting objective.

To describe what is known about the costs of GME training programs, we 

interviewed experts from seven research and industry organizations 

about the costs to train residents, teaching sites’ measurement of costs, 

and how costs compare to federal funding levels.

16 We also conducted a 

literature review of studies that estimated the costs of training physician 

residents. To identify relevant studies, we searched multiple reference 

databases and reviewed the abstracts of studies initially identified to 

select potentially relevant studies for full review.17 We also asked for 

studies that estimated the costs of GME during interviews with experts. Of 

the over 300 studies we initially identified, 10 were deemed relevant 

because the studies provided estimates of the costs of training residents. 

We also analyzed 2015 data on the costs of GME training reported by 

 14To adjust the amount of funding received per FTE resident, we applied the CMS wage 

index by dividing the labor share of the amount paid per FTE resident by the wage index 

for each funding recipient. The labor share is the portion of the cost that is adjusted for 

regional wage differences, while the non-labor share is only adjusted for hospitals in 

Alaska and Hawaii for cost-of-living differences. For each recipient of federal GME 

funding, we assigned a wage index based on the hospital’s Medicare identification 

number. For funding recipients that did not have a Medicare identification number, we 

assigned a wage index based on their core-based statistical area and state. We assigned 

a cost-of-living adjustment factor based on recipients’ state. 

15Using the survey of state Medicaid directors, we requested data on the amount spent 

and number of FTE residents or resident positions supported by funding recipient. 

However, of the 45 state Medicaid agencies that made Medicaid payments for GME 

training in 2015, 21 were not able to provide data on the number of FTE residents or 

resident counts. 

16We interviewed experts from the American Hospital Association, American Association 

of Teaching Health Centers, Association of American Medical Colleges, American Board 

of Family Medicine, George Washington University’s Health Workforce Institute, the 

RAND Corporation, and a private consultant to GME training programs. We selected 

these experts and organizations based on relevance of their published or other work to 

our reporting objective. 

17We performed a structured search of over 40 reference databases, including 

MEDLINE®, ProQuest, EBSCO, and Academic OneFile, for studies published on this 

topic from January 2000 through May 2016. 
Page 6 GAO-18-240 Spending on Physician Training

teaching hospitals to CMS. To assess the reliability of these data, we 

reviewed documentation about how the data were collected and verified, 

and we checked the data for obvious errors. We found the data to be 

sufficiently reliable for the purposes of our reporting objective. We also 

interviewed officials from three Medicare Administrative Contractors 

(MAC) selected based on the high percentage of new teaching hospitals 

in the MAC’s geographic jurisdiction.18 We asked the MAC officials about 

their role and responsibilities in reviewing and auditing teaching hospitals’

GME costs that are reported annually to CMS.

To examine the extent to which the federal government collects 

information needed to understand its investment in GME training, we 

reviewed, where available, public laws, regulations, agency guidance, 

reporting forms and instructions, and performance reports concerning the 

five federal programs that fund GME training. We interviewed officials 

from HHS’s Office of the Assistant Secretary for Planning and Evaluation, 

CMS, HRSA, and VA about their reporting requirements, program 

management and oversight responsibilities, and program evaluation and 

performance measurement activities.19 We compared the information that 

agencies collect to the leading practices we derived from the Government 

Performance and Results Act of 1993 (GPRA) and the GPRA 

Modernization Act of 2010 (GPRAMA) and Federal Standards for Internal 

 18Since 2006, CMS has used regional contractors called MACs to process claims for 

health care items and services submitted by enrolled Medicare providers and suppliers. 

Among other things, MACs are responsible for processing, paying, and auditing Medicare 

claims. We selected MACs that had greater than 10 percent of all new teaching hospitals 

located within their geographic jurisdiction in 2015. 

19Program evaluations assess how well a program is working and typically examine 

achievement of program objectives. Performance measurement is the ongoing monitoring 

and reporting of program accomplishments, particularly progress toward pre-established 

goals. Performance measures may address the type or level of program activities 

conducted (process), the direct products and services delivered by a program (outputs), or 

the results of those products and services (outcomes). 
Page 7 GAO-18-240 Spending on Physician Training

Controls to determine whether agencies collected information needed to 

understand the federal investment in GME training.

20

We conducted this performance audit from March 2016 to March 2018 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Following medical school, GME training provides the clinical training 

required for a physician to be eligible for licensure and board certification 

to practice medicine independently in the United States. Physicians 

pursue GME training within a variety of specialties or subspecialties. 

Initially, these physicians, known as residents, go through GME training 

for a specialty—such as internal medicine, family medicine, pediatrics, 

anesthesiology, radiology, or general surgery. Of the specialties, family 

medicine, internal medicine, and pediatrics are generally considered 

primary care specialties. However, a resident who trained in a primary 

care specialty may not ultimately practice as a primary care physician. 

Some residents may choose to subspecialize and seek additional GME 

training. For example, a resident who completed an internal medicine 

GME training program may decide to subspecialize in cardiology. The 

 20See Pub. L. No. 103-62, 107 Stat. 285 (1993); Pub. L. No. 111-352, 124 Stat. 3866 

(2011). We previously reported that principles derived from the performance planning and 

reporting framework put in place by GPRA and GPRAMA can serve as leading practices 

within an agency. For example, see GAO, Nuclear Regulatory Commission: Regulatory 

Fee-Setting Calculations Need Greater Transparency, GAO-17-232 (Washington, D.C.: 

Feb. 2, 2017). See also GAO, Standards for Internal Control in the Federal Government, 

GAO-14-704G (Washington, D.C.: September 2014). Internal control is a process effected 

by an entity’s oversight body, management, and other personnel that provides reasonable 

assurance that the objectives of an entity will be achieved.

Background

GME Training
Page 8 GAO-18-240 Spending on Physician Training

percentage of residents who later subspecialize varies based on specialty 

type.21

To operate and maintain GME training programs, teaching sites, including 

hospitals, health centers, medical schools, and other settings, incur 

medical education costs that can generally be categorized into two 

groups—direct costs and indirect costs. Direct costs include, for example, 

residents’ salaries and benefits; compensation for faculty who supervise 

the residents; and overhead costs. Indirect costs are the portion of higher 

patient care costs that teaching sites are thought to incur as a result of 

training residents, such as increased diagnostic testing and procedures 

performed. (See table 1.)

 21According to a 2008 study, among the primary care specialties, 5 percent of family 

medicine residents end up subspecializing, compared with 55 and 39 percent of internal 

medicine and pediatric residents, respectively. See E. Salsberg, et al., “U.S. Residency 

Training Before and After the 1997 Balanced Budget Act,” JAMA, vol. 300, no. 10 (2008): 

1174-1180. 
Page 9 GAO-18-240 Spending on Physician Training

Table 1: Examples of Direct and Indirect Graduate Medical Education Costs that Teaching Sites May Incur 

Direct costs Indirect costs

Resident salaries and fringe benefits

Faculty compensation

Administrative staff compensation

Building space

Medical malpractice insurance premiums

Accreditation and licensing fees

Resident recruitment costs

Faculty development

Program funded conferences and travel fees

Subsidies for parking, housing, or meals

Education materials, such as equipment, technology 

software, and textbooks

Additional diagnostic tests or procedures ordered by residents

Longer time for residents to interpret test results

Higher staff-to-patient ratios

Increased record keeping to maintain educational records for 

residents

Less efficient provision of services by residents in lieu of more 

experienced clinicians

Additional costs of resident supervision, especially during the 

resident’s first year of residency

Greater use of highly specialized or emerging technologies, such 

as burn units or transplant units

Source: GAO. | GAO-18-240

While they may generate costs, residents may also produce financial 

benefits for a teaching site. Teaching sites may incur lower personnel 

costs because residents perform services at lower pay than more 

experienced clinicians or other health care professionals. And, residents 

may have more flexibility to work long or irregular hours. For example, 

residents can provide on-call services in lieu of fully trained physicians at 

a much lower cost to the teaching site. Residents may also increase the 

efficiency and productivity of faculty with whom they work by, for example, 

enabling the faculty to increase the number of patient services for which 

they can bill.

Within the federal government, funding of GME training is fragmented. 

Most federal GME funding is provided through five programs—Medicare 

GME payments, Medicaid GME payments, HRSA’s CHGME and 

THCGME payment programs, and the VA’s physician GME training 

programs. For most of the programs, the funding is formula-driven and 

essentially guaranteed if eligibility requirements are met. Each program 

uses a different methodology to determine the amount of payments to 

funding recipients, though there are some similarities between programs. 

Funding of GME Training 

through Federal Programs 

and State Medicaid 

Agencies
Page 10 GAO-18-240 Spending on Physician Training

GME training programs generally must be accredited by an independent 

organization in order to receive federal funding.22

Medicare—a federally financed program that provides health insurance 

coverage to people age 65 and older, certain individuals with disabilities, 

and those with end-stage renal disease—pays for GME training. It does 

so through two mechanisms—Direct Graduate Medical Education 

(DGME) payments and Indirect Medical Education (IME) payments—both 

of which are formula-based payments set by statute.23 These payments 

are made to reflect Medicare’s “share” of the costs associated with 

providing GME training.

Medicare DGME payments are made to cover a hospital’s direct costs 

associated with GME training, such as stipends, supervisory physician 

salaries, and administrative costs. The payments are the product of a

hospital’s weighted 3-year average number of FTE residents, subject to a 

cap; a per resident amount (PRA); and the hospital’s Medicare patient 

load—the portion of a hospital’s total inpatient bed days that were paid for 

by Medicare.24 In part to constrain spending, the Balanced Budget Act of 

1997 capped, for most hospitals, the number of FTE residents that 

hospitals may count for DGME and IME payment at the number of FTE 

residents in place in 1996.25

 22GME training programs generally are accredited by the Accreditation Council for 

Graduate Medical Education or the American Osteopathic Association. Accreditors 

evaluate a program’s ability to adequately train residents by considering residents’ hours 

and activities, the program’s facilities, faculty-to-resident ratios, and other factors.

23See 42 U.S.C. § 1395ww(d)(5)(B) (IME payment formula) and 42 U.S.C. § 1395ww(h) 

(DGME payment formula). 

24Residents who have completed their initial residency period—the minimum number of 

years required for board eligibility in a specialty or subspecialty—are weighted at 0.5 of an 

FTE for Medicare DGME payments. The length of residency training varies depending on 

the specialty chosen. Generally, residency programs are 3 years for primary care fields, 

such as family medicine, general internal medicine, and general pediatrics, and 5 years for 

general surgery. Fellowship training to become a subspecialist can add 1 or more years of 

training. 

25Pub. L. No. 105-33, §§ 4621(b), 4623, 111 Stat. 251, 476-78 (1997). If a hospital did not 

have GME training in 1996, its resident FTE caps are set 5 years after it begins training 

residents in its first new program, based in part on the highest number of FTE residents 

who train during that fifth year. Some exceptions have allowed hospitals to increase their 

FTE resident cap from their 1996 base year. For example, the Medicare, Medicaid, and 

SCHIP Balanced Budget Refinement Act of 1999 allowed rural teaching hospitals to 

increase their FTE resident cap up to 130 percent of their 1996 cap. 

Medicare GME Payments
Page 11 GAO-18-240 Spending on Physician Training

Rather than reimburse teaching hospitals for actual direct costs incurred 

each year from training residents, DGME payments are calculated using 

a PRA. A hospital’s PRA is based on its direct costs and its number of 

FTE residents when the PRA was set in a base year, which is fiscal year 

1984 for most hospitals, and is adjusted annually for inflation. Congress

set a base year for calculating DGME costs that would incentivize local 

providers to keep down their costs and for local communities to assume a 

greater role in the costs of medical education.26 After fiscal year 1984, for 

hospitals that did not previously have any approved residency programs 

or did not participate in Medicare but began doing so, a PRA for the 

hospital is established using direct costs the hospital reported that it 

incurred on its cost report during its base year, which is generally the first 

cost reporting year it began training residents.27 In general, each hospital 

has two separate PRAs—a primary care PRA and a nonprimary care 

PRA—whereby teaching hospitals receive slightly higher payments for 

residents training in primary care specialties.28

Medicare IME payments, which are made to cover a hospital’s indirect 

costs associated with GME training, are an add-on to the hospital’s 

Medicare reimbursement for each discharge.29 IME payments are not 

 26Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, § 9202, 

100 Stat. 82, 171 (1986). Earlier HHS determined that, while the federal government 

would share substantially in these costs, any increase above the level of reimbursement in 

that base year was not necessary for the efficient delivery of health services to Medicare 

beneficiaries. 50 Fed. Reg. 21026, (May 21, 1985).

27If residents were not training in the first month of the first cost reporting year that the 

hospital began training residents, its base year is the second year that it trained residents. 

The PRA for these new teaching hospitals is the lesser amount of either the hospital’s 

actual costs per resident or the updated weighted average value of PRAs for all teaching 

hospitals located in the same core-based statistical area. 

28Under Medicare DGME payment rules, primary care specialties include family medicine, 

general internal medicine, general pediatrics, preventive medicine, geriatric medicine, and 

osteopathic general practice. 

29Under the inpatient prospective payment system, hospitals are paid a predetermined 

amount based on the clinical classification of the discharge from the hospital. CMS 

calculates these payments through a series of adjustments applied to separate national 

base payment rates covering operating and capital expenses. Because Medicare’s 

inpatient reimbursement method, the Inpatient Prospective Payment System, does not 

typically provide separate reimbursement for additional testing, teaching hospitals may be 

disadvantaged by training residents under this reimbursement method. To adjust for this 

possibility, Medicare IME payments are provided as a percentage increase to Medicare’s 

inpatient reimbursement (a sum reimbursement amount of separate operating and capital 

components) for each discharge based on a statutory payment formula. 
Page 12 GAO-18-240 Spending on Physician Training

based on teaching hospitals’ actual indirect costs. Rather, the adjustment 

is based on the number of FTE residents per hospital bed, referred to as 

the resident-to-bed ratio, and a statistically estimated factor that 

represents the incremental patient care cost due to providing GME 

training.30

Medicaid is a joint federal-state program that finances health care 

coverage for low-income and medically needy individuals. While there is 

no federal requirement for state Medicaid programs to fund GME training, 

states may elect to recognize GME training costs as a component of the 

overall costs incurred by hospitals.31 And, payment for these expenses is

shared by the federal government through federal matching funds. GME 

training costs may be reimbursed as an add-on adjustment to the state’s 

payment rates to eligible providers or as an enhanced payment made as 

a lump sum supplemental to the initial payment rate.

32

Because children’s hospitals treat very few Medicare patients and 

consequently receive few GME payments from Medicare, the CHGME 

Payment Program was created in 1999 and reauthorized through fiscal 

year 2018 to support pediatric and pediatric subspecialty GME training in 

freestanding children’s hospitals.33 Unlike Medicare GME, which is a 

 30The current adjustment factor for the operating component of Medicare reimbursement 

per discharge represents a 5.5 percent increase in IME payment for every 10 percent 

increase in the resident-to-bed ratio. Hospitals also receive an IME adjustment to the 

capital component of their Medicare reimbursement per discharge, which is based on a 

slightly different formula that uses the resident-to-average daily census ratio.

31Payment for overall costs incurred by hospitals within the Medicaid program, including 

GME training costs, is limited by the Medicaid Upper Payment Limit. This limit is based on 

a reasonable estimate of the aggregate amount Medicare would pay for comparable 

services. See 42. C.F.R. § 447.272.

32States pay qualified health providers for covered services provided to Medicaid 

beneficiaries and obtain federal matching funds for the federal share of these payments. 

In addition to these regular payments, which are generally based on claims submitted by 

the providers for services rendered, states also make and obtain federal matching funds 

for supplemental payments to certain providers—particularly hospitals—to help offset 

remaining costs of care for Medicaid patients and, in some cases, uninsured patients. 

Unlike regular Medicaid payments, supplemental payments typically are not made on the 

basis of claims. Rather, they generally consist of large lump sum payments made on a 

monthly, quarterly, or yearly basis. 

33Pub. L. No. 106-129, § 4, 113 Stat. 1653, 1671-74 (1999) (codified, as amended, at 42 

U.S.C. § 256e). The CHGME program provides payments to freestanding children’s 

hospitals as well other types of freestanding hospitals that predominantly treat individuals 

under age 18, such as psychiatric hospitals and rehabilitation hospitals.

Federal and State Medicaid 

GME Payments

CHGME Payment Program
Page 13 GAO-18-240 Spending on Physician Training

mandatory spending program, the CHGME program relies on 

discretionary spending. And, the total amount of payments available to 

each hospital varies from year to year depending on the total amount of 

funding made available from annual appropriations and the total number 

of hospitals that participate. The CHGME program makes both DGME 

and IME payments where one-third of program funds are allocated for 

DGME payments and two-thirds for IME payments. Both payments are 

calculated using formulas similar to Medicare. For example, the 

program’s DGME payments are based, in part, on the number of FTE 

residents, subject to a cap, and an updated national standardized PRA.34

And, the IME payment is based, in part, on an estimated factor that 

represents the incremental patient care cost due to providing GME 

training, rather than the hospital’s actual indirect costs.

The THCGME program was created under the Patient Protection and 

Affordable Care Act and reauthorized through fiscal year 2017 to increase 

the number of primary care residents who trained in community-based, 

ambulatory patient settings.35 HRSA awards funds to eligible teaching 

health centers for the purpose of covering both direct and indirect GME 

costs of new or expanded community-based primary care residency 

programs. HHS established an interim annual payment rate of $150,000 

per resident until it establishes formulas for determining the payments.36

 34Like Medicare DGME payments, the FTE resident counts used to calculate CHGME 

payments are weighted by a factor of 1.0 for residents in their initial residency period and 

0.5 for trainees beyond their initial residency period.

35Eligible community-based ambulatory settings can include federally qualified health 

centers; federally qualified health center Look-Alikes; community mental health clinics; 

rural health clinics; health centers operated by the Indian Health Service, an Indian tribe, 

or a tribal organization; or entities receiving funds under title X of the Public Health Service 

Act. A GME consortium that includes a health center that operates one or more primary 

care residency programs may also be eligible. Under the THCGME program, primary care 

residency programs include family medicine, internal medicine, pediatrics, internal 

medicine-pediatrics, obstetrics and gynecology, psychiatry, general dentistry, pediatric 

dentistry, and geriatrics. 

36HHS is required to establish formulas for determining separate DGME and IME payment 

formulas for the THCGME program. 42 U.S.C. § 256h. As of November 2017, HHS had 

not established rules on such payment formulas and instead has been making payments 

using the interim payment amount it established under the statute. With respect to the 

DGME and IME formulas, the statute provides that DGME payments shall be equal to the 

product of the updated national PRA and the average number of FTE residents in 

teaching health centers’ residency programs. And, in determining the IME payment 

formula, the statute provides that HHS shall evaluate the indirect teaching costs relative to 

supporting primary care residency programs in qualified teaching health centers and 

assure that the aggregate payments for indirect and direct costs do not exceed the total 

amount appropriated for the THCGME program in a given fiscal year. 

THCGME Program
Page 14 GAO-18-240 Spending on Physician Training

However, the payment rate for THCGME recipients may fluctuate over 

time, depending on available appropriations, the number of eligible 

applicants, and the number of FTE residents supported. THCGME 

awards can supplement GME payments from other federal sources, 

including Medicare, Medicaid, and CHGME, but recipients generally 

cannot use funds to pay for the same portion of resident time that they 

used to count toward funding in these other GME programs.

GME training is a statutory requirement of VA to enhance the nationwide 

supply of health care professionals and assists VA in the recruitment and 

retention of staff at its medical facilities. Nearly all of VA’s GME training is 

conducted through academic affiliations with medical schools and 

teaching hospitals where residents from those institutions do clinical 

rotations at VA medical facilities.

VA provides financial support for GME training at its facilities in two 

ways—disbursement payments to its academic affiliates and educational 

support payments for its VA medical facilities. VA reimburses academic 

affiliates through disbursement agreements to cover the costs of stipends 

and benefits for the period of time that a resident serves in a VA medical 

facility.37 Reimbursement is based on the number of FTE residents 

completing a VA rotation and the approved per diem rate of the academic 

affiliates’ stipend and benefit costs by residents’ postgraduate year level 

of training.38 In addition, VA allocates a portion of VA-wide funding for 

educational support using a formula that accounts for the number of FTE 

resident positions and a per resident cost factor. According to VA officials, 

the funding is used to pay for compensation of faculty and other staff, 

 37VA cannot pay for an affiliate’s other GME costs, including the costs of GME staff 

salaries and benefits, administrative costs, and other GME costs through a disbursement 

agreement. However, VA can pay for some GME costs, such as accreditation fees, 

through a health care services contract with the affiliate. 

Disbursement agreements are a payroll mechanism where VA allows a disbursing agent 

to centrally administer salary payments and fringe benefits for residents assigned to a VA 

medical facility. 

38A resident’s postgraduate year level of training is assigned by a review of, for example, 

the number of years of specialty board training required for board certification in a given 

specialty training program; number of applicable years already completed by the resident 

in the particular specialty training program; and the number of training years accredited by 

the appropriate accrediting body. 

VA GME Program
Page 15 GAO-18-240 Spending on Physician Training

overhead costs, and other costs necessary to host and manage the GME 

training at VA medical facilities.39

Like its funding, federal oversight of programs that fund GME training is 

fragmented. Federal agencies are responsible for the management and 

oversight of their respective GME training program or programs. For 

Medicare, CMS uses regional contractors—MACs—to process and audit 

payments for health care items and services submitted by enrolled 

Medicare providers on their annual cost report, including Medicare DGME 

and IME payments. For example, MACs audit the number of FTE 

residents that hospitals report on their annual cost report by reviewing 

relevant rotation schedules. Hospitals claiming reimbursement for GME 

training are also required to submit Intern and Resident Information 

System (IRIS) files that provide data on each resident that the hospital 

trained, including the resident’s specialty type, postgraduate year, and 

proportion of time spent on rotation at each training site.

CMS is responsible for broad oversight of the Medicaid program, while 

states are responsible for the daily administration of their individual 

Medicaid programs, including program integrity activities. In its broad 

oversight role, CMS develops guidance and provides assistance to the 

states. However, state Medicaid programs are not required to make GME 

payments, and CMS has not established requirements or guidance 

specifically related to Medicaid GME payments. Instead, CMS reviews 

states’ Medicaid payments to providers, including GME payments, as part 

of its review of Medicaid state plans.40

HRSA is responsible for the management and oversight of the CHGME 

and THCGME programs. Specifically, it is responsible for determining 

applicants’ program eligibility, making payments, and auditing those 

 39Although the payment amount is based on the number of FTE physician residents, the 

funds are intended to cover medical centers’ costs of training all types of health 

professionals, including nurses and other health professionals.

40Each state must have in effect a Medicaid state plan that is approved by CMS. Among 

other things, a state Medicaid plan establishes criteria and requirements for providers to 

be eligible to receive payments and must be approved by CMS in order for the state to 

receive matching funds for the federal share of Medicaid payments it makes. Overall 

reimbursement made to hospitals is subject to applicable statutory and regulatory 

reporting and program integrity requirements within the Medicaid program, including the 

upper payment limit requirements.

Federal Oversight of GME 

Funding
Page 16 GAO-18-240 Spending on Physician Training

payments. HRSA is also responsible for collecting information about, and 

reporting on, the performance of the CHGME and THCGME programs.

Oversight of GME training at VA medical facilities is shared between the 

VA medical facilities and their academic affiliates. Through affiliation 

agreements, academic affiliates provide for the central administration of 

residents’ stipends and benefits.41 Academic affiliates are also 

responsible for the overall quality of the GME training program, 

monitoring all resident educational activities, obtaining and maintaining 

accreditation, developing educational objectives and curriculum, selecting 

residents, creating resident rotation schedules, and submitting residents’

schedules of educational activities to VA for reimbursement. VA has the 

responsibility of overseeing and managing clinical training in VA medical 

facilities, and must ensure that there are sufficient patient care 

opportunities, educational infrastructure, and qualified teaching 

physicians to accommodate trainees from the affiliates. Each VA medical 

facility must also track the educational activities of all residents, including 

the amount of time the resident spent training at its facility.

 41See 38 U.S.C. § 7406. The affiliation agreement is the required legal document that 

enables an affiliation relationship with a sponsoring institution of GME training programs, 

which ensures compliance with accrediting body institutional requirements and may 

promote common standards for patient care, medical education, research, and staff 

appointments. It delineates the duties of the VA and the affiliated institution, with respect 

to clinical education of the trainees. 
Page 17 GAO-18-240 Spending on Physician Training

Federal agencies and state Medicaid agencies spent over $16.3 billion on 

GME training in 2015 to support direct and indirect costs of training. The 

amount spent per FTE resident varied across programs, and the largest 

variation across payment recipients and regions was within Medicare due 

to variation in the values of factors used to calculate Medicare payment 

amounts. Almost half of participants received payments from more than 

one program, and the designs of federal programs may reduce the 

potential for duplicate payments.

Federal agencies and state Medicaid agencies spent over $16.3 billion on

GME training in 2015 through five federal programs and 45 state 

Medicaid agencies. Of this, the federal government spent $14.5 billion 

through Medicare, Medicaid, VA, the CHGME program, and the THCGME 

program. (See table 2). Most spending on GME training came from 

Medicare, accounting for 71 percent of federal spending, with over $10.3 

billion in payments to teaching hospitals. Medicaid spending accounted 

for 16 percent of federal spending on GME training, or $2.4 billion. These 

federal Medicaid funds matched an additional $1.8 billion that Medicaid 

agencies in 45 states spent on GME training in 2015. (For information 

about state Medicaid agency and other non-federal sources of funding on 

GME training, see appendix I.)

Federal Agencies and 

State Medicaid 

Agencies Spent Over 

$16.3 Billion on GME 

Training in 2015, and 

the Amount Spent Per 

FTE Resident Varied

Federal Agencies and 

State Medicaid Agencies 

Spent Over $16 Billion on 

GME Training in 2015 to 

Support Direct and Indirect 

Costs of Training
Page 18 GAO-18-240 Spending on Physician Training

Table 2: Federal Spending on Graduate Medical Education (GME) Training and Number of Recipients and Residents 

Supported by Program, 2015

Program Total GME spending 

(dollars)

Percent of total 

spending (percent)

Number of funding 

recipients

Number of FTE 

residents supported

Medicare GME Payments 10,334,518,025 71 1,226 87,980 a

Direct GME payments 3,709,961,953 n/a n/a n/a

Indirect Medical Education 

payments

6,624,556,072 n/a n/a n/a

Medicaid GME Payments 

(federal share)

2,350,654,201 16 1,148 74,202b

VA Physician GME Program 1,499,021,193 10 167c 10,367

Resident Salaries & Benefits 660,399,034 n/a n/a n/a

Educational Support 838,622,159 n/a n/a n/a

Children’s Hospitals GME Payment 

Program

248,599,622 2 56 4,568

Teaching Health Center GME 

Program

76,320,578d 1 39 630

Totale 14,509,113,619 100 1,657f n/a

Legend: n/a = not applicable

Sources: GAO analysis of Centers for Medicare & Medicaid Services (CMS), Health Resources and Services Administration (HRSA), and Department of Veterans Affairs (VA) data; and GAO web-based 

survey administered to state Medicaid agencies. | GAO-18-240

a

This number is the 3-year rolling average of full-time equivalent (FTE) residents that is used to 

calculate Medicare Direct GME payments. CMS counts the number of FTEs to calculate Indirect 

Medical Education (IME) payments slightly differently from Direct GME payments—there were 88,416 

FTE residents funded through Medicare IME payments.

b

Of the 45 states that reported paying for GME training through Medicaid, 21 were unable to provide 

FTE information, and thus were not included in this calculation. Medicaid spending in these states 

represents 19 percent of total (federal and state) Medicaid spending on GME training.

c

The number of VA recipients represents academic affiliates, which were reimbursed by 125 VA 

medical centers for the time that residents spend training at VA facilities. VA medical centers received 

educational support payments for costs of training residents.

d

In fiscal year 2015, the Teaching Health Center GME Program spent $119,632,825 to support 

training that occurred from October 2014 to June 2016. We calculated the amount that HRSA spent 

on GME training that occurred from October 2014 through September 2015 (i.e., the federal fiscal 

year), by multiplying the payment rates by the number of FTEs and weighting the resulting totals by 

the number of months included in the time period of interest.

e

Numbers do not total due to rounding unless otherwise specified.

f

Recipients can participate in more than one federal program, so the total number of recipients is not 

a sum of the number of recipients of each individual program.

These payments supported both direct and indirect costs associated with 

GME training, though data were limited for some programs. We 

calculated that about one-third of Medicare payments were made to cover 
Page 19 GAO-18-240 Spending on Physician Training

the direct costs of GME training.42 Similarly, HRSA reported that one-third 

of CHGME payments were made to cover direct costs. For the VA GME 

program, we calculated that 44 percent of payments were made to 

academic affiliates to reimburse them for resident salaries and benefits, a 

category of direct costs.43 HRSA does not separate payments for direct 

costs from those for indirect costs under the THCGME program. And, the 

data we received from state Medicaid directors did not separate them, 

though 8 of 45 states specifically reported paying providers for indirect 

costs in addition to direct costs.

Providers in all 50 states and the District of Columbia received payments 

for training GME residents, but some regions received a notably higher 

amount compared to others. In particular, federal agencies spent $5.47 

billion ($97 per-capita) in the Northeast region, which represents 38 

percent of total federal spending, compared with the West where federal 

agencies spent $1.83 billion ($24 per-capita or 13 percent of total federal 

spending). (See table 3). State Medicaid agencies in the Northeast also 

spent significantly more on GME training than did agencies in other 

regions. Agencies in the Northeast spent $1 billion ($18 per-capita), 

whereas agencies in the West spent $120 million ($2 per-capita). Notably, 

New York accounted for about half (48 percent) of nationwide state 

Medicaid agency spending on GME and 86 percent of spending in the 

Northeast. Overall, GME spending was somewhat more concentrated in 

the Northeast than was the number of GME residents; in a May 2017 

study, we found that 31 percent of GME residents were located in the 

Northeast.44 The Northeast was the only region for which the percentage 

of the GME spending in the region was higher than the percentage of 

GME residents.

 42Direct costs of GME include salaries for residents, faculty, and residency program 

directors. Indirect costs of GME training include undefined higher cost of health care as a 

result of educating physicians.

43VA can also contract with its academic affiliates to provide resident supervision and 

teaching time. We did not obtain data from VA about the amount it spent on faculty 

salaries through this contracting mechanism, so the VA GME spending figures presented 

are likely an underestimate of VA spending when compared to the costs included in other 

programs’ totals.

44GAO-17-411.
Page 20 GAO-18-240 Spending on Physician Training

Table 3: Federal and State Spending on Graduate Medical Education (GME) Resident Training by Region, 2015

Region Federal spending State Medicaid agency spending GME residentsb

Total

(in billions of dollars)

Per-capitaa

(dollars) 

Total

(in billions of dollars) 

Per-capitaa

(dollars)

Northeast 5.47

(38 percent)

97 1.00

(55 percent)

18 38,951

(31 percent)

South 3.74

(26 percent)

31 0.42

(23 percent)

3 37,967

(30 percent)

Midwest 3.47

(24 percent)

51 0.29

(16 percent)

4 31,056

(24 percent)

West 1.83

(13 percent)

24 0.11

(6 percent)

2 19,604

(15 percent)

Totalc 14.51

(100 percent)

45 1.82

(100 percent)

6 127,578

(100 percent)

Sources: GAO analysis of Centers for Medicare & Medicaid Services, Health Resources and Services Administration, and Department of Veterans Affairs data; GAO web-based survey administered to 

state Medicaid agencies; and U.S. Census Bureau region definitions and data. | GAO-18-240

a

To calculate per-capita spending, we divided the total spending by the 2015 regional population 

estimated by the U.S. Census Bureau.

b

See GAO, Physician Workforce: Locations and Types of Graduate Training Were Largely 

Unchanged, and Federal Efforts May Not Be Sufficient to Meet Needs, GAO-17-411 (Washington, 

D.C.: May 25, 2017)

c

Numbers do not total due to rounding.

Available data show that almost all spending on GME training (99 

percent) went to recipients located in urban areas.45 However, it is likely 

that more than 1 percent of spending was used to support training in rural 

areas; data limitations in HHS and state Medicaid agency data preclude 

calculation of the amount of spending on GME training in rural areas. The 

data we received from HHS listed only the direct recipient of the 

payments, such as a hospital or a medical school, which can arrange 

rotations at other teaching sites that may be located in rural areas.46

 45We similarly reported in May 2017 that 99 percent of residents in GME programs trained 

in urban areas. See GAO-17-411.

46Because of these limitations, we were also unable to trace the amount of spending that 

was used to support training by setting, including nonhospital settings. However, nearly 

half (42 percent) of Medicare GME payment recipients reported that residents rotate to a 

nonhospital setting. Of the 45 states that made Medicaid payments for GME funding, 7 

reported that they pay other types of teaching sites in addition to hospitals, such as 

teaching health centers or medical schools. 
Page 21 GAO-18-240 Spending on Physician Training

Data limitations also preclude calculation of the overall amount of 

spending on GME resident training in specific specialties, such as primary 

care.47 With data that were available, we found:

• Of the 10,367 FTE residents that VA funded, 53 percent were training 

in a primary care specialty. We also estimated that 52 percent of VA’s 

spending supported primary care training.48

• The THCGME program is intended to train residents in primary care, 

with 100 percent of the $76.3 million used to support 630 primary care

residency positions.

• HRSA reported that 43 percent of the 11,667 trainees supported by 

CHGME funds trained in general pediatrics or combined pediatrics 

programs. HRSA did not report how much it spent on primary care 

training, or the number of FTE residents training in primary care 

specialties.

• Of the 87,980 FTE residents that Medicare funded, 44 percent were 

denoted as primary care residents. However, Medicare is likely 

supporting more residency positions than these data indicate, and 

these residents are unlikely to be training in primary care. The 

program counts each resident pursuing additional training, such as a 

resident training in a subspecialty, as half of an FTE when calculating 

DGME payments.

 47Physicians training in primary care specialties may not ultimately practice as primary 

care physicians when they complete this training, as some will likely seek additional GME 

training to subspecialize.

48For the purposes of this analysis, we defined primary care specialties as internal 

medicine, family medicine, geriatric medicine, and preventative medicine, including 

subspecialties of these specialties. To estimate total VA spending on primary care 

training, we multiplied the number of FTE residents training in a primary care specialty at 

each VA medical facility by the average per FTE resident payment to the facility’s 

affiliates.
Page 22 GAO-18-240 Spending on Physician Training

We found that in 2015, the average amount that a program paid per FTE 

resident ranged from $34,814 for Medicaid GME payments to $137,491 

for the VA GME program.49 (See table 4.) Programs use different 

methods to calculate how much to pay providers on a per resident basis, 

thus payment amounts are not comparable across programs. For 

example, Congress appropriated funding for the THCGME program for 

each of the fiscal years 2011 through 2017 and eligible entities received 

the same amount per FTE resident. In contrast, Medicare GME payments 

to eligible entities are determined according to formulas that take many 

factors into account, including the share of a hospital’s patients that are 

covered under Medicare. Consequently, the amount that Medicare pays 

recipients varies widely based on variation in the values of factors used to 

calculate payments. Nationwide, hospitals received $116,997 on average 

from Medicare for each FTE resident, and the middle 50 percent of 

hospitals received between $85,478 and $150,610.

 49We adjusted all of the payments per FTE resident by the 2015 CMS wage index to 

account for geographic differences in the cost of labor. 

The average Medicaid GME payment amount reflects combined federal and state 

spending. Of the 45 states that pay for GME training through Medicaid, 21 were unable to 

provide FTE resident information, and thus were not included in this calculation. Medicaid 

spending in these states represents 19 percent of total (federal and state) Medicaid 

spending on GME training.

Per FTE spending for the VA program combines the amount that VA reimburses affiliates 

for a resident’s salary and benefits and the amount that VA medical facilities receive to 

support educational activities at the VA level.

The Amount Paid Per FTE 

Resident Varied Across 

Programs, and the Largest 

Variation Across 

Recipients and Regions 

Was within Medicare
Page 23 GAO-18-240 Spending on Physician Training

Table 4: Graduate Medical Education (GME) Program Spending per Full-Time Equivalent (FTE) Resident, Adjusted and 

Unadjusted for Geographic Differences in the Cost of Labor by Federal Program, 2015

Program Average 

(dollars)

5th percentile 

(dollars)

25th 

percentile 

(dollars)

50th 

percentile 

(median, 

dollars)

75th 

percentile 

(dollars)

95th 

percentile 

(dollars)

VA Physician GME 

Program

Adjusted 137,491 103,157 127,814 141,636 151,597 162,921

Unadjusted 137,250a 100,098 131,335 140,722 148,972 159,859

Teaching Health 

Center GME 

Program

Adjusted 131,573 106,615 113,127 132,016 146,070 159,256

Unadjusted 136,250 136,250 136,250 136,250 136,250 136,250

Medicare GME 

Payments

Adjusted 116,997 13,597 85,478 122,646 150,610 194,617

Unadjusted 117,674 7,766 85,446 121,147 151,784 203,639

Children’s Hospitals 

GME Payment 

Program

Adjusted 50,736 28,273 45,044 50,814 57,054 65,860

Unadjusted 51,778 21,765 44,155 51,512 60,093 82,351

Medicaid GME 

Paymentsb

(Federal and State)

Adjusted 34,814 3,586 10,645 21,401 44,630 116,545

Unadjusted 36,540 3,606 10,801 22,092 47,029 125,000

Sources: GAO analysis of Centers for Medicare & Medicaid Services (CMS), Health Resources and Services Administration, and Department of Veterans Affairs (VA) data; and GAO web-based survey 

administered to state Medicaid agencies. | GAO-18-240

Notes: We adjusted payments per FTE resident using the CMS wage index so that amounts are 

comparable across recipients in geographic areas with different labor costs.

a

These VA payment amounts are calculated at the VA medical facility level, and combine the 

payments from VA medical facilities to their affiliates and the amount that VA spends to support other 

educational expenses. Without adjusting for geographic differences in the cost of labor, the VA 

reimbursed its academic affiliates at an average rate of $56,996 per FTE resident, and its educational 

support payments to VA medical facilities was based on a rate of $80,900 per FTE resident.

b

Twenty-one of the 45 states that pay for GME training through Medicaid were unable to provide FTE 

information, and thus were not included in this calculation. Medicaid spending in these states 

represents 19 percent of total federal and state Medicaid spending on GME training.

Given the wide variation in overall Medicare per FTE resident payment 

amounts by hospital, we examined variation among regions and states.

• Regionally, the average total Medicare per FTE resident payment 

ranged from $127,503 in the Midwest to $87,172 in the West. (See 

table 5.)
Page 24 GAO-18-240 Spending on Physician Training

Table 5: Average Medicare Graduate Medical Education (GME) Payment Per Full-Time Equivalent (FTE) Resident by Region, 

2015

Region Average Direct GME payment 

per FTE resident (dollars)

Average Indirect Medical 

Education payment per FTE 

resident (dollars)

Average total payment per 

FTE resident (dollars)

Northeast 50,476 75,579 123,264

South 44,420 84,382 121,915

Midwest 49,700 83,356 127,503

West 33,397 59,219 87,172

National 45,189 77,157 116,997

Sources: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data and U.S. Census Bureau region definitions. | GAO-18-240

Note: We adjusted payments per FTE resident using the CMS wage index so that amounts are 

comparable across recipients in geographic areas with different labor costs.

• Across individual states, the average total Medicare per FTE resident 

payment amount ranged from $65,672 in California to $170,591 in

New Hampshire. (See fig. 1.)
Page 25 GAO-18-240 Spending on Physician Training

Figure 1: Average Medicare Payment per Full-Time Equivalent Graduate Medical Education Resident, 2015

Note: We adjusted payments per-full-time equivalent resident using the Centers for Medicare & 

Medicaid Services wage index so that amounts are comparable across recipients in geographic areas 

with different labor costs.
Page 26 GAO-18-240 Spending on Physician Training

Some of this variation is due to significant variation in the values of 

certain factors used to calculate Medicare DGME payments—specifically, 

the PRA and Medicare patient load. (See table 6.)

• The Medicare PRA varies among recipients and across regions, 

though to a lesser degree than the overall per FTE resident payment. 

For example, the average PRA for the middle 50 percent of primary 

care residents ranged from $87,962 to $117,144 per FTE resident, 

compared to $85,478 to $150,610 for the overall per FTE resident 

payment. The PRA also varied by region and, as with the overall 

payment amounts, the average PRA was lowest in the West. 

However, in contrast to the nationwide average per FTE resident 

payment, which was highest in the Midwest, the recipients in the 

Northeast had the highest average PRA.

• The Medicare patient load also varies across regions, which affects 

DGME payments. Medicare DGME payment recipients in the West 

reported an average Medicare patient load of 24 percent, which is 

significantly lower than the 34 to 36 percent reported in other regions.

Table 6: Factors Used to Calculate the Medicare Direct Graduate Medical Education (GME) Payment by Region, 2015 

Region Average Medicare primary care 

PRA (dollars)a Average Medicare non-primary care PRA (dollars)

Average Medicare Patient Load 

(percent)b

Northeast 110,991 106,697 34

South 102,780 103,049 34

Midwest 107,317 104,468 36

West 90,373 87,991 24

National 103,570 101,735 32

Sources: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data; and U.S. Census Bureau region definitions. | GAO-18-240

Notes: We adjusted the Medicare per resident amount (PRA) using the CMS wage index so that 

amounts are comparable across recipients in geographic areas with different labor costs.

a

The Medicare PRA is a set number for each hospital that reflects the direct costs of training a GME 

resident. For many hospitals, the PRA was set based on the costs of training a resident in fiscal year 

1984 and adjusted for inflation annually. A hospital’s primary care resident PRA is generally larger 

than its non-primary care PRA.

b

The Medicare patient load is the ratio of the hospital’s Medicare inpatient days to total inpatient days 

in the hospital.

A hospital’s Medicare patient load also affects Medicare IME payments 

per FTE resident. A hospital’s IME payment is calculated by increasing 

Medicare’s payments for inpatient services to a hospital by an IME 
Page 27 GAO-18-240 Spending on Physician Training

adjustment factor. Therefore, a hospital that received more Medicare 

payments for inpatient services will receive a larger IME payment.

Over half (51 percent) of providers that participated in any of the five 

GME programs received payments from more than one federal program. 

For example, 69 percent of providers that participated in Medicare also 

participated in another program, and 84 percent of CHGME awardees 

participated in another program. However, in each case, these programs 

provided most of these recipients’ total funding (74 percent and 66 

percent respectively). In contrast, recipients of Medicaid or VA payments 

also generally participated in another program, but received only 22 

percent and 10 percent of their total funding for GME training through 

Medicaid and VA, respectively. (See table 7.)

Table 7: Provider Participation in Multiple Graduate Medical Education (GME) Programs and Average Percentage of Total 

Funding Received by Program, 2015

Program Percent of providers that received 

payments from another GME program 

(percent)

Average percent of providers’ total 

funding from program among providers 

that participated in more than one GME 

program (percent) 

Medicare GME Payments 69 74

Medicaid GME Payments

(federal and state)

70 22

VA Physician GME Program 75a 10

Children’s Hospitals GME Payment Program 84 66

Overall 51 n/a

Legend: n/a = not applicable

Sources: GAO analysis of Centers for Medicare & Medicaid Services, Health Resources and Services Administration and Department of Veterans Affairs (VA) data; and GAO web-based survey 

administered to state Medicaid agencies. | GAO-18-240

a

This analysis includes only hospitals that VA reimbursed for the time that residents spent training at 

a VA medical center.

Though the high portion of providers that receive payments from multiple 

sources creates the potential for providers to receive duplicate payments, 

this risk of duplication is reduced by the programs’ designs.

• The CHGME program was established for children’s hospitals 

because they did not traditionally receive significant Medicare GME 

payments.

• The THCGME program provides payments to outpatient facilities, 

whereas residency training has been, in general, hospital based.

About Half of GME 

Program Participants 

Received Payments from 

More than One Program
Page 28 GAO-18-240 Spending on Physician Training

• VA only pays for residents’ time spent training at a VA medical facility, 

and not for time residents spent training in non-VA settings that may 

receive other federal payments for GME training.

• Medicare adjusts all DGME payments by the ratio of a hospital’s 

patients covered under Medicare.

• CMS has not established requirements or guidance specifically 

related to Medicaid GME payments, including how the payments are 

to be calculated.50 However, 10 states adjust payments by the ratio of 

a teaching site’s patients covered under Medicaid.

GME training costs vary by program characteristics, such as size, type, 

training setting, and age, and some training costs are more prone to 

variation than others. Challenges exist in measuring and comparing GME 

training costs due to a lack of standard cost methodologies across 

teaching sites and some training costs being difficult to measure. Further, 

little is known about how GME training costs relate to federal GME 

funding.

According to literature we reviewed and experts we interviewed, GME 

training costs vary by residency program characteristic, and some costs, 

such as faculty teaching time, are more prone to variation than others. 

Specifically, variation in training costs can be explained by one or more of 

the following program characteristics:

• Program size: Larger residency programs may be more cost efficient 

than smaller ones in that fixed costs, such as infrastructure and 

program administration, can be spread out over a larger number of 

residents. Therefore, adding another resident increases variable 

costs, but lowers per resident fixed costs.51

 50However, overall reimbursement made to hospitals, including for GME training costs, is 

subject to applicable statutory and regulatory requirements within the Medicaid program. 

51See T. J. Nasca et al., “Minimum Instructional and Program-Specific Administrative 

Costs of Educating Residents in Internal Medicine,” Archives of Internal Medicine, vol. 161 

(2001). 

GME Training Costs 

Vary by Residency 

Program 

Characteristics, and 

Teaching Sites Face 

Challenges in 

Measuring These 

Costs

GME Training Costs Vary 

by Program Size, Type, 

Setting, Age, and Location
Page 29 GAO-18-240 Spending on Physician Training

• Type of Specialty: Residency training in some specialties costs more 

than others, and accreditation requirements are one of several factors 

driving this variation. For example, compared to internal medicine 

programs, accreditation standards for family medicine programs 

require more hours of faculty involvement and higher faculty-toresident ratios. Therefore, these residency programs may incur higher 

per resident costs. The complexity of a specialty program also affects 

its training costs—for example, subspecialty programs, such as 

vascular surgery or gastroenterology, require additional GME training 

or specialized equipment and will thus incur more training costs. In 

addition, costs can be affected by variation in faculty compensation. 

According to a 2013 analysis of available data on residency training 

costs, the median compensation for attending physicians in academic 

health centers ranged from $163,319 for family medicine to $336,136 

for radiation oncology.52 Further, malpractice insurance premium 

costs can vary based on the degree of surgical involvement, with 

primary care specialties having the lowest premium costs and general 

surgery physicians the highest.53

• Type of Training Setting: GME training in outpatient settings, such 

as community-based clinics, is considered less efficient and more 

expensive than in inpatient hospital settings, according to reviewed 

literature and experts we interviewed.54 One reason for this may be 

differences in the models of teaching used in each of these settings. 

According to one group of experts we interviewed, residents in 

inpatient settings are part of teams that do rounds together, where 

much of the teaching time involves one clinical teacher and a team of 

residents, nurses, and other affiliated professionals. This method of 

teaching may not be feasible in outpatient settings where teaching is 

more often provided on a more expensive one-to-one basis. 

Outpatient settings, particularly smaller ones, may also have to incur 

more fixed costs relative to inpatient settings that may have more 

facility space and other resources in place to meet accreditation 

requirements.

 52See B. O. Wynn, R. Smalley, K. M. Cordasco, Does it Cost More to Train Residents or 

to Replace Them? A Look at the Costs and Benefits of Operating Graduate Medical 

Education Programs (Santa Monica, Ca.: RAND Corporation 2013), 11.

53See Wynn et al., Does it Cost More, 9.

54See Nasca et al., “Minimum Program Requirements,” 763; and R. Ben-Ari et al, “The 

Costs of Training Internal Medicine Residents in the United States,” The American Journal 

of Medicine, vol. 127, no.10 (2014). 
Page 30 GAO-18-240 Spending on Physician Training

• Location: Geographic location also drives the variation in training 

costs. For example, resident salaries vary based on general salary 

patterns across the United States. According to one group of experts 

we interviewed, there is a range of compensation packages for 

residents, and base salaries can vary from $35,000 to $55,000 per 

year. Malpractice insurance may also vary by geographic location. 

Further, rural training sites may incur higher costs because their 

training may have to utilize multiple training sites—such as community 

hospitals or rural health clinics—in order to meet accreditation 

requirements for resident rotations and patient case-mix. The added 

administrative work of coordinating with other sites to provide these 

resources can be a challenge.

• Age of the program: Newer residency programs may have higher 

costs than older, more established programs.55 According to some 

GME experts we interviewed, the first year a teaching site operates a 

residency program is more expensive because new programs may be 

smaller and cannot spread out fixed costs. In addition, it can be 

expensive for a new GME program to meet accreditation 

requirements, such as required infrastructure and minimum faculty.

Studies estimating GME training costs show these costs vary by program 

characteristics. For example, we identified 10 studies that estimated GME 

training costs; however, these studies were not comparable because they 

focused on discrete programs with different characteristics, utilized 

different methodologies, were conducted at different points in time, and 

did not examine the same cost elements. Further, these studies are not 

generalizable due to limitations in study methodology, such as small 

sample sizes. And, given the age of some of these studies, they may not 

be reflective of current GME training costs. Across the 10 studies we 

reviewed, estimates of costs ranged from $35,164 to $226,331 per 

resident. (See table 8.)

 55See M. Regenstein et al., “The Cost of Residency Training in Teaching Health Centers,”

The New England Journal of Medicine, vol. 375, iss. 7 (2016). 
Page 31 GAO-18-240 Spending on Physician Training

Table 8: Summary of Identified Studies that Estimate Graduate Medical Education (GME) Training Costs, 2000-2016 

Authors Year of 

publication

Methodology Type of program 

specialty 

Type of 

training 

setting

Program or 

study size 

(residents)

Total per resident 

cost (dollars)

Regenstein 

et al.a 2016 Estimated training costs in teaching 

health centers using a 

self-developed 

instrument based on 

2013-2014 data from 

26 programs

Primary care Outpatient Not specified 157, 602b

Ben-Ari et al.c 2014 Estimated direct 

training costs of 

internal medicine 

residency programs in 

2013, including costs 

associated with 

meeting accreditation 

requirements 

Internal medicine Inpatient 24 208,320

160 181,737

Outpatient 24 224,668

160 198,085

Turner et al.d 2014 Estimated direct costs 

for an anesthesiology 

resident by clinical 

training year in 2011-

2012

Anesthesiology Not specified Not specified Year 1: 65,951

Year 2: 71,492

Year 3: 75,636

Wynn et al.e 2013 Summarized direct 

GME training costs 

across 1,141 hospitals 

using 2008 Medicare 

cost report dataf

Multiple 

specialties 

Inpatient and 

outpatient

97,577g 141, 240

Primary careh Not specified 0-24 

percenth 161, 779

75 percent or 

moreh 153,162

Pauwels et al.i 2006 Analyzed survey data 

from family medicine 

residency programs to 

estimate total GME 

training costs in 2003 

Family medicine Inpatient and 

outpatient 

22j 44,812k

Zeidel et al.l 2005 Estimated GME 

training costs to a 

university department 

of medicine in 2003

Internal medicine Inpatient and 

outpatient

141m 35,164n

Blewett et al.o 2001 Estimated average 

direct GME training 

costs across 117 

residency programs in 

Minnesota in fiscal 

year 1997

Multiple 

specialties

Inpatient and 

outpatient

2002m 130,843
Page 32 GAO-18-240 Spending on Physician Training

Authors Year of 

publication

Methodology Type of program 

specialty 

Type of 

training 

setting

Program or 

study size 

(residents)

Total per resident 

cost (dollars)

Nasca et al.p 2001 Estimated the 

minimum instructional 

and administrative 

costs of training 

internal medicine 

residents using 1998 

accreditation 

requirements 

Internal medicine Inpatient 21 94,730

126 70,279

Outpatient 21 102,107

126 77,656

Duffy et al.q 2000 Estimated average 

direct and indirect 

costs incurred by 46 

non-academic health 

center teaching 

hospitals in Maryland 

in 1994

Multiple 

specialties

Inpatient and 

outpatient 

44r 226,331

Magen et al.s 2000 Surveyed clinical 

faculty and analyzed 

the budget of a 

psychiatric residency 

program to identify 

psychiatric training 

costs from 1996-1997

Psychiatry Inpatient and 

outpatient

20 78,159

Source: GAO analysis. | GAO-18-240

a

M. Regenstein et al., “The Cost of Residency Training in Teaching Health Centers,” The New 

England Journal of Medicine, vol. 375, iss. 7 (2016).

b

Total per resident cost estimate was for fiscal year 2017, and reflected academic year 2013-2014 

data that was adjusted by factors related to cost of living and program maturity. Total per resident 

cost estimate was the median net cost after factoring in expenses and revenues.

c

R. Ben-Ari et al, “The Costs of Training Internal Medicine Residents in the United States,” The 

American Journal of Medicine, vol. 127, no.10 (2014).

d

B. Turner et al., “Clinical Revenue Directly Attributable to Anesthesiology Residents,” Journal of 

Graduate Medical Education, vol. 6, iss. 2 (2014).

e

B. O. Wynn, R. Smalley, K. M. Cordasco, Does it Cost More to Train Residents or to Replace Them? 

A Look at the Costs and Benefits of Operating Graduate Medical Education Programs (Santa Monica, 

Ca.: RAND Corporation 2013), 50.

f

Medicare cost report data included 1,141 hospitals that reported residents during the reporting 

period.

g

Number of reported residents across all hospitals included in the study.

h

Percentage of weighted residents in primary care programs across 1,141 hospitals.

i

J. Pauwels et al., “Three-year Trends in the Costs of Residency Training in Family Medicine,” Family 

Medicine, vol. 38, no. 6 (2006).

j

Average number of full-time equivalent residents across studied programs.

k

Total per resident cost excludes resident salary and benefits and malpractice insurance, and 

includes GME revenue, with the exception of Medicaid GME revenue.

l

M. L. Zeidel et al., “Estimating the Cost to Departments of Medicine of Training Residents and 

Fellows: A Collaborative Analysis,” The American Journal of Medicine, vol. 118, no. 5 (2005).

mNumber of full-time equivalent residents included in the study.
Page 33 GAO-18-240 Spending on Physician Training

n

Total per resident cost excludes resident salary and benefits and does not reflect GME revenue.

o

L.A. Blewett et al., “Measuring the Direct Costs of Graduate Medical Education Training in 

Minnesota,” Academic Medicine, vol. 76, no. 5 (2001).

p

T. J. Nasca et al., “Minimum Instructional and Program-Specific Administrative Costs of Educating 

Residents in Internal Medicine,” Archives of Internal Medicine, vol. 161 (2001).

q

S. Q. Duffy et al., “Graduate Medical Education Costs in Nonacademic Health Center Teaching 

Hospitals: Evidence from Maryland,” Medical Care Research and Review, vol. 57, no. 1 (2000).

r

Mean number of residents and interns across studied hospitals.

s

J. Magen et al., “The Cost of Residency Training in Psychiatry,” Academic Psychiatry, vol. 24, iss. 4 

(2000).

The Medicare cost reports that hospitals submit annually to CMS, though 

they have certain limitations, also suggest variability in residency training 

costs. For example, according to the cost reports, in 2015, direct costs 

varied from $56,998 to $333,565 per resident (excluding outliers).56 (See 

table 9.) However, these costs are limited to direct GME costs specified in 

Medicare guidance, and they have other limitations due to their collection 

and reporting.

Table 9: Teaching Hospitals’ Direct Costs of Graduate Medical Education (GME) 

Training Programs Reported on Their Annual Medicare Cost Reports, 2015

Direct GME training costs per FTE resident 

(dollars)a

5th percentile 56,998

25th percentile 110,789

Median 151,851

75th percentile 206,406

95th percentile 333,565

Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) data. | GAO-18-240

Note: Hospitals that were below the 5th and above the 95th percentiles were excluded as outliers. We 

adjusted direct GME training costs per full-time equivalent (FTE) using the CMS wage index to 

account for geographic differences in the cost of labor.

a

In addition to inconsistencies in how data is collected for Medicare cost reports, the data do not 

include the revenue impact and actual indirect costs associated with training residents, and they are 

generally not reviewed or audited except when teaching sites establish their base year per resident 

amount.

 56Hospitals that were below the 5th and above the 95th percentiles were excluded as 

outliers. We adjusted GME training costs per FTE using the CMS wage index so that 

costs are comparable across teaching hospitals.
Page 34 GAO-18-240 Spending on Physician Training

We found that there is no standard method or tool across teaching sites 

for identifying and capturing GME training costs. One expert told us that, 

therefore, the reporting of costs depends on how each teaching site, and 

the individuals at each site, are tracking and defining those costs. Another 

group of experts who conducted a study to estimate GME training costs in 

teaching health centers told us they were unable to identify a common 

instrument and had to develop their own instrument to standardize costs.

According to literature we reviewed and experts we interviewed, Medicare 

GME guidance for reporting training costs is not always clear, and 

differences in how teaching sites define costs can lead to inconsistent 

measurement. One expert told us that Medicare GME payment rules are 

subject to interpretation, and thus there is variation between teaching 

sites in how costs are reported on Medicare cost reports. Other GME 

experts told us that many teaching health center residency programs rely 

on in-kind benefits, such as building space donated by organizations, but 

health centers vary in how they account for the costs of these benefits. 

Some teaching health centers will score them as in-kind contributions, 

others will provide a square footage cost amount, and others may not 

track and report these costs at all. While one group of experts suggested 

there be national guidelines to ensure all teaching sites are using the 

same rules to define and report costs, one expert cautioned that a 

common tool would make it impossible to reflect the unique 

characteristics of each program.

Factors specific to teaching sites may affect how they identify their 

training costs. The varying relationships and financial arrangements 

between the teaching site, its partners, and its faculty affect how it 

allocates and reports training costs. For example, a teaching site may 

have various educational partners, such as medical schools and 

community-based training sites, and be affiliated with multiple hospitals, 

each of which tracks costs differently. Teaching sites differ in how they 

share training costs with these partners. In addition, faculty arrangements 

vary. For example, in some cases faculty are employees of the teaching 

site and in other cases, faculty bill for their services independently. 

Moreover, facilities vary in the experience of their personnel responsible 

for identifying GME training costs. For example, program directors may 

not have the financial experience needed to identify costs, and some 

teaching sites may use outside consultants to identify costs. Turnover in 

the staff responsible for tracking costs, lack of communication between 

program staff and the accounting departments, or a change in ownership 

Challenges Exist in 

Measuring and Comparing 

GME Training Costs and 

Little is Known about their 

Relationship to Federal 

GME Funding
Page 35 GAO-18-240 Spending on Physician Training

of the teaching site may add to the challenge of accurately identifying 

costs.

According to studies we reviewed and experts we interviewed, some 

GME training costs are difficult to accurately identify and measure. For 

example:

• Faculty Costs: Faculty responsibilities are spread out across 

education, research, administrative, and patient care activities, and 

the time spent in each activity is not always clear. The only allowable 

faculty costs on Medicare cost reports are those for education-related 

activities, such as the clinical supervision of residents. For example, if 

a faculty member performs a procedure while doing rounds with 

residents, the teaching site must determine how much of that time 

was for patient care and how much was for education. However, 

making this determination can be challenging for teaching sites. One 

group of experts told us that while most teaching sites have a formula 

to calculate these education costs, they are most likely an undercount. 

However, another expert said that officials preparing the cost reports 

are not systematically splitting faculty time between education and 

patient-care activities and are most likely guessing.

• Facility Costs: MAC officials told us that facility costs that hospitals 

report on their cost reports should be allocated based on square 

footage, building depreciation, and utility costs, but there is some 

variation in how teaching sites calculate their square footage. Further, 

as previously described, donated building space may not be 

accurately identified by teaching sites. Experts who conducted a study 

to estimate teaching health center program costs told us that several 

centers in their study were not accustomed to thinking of donated 

space as a residency program expense.

• Indirect Medical Education Costs: There is not a clear and 

consistent definition of the indirect medical education costs, and there 

may be variability in these costs. Furthermore, there is little incentive 

for teaching sites to accurately identify these costs because Medicare 

does not require them for purposes of determining IME payments, 

according to one reviewed study.57 As a result, it is unclear what 

indirect costs the Medicare IME payment adjustment is meant to 

cover. Additionally, experts told us that it is difficult to measure the 

extent to which costs associated with the unique services that 

 57See National Academy of Medicine, Graduate Medical Education, 87.
Page 36 GAO-18-240 Spending on Physician Training

teaching sites provide, such as stand-by services or their role as a 

safety net provider, are attributable to GME training.

• Resident benefits for teaching site costs and productivity: The 

benefits that residents provide can generate cost savings and revenue 

for the teaching site, yet the extent of these benefits can be difficult to 

calculate. According to one study we reviewed, the value that 

residents provide cannot be measured directly; rather, the value is 

reflected in the teaching site’s patient care costs and on the clinical 

productivity of attending physicians.58 One expert we interviewed said 

that identifying when residents move from a cost to a financial benefit 

is complicated and depends, for example, on a resident’s year of 

training and residency program requirements. Also, the value of 

resident services can vary by specialty. For example, residents in 

general surgery or internal medicine provide more on-call services 

than residents in dermatology or radiation oncology.59 Although the 

cost savings and revenue generated by residents has an effect on the 

net costs of GME training, it is typically not accounted for when 

estimating costs.

In addition to these challenges, federal agencies do not systematically 

collect and standardize cost information at the national level, according to 

literature we reviewed and experts we interviewed. For example, a HRSA 

study identified training costs in teaching health centers, but the study 

only captured costs over one year and did not include all THCGME 

programs. Further, in addition to inconsistencies in how teaching sites 

collect data for Medicare cost reports, the data do not include the revenue 

impact and actual indirect costs associated with training residents and 

cannot be broken down by specialty programs. In addition, they are not a 

comprehensive source of training costs because they are limited to

teaching sites that received Medicare GME payments. It does not include

other teaching sites, such as medical schools, teaching health centers, 

and teaching hospitals that may have only received other federal funding

for GME training, such as VA GME payments. Finally, because Medicare 

cost report data are not generally used to calculate GME payments, they 

are not reviewed or audited by contractors except when new teaching 

sites establish their base year PRA.60

 58See Wynn et al., Does it Cost More, 3.

59See Wynn et al., Does it Cost More, 20.

60However, according to MAC officials and some experts we interviewed, the direct costs 

that are reported are generally complete.
Page 37 GAO-18-240 Spending on Physician Training

Further, teaching sites may not have accurately reported costs used to 

calculate Medicare DGME payments. According to experts we 

interviewed, at the time that most teaching sites established the base 

year PRAs used to calculate DGME payments, teaching site accounting 

practices and their varying financial relationships with affiliated education 

partners may have led them to over-report or under-report their costs.61

As a result, there is variation in sites’ PRAs, which may not reflect actual 

variation in direct costs.62 To identify how the PRA compares to reported 

direct training costs, we compared teaching site PRAs with the direct 

training costs that they reported for 2015 (though reported costs may not 

accurately reflect all GME training costs, as previously noted). For 

teaching sites in the median range, their Medicare DGME payment 

covered 67 percent of their reported direct training costs in 2015. 

However, we found wide variation across teaching sites—the PRA ranged 

from 31 to 157 percent (excluding outliers) of teaching sites’ reported 

direct costs.63 (See table 10.)

 61A teaching site’s Medicare DGME payment is based on GME training costs that 

teaching sites reported in a base year, which is fiscal year 1984 for most teaching sites. 

62Congress implemented a floor and ceiling on the PRA and therefore there are limits to 

how much PRAs can vary. Specifically, Congress established a PRA floor for hospitals 

that had a PRA that was less than 70 percent of the national average PRA in fiscal year 

2001, adjusted for inflation thereafter within certain limits. The floor was raised to 85 

percent of the national PRA for fiscal year 2002. And, between fiscal years 2000 through 

2002, and 2004 through 2013, hospitals that had a PRA greater than 140 percent of the 

national average PRA did not have their PRA adjusted for inflation. For fiscal year 2003, 

hospitals that had a PRA greater than 140 percent of the national average PRA, had their 

PRA inflation adjustment reduced. A group of experts also told us that, although the PRA 

has received these and other adjustments for inflation, it has not kept pace with the 

increase in GME training costs. 

63The Medicare PRA is a measure of hospitals’ allowable costs of GME for a base year 

divided by the number of FTE residents in that base year.
Page 38 GAO-18-240 Spending on Physician Training

Table 10: Teaching Hospitals’ per Resident Amounts (PRA) Used to Calculate their 

Medicare Direct Graduate Medical Education (GME) Payments, Relative to their 

Reported Training Costs, 2015

Average Medicare PRA as a percentage of 

direct GME training costs (percent)a

5th percentile 31

25th percentile 50

Median 67

75th percentile 89

95th percentile 157

Sources: GAO analysis of Centers for Medicare & Medicaid Services data. | GAO-18-240

Notes: Hospitals that were below the 5th and above the 95th percentiles were excluded as outliers. 

The PRA is based on GME costs that a hospital incurred in a base year, which is fiscal year 1984 for 

most hospitals and is adjusted annually for inflation.

a

In general, each hospital has two separate PRAs—a primary care PRA and a nonprimary care 

PRA—whereby teaching hospitals receive slightly higher payments for residents training in primary 

care specialties. We calculated the average of each hospital’s primary care and nonprimary care 

PRAs. In addition to inconsistencies in how data is collected for Medicare cost reports, the data do 

not include the revenue impact and actual indirect costs associated with training residents, and it is 

generally not reviewed or audited except when teaching sites establish their base year PRA.

In addition to the challenges of identifying and comparing costs, little is 

known about their relationship to federal GME funding. Some studies 

have analyzed federal GME funding relative to GME training costs but do 

not consistently indicate whether federal payments accurately reflect 

training costs. For example, both the Medicare Payment Advisory 

Commission and HHS found that the Medicare IME payment adjustment 

exceeds the actual indirect costs that teaching sites incur from operating 
Page 39 GAO-18-240 Spending on Physician Training

GME programs.64 The studies recommended modifying the IME payment 

adjustment. However, another study found that indirect medical education 

costs and other costs, such as stand-by services, add to patient care 

costs in teaching hospitals, and concluded that a reduction in the 

Medicare IME payment adjustment could result in insufficient Medicare 

payments to cover these costs.65 Other studies found that federal funding 

is lower than actual program costs. For example, one study estimated the 

per resident training cost in teaching health centers in fiscal year 2017 to 

be $157,602, compared to the $95,000 per resident that was being 

provided in federal funding.66 Another study found that their average 

$183,138 per resident cost estimate for internal medicine programs of 

120 residents exceeded Medicare DGME payments in 2012 by 

approximately $160,000 per resident, and noted that other sources of 

funding, including Medicare IME payments, subsidized training costs.67

The relationship between training costs and federal GME funding is 

complicated by the nature of how most GME payments are made. For 

example, with respect to Medicare GME payments, the largest source of 

federal GME funding, payments are not based on actual costs, and there 

are no reporting requirements for how teaching sites use the payments. 

Specifically, teaching sites distribute these payments depending on their 

needs and the needs of their affiliates, making it difficult to understand the 

relationship between GME funding and training costs.

 64In 2009 and 2010, the Medicare Payment Advisory Commission reported that only 40 to 

45 percent of IME payments can be analytically justified to cover the higher inpatient costs 

for Medicare inpatients. Furthermore, the current 5.5 percent adjustment is set at more 

than twice the estimated empirical relationship between teaching intensity and Medicare 

cost per case, resulting in approximately $3.5 billion to teaching hospitals with little 

accountability for the use of these funds. See Medicare Payment Advisory Commission, 

Report to the Congress: Improving Incentives in the Medicare Program, June 2009

(Washington, D.C., June 15, 2009), 13; and Medicare Payment Advisory Commission, 

Report to the Congress: Aligning Incentives in Medicare, June 2010 (Washington, D.C.: 

June 15, 2010), 109. A 2011 HHS-sponsored study examined the statistical basis of the 

IME payment adjustment using 2006 hospital cost data and found that the impact of IME 

on Medicare costs is smaller than the 5.5 percent adjustment under current law. The 

study’s results suggest that a much smaller IME adjustment would adequately 

compensate hospitals for their indirect medical education costs. See N. X. Nguyen, et al., 

“Indirect Medical Education and Disproportionate Share Adjustments to Medicare Inpatient 

Payment Rates,” Medicare & Medicaid Research Review, vol. 1, no. 4 (2011).

65See L. Koenig, et al., “Estimating the Mission-Related Costs of Teaching Hospitals,”

Health Affairs, vol. 22, no.6 (2003). 

66See Regenstein et al., “The Cost of Residency Training,” 612-613. 

67See Ben-Ari et al., “The Costs of Training,” 1022. 
Page 40 GAO-18-240 Spending on Physician Training

Agencies generally collect information to manage their respective 

programs, ensure the accuracy of payments, and reduce the potential for 

duplicative payments within or across federal programs that fund GME 

training. However, HHS does not have sufficient information available to 

comprehensively evaluate the federal programs that fund GME training, 

identify gaps between federal GME programs’ results and physician 

workforce needs, and make or recommend to Congress changes in order 

to improve the efficient and effective use of federal funds.

Federal agencies generally collect information to manage their respective 

programs and ensure the accuracy of payments. To manage their 

programs, agencies use information, such as the total number of FTE 

residents and training costs, to calculate payments. For example, VA 

medical facilities use information that academic affiliates report about the 

costs of their resident salaries and benefits to set payment rates used to 

reimburse the affiliates. And, information about individual residents is 

used to verify that recipients accurately reported, according to resident 

counting rules, the number of FTE residents used to calculate payments. 

For example, MACs use IRIS data about residents’ number of years 

completed in all types of GME training programs to verify that residents 

who have completed their initial residency period were only counted as 

half (50 percent) when determining the DGME payment amount. (For a 

summary of the information that agencies collect for each of the five 

programs we reviewed, see appendix II. See table 11 for a summary of 

how agencies use the collected information.)

Information the 

Federal Government 

Collects to Manage 

Programs Is Not 

Sufficient to 

Comprehensively 

Understand Its 

Investment in GME 

Training

Each Federal Agency 

Generally Collects 

Information Needed to 

Manage Its Respective 

Program and Ensure 

Payment Accuracy
Page 41 GAO-18-240 Spending on Physician Training

Table 11: Summary of How Federal Agencies Use Information Collected about Funding for Graduate Medical Education (GME) 

Training

CMS VA HRSA

How information is used Medicare GME 

Payments

Medicaid 

GME 

Payments

VA 

Physician 

GME 

Program 

Children’s 

Hospital GME 

Payment 

Program 

Teaching 

Health 

Center GME 

Program

Calculate Payments

To establish payment rates, such as a per 

resident amount or per diem reimbursement 

rate

√ * √ √ √

To establish a base year full-time equivalent 

(FTE) resident cap or make adjustments to the 

cap 

√ — n/a √ n/a

To determine the number of allowable FTE 

residents in which GME payments are based

√ — √ √ √

Audit Payments

To verify FTE resident counts were accurately 

reported by funding recipients 

√ — √ √ √

To identify potential duplicate payments 

between recipients (i.e., two or more recipients 

claimed the same FTEs)

√ — ┼ √ √

To identify potential duplicate payments with 

other federal programs (i.e., a funding recipient 

claimed the same FTEs for more than one 

federal program)

— — ┼ √ √

Monitor Program Performance

To evaluate the output of GME training 

programs supported, such as the number and 

type of residents supported

— — √ √ √

To evaluate outcomes of GME training 

programs supported, such as where residents 

plan or did go on to practice

— — √ √ √

To evaluate the educational experiences of 

residents supported.

— — √ √ √

Legend:

√ = Agency used information to conduct the program management or oversight activity.

* = State Medicaid agencies report to CMS the aggregate amount of GME supplemental payments that they make, which is used by CMS to calculate 

the amount of federal Medicaid matching funds for each state. Otherwise, CMS generally does not collect or use information on supported GME training, 

payment accuracy, or potential duplication. Instead, states establish and administer Medicaid GME payment policies, and CMS reviews states’ overall 

Medicaid payments, including GME payments, as part of its review of state Medicaid plans. 

— = Agency did not use information to conduct the program management or oversight activity.

n/a = not applicable

┼ = VA does not have processes in place to identify duplicate payments with other federal programs. However, through its use of information, such as 

total FTE resident counts and rotation schedules, it verifies that recipients only claimed residents’ time spent within the VA medical facility and not in 

another medical facility that may have received funds from another federal source.

Source: GAO analysis of information from the Centers for Medicare & Medicaid Services (CMS), Health Resources and Services Administration (HRSA), and Department of Veterans Affairs (VA). | 

GAO-18-240
Page 42 GAO-18-240 Spending on Physician Training

In contrast to the other programs, states establish and administer 

Medicaid GME payment policies and CMS generally collects limited 

information about states’ Medicaid GME payments. CMS does not use 

this information except to determine the amount of federal matching funds 

for each state. While state Medicaid agencies report the aggregate 

amount of GME supplemental payments they make to CMS, there are no 

federal requirements that states or teaching institutions report information 

about supplemental payments at the provider level, the aggregate or 

provider-level amount of add-on adjustments to the state’s payment rates 

for GME training, or how these payments support GME training.68 Rather, 

CMS officials said that states have the option to collect information about

Medicaid GME payments. However, of the 45 state Medicaid agencies 

that reported on our survey that they paid for GME training, less than half 

(20 states) indicated that they require funding recipients to report any 

information related to Medicaid GME payments, such as the number or 

type of residents supported.

While the risk of duplication is reduced by each program’s design, federal 

agencies also use the information collected to identify duplicative 

payments within and between most of the federal programs, with the 

exception of Medicaid. For example, IRIS data is used to identify whether 

more than one hospital claimed the same resident’s time for purposes of 

Medicare GME payments. Also, according to HRSA officials, contractors 

conduct assessments of the FTE resident counts reported by recipients of 

CHGME or THCGME program funding to identify duplication with FTE 

residents reported for Medicare GME payments. For example, HRSA

 68CMS requires state Medicaid agencies to use the Form CMS-64 to report their 

aggregate Medicaid expenditures for all recipients through specified, standard categories 

of services, including the amount of expenditures on supplemental payments for GME 

training. For each category of service, the CMS-64 collects a state’s total Medicaid 

expenditure as well as the federal share. Aggregate Form CMS-64 data are submitted by 

states to receive federal reimbursement for a share of their Medicaid spending. However, 

in a 2012 report, we found that the exact amount of Medicaid supplemental payments was 

unknown because state reporting was incomplete. In another 2012 report, we found that 

CMS lacked data on supplemental payments made to individual facilities. And, we 

proposed to Congress that it require the Administrator of CMS to improve state reporting 

of supplemental payments, including requiring annual reporting of payments made to 

individual facilities and other information the agency determines is necessary to oversee 

supplemental payments; clarify permissible methods for calculating supplemental 

payments; and require states to submit an annual independent audit verifying state 

compliance with permissible methods for calculating supplemental payments. See 

GAO-12-694 and GAO-13-48. As of December 2017, no legislation had been enacted. 

However, CMS has taken some actions administratively to understand how to improve its 

oversight of supplemental payments, which are underway. 
Page 43 GAO-18-240 Spending on Physician Training

officials told us that its combined academic years 2012-2013, 2013-2014, 

and 2014-2015 FTE assessment of the 59 teaching health centers in the 

THCGME program identified 6 centers, from 3 unique organizations, that 

had a combined total of 6.63 FTE residents that were duplicative with 

Medicare FTE resident claims, out of over 1,000 FTE residents reviewed 

over that 3-year time period. In addition, HRSA has worked with CMS to 

maintain data for this assessment. For example, at HRSA’s request, CMS 

added a field to the cost reports to check whether any residents from a 

teaching health center rotated to the hospital and, if so, the number that 

rotated from a teaching health center. However, these agencies do not 

have procedures in place to identify potentially duplicative payments 

between their programs and Medicaid GME payments, which totaled $2.3 

billion in federal Medicaid spending in 2015.69 There is no federal 

requirement that CMS identify potentially duplicative payments between 

Medicaid GME payments and other federal GME programs. And, without 

better data collected about Medicaid GME payments, there is limited 

information available to identify potentially duplicative payments between, 

for example, HRSA’s GME programs and Medicaid GME payments.

HRSA and VA, which combined provided 13 percent of total federal GME 

funding in 2015, use the information collected for ongoing program 

performance measurement and program evaluation. HRSA evaluates the 

performance of its payment programs. To do so, HRSA collects 

information on program outcomes, such as whether supported residents 

received training in, or went on to practice in, a medically underserved 

area, a primary care setting, or rural area. HRSA uses these performance 

measures for ongoing evaluations, for internal and congressional 

reporting, and in its budget justification. In addition, HRSA is authorized to 

implement a quality bonus system for the CHGME program, which it 

plans to do by fiscal year 2019.70 VA issues a survey to VA residents to 

assess, among other things, a resident’s likelihood of considering a future 

 69VA does not have processes in place to identify duplicate payments with other federal 

programs. However, through its use of information, such as total FTE resident counts and 

rotation schedules, it verifies that recipients only claimed residents’ time spent within the 

VA medical facility and not in another medical facility that may have received funds from 

another federal source. Similarly, for the Medicare, CHGME, and THCGME payment 

programs, agencies use information collected about residents’ rotation schedules to 

ensure that recipients only report residents’ time spent in allowable settings and activities. 

70Federal law provides that, under the bonus system, HRSA will distribute payments to 

CHGME participating hospitals that meet standards specified by HRSA that may include a 

focus on, for example, interpersonal and communication skills, delivering patient-centered 

care, and practicing in integrated health systems. 42 U.S.C. § 256e(h)(6)(B).
Page 44 GAO-18-240 Spending on Physician Training

employment opportunity at a VA medical facility. VA medical facilities are 

required to collect detailed records of residents’ participation in assigned 

educational activities and they must evaluate each resident according to 

accrediting body requirements, such as patient care and medical 

knowledge. VA medical facilities are also required to produce an annual 

report on each GME training program that includes, among other things, 

the accreditation status of its GME training programs, its response to 

results of the resident satisfaction survey, and opportunities for 

improvement in residents’ education.

CMS, however, does not use the information it collects for Medicare or 

Medicaid to evaluate the performance of these programs toward meeting

physician workforce goals, even though they accounted for 87 percent of 

federal GME spending in 2015. As noted, Medicaid programs are 

administered at the state level. For Medicare, CMS officials said that their 

goal is to ensure hospitals are paid according to the GME statutes and 

regulations. It does not use information collected to evaluate the 

performance of Medicare GME payments, such as evaluating the number 

of residents supported by specialty or whether residents went on to 

practice in rural areas, primary care, or in medically underserved areas. 

The officials further noted that Medicare is an insurance program, and not 

among the health care workforce programs that are under the purview of 

HRSA. Although CMS officials told us that they coordinate with HRSA 

regarding Medicare GME payments, HRSA does not conduct research to 

inform GME policy related to CMS’s GME payments. Also, in a 2015 

report, we found that HHS lacks performance measures of Medicare 

GME payments that are directly aligned with areas of health care 

workforce needs identified in HRSA workforce projections.71

Information that agencies collect is not always complete, especially 

information about Medicaid GME spending. As previously noted, CMS 

collects limited information about the amount of Medicaid GME payments 

and how these payments support GME training, such as the number or 

type of residents supported. In addition, agencies did not collect or use 

the following information, with some exceptions, to understand the federal 

investment in GME training:

 71GAO-16-17. 

Agencies Do Not Collect 

Sufficient Information for 

HHS to Comprehensively 

Understand the Federal 

Investment in GME 

Training
Page 45 GAO-18-240 Spending on Physician Training

• Payment Amounts by Recipient Characteristics: With the 

exception of HRSA’s CHGME and THCGME programs, agencies do 

not collect information on payment amounts to training programs with 

specific characteristics, such as payment amounts by the type of 

training programs supported. This information would be needed, for 

example, to compare the payment rates of each program to the costs 

of training residents in the teaching sites supported.

• GME Costs and Revenues: Agencies did not collect information 

about funding recipients’ indirect costs or revenue generated from 

resident activities, with the exception of HRSA’s THCGME program.72

Also as previously noted, the costs that hospitals are required to 

report annually on their Medicare cost report may not be complete or 

consistent, nor, according to CMS officials we interviewed, is this 

information audited and used except in limited cases. No information 

is collected by CMS about direct or indirect training costs incurred by 

recipients of Medicaid GME payments, and only eight state Medicaid 

agencies reported on our survey that they require recipients to report 

information about their direct costs.

• Output or Outcome Measures: Unlike HRSA and VA, CMS does not 

collect information for the GME training programs that it supports 

through Medicaid to assess outputs or outcomes related to health 

care workforce planning. In addition, while CMS uses IRIS to collect 

information on the number and type of residents and their number of

years completed in all types of GME training programs of residents 

supported by Medicare GME payments, it does not use it to 

understand the output of such spending or for health care workforce 

planning.73 CMS also does not collect information on the outcomes 

associated with Medicare GME payments, such as whether residents 

who were supported by Medicare went on to practice primary care 

specialties or in rural or medically underserved areas. Further, 

although HRSA collects data about the outcomes of its CHGME and 

THCGME programs, this information is self-reported by funding 

 72Experts who conducted the one-time THCGME cost evaluation said that they collected 

all possible costs associated with the GME programs, including those that may have 

otherwise been considered as indirect costs. 

73Hospitals that received Medicare GME payments previously submitted their IRIS files to 

their regional MAC, which limited the ability to centrally compare and access information 

across MACs. Because some residents rotate to hospitals outside of a MAC’s jurisdiction, 

they did not have access to the rotation hospital’s IRIS file from another MAC in order to 

verify that the hospital accurately reported its FTE resident count. To address this issue, 

CMS launched a new national IRIS database in April 2017.
Page 46 GAO-18-240 Spending on Physician Training

recipients. However, HRSA officials told us that it has taken steps to 

validate the information reported. For example, it has started to collect 

residents’ national provider identifiers for residents supported by the 

CHGME and THCGME programs, which is used to validate resident 

FTE counts and reported outcomes, such as whether residents went 

on to practice in primary care.

• Quality Measures: Agencies generally require that GME training 

programs be accredited in order to receive funding, and accrediting 

bodies are responsible for evaluating the educational quality of GME 

training programs. In addition, HRSA and VA collect some information 

about the learning experiences of residents in GME training programs 

supported, such as whether residents received training in certain topic 

areas. HHS and its advisory bodies have proposed tying federal 

funding to the performance of the programs.74 For example, the 

President’s budget proposals for fiscal years 2015, 2016, and 2017 for 

HHS proposed to Congress that it be allowed to set standards for 

teaching hospitals that receive Medicare GME payments to 

emphasize skills that promote high quality and high value in health 

care. In addition, the National Academy of Medicine has called for 

improved measures of the performance of GME training programs, 

and as of October 2017, it had an initiative to identify quality and other 

measures, such as residents’ competency or patient outcomes of care 

provided by residents.75

Information is also not always consistently collected within programs or 

standardized across programs. For example, VA medical facilities report 

information centrally to VA about their total payments to academic 

affiliates, but they inconsistently used accounting codes to report the total 

amount that they spent and did not report the amount they paid each 

academic affiliate, limiting the reliability of data VA collects on the total 

amount spent on GME. Additionally, VA medical facilities are required to 

report annually to VA their approved payment rates that each affiliate 

charges, but VA was unable to provide payment rate schedules for all 

affiliates in fiscal year 2015. Across all agencies, information about the 

number of FTE residents supported was collected at, and for, generally 

 74See, for example, Medicare Payment Advisory Commission, Report to the Congress, 

(2010); and Council on Graduate Medical Education, The Role of Graduate Medical 

Education in the New Health Care Paradigm, Twenty Second Report (Rockville, Md.: 

November 2014); and National Academy of Medicine, Graduate Medical Education, 2014. 

75D. F. Weinstein, “Optimizing GME by Measuring Its Outcomes,” New England Journal of 

Medicine vol. 377, no. 21 (2017): 2007-2009.
Page 47 GAO-18-240 Spending on Physician Training

different points in time and through different reporting systems. (See table 

12.) For example, HRSA generally collects FTE resident information 

through applications or supporting documentation prior to and at the end 

of a fiscal year, while VA collects such information in monthly or quarterly 

invoices throughout an academic year. And, CMS collects similar FTE 

resident information through cost reports and IRIS files based on each 

hospital’s own cost reporting period, which can vary by hospital. In 

addition, the five federal programs do not consistently use the same 

unique identifiers for their funding recipients, such as a hospital’s 

Medicare provider identification number, or individual residents 

supported, such as their national provider identifier, which limits the ability 

to link data across programs.76

Table 12: Information that Agencies Collect about the Number and Type of Residents Supported by Federal Funding for 

Graduate Medical Education (GME) Training 

Federal Program Description of information collected Reporting timeline

Centers for Medicare & Medicaid Services (CMS)

Medicare GME 

Payments

On their cost report, hospitals must report the aggregate number 

of unweighted full-time equivalent (FTE) residents as well as the 

total number of weighted primary care and nonprimary care FTE 

residents. Hospitals must also submit their Intern and Resident 

Information System (IRIS) files, which contain data on each 

resident’s specialty and number of years completed in all types 

of residency programs. 

End of a hospital’s cost reporting year, which 

can vary by hospital.

Medicaid GME 

Payments

CMS does not require state Medicaid agencies or teaching 

institutions to report any information about the number or 

characteristics of residents supported by Medicaid GME 

payments. 

Not applicable 

Health Resources and Services Administration (HRSA)

Children’s Hospitals 

GME Payment 

Program

Like Medicare teaching hospitals, most children’s hospitals must 

submit, through Medicare cost reports, their aggregate number 

of unweighted FTE residents and weighted primary care and 

nonprimary care FTE residents. Children’s hospitals must also 

submit IRIS files, which contain data on each resident. In 

addition, children’s hospitals must submit, with their initial 

application, documentation of the aggregate number of eligible 

FTE residents in the most recently completed cost reporting 

period. And, in a reconciliation application, children’s hospitals 

must report any changes in the number of FTE residents 

reported in their initial applications.

Cost reports and IRIS files are due at the end 

of a hospital’s cost reporting period.

Initial applications are due prior to the start of 

the fiscal year, and reconciliation applications 

are due in the third quarter of the fiscal year.

 76According to HRSA officials, the agency collects residents’ national provider identifier for 

the CHGME and THCGME payment programs.
Page 48 GAO-18-240 Spending on Physician Training

Federal Program Description of information collected Reporting timeline

Teaching Health 

Center GME 

Program

In their initial applications, applicants must submit 

documentation of the aggregate number of eligible FTE 

residents planned for the academic year as well as the number 

by postgraduate year level. Teaching health centers must also 

report, through a reconciliation tool, each resident’s time paid for 

by the health center as opposed other sources.

Initial applications are due prior to the start of 

the fiscal year, and the reconciliation tool is 

must be submitted at the end of the fiscal 

year.

Department of Veterans Affairs (VA)

VA Physician GME 

Program

Academic affiliates must submit the planned number of resident 

positions to rotate to VA by training program and post-graduate 

year level of training. And, they must submit monthly or quarterly 

invoices that detail, among other things, the number of VAassigned residents for each training program by post-graduate 

year level.

The planned number of resident positions is 

due prior to the start of an academic year. 

Invoices are due quarterly or monthly 

throughout the academic year.

Source: GAO analysis of information from CMS, HRSA, and VA. | GAO-18-240

In some cases, data collection may vary across the various GME 

programs based on program requirements. Additionally, GME funding 

recipients may be required by law to report certain types of information for 

some programs, but not for others. For example, THCGME recipients are 

required to report on the number of residents trained at the health centers 

who completed their residency and care for vulnerable populations living 

in underserved areas. Relatedly, CHGME funding recipients are required 

to report the number of residents trained at the hospital who completed 

their residency training and care for children within the service area of the 

hospital or state in which the hospital is located. No similar requirements 

apply to Medicare GME recipients.

Because the information that agencies collect is not always complete or 

consistent, HHS does not have sufficient information available to 

comprehensively evaluate the federal programs that fund GME training. 

As a result, HHS cannot identify problems and make or recommend 

changes to Congress in order to improve the efficient and effective use of 

federal funds. Under leading practices we derived from GPRA and 

GPRAMA and federal standards for internal controls, agencies should 

identify and collect complete and reliable information needed to evaluate 

the performance of federal programs, while balancing the administrative 

costs of such efforts. In addition, agencies should use that information to 

monitor performance of programs in order to identify problems and make 

changes or recommendations to Congress for improvements. 

Improvements in the performance monitoring can enhance and sustain 

collaboration and reduce fragmentation within and across federal 

agencies that administer programs that fund GME training. However, 
Page 49 GAO-18-240 Spending on Physician Training

because of limitations with the information agencies collect, HHS does 

not have information available to comprehensively understand across all 

programs that fund GME training, for example, the:

1. Total amount that the federal government spends on GME training 

that includes total Medicaid GME spending and the total amount VA 

medical facilities paid to academic affiliates;

2. The amount the federal government paid each recipient for GME 

training, such as the amount paid to each VA academic affiliate;

3. Distribution of funding—that is, the amount of funding by GME training 

program characteristics, including program type;

4. Extent to which the net cost of training residents, including the 

variation in costs along different factors that were previously 

discussed, are accurately represented by formulas used to calculate 

payments;

5. Output and outcomes of GME training funded by federal programs—

that is, how many and what type of residents the federal government 

supports, where those residents trained and went on to practice, and 

whether those residents will help address future health care workforce 

needs; and

6. Quality of GME training programs that are supported by the federal 

government, such as whether residents participated in certain 

educational activities or the practice readiness or competence of 

residents who completed GME training programs supported.

HHS’s advisory bodies and stakeholders have made calls for 

improvements in the accountability and transparency of federal programs 

that fund GME training. For example, the Medicare Payment Advisory 

Commission recommended greater accountability and transparency for 

Medicare GME payments by making information about Medicare GME 

payments and teaching costs available to the public.77 And, the National 

Academy of Medicine recommended that a GME Center within the 

Centers for Medicare & Medicaid Services be created to be responsible 

for, among other things, data collection and detailed reporting to ensure 

transparency in the distribution and use of Medicare GME payments.78

 77See Medicare Payment Advisory Commission, Report to the Congress (2010).

78See National Academy of Medicine, Graduate Medical Education, 2014. 
Page 50 GAO-18-240 Spending on Physician Training

The federal government is an important source of funds for GME training, 

and through its funding and workforce planning efforts, HHS, as the 

largest funder of GME training, has an important role in ensuring federal 

programs are meeting the nation’s workforce needs. For HHS to carry out 

the comprehensive planning approach that we recommended in 2015, 

complete and consistent information on GME training is important. 

However, the information currently collected is insufficient for this 

purpose. For example, HHS lacks comprehensive information on the total 

number and specialty type of residents supported by all of the federal 

programs that fund GME training. But, HHS may have the opportunity to 

improve the information that its component agencies collect about how 

federal funding is used to support GME training to determine whether 

these programs are meeting these needs. New data collection efforts 

could potentially increase certain administrative costs for the federal 

government and providers. However, unless HHS collects more complete 

and consistent information, it will be limited in its ability to conduct 

comprehensive, ongoing evaluations of the federal government’s $14.5 

billion annual investment in GME training. Such evaluations could allow 

HHS and other federal agencies to make programmatic changes, or make 

recommendations to Congress if legislative authority is needed, to 

improve the cost effectiveness of current federal funding. In addition, 

collecting more complete information could help HHS and other federal 

agencies better manage fragmentation in spending, management, and 

oversight of federal programs that fund GME training.

We are making the following two recommendations to HHS:

The Secretary of HHS should coordinate with federal agencies, including 

VA, that fund GME training to identify information needed to evaluate the 

performance of federal programs that fund GME training, including the 

extent to which these programs are efficient and cost-effective and are 

meeting the nation’s health care workforce needs. (Recommendation 1)

The Secretary of HHS should coordinate with federal agencies to identify 

opportunities to improve the quality and consistency of the information 

collected within and across federal programs, and implement these 

improvements. (Recommendation 2)

Conclusions

Recommendation for 

Executive Action
Page 51 GAO-18-240 Spending on Physician Training

We provided a draft of this product to HHS and VA for comment. In its 

comments, reproduced in appendix III, HHS concurred with our two 

recommendations to identify and improve information collected to 

evaluate the performance of federal GME programs. HHS noted that the 

President’s fiscal year 2019 budget for HHS, released on February 12, 

2018, proposed consolidating federal spending from Medicare, Medicaid, 

and the CHGME Payment Program into a single grant program for 

teaching hospitals.79 The proposed program would be jointly operated by 

CMS and HRSA and grant HHS authority to modify GME payment 

amounts based on criteria, including addressing health care workforce 

shortages. HHS stated that the program would allow the department to 

set priorities, reward performance, and align reporting metrics across its 

GME efforts. HHS indicated that, if the Congress adopts this proposal, it 

could work toward addressing both recommendations. It is important to 

note, however, that the recommendations in this report stand on their own 

and are separate from any efforts to modify how federal GME funds are 

distributed. Whether or not legislation is enacted to implement a 

consolidated federal GME grant program, HHS still needs to take actions 

to improve the information that agencies collect about how federal funding 

is used to support GME training. Such actions are important for HHS to 

assess the cost effectiveness of federal efforts to help meet the nation’s 

physician workforce needs.

HHS also provided technical comments, which we incorporated as 

appropriate. 

In its comments, reproduced in Appendix IV, VA said that it has significant 

relationships with other federal funders of GME, including HRSA. In 

addition, VA said it looks forward to further dialogue with other agencies 

to better share GME information. VA did not provide technical comments.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 20 days from the 

report date. At that time, we will send copies of this report to the 

Secretary of Health and Human Services and the Secretary of Veterans 

Affairs. In addition, the report will be available at no charge on GAO’s 

website at http://www.gao.gov.

 79See Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 

2019 (Washington, D.C.: February 2018).

Agency Comments 

and Our Evaluation
Page 52 GAO-18-240 Spending on Physician Training

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our 

Office of Congressional Relations and Office of Public Affairs can be 

found on the last page of this report. Other major contributors to this 

report are listed in appendix V.

James Cosgrove

Director, Health Care
Page 53 GAO-18-240 Spending on Physician Training

List of Requesters

The Honorable Greg Walden

Chairman

Committee on Energy and Commerce

House of Representatives

The Honorable Kevin Brady

Chairman

Committee on Ways and Means

House of Representatives

The Honorable Todd Young

United States Senate

The Honorable Gus M. Bilirakis

House of Representatives

The Honorable Diane Black

House of Representatives

The Honorable Marsha Blackburn

House of Representatives

The Honorable Vern Buchanan

House of Representatives

The Honorable Bill Flores

House of Representatives

The Honorable Morgan Griffith

House of Representatives

The Honorable Brett Guthrie

House of Representatives

The Honorable Bill Johnson

House of Representatives

The Honorable Sam Johnson

House of Representatives
Page 54 GAO-18-240 Spending on Physician Training

The Honorable Mike Kelly

House of Representatives

The Honorable Robert E. Latta

House of Representatives

The Honorable Billy Long

House of Representatives

The Honorable Kenny Marchant

House of Representatives

The Honorable David McKinley

House of Representatives

The Honorable Cathy McMorris Rodgers

House of Representatives

The Honorable Kristi Noem

House of Representatives

The Honorable Devin Nunes

House of Representatives

The Honorable Pete Olson

House of Representatives

The Honorable Jim Renacci

House of Representatives

The Honorable Adrian Smith

House of Representatives

The Honorable Jason Smith

House of Representatives

The Honorable Fred Upton

House of Representatives
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 55 GAO-18-240 Spending on Physician Training

In addition to federal funding, state governments—including state 

Medicaid agencies—and private sources also support graduate medical 

education (GME) training.1 However, little is known about these other 

sources. Therefore, we analyzed Medicare cost report data to determine 

the extent to which teaching hospitals were operating above their FTE 

resident caps in 2015—an indication of the extent to which hospitals may 

receive other sources of GME funding, such as state or private sources. 

We also surveyed state Medicaid Directors from 50 states and the District 

of Columbia to collect information on how and the extent to which states 

paid for GME training through Medicaid payments, and the states’ related 

reporting requirements and oversight activities.2 As part of our interviews 

with experts from research and industry organizations, we asked about 

state and private sources of funding for GME training and what is known 

about the amount of such funding.

Teaching hospitals likely utilize state and private sources of funding, as 

well as other federal funding, to pay for residents beyond those paid for 

by Medicare—the largest federal funder of GME training. Hospitals have 

continued to add residents over time even though for most hospitals 

Medicare capped funding based on their number of full-time-equivalent 

(FTE) residents in 1996. In 2015, about half of teaching hospitals that 

receive Medicare GME payments had expanded their GME training 

programs above their Medicare FTE cap, and the extent to which they 

operate above their cap varied by hospital. We found that 47 percent of 

teaching hospitals were operating their GME training programs above 

their Medicare FTE cap on direct GME (DGME) payments. These 

hospitals had an average of 30.8 additional FTE residents above their 

DGME cap, ranging from 1.0 to 284.3 additional FTE residents.3

Most states (45) paid for GME training through their Medicaid programs in 

2015; however, states varied in the payment model that they used to 

make Medicaid payments for GME training, though most used fee-for-

 1

See National Academy of Medicine, Graduate Medical Education 2014; and Council on 

Graduate Medical Education, State and Managed Care Support for Graduate Medical 

Education: Innovations and Implications for Federal Policy (Rockville, Md.: July 2004).

2

To develop the survey, we reviewed other surveys of state Medicaid GME payments, 

interviewed experts in state Medicaid GME spending, and pre-tested the survey in four 

states. 

3

Slightly more than half (52 percent) of teaching hospitals were operating above their FTE 

cap on Medicare IME payments. These hospitals had an average of 32.9 additional FTE 

residents above their IME cap, ranging from 1.0 to 482.7 additional FTE residents. 

Appendix I: State Medicaid Agency and 

Other State and Private Sources of Graduate 

Medical Education Funding
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 56 GAO-18-240 Spending on Physician Training

service payments, including supplemental payments. Of the 45 state 

Medicaid agencies that paid for GME training, 25 states did so through 

fee-for-service payments only; 19 states did so through both fee-forservice and managed care payments; and 1 state (New Jersey) made 

managed care payments only.

• Of the 44 states that paid for GME through Medicaid fee-for-service 

payments, 21 states paid as an add-on to its fee-for-service rate, and 

31 states paid through lump sum supplemental or other payments.

4

• Of the 20 states that made Medicaid managed care payments for 

GME, 12 paid teaching sites directly and 10 states made GME 

payments through managed care plans.

• Of the 19 states that paid for GME through both Medicaid fee-forservice and managed care, fee-for-service GME payments made up 

48 percent of all Medicaid GME payments, on average, while 

managed care payments made up 52 percent. (See table 13.)

Table 13: Amount of Medicaid Graduate Medical Education (GME) Spending (Federal and State Share) and Percentage Paid 

through Fee-for-Service or Managed Care by State, 2015

State Pays for 

GME 

training 

Total

(dollars)

State share

(dollars)

Federal share

(dollars)

Fee-for-service 

payments

(percent)

Managed 

care

payments

(percent)

Alabama Yes 43,097,505 13,364,536 29,732,969 100 0

Alaska No n/a n/a n/a n/a n/a

Arizona Yes 162,992,580 51,909,062 111,083,518 100 0

Arkansas Yes 24,471,575 7,126,123 17,345,452 100 0

California No n/a n/a n/a n/a n/a

Colorado Yes 12,788,757 6,297,504 6,491,253 87 13

Connecticut Yes 20,538,469 10,269,235 10,269,235 100 0

Delaware Yes 1,055,836 485,157 570,679 51 49

District of 

Columbia

Yes 62,852,747 18,855,824 43,996,923 77 23

Florida Yes 79,980,644 32,344,176 47,636,468 100 0

Georgia Yes 45,992,410 15,320,072 30,672,338 56 44

Hawaii Yes — — — — —

 4

In their description of “other payments,” some states described the payments as 

supplemental payments. Four states paid for GME training through both lump sum 

supplemental payments and add-ons to the fee-for-service rate. 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 57 GAO-18-240 Spending on Physician Training

State Pays for 

GME 

training 

Total

(dollars)

State share

(dollars)

Federal share

(dollars)

Fee-for-service 

payments

(percent)

Managed 

care

payments

(percent)

Iowa Yes 23,811,297 10,443,635 13,367,662 100 0

Idaho Yes 2,379,846 713,956 1,665,890 100 0

Illinoisa Yes 3,000,000 1,500,000 1,500,000 — —

Indiana Yes 40,003,743 13,353,248 26,650,495 75 25

Kansas Yes 14,509,126 6,282,452 8,226,674 7 93

Kentucky Yes 9,668,045 2,906,214 6,761,831 13 87

Louisiana Yes 28,640,247 10,866,110 17,774,137 62 38

Maine Yes 13,384,267 5,075,314 8,308,953 100 0

Maryland Yes 48,729,611 24,364,805 24,364,805 — —

Massachusetts No n/a n/a n/a n/a n/a

Michigan Yes 148,378,700 51,131,297 97,247,403 42 58

Minnesota Yes 83,626,874 55,505,617 28,121,257 43 57

Missouri Yes 129,658,845 47,502,119 82,156,726 100 0

Mississippi Yes 33,588,943 8,874,198 24,714,745 100 0

Montana Yes 1,523,067 519,366 1,003,701 100 0

Nebraska Yes 11,200,753 5,192,669 6,008,084 0 100

Nevada Yes 12,558,221 4,515,308 8,042,913 100 0

New Hampshire No n/a n/a n/a n/a n/a

New Jersey Yes 100,000,000 50,000,000 50,000,000 0 100

New Mexico Yes 68,752,386 20,866,349 47,886,037 100 0

New York Yes 1,739,277,715 869,638,858 869,638,858 27 73

North Carolina Yes 77,695,273 26,525,166 51,170,107 100 0

North Dakota No n/a n/a n/a n/a n/a

Ohio Yes 259,881,068 96,844,680 163,036,388 42 58

Oklahoma Yes 140,931,567 52,492,776 88,438,791 31 69

Oregon Yes 61,748,548 22,343,500 39,405,048 33 67

Pennsylvania Yes 118,398,033 56,819,216 61,578,817 100 0

Rhode Island Yes 1,000,000 1,000,000 0 100 0

South Carolina Yes 116,642,238 34,269,491 82,372,747 35 65

South Dakota Yes 2,845,832 1,376,244 1,469,588 100 0

Tennessee Yes 50,000,000 17,467,499 32,532,501 100 0

Texas Yes 170,619,557 71,489,594 99,129,962 53 47

Utah Yes 6,224,847 1,833,448 4,391,400 100 0

Vermont Yes 30,000,000 13,054,500 16,945,500 100 0

Virginia Yes 151,952,065 75,976,033 75,976,033 63 37
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 58 GAO-18-240 Spending on Physician Training

State Pays for 

GME 

training 

Total

(dollars)

State share

(dollars)

Federal share

(dollars)

Fee-for-service 

payments

(percent)

Managed 

care

payments

(percent)

Washington Yes 11,019,018 5,509,509 5,509,509 13 87

West Virginia Yes 10,025,192 2,878,734 7,146,458 100 0

Wisconsin Yes 534,199 221,853 312,346 100 0

Wyoming No n/a n/a n/a n/a n/a

Total 45 4,175,979,646 1,825,325,447 2,350,654,201 48 52

Average 94,908,628 53,423,959 41,484,669 72 28

Median 36,796,343 24,539,775 13,203,874 100 0

Legend: n/a = not applicable; — = not available

Source: GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

Notes: Although Hawaii made Medicaid payments for GME, the state did not provide data on the 

amount of Medicaid spending. In addition, two states—Illinois and Maryland—could not provide data 

on the amount of Medicaid GME spending paid through fee-for-services versus managed care 

payments.

a

Although Illinois provided an estimate of the overall amount the state spent on Medicaid payments 

for GME training, the state could not provide data on the amount paid to each recipient of Medicaid 

GME funding.

While some states followed the Medicare formula for calculating GME 

payments, most have deviated from this method. Of the 43 states that 

responded about how they calculated the amount of GME payments, 10 

states reported that they followed the Medicare GME payment formula to 

calculate Medicaid fee-for-service payments for GME training. In addition, 

two states followed Medicare’s formula for making managed care 

payments for GME training. Most states (32) followed another method.5

Medicaid GME payments per FTE resident varied by state and within 

states, even after adjusting for geographic differences in labor costs.6

Specifically, the average combined federal and state payment per FTE 

 5

Medicare DGME payments are calculated in part using the portion of a hospital’s total 

inpatient bed days that were paid for by Medicare Part A fee-for-service payments and 

Medicare Part C managed care payments. Similar to Medicare, some state Medicaid 

agencies made Medicaid GME payments based on the portion of teaching hospitals’

Medicaid patients that were managed care patients. 

6

We adjusted payments per FTE by the 2015 Centers for Medicare & Medicaid Services 

wage index to account for geographic differences in the cost of labor. 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 59 GAO-18-240 Spending on Physician Training

resident ranged from $2,108 in Rhode Island to $100,587 in Arizona.7

(See table 14.) The payment per FTE resident also varied within states. 

The Medicaid payment per FTE varied the most within Ohio, where the 

state reported payments ranging from $1,415 per FTE to $453,098 per 

FTE.

Table 14: Medicaid Spending (Federal and State Share) on Graduate Medical Education (GME) Training per Full-Time 

Equivalent (FTE) Resident by State, 2015

State Number of 

funding 

recipients

Number of 

FTE residents

Spending per FTE resident (dollars)

Average Median Minimum Maximum

Alabama 15 — — — — —

Arizona 12 1,351.6 100,587 108,004 24,120 170,615

Arkansas 19 1,074.8 16,119 7,959 119 104,023

Colorado 21 — — — — —

Connecticut 17 1,570.0 9,780 10,634 990 13,712

Delaware 3 — — — — —

District of Columbia 8 — — — — —

Florida 52 3,951.3 23,844 21,163 18,581 53,119

Georgia 18 — — — — —

Hawaii — — — — — —

Iowa 17 845.9 28,638 28,752 11,473 51,523

Idaho 21 — — — — —

Illinois 22 — — — — —

Indiana 34 3,263.6 34,241 22,810 53 135,134

Hawaii — — — — — —

Kansas 6 119.0 58,044 53,680 42,743 77,709

Kentucky 15 787.0 9,621 10,018 2,350 21,086

Louisiana 18 1,847.9 14,446 11,130 5 56,178

Maine 4 — — — — —

Maryland 17 — — — — —

Michigan 57 8,679.1 12,345 9,221 3,185 60,496

Minnesota 292 3,230.4 38,548 29,743 1,056 184,078

Missouri 29 — — — — —

 7

Of the 45 states that pay for GME training through Medicaid, 21 were unable to provide 

FTE resident information, and thus were not included in this calculation. Medicaid 

spending in these states represents 19 percent of total (federal and state) Medicaid 

spending on GME training.
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 60 GAO-18-240 Spending on Physician Training

State Number of 

funding 

recipients

Number of 

FTE residents

Spending per FTE resident (dollars)

Average Median Minimum Maximum

Alabama 15 — — — — —

Mississippi 5 — — — — —

Montana 4 27.0 68,128 55,322 40,430 121,437

Nebraska 10 — — — — —

Nevada 1 154.9 73,576 73,576 73,576 73,576

New Jersey 42 3,224.5 18,821 17,134 1,268 63,004

New Mexico 5 396.1 58,082 24,726 24,555 190,002

New York 93 15,518.1 70,775 59,950 3,534 277,540

North Carolina 17 — — — — —

Ohio 56 6,029.0 47,520 35,275 1,415 454,513

Oklahoma 13 — — — — —

Oregon 8 — — — — —

Pennsylvania 84 8,868,0 10,892 9,446 190 38,231

Rhode Island 1 420.7 2,108 2,108 2,108 2,108

South Carolina 14 1,008.7 68,883 68,374 3,437 172,650

South Dakota 3 99.9 30,569 30,345 24,923 36,439

Tennessee 4 — — — — —

Texas 65 6,184.2 22,036 15,076 615 263,731

Utah 8 — — — — —

Vermont 1 — — — — —

Virginia 37 4,814.4 35,047 23,070 110 336,483

Washington 22 — — — — —

West Virginia 11 736.3 13,586 10,993 6,453 24,652

Wisconsin 3 — — — — —

Legend: n/a = not applicable; — = not available

Source: GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

Notes: Eighteen states could not provide data on either the number of residents or full-time equivalent 

residents supported, and three states—North Carolina, Tennessee, and Vermont—provided data on 

the number of residents but not the number of FTE residents. Medicaid spending in these 21 states 

represents 19 percent of total (federal and state) Medicaid spending on GME training. We adjusted 

the amount of funding received per FTE resident by the 2015 Centers for Medicare & Medicaid 

Services wage index to account for geographic differences in the cost of labor.

About half of the states (22 of 45) reported that they specified the type of 

expenses that its Medicaid GME payments were intended to cover. Of 

these 22 states, payments were intended to cover the costs of residents’

salaries and benefits (14 states), faculty salaries and benefits (11 states), 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 61 GAO-18-240 Spending on Physician Training

program administration costs (10 states), or indirect medical education 

costs (8 states).

Some state Medicaid agencies have tied their payments to incentives to 

expand the physician workforce. Of the 45 states that reported Medicaid 

GME payments in 2015, 4 states—Alabama, Montana, New Mexico, and 

South Dakota—reported that they restrict payments to the training of 

primary care physicians only.8 (See table 15.) An additional 9 states 

required that the funding recipient have a primary care residency 

program. In addition, according to experts we interviewed, states have 

been considering how to target Medicaid GME payments to meet state 

workforce needs. For example, one expert said some states have used 

Medicaid payments to expand GME training of physicians in outpatient, 

ambulatory care settings. However, Medicaid GME payments generally 

go to hospitals. Specifically, 44 of the states reported making payments to 

hospitals and 7 states paid other teaching sites, such as teaching health 

centers. The one state that did not make payments to teaching hospitals 

directed all Medicaid payments for GME training to medical schools. 

Further, one expert we interviewed told us that it is difficult for states to 

change their GME financing models to direct funding to specific workforce 

goals because hospitals are reliant on state GME payments to support 

certain residency positions. Instead, states have used a moderate 

approach, such as providing additional funding targeted to specific 

training, rather than a complete funding overhaul that would redistribute 

existing funds.

 8

One state did not respond to the survey question about the type of health professionals’

training that its Medicaid GME payments were intended to cover.

Nearly half (20 of 45 states) also permitted Medicaid GME payments to be used to support 

the training of other health professionals, such as dentists, physician assistants, or nurses. 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 62 GAO-18-240 Spending on Physician Training

Table 15: Health Care Professionals Training Eligible for Medicaid Graduate Medical Education (GME) Payments by State, 

2015

Type of Health Professional Number of States Statesa

Any type of physician 44 AL, AZ, AR, CO, CT, DE, DC, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, 

MI, MN, MS, MO, MT, NE, NV, NJ, NM, NY, NC, OH, OK, OR, PA, RI, SC, 

SD, TN, TX, UT, VT, VA, WV, WI

Primary care physicians only 4 AL, MT, NM, SD

Dentists and podiatrists 15 AR, CT, GA, IN, MI, MN, MS, NE, NJ, NY, NC, OH, OR, TX, VA

Physician assistants and nurse 

practitioners

10 IN, IA, KS, LA, MN, MS, OH, OR, VA, WV

Nurses 9 IN, IA, KS, LA, MN, MS, OH, VA, WV

Allied health professionals 8 IN, IA, LA, MN, MS, OH, VA, WI

Other health professionals 5 IN, MN, MS, OH, WV

Sources: GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

Note: Six states—Alaska, California, Massachusetts, New Hampshire, North Dakota, and Wyoming—

did not make Medicaid payments for GME funding in 2015.

a

One state that reported that it made Medicaid payments for GME training—Washington—did not 

respond to our question about the types of health professionals’ training that Medicaid GME 

payments were intended to cover.

Despite the significant investment in GME training by state Medicaid 

agencies, which is matched by the federal government, the extent of state 

oversight of Medicaid GME spending varied by state. As previously 

mentioned, less than half of the states (20 of 45) required teaching sites 

that received Medicaid GME payments to report information to the state.9

(See table 16.) Among these 20 states, 16 required recipients to report 

information on the number of residents or FTE residents, 8 states 

required information about direct medical education costs, 6 states 

required information about the GME training program specialties 

supported, and 4 states required recipients to report information about the 

residents’ characteristics, such as their post-graduate year. Of the 10 

states that made Medicaid GME payments to managed care plans, 4 

states—Kansas, Kentucky, Michigan, and Minnesota—set the 

methodology or base rate that managed care plans were required to use 

to calculate GME payments. None of the states reviewed and approved 

payments.

 9

Among the 20 states that paid for GME through managed care (either to managed care 

plans or directly to teaching entities), few states (6 of 20) required recipients of GME 

payments to report information to the state. 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 63 GAO-18-240 Spending on Physician Training

Table 16: Reporting Requirements for Medicaid Graduate Medical Education (GME) Training by State, 2015

Type of Information Required to 

be Reported

Number of States States

Number of residents 16 AR, FL, ID, MN, MT, NV, NJ, NM, OH, PA, SD, TN, TX, VT, VA, WI

Direct GME training costs 8 AR, ID, NJ, OH, PA, SD, VA, WI

Type of GME training programs 

supported

6 AZ, FL, MN, PA, VT, WI

Resident characteristics 4 AZ, FL, MN, VT

Indirect medical education costs 3 ID, OH, TN

State required recipients of 

Medicaid GME payments to report 

information to the state

20 AZ, AR, FL, ID, LA, MN, MS, MT, NV, NJ, NM, OH, OK, PA, SD, 

TN, TX, VT, VA, WI

Sources: GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

Note: Six states—Alaska, California, Massachusetts, New Hampshire, North Dakota, and Wyoming—

did not make Medicaid payments for GME funding in 2015.

Further, 44 of the 45 states were able to provide at least some 

information on the total amount the state spent on Medicaid GME 

payments, but the amount of information they were able to provide varied. 

While most states (38) were able to provide data on all GME payments by 

recipient, 4 states could provide data on some but not all payments, and 2 

states could not provide data on the amount of GME payments by 

recipient.10 And, less than half of the states (18 of 45) were unable to 

provide data on either the number of FTE residents or resident counts at 

teaching entities that received Medicaid GME payments.11 (See table 17.)

 10Illinois did not report information on the amount spent by funding recipient. Illinois, 

however, was able to provide an estimate of the total amount of Medicaid GME payments 

that the state made in 2015 and provided a list of recipients of those payments. Slightly 

more than half of states (25 of 45) provided data on the exact amount of the GME 

payments while 16 states could only provide estimates. One state—Alabama—did not 

respond to our question about the completeness of the data the state provided on 

Medicaid GME payments.

11Most states provided data on the number of FTE residents at the teaching entity while 

three states—North Carolina, Tennessee, and Vermont—provided the count of residents 

at the teaching entity. 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 64 GAO-18-240 Spending on Physician Training

Table 17: Recipient and Resident Data Available for State Medicaid Graduate Medical Education (GME) Payments 

Data availability from states Number of 

states

States

GME payments by recipienta

All 38 AZ, AR, CO, CT, DE, DC, FL, GA, ID, IN, IA, KS, KY, LA, ME, MD, MI, MS, 

MO, MT, NV, NJ, NM, NY, NC, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, 

VA, WV

Some 4 MN, NE, WA, WI

No data on payments by 

recipient

2 HI, IL

Number of residents supported

Full-time equivalent residents 24 AZ, AR, CT, FL, IN, IA, KS, KY, LA, MI, MN, MT, NV, NJ, NM, NY, OH, PA, RI, 

SC, SD, TX, VA, WV

Resident counts 3 NC, TN, VT

No data on residents 18 AL, CO, DE, DC, GA, HI, ID, IL, ME, MD, MS, MO, NE, OK, OR, UT, WA, WI

Source: GAO web-based survey administered to state Medicaid agencies. | GAO-18-240

a

One state—Alabama—did not respond to our question about the completeness of the data the state 

provided on Medicaid GME payments.

Experts we interviewed identified other sources of state and private 

funding for GME training.

• Hospitals and health systems: Hospitals may rely on their own 

funding to support their residency programs. One expert we 

interviewed said that hospitals that sponsor GME residency programs 

provide funding for certain specialty residency programs that make 

money for the hospital.

• State government grant or other funding: Aside from GME funding 

through Medicaid, one expert told us that some states make direct 

grants to residency programs, mostly primary care residency 

programs, or through state appropriations specifically for GME 

training. For example, Florida created an $80 million fund to support 

state training in outpatient or community-based programs. And, one 

expert told us that some states have developed innovative funding 

mechanisms. This was the case in Georgia, which established a 

hospital coalition that funded 400 new residency slots to meet the 

needs of medically underserved populations.

• Private health insurers: Experts said GME funding from private 

health insurers is generally thought to be provided through higher 

reimbursement rates to teaching hospitals than nonteaching hospitals, 

including through Medicare reimbursement. While private insurers 

fund GME training through their contracts with individual hospitals, 
Appendix I: State Medicaid Agency and Other 

State and Private Sources of Graduate Medical 

Education Funding

Page 65 GAO-18-240 Spending on Physician Training

one expert told us that those contracts do not likely differentiate the 

amount of funding that is used toward GME training versus other 

activities. However, one expert raised concerns that private insurers 

are not paying their share of GME costs. Another expert noted that 

there have been some state-level efforts to require all payers, 

including private insurers, to have some responsibilities in paying for 

the education of the health care workforce, even beyond physician 

GME training.

• Other: Experts also identified other possible sources of private 

funding. For example, one expert told us that, while the amount of 

funding from pharmaceutical or medical device companies has not 

been identified in existing studies, anecdotally there is a growing use 

of these funding sources. Experts also said that some funding is 

provided by philanthropic organizations or medical schools that are 

affiliated with residency programs.
Appendix II: Information that Federal Programs 

Collect about Funding for Graduate Medical

Education Training

Page 66 GAO-18-240 Spending on Physician Training

Table 18: Selected Information that Federal Agencies Collect about Funding for Graduate Medical Education (GME) Training

Centers for Medicare & 

Medicaid Services (CMS)

Department of 

Veterans 

Affairs (VA)

Health Resources and Services 

Administration (HRSA)

Type of Information Medicare GME 

Payments

Medicaid 

GME 

Paymentsa

VA Physician 

GME 

Payments

Children’s 

Hospitals GME 

Payment Program

Teaching Health 

Center GME 

Program 

Amount Spent on GME Training

Total amount spent √ √b √ √ √

by funding recipient √ — —c √ √

by residency program — — — — √

Costs and Revenues of GME 

Training Programs Supported

Direct GME costs, such as 

residents’ stipends and benefits

√ — √d — √

Indirect medical education costs — — — — √e

Revenue generated by residents — — — — √

Output of GME Training Programs 

Supported

Total number of resident positions 

or FTE residents 

√ — √ √ √

Count of residents or FTE 

residents by type of residency 

program

√ — √ √ √

Count of residents or FTE 

residents by their number of years 

completed in all types of residency 

programs

√ — √ √ √

Whether the resident is an 

underrepresented minority

— — — √ √

Whether the resident is from a 

disadvantaged background

— — — √ √

Whether the resident is from a 

rural area

— — — √ √

Resident rotation schedules or 

other documentation of time 

residents’ spent training at other 

sites 

√ — √ √ √

Whether residents received 

training in a nonhospital or primary 

care setting

√ — — √ √

Whether residents received 

training in a medically underserved 

area

— — — √ √

Appendix II: Information that Federal 

Programs Collect about Funding for 

Graduate Medical Education Training
Appendix II: Information that Federal Programs 

Collect about Funding for Graduate Medical 

Education Training

Page 67 GAO-18-240 Spending on Physician Training

Centers for Medicare & 

Medicaid Services (CMS)

Department of 

Veterans 

Affairs (VA)

Health Resources and Services 

Administration (HRSA)

Type of Information Medicare GME 

Payments

Medicaid 

GME 

Paymentsa

VA Physician 

GME 

Payments

Children’s 

Hospitals GME 

Payment Program

Teaching Health 

Center GME 

Program 

Whether residents received 

training in a rural area

—f — — √ √

Outcome of GME Training Programs 

Supportedg

Whether residents went on to 

practice in a primary care field or 

primary care setting

— — — √ √

Whether residents went on to 

practice in medically underserved 

areas

— — — √ √

Whether residents went on to 

practice in a rural versus urban 

area

— — — √ √

Quality of GME Training Programs 

Supported

Accreditation status of GME 

training programs supported

√ — √ √ √

Learning experiences of residents 

in GME training programs 

supported, such as whether 

residents received training in 

certain topic areas or 

competencies

— — √ √ √

Legend: √ = agency collected the type of information; — = agency did not collect the type of information

Source: GAO analysis of information from the CMS, HRSA, and the VA. | GAO-18-240

a

CMS generally collects limited information specifically about states’ Medicaid GME programs.

Instead, overall payments for costs incurred by hospitals, including those for GME training costs, are 

subject to statutory and regulatory reporting and program integrity requirements within the Medicaid 

program, including upper payment limit requirements codified at 42 C.F.R. § 447.272. 

b

Information about the amount of Medicaid GME supplemental payments that CMS collects provides 

an incomplete account of total Medicaid GME spending. Medicaid GME supplemental payments are a 

subset of all Medicaid GME payments and exclude other Medicaid GME payments, such as those 

made through adjustments to the state’s payment rates.

c

VA central office is responsible for making spending allocations to its VA medical facilities. And, VA 

medical facilities are responsible for making payments to academic affiliates to reimburse them for 

the costs of residents’ salaries and benefits while they are at the VA medical facility. While VA central 

office collects data on the amount it allocates to each VA medical facility, it does not collect data on 

the amount of payments that VA medical facilities make to each academic affiliate.

d

VA only collects direct costs data on residents’ salaries and benefits. It does not collect data on nor 

reimburse affiliates for other direct costs, such as administrative expenses, accreditation and licenses 

fees, or the costs of educational materials.

e

Experts who conducted a one-time cost evaluation of Teaching Health Center GME Program 

recipients said that the costing instrument used collected all possible costs that teaching health 

centers incurred by operating GME training programs, including those that otherwise are considered 

indirect costs.
Appendix II: Information that Federal Programs 

Collect about Funding for Graduate Medical 

Education Training

Page 68 GAO-18-240 Spending on Physician Training

f

Although CMS is not required to track information on Medicare GME funding to urban versus rural 

hospitals, CMS officials told us that cost report data can be used in conjunction with other data to 

determine whether a hospital that received Medicare GME funding was located in a rural area.

g

VA collects information on residents’ likelihood of considering future employment at a VA medical 

facility.
Appendix III: Comments from the Department 

of Health and Human Services

Page 69 GAO-18-240 Spending on Physician Training

Appendix III: Comments from the 

Department of Health and Human Services
Appendix III: Comments from the Department 

of Health and Human Services

Page 70 GAO-18-240 Spending on Physician Training
Appendix III: Comments from the Department 

of Health and Human Services

Page 71 GAO-18-240 Spending on Physician Training
Appendix IV: Comments from the Department 

of Veterans Affairs

Page 72 GAO-18-240 Spending on Physician Training

Appendix IV: Comments from the 

Department of Veterans Affairs
Appendix IV: Comments from the Department 

of Veterans Affairs

Page 73 GAO-18-240 Spending on Physician Training
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 74 GAO-18-240 Spending on Physician Training

James Cosgrove, (202) 512-7114 or cosgrovej@gao.gov

In addition to the contact named above, William Hadley, Assistant 

Director; Christine Brudevold, Assistant Director; Katherine Mack, 

Analyst-in-Charge; A. Elizabeth Dobrenz; Maggie G. Holihan; Daniel Lee; 

and Todd Anderson made key contributions to this report. Also 

contributing were Sam Amrhein, Muriel Brown, Lisa Opdycke, and 

Jennifer Whitworth.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Acknowledgments

(100698)
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