18654 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 

PART 799—AMENDED 

■ 1. The authority citation for part 799 

continues to read as follows: 

Authority: 15 U.S.C. 2603, 2611, 2625. 

■ 2. Amend §799.5115 by revising the 

first sentence of paragraph (h)(5)(vii)(A) 

in § 799.5115 to read as follows and by 

removing the entry ‘‘CAS No. 77–78–1 

Dimethyl sulfate’’ in Table 2 of 

paragraph (j) in § 799.5115. 

§ 799.5115 Chemical testing requirements 

for certain chemicals of interest to the 

Occupational Safety and Health 

Administration. 

* * * * * 

(h) * * * 

(5) * * * 

(vii) * * * 

(A) Kp. A Kp must be determined for 

each test chemical, except for methyl 

isoamyl ketone (MIAK; CAS No.: 110–

12–3, Chemical Abstracts (CA) Index 

Name: 2-Hexanone, 5-methoxy-) and 

dipropylene glycol methyl ether 

(DPGME; CAS No.: 34590–94–8, CA 

Index Name: Propanol, 1(or 2)-(2- 

methoxymethylethoxy)-). * * * 

* * * * * 

[FR Doc. 06–3491 Filed 4–11–06; 8:45 am] 

BILLING CODE 6560–50–S 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 412 and 413 

[CMS–1531–IFC] 

RIN 0938–AO35 

Medicare Program; Medicare Graduate 

Medical Education Affiliation 

Provisions for Teaching Hospitals in 

Certain Emergency Situations 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period will modify the current 

Graduate Medical Education (GME) 

regulations as they apply to Medicare 

GME affiliations to provide for greater 

flexibility during times of disaster. 

Specifically, this rule will implement 

the emergency Medicare GME affiliated 

group provisions that will address 

issues that may be faced by certain 

teaching hospitals in the event that 

residents who would otherwise have 

trained at a hospital in an emergency 

area (as that term is defined in section 

1135(g) of the Social Security Act (the 

Act)) are relocated to alternate training 

sites. 

DATES: This interim final rule is 

effective as of August 29, 2005. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

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

June 12, 2006. 

ADDRESSES: In commenting, please refer 

to file code CMS–1531–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http:// 

www.cms.hhs.gov/eRulemaking. Click 

on the link ‘‘Submit electronic 

comments on CMS regulations with an 

open comment period.’’ (Attachments 

should be in Microsoft Word, 

WordPerfect, or Excel; however, we 

prefer Microsoft Word.) 

2. By regular mail. You may mail 

written comments (one original and two 

copies) to the following address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–1531–

IFC, P.O. Box 8011, Baltimore, MD 

21244–8011. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments (one 

original and two copies) to the following 

address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–1531–

IFC, Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786–

9994 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided at the end of the ‘‘Collection 

of Information Requirements’’ section in 

this document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Truong, (410) 786–6005. 

Renate Rockwell, (410) 786–4645. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–1531–IFC 

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://www.cms.hhs.gov/ 

eRulemaking. Click on the link 

‘‘Electronic Comments on CMS 

Regulations’’ on that Web site to view 

public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately three weeks after 

publication of a document, at the 

headquarters of the Centers for Medicare 

& Medicaid Services, 7500 Security 

Boulevard, Baltimore, Maryland 21244, 

Monday through Friday of each week 

from 8:30 a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘BACKGROUND’’ at the 

beginning of your comments.] 


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Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 18655 

A. Legislative Authority 

The stated purpose of section 1135 of 

the Act is to enable the Secretary to 

ensure, to the maximum extent feasible, 

in any emergency area and during an 

emergency period, that sufficient health 

care items and services are available to 

meet the needs of enrollees in Medicare, 

Medicaid, and the State Children’s 

Health Insurance Program (SCHIP). 

Section 1135 of the Act authorizes the 

Secretary, to the extent necessary to 

accomplish the statutory purpose, to 

temporarily waive or modify the 

application of certain types of statutory 

and regulatory provisions (such as 

conditions of participation or other 

certification requirements, program 

participation or similar requirements, or 

pre-approval requirements) with respect 

to health care items and services 

furnished by health care provider(s) in 

an emergency area during an emergency 

period. 

The Secretary’s authority under 

section 1135 of the Act arises in the 

event there is an ‘‘emergency area’’ and 

continues during an ‘‘emergency 

period’’ as those terms are defined in 

the statute. Under section 1135(g) of the 

Act, an emergency area is a geographic 

area in which there exists an emergency 

or disaster that is declared by the 

President according to the National 

Emergencies Act or the Robert T. 

Stafford Disaster Relief and Emergency 

Assistance Act, and a public health 

emergency declared by the Secretary 

according to section 319 of the Public 

Health Service Act. (Section 319 of the 

Public Health Service Act authorizes the 

Secretary to declare a public health 

emergency and take the appropriate 

action to respond to the emergency, 

consistent with existing authorities.) 

Throughout the remainder of this 

discussion, we will refer to such 

emergency areas and emergency periods 

as ‘‘section 1135’’ emergency areas and 

emergency periods. 

Section 1871(e)(1)(A) of the Act, as 

amended by section 903(a)(1) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173), 

generally prohibits the Secretary from 

making retroactive substantive changes 

in policy unless retroactive application 

of the change is necessary to comply 

with statutory requirements, or failure 

to apply the change retroactively would 

be contrary to the public interest. Due 

to the infrastructure damage and 

disruption of operations experienced by 

medical facilities, and the consequent 

disruption in residency training, caused 

by Hurricanes Katrina and Rita in 2005, 

there is urgent need for the regulation 

changes provided in this interim final 

rule with comment period to be applied 

retroactively. Existing regulations do not 

adequately address the issues faced by 

hospitals that are located in the 

emergency areas addressed in this rule, 

or hospitals that assisted by training 

displaced residents from the emergency 

area. We believe failure to apply the 

regulatory changes retroactively would 

be contrary to the public interest 

because hospitals affected by Hurricanes 

Katrina and Rita could otherwise face 

dramatic financial hardship and impede 

the recovery of graduate medical 

education programs in the emergency 

area. 

Specifically, the training programs at 

many teaching hospitals in New Orleans 

and surrounding areas were temporarily 

closed in the aftermath of the 

hurricanes, and the displaced residents 

were transferred to other hospitals to 

continue their training programs in 

other parts of the country. While many 

residents will likely be able to return to 

the hurricane-affected hospitals after 

some period of time, others may need to 

remain where they have been 

transferred for an extended period of 

time. A regulatory change is required so 

that Medicare graduate medical 

education (GME) funding can be 

maintained while there are displaced 

residents training at various hospitals 

outside of the emergency area even as 

the hurricane-affected hospitals 

incrementally bring residents back in 

the process of rebuilding their training 

programs. 

Under section 1886(h) of the Act, as 

amended by section 9202 of the 

Consolidated Omnibus Budget 

Reconciliation Act (COBRA) of 1985 

(Pub. L. 99–272), the Secretary is 

authorized to make payments to 

hospitals for the direct costs of 

approved GME programs. Section 

1886(d)(5)(B) of the Act provides that 

prospective payment hospitals that have 

residents in an approved GME program 

receive an additional payment for a 

Medicare discharge to reflect the higher 

patient care costs of teaching hospitals, 

that is, the indirect graduate medical 

education (IME) costs. Sections 

1886(h)(4)(F) and 1886(d)(5)(B)(v) of the 

Act established limits on the number of 

allopathic and osteopathic residents that 

hospitals may count for purposes of 

calculating direct GME payments and 

the IME adjustment, respectively, 

thereby establishing hospital-specific 

direct GME and IME full-time 

equivalent (FTE) resident caps. 

However, under the authority granted 

by section 1886(h)(4)(H)(ii) of the Act, 

the Secretary may issue rules to allow 

institutions that are members of the 

same affiliated group to apply their 

direct GME and IME FTE resident caps 

on an aggregate basis through a 

Medicare GME affiliation agreement. 

The Secretary’s regulations permit 

hospitals, through a Medicare GME 

affiliation agreement, to adjust IME and 

direct GME FTE resident caps to reflect 

the rotation of residents among affiliated 

hospitals. The current regulation at 

§ 413.75(b), implementing Medicare 

GME affiliations, specifies that hospitals 

may only form a Medicare GME 

affiliated group with other hospitals if 

they are in the same or contiguous 

urban or rural areas, if they are under 

common ownership, or if they are 

jointly listed as program sponsors or 

major participating institutions in the 

same program. The existing regulations 

do not provide for hospitals whose 

residency programs have been disrupted 

in an emergency area to enter into valid 

Medicare GME affiliation agreements 

with host hospitals where the hospitals 

may not meet the regulatory 

requirements for Medicare GME 

affiliations. Therefore, through this 

interim final rule with comment period, 

we are supplementing the regulations at 

§ 413.75(b) and § 413.79(f) with 

provisions for emergency Medicare 

GME affiliated groups to provide relief 

to hospitals with disrupted residency 

programs in an emergency area. These 

provisions are being made effective 

retroactive to August 29, 2005. 

B. Overview of Medicare Direct GME 

and IME 

As we discussed in the previous 

section, the Medicare program makes 

payments to teaching hospitals to 

account for two types of costs, the direct 

costs (direct GME) and the indirect costs 

(IME) of a hospital’s graduate medical 

education program. Direct GME 

payments represent the direct costs of 

training residents (for example, resident 

salaries, fringe benefits, and teaching 

physician costs associated with an 

approved GME program) and generally 

are calculated by determining the 

product of the Medicare patient load 

(that is, the percentage of the hospital’s 

Medicare inpatient days), the hospital’s 

per resident payment amount, and the 

weighted number of FTE residents 

training at the hospital during the cost 

reporting period. 

The IME adjustment is made to 

teaching hospitals for the additional 

indirect patient care costs attributable to 

teaching activities. For example, 

teaching hospitals typically offer more 

technologically advanced treatments to 

their patients, and therefore, patients 

who are sicker and need more 

sophisticated treatment are more likely 


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18656 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 

to go to teaching hospitals. Furthermore, 

there are additional costs related to the 

presence of inefficiencies associated 

with teaching residents resulting from 

the additional tests or procedures 

ordered by residents and the demands 

put on physicians who supervise, and 

staff who support, the residents. IME 

payments are made as a percentage addon adjustment to the per discharge 

Hospital Inpatient Prospective Payment 

System (IPPS) payment, and are 

calculated based on the hospital’s ratio 

of FTE residents to available beds as 

defined at § 412.105(b). The statutory 

formula for calculating the IME 

adjustment is: c × [(1 + r).405 ¥ 1], 

where ‘‘r’’ represents the hospital’s ratio 

of FTE residents to beds, and ‘‘c’’

represents an IME multiplier, which is 

set by the Congress. 

The amount of IME payment a 

hospital receives for a particular 

discharge is dependent upon the 

number of FTE residents the hospital 

trains, the hospital’s number of 

available beds, the current level of the 

statutory IME multiplier, and the per 

discharge IPPS payment. Sections 

1886(d)(5)(B)(v) and 1886(h)(4)(F) of the 

Act established hospital specific limits 

(that is, caps) on the number of 

allopathic and osteopathic FTE 

residents that hospitals may count for 

purposes of calculating indirect and 

direct GME payments, respectively. 

C. Effect of Existing Regulations 

As explained above, the Secretary’s 

authority under section 1135 of the Act 

is prompted by the occurrence of an 

emergency or disaster that leads to 

designation of a section 1135 emergency 

area, and continues throughout a section 

1135 emergency period. For example, 

when Hurricane Katrina occurred on 

August 29, 2005, disrupting health care 

operations and medical residency 

training programs at teaching hospitals 

in New Orleans and the surrounding 

area, the conditions were met for an 

emergency area and emergency period 

under section 1135(g) of the Act. Under 

section 1135 of the Act, the Secretary 

was then authorized to waive a number 

of provisions to ensure that sufficient 

services would be available in the 

section 1135 emergency area to meet the 

needs of Medicare, Medicaid, and 

SCHIP patients. Shortly after Hurricane 

Katrina occurred, we were informed by 

hospitals in New Orleans that the 

training programs at many teaching 

hospitals in the city were closed as a 

result of the disaster and that the 

displaced residents were being 

transferred to training programs at host 

hospitals in other parts of the country. 

For purpose of discussion in this rule, 

a host hospital is a hospital that trains 

residents displaced from a training 

program in a section 1135 emergency 

area. A home hospital is a hospital that 

meets all of the following: (1) Is located 

in a section 1135 emergency area (2) had 

its inpatient bed occupancy decreased 

by 20 percent or more due to the 

disaster so that it is unable to train the 

number of residents it originally 

intended to train in that academic year, 

and (3) needs to send the displaced 

residents to train at a host hospital. 

Immediately after Hurricane Katrina, 

home and host hospitals petitioned 

CMS for a mechanism to allow host 

hospitals to count the displaced FTE 

residents they would be training for 

direct GME and IME payment purposes. 

In response to the petitions, we 

immediately issued a Question and 

Answer (Q&A), which cited provisions 

in existing regulations at § 413.79(h). 

Section 413.79(h) allows home hospitals 

that closed, or closed one or more 

residency training programs, to 

temporarily transfer FTE residents to 

host hospitals and allows host hospitals 

that were already training residents at or 

above their FTE resident caps to count 

those displaced residents for direct GME 

and IME payment (see the CMS Q&A’s 

Web site: http://questions.cms.hhs.gov 

(the Web site link is located at ID 5696)). 

As specified at § 413.79(h), Medicare 

considers a program at a hospital to be 

closed if ‘‘* * * the hospital ceases to 

offer training for residents in a 

particular approved medical residency 

training program.’’ Section 413.79(h) 

also defines closure of a hospital as 

when a hospital ‘‘* * * terminates its 

Medicare agreement under the 

provisions of § 489.52 * * *.’’ The 

regulations at § 413.79(h) allow a host 

hospital that accepts residents from the 

closed program to receive a temporary 

increase in its IME and direct GME 

resident caps for those residents as long 

as the home hospital agrees to a 

corresponding temporary reduction to 

its own caps. The host hospital under 

the closed program provisions would 

receive temporary FTE resident cap 

adjustments only as long as the specific 

resident(s) is displaced (and only as 

long as the home hospital or home 

hospital’s program remains closed). 

Therefore, once the resident(s) 

completes training in the program that 

he or she was training in when the 

program closed, or he or she returns to 

train at the home hospital, no additional 

FTE resident cap adjustments for the 

host hospital are permitted under 

§ 413.79(h). Furthermore, § 413.79(h) 

specifies that a host hospital can receive 

a temporary increase in its FTE resident 

caps in order to count displaced FTE 

residents only if the proper 

documentation is submitted to the fiscal 

intermediaries (FIs) by both the home 

and host hospital no later than 60 days 

after the host hospital begins to train the 

displaced resident(s). 

In accordance with the authority 

granted to the Secretary under section 

1135 of the Act, as stated in our Q&A 

posted on the CMS Web site, we 

extended the regulatory 60-day deadline 

for submitting documentation to CMS as 

required by § 413.79(h) and thus 

allowed hospitals to submit the 

documentation by the earlier of the end 

of the section 1135 emergency period 

granted for Hurricanes Katrina and Rita 

or by June 30, 2006. The section 1135 

emergency period ended on January 31, 

2006. We believe the existing regulation 

at § 413.79(h) addressed the issue of 

finding host hospitals for residents 

displaced from home hospitals in the 

immediate aftermath of Hurricanes 

Katrina and Rita. However, teaching 

hospitals in section 1135 emergency 

areas have since made us aware of 

several issues that are not addressed (or 

not addressed adequately) under current 

regulations. For instance, some of the 

hurricane-affected programs in New 

Orleans and elsewhere did not in fact 

close entirely. In many cases, a reduced 

number of residents continued to train 

in the hospitals’ outpatient departments. 

Therefore, those programs at the home 

hospitals did not actually close, and 

neither the home or host hospitals will 

be able to use the regulatory provisions 

at § 413.79(h) to enable host hospitals 

that are at or above their FTE resident 

caps to count displaced residents from 

home hospitals for Medicare direct GME 

and IME purposes. We understand that 

even hospitals that had originally 

completely closed their programs have 

been in the process of gradually 

reopening their programs (that is, 

residents are being brought back to the 

home hospitals in stages). Therefore, 

even where a home hospital temporarily 

closed a program following the disaster, 

once it begins training any residents 

(even a fraction of an FTE resident) in 

that program again, the program is no 

longer closed and any adjustments made 

to the host hospital’s cap under the 

closed program regulation would no 

longer be allowed. Therefore, we believe 

that, in order to remove the disincentive 

faced by hospitals that are at or above 

their FTE resident caps to continue 

training displaced residents, some kind 

of regulatory relief is necessary. 

II. Meeting the Needs of Teaching 

Hospitals Affected by a Disaster 

[If you choose to comment on issues 

in this section, please include the 


cprice-sewell on PROD1PC66 with RULES
Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 18657 

caption ‘‘TEACHING HOSPITALS 

AFFECTED BY A DISASTER’’ at the 

beginning of your comments.] 

This interim final rule with comment 

period will amend the Medicare GME 

affiliation regulations to address the 

needs and incentives of home and host 

hospitals in the event of an emergency 

or disaster. In developing a policy to 

provide home and host hospitals 

flexibility in response to a disaster, we 

address two priorities. First, we believe 

that in disaster situations, to the extent 

that the statute permits, the policy 

should facilitate the continuity of GME, 

minimizing the disruption of residency 

training. Second, the policy should take 

into account that the training programs 

at home hospitals have been severely 

disrupted by a disaster and that home 

hospitals will usually want to rebuild 

their GME programs as soon as possible. 

A. Overview of the Closed Programs 

Provisions 

As we noted in our Q&A (posted on 

the CMS Web site), issued in response 

to inquiries from hospitals affected by 

Hurricane Katrina, the regulations at 

§ 413.79(h) offer a payment policy 

option that could be applied in limited 

situations occurring after a disaster. 

Thus, a host hospital would be allowed 

to make temporary adjustments to its 

IME and direct GME caps (limited by 

the home hospital’s IME and direct GME 

caps) in order to count displaced 

residents for direct GME and IME 

payment purposes. However, due to the 

complexity of training programs where 

residents train at multiple hospitals 

(this is a common training model used 

throughout the country), there are many 

potential difficulties that can arise in 

applying this policy to address disaster 

situations. 

Typically, residents in a program 

spend time training during the year at 

multiple hospitals, some of which may 

have been affected by the disaster, while 

others may not have been affected. For 

example, a first year resident in a family 

practice program may spend one third 

of the year training at a hospital in New 

Orleans, and the remaining two-thirds 

of the year at other hospitals in Baton 

Rouge. When the New Orleans hospital 

closed due to the hurricane, this 

resident may have been training at one 

of the Baton Rouge hospitals. Therefore, 

although the resident was not 

immediately displaced by the hurricane, 

since the resident would have rotated to 

the New Orleans hospital later in the 

year, the resident will ultimately be 

affected. Conversely, a resident that was 

training in New Orleans at the time of 

the hurricane was immediately 

displaced, so even if the resident was 

transferred to a host hospital in Texas to 

continue training, that resident may be 

able to continue to train at the 

unaffected Baton Rouge hospital after 

completing a rotation at the host 

hospital. 

Additional complexity can arise 

through the interaction of the home and 

host hospital’s FTE resident caps. Each 

one of the home hospitals involved in 

the previous example could be training 

residents above their respective IME and 

direct GME FTE resident caps. Since the 

closed program provisions are residentspecific, that is, the host hospital’s cap 

adjustment is tied to the specific 

resident who was displaced, as 

specified at § 413.79(h), documentation 

would be required to account for each 

resident’s FTE time spent training at 

each of the home and host hospitals. 

Additionally, because the policy under 

§ 413.79(h) is resident-specific, the host 

hospital would only receive a temporary 

cap adjustment for as long as the 

specific residents are displaced. 

Therefore, home and host hospitals 

would need to provide a very detailed 

accounting of each resident’s training as 

required at § 413.79(h). 

Hospitals in New Orleans have 

notified us that in light of the damage 

they suffered from the hurricane, 

documenting the specific residents, 

their rotations at the various home and 

host hospitals (and the FTEs associated 

with each rotation) and where the 

displaced residents were sent after the 

hurricane constitutes a major 

documentation burden. We note that 

although CMS extended the 

documentation deadline to January 31, 

2006, under the authority of section 

1135 of the Act, giving hospitals 5 

months from the time of the hurricane 

to submit this type of documentation, 

we are aware of no hospitals that 

complied with all of the documentation 

requirements listed at § 413.79(h) by the 

due date. Therefore, due to the 

challenges and complexities mentioned 

above, we believe that the existing 

closed program regulations do not 

adequately address the issues associated 

with Medicare direct GME and IME 

payment policies that are faced by 

residency training programs affected by 

a disaster. 

B. Overview of the Medicare GME 

Affiliation Provisions 

Accordingly, we are revising 

§ 413.75(b) to include definitions of 

emergency Medicare GME affiliated 

group, home hospital, host hospital, 

section 1135 emergency area, and 

section 1135 emergency period. We are 

also revising § 413.79(f) to set forth the 

requirements of an emergency Medicare 

GME affiliation agreement. 

The existing definition of Medicare 

GME affiliated group at § 413.75(b) 

specifies that hospitals may only form a 

Medicare GME affiliated group with 

other hospitals if they are in the same 

or contiguous urban or rural areas, if 

they are under common ownership, or 

if they are jointly listed as program 

sponsors or major participating 

institutions in the same program. The 

existing Medicare GME affiliation 

provisions at § 413.79(f) permit 

participating teaching hospitals to 

aggregate and ‘‘share’’ FTE caps during 

a specified academic year. The Medicare 

GME affiliation regulations allow 

hospitals that need to either decrease or 

increase their FTE resident counts to 

reflect the normal movement of 

residents among affiliated hospitals to 

do so for the agreed-upon training years. 

Hospitals that affiliate must submit a 

Medicare GME affiliation agreement, as 

specified at § 413.75(b), to their 

Medicare FIs and to CMS no later than 

July 1 of the relevant academic year. 

Each hospital in the Medicare GME 

affiliated group must have a shared 

rotational arrangement with at least one 

other hospital within the Medicare GME 

affiliated group, and all of the hospitals 

within the Medicare GME affiliated 

group must be connected by a series of 

shared rotational arrangements. The net 

effect of the adjustments to hospitals’

FTE resident caps, whether positive or 

negative on a hospital-specific basis, in 

the aggregate must not exceed zero. 

While additional hospitals may not be 

added to the Medicare GME affiliated 

group after July 1 of a year, amendments 

to the affiliation agreement to adjust the 

distribution of the number of FTE 

residents in the original Medicare GME 

affiliation among the hospitals that are 

part of the Medicare GME affiliated 

group can be made through June 30 of 

the academic year for which they are 

effective. 

C. Overview of the Emergency Medicare 

GME Affiliated Group Provision 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘OVERVIEW OF THE 

EMERGENCY MEDICARE GME 

AFFILIATED GROUP PROVISION’’ at 

the beginning of your comments.] 

Based on what we have learned about 

the impact of a disaster on teaching 

hospitals, we believe it is necessary to 

provide hospitals with greater flexibility 

to distribute FTE resident caps within a 

group of home and host hospitals if 

there is an emergency at a home 

hospital that has resulted in the 

designation of a section 1135 emergency 


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18658 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 

area. We believe that a modified 

Medicare GME affiliation policy would 

allow affected hospitals the maximum 

degree of flexibility following the 

disaster so that residents displaced by 

the disaster can continue their residency 

training at other hospitals, while the 

home hospitals can remain committed 

to reopening their programs. 

While there may be hospitals in the 

section 1135 emergency area that do not 

experience a disruption in residency 

training due to the disaster, the 

provisions in this rule are only intended 

to help home hospitals, that is, hospitals 

that have been directly affected by the 

disaster to the extent that their inpatient 

bed occupancy is diminished, limiting 

the hospital’s ability to train residents. 

In determining whether a hospital in a 

section 1135 emergency area qualifies as 

a home hospital, we believe it is 

appropriate to compare the inpatient 

bed occupancy of the hospital one week 

before the earlier of the date the section 

1135 emergency period begins, or the 

date on which the hospital began any 

evacuation efforts in anticipation of an 

event that results in the declaration of 

a section 1135 emergency area, to the 

inpatient bed occupancy of the hospital 

one week after the section 1135 

emergency period begins. If the 

inpatient bed occupancy decreases by 

20 percent or more between these two 

comparison timeframes, we believe that 

the significant drop in occupancy can be 

assumed to be the result of the event 

that led to the declaration of a section 

1135 emergency period. We believe a 

hospital that experiences such a drop in 

occupancy may not have enough 

patients to continue to provide for 

adequate residency training, and 

therefore, may need to send residents to 

host hospitals. The emergency Medicare 

GME regulations are applicable to these 

home hospitals. These emergency 

Medicare GME affiliated group 

provisions in § 413.79(f)(6) are effective 

as of the date of the first day of a section 

1135 emergency period (for example, in 

the case of Hurricane Katrina, they are 

effective on August 29, 2005). The 

duration of these emergency Medicare 

GME affiliation agreements is limited to 

the remainder of the academic year 

during which the section 1135 

emergency period began, plus two 

additional academic years. Thus, an 

emergency Medicare GME affiliation 

agreement is permitted to remain in 

effect for no more than 3 training years, 

beginning with the first day of the 

section 1135 emergency period. (An 

emergency Medicare GME affiliation 

agreement could remain in effect for 

three full academic years only if the first 

day of a section 1135 emergency period 

occurred on July 1.) 

For example, in the case of Hurricane 

Katrina, an emergency Medicare GME 

affiliation could be effective from 

August 29, 2005, to June 30, 2006 (we 

refer to this as the first effective year); 

the affiliation could also be effective for 

two subsequent academic years: the 

second effective year of the emergency 

Medicare GME affiliation would be from 

July 1, 2006 to June 30, 2007, and the 

third effective year would be from July 

1, 2007 to June 30, 2008. At the 

conclusion of the allowable effective 

period for an emergency Medicare GME 

affiliated group, the emergency 

provisions at § 413.79(f)(6) cease to 

apply, and the existing provisions for 

Medicare GME affiliation agreements at 

§ 413.79(f)(1) through (5) would apply. 

We believe that the limits on the 

allowable effective period for emergency 

Medicare GME affiliated group serve to 

maintain GME funding over a sufficient 

period to allow home hospitals to 

rebuild their GME programs, while also 

supporting the continuity of residency 

training. We welcome public comments 

on whether the allowable effective 

period is sufficient time to 

accommodate rebuilding of residency 

programs at home hospitals. 

D. Emergency Medicare GME Affiliated 

Group Provisions 

1. Affiliation Agreement 

To provide home hospitals with more 

flexibility to train displaced residents at 

various sites, and to allow host hospitals 

to count displaced residents for IME and 

direct GME, home hospitals may enter 

into emergency Medicare GME 

affiliation agreements effective 

retroactive to the date of the first day of 

the section 1135 emergency period. 

The emergency Medicare GME 

affiliated group may include hospitals 

that would not meet the requirements 

for a Medicare GME affiliated group as 

specified as § 413.75(b). Specifically, for 

these emergency Medicare GME 

affiliated groups, home hospitals may 

affiliate with host hospitals anywhere in 

the country because we recognize that 

immediately following a disaster, home 

hospitals need flexibility to assign 

displaced residents to any available 

program. As home hospitals recover the 

ability to train residents after a disaster, 

the emergency Medicare GME affiliated 

group provisions allow home hospitals 

to return residents to their training sites, 

thereby giving home hospitals the 

opportunity to rebuild their programs 

incrementally. 

For the year during which the section 

1135 emergency was declared, each 

hospital participating in the emergency 

affiliation must submit a copy of the 

emergency Medicare GME affiliation 

agreement, as specified under 

§ 413.79(f)(6), to CMS and the CMS FI 

servicing each hospital in the agreement 

by the later of 180 days after the section 

1135 emergency period begins or by 

June 30 of the relevant training year. 

Emergency Medicare GME affiliation 

agreements for the subsequent 2 

academic years must be submitted by 

the later of 180 days after the section 

1135 emergency period begins or by July 

1 of each of the years. Amendments to 

the emergency Medicare GME affiliation 

agreement to adjust the distribution of 

the number of FTE residents in the 

original emergency Medicare GME 

affiliation among the hospitals that are 

part of the emergency Medicare GME 

affiliated group can be made through 

June 30 of the academic year for which 

they are effective. The emergency 

Medicare GME affiliation agreement 

must be written, signed, and dated by 

responsible representatives of each 

participating hospital and must: (1) List 

each participating hospital and its 

provider number, and specify whether 

the hospital is a home or host hospital; 

(2) specify the effective period of the 

emergency Medicare GME affiliation 

agreement; (3) list each participating 

hospital’s IME and direct GME FTE caps 

in effect for the current academic year 

before the emergency Medicare GME 

affiliation (that is, if the hospital was 

already a member of a regular Medicare 

GME affiliated group before entering 

into the emergency Medicare GME 

affiliation, the emergency Medicare 

GME affiliation must be premised on the 

FTE caps of the hospital as adjusted per 

the regular Medicare GME affiliation 

agreement, and not include any slots 

gained under section 422 of the MMA); 

and (4) specify the total adjustment to 

each hospital’s FTE caps in each year 

that the emergency Medicare GME 

affiliation agreement is in effect, for 

both direct GME and IME, that reflects 

a positive adjustment to the host 

hospital’s direct and indirect FTE caps 

that is offset by a negative adjustment to 

the home hospital’s (or hospitals’) direct 

and indirect FTE caps of at least the 

same amount. The sum total of 

adjustments to all the participating 

hospitals’ FTE caps under the 

emergency Medicare GME affiliation 

agreement may not exceed the aggregate 

adjusted caps of the hospitals 

participating in the emergency Medicare 

GME affiliated group. A home hospital’s 

IME and direct GME FTE cap reductions 

under an emergency Medicare GME 

affiliation agreement are limited to the 


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home hospital’s IME and direct GME 

FTE resident caps in effect for the 

academic year in accordance with 

regulations at § 413.79(c)(1) through 

(c)(3) or § 413.75(b), that is, the 

hospital’s base year FTE resident caps as 

adjusted by any and all existing 

affiliation agreements. 

In addition to meeting the 

requirements for an emergency 

Medicare GME affiliation agreement, a 

host hospital will be required to 

document that any FTE residents 

counted pursuant to the emergency 

Medicare GME affiliation agreement are, 

in fact, displaced residents from a 

program located in the emergency area. 

That is, the host hospital will need to 

provide the FI with a list of resident 

names and social security numbers, and 

the name of the original sponsor of the 

program located at the home hospital in 

the emergency area for each displaced 

resident. We note that the hospital is 

already required, as specified at 

§ 413.75(d), to provide much of this 

information in order to include any 

resident in its FTE count for a particular 

cost reporting period. We are adding the 

requirement that a host hospital 

document the original program sponsor 

of each displaced resident it is training 

in order to document that any 

additional FTE residents counted 

pursuant to the emergency Medicare 

GME affiliation agreement are indeed 

due to training of displaced residents. 

Providing appropriate and sufficient 

documentation permits the FI to 

properly reconcile the correct FTE 

resident count for each hospital. 

2. Multiple Affiliations 

In many cases, home hospitals will 

already have Medicare GME affiliation 

agreements in effect before the section 

1135 emergency period, and may be 

entering into emergency Medicare GME 

affiliation agreements with host 

hospitals that will already have regular 

Medicare GME affiliation agreements in 

effect. Therefore, such situations will 

lead to multiple layers of Medicare GME 

affiliations. It is critical that the 

emergency Medicare GME affiliation 

agreements accurately state the 

appropriate caps for each hospital in the 

affiliated group in order for the FIs to 

pay the hospitals correctly. The 

hospitals must attach copies of all 

existing Medicare GME affiliation 

agreements (that is, a hospital’s regular 

or other emergency Medicare GME 

affiliations already in place for the year) 

when submitting the emergency 

Medicare GME affiliation agreement to 

the FI so that the FI can verify and 

reconcile the cap adjustments. For 

example, if a home hospital has a direct 

GME cap of 100 but has an existing 

affiliation agreement before the disaster 

in which it reduced its cap by 40 FTEs, 

then, for purposes of entering into the 

emergency Medicare GME affiliation 

agreement, it has an adjusted direct 

GME cap of 60 with which to affiliate 

under the emergency affiliation 

provisions. The emergency Medicare 

GME affiliation provisions are different 

from the regular Medicare GME 

affiliation provisions in that regular 

Medicare GME affiliations are based 

upon the hospitals’ FTE resident caps 

before any adjustments resulting from 

Medicare GME affiliation agreements. 

Because they are likely to occur during 

an academic year, and cannot be 

anticipated before the beginning of the 

year, emergency Medicare GME 

affiliations are based upon hospitals’

FTE resident caps as they are already 

modified by any existing Medicare GME 

affiliation agreement(s). 

In order to provide each hospital with 

its correct payment, the CMS FIs 

involved need to be aware of both 

regular Medicare GME affiliation 

agreements and any emergency 

Medicare GME affiliation agreements in 

which a hospital is participating. 

Without the correct information on each 

hospital’s Medicare GME affiliation 

agreements (whether regular or 

emergency affiliations), hospitals could 

be paid improperly for direct GME and 

IME based on application of incorrect 

FTE resident caps that do not reflect all 

Medicare GME affiliation agreements in 

effect (that is, regular and emergency 

affiliations). 

Furthermore, to determine direct GME 

and IME payments under an emergency 

Medicare GME affiliation, the normal 

FTE-counting rules as specified at 

§ 413.78 will apply. For example, 

residents beyond the initial residency 

period are counted at .5 FTE for direct 

GME purposes. The existing IME FTEcounting rules as specified at 

§ 412.105(f) apply in determining the 

IME adjustment. Therefore, when the 

CMS FI settles a cost report for a 

hospital in which an emergency 

Medicare GME affiliation agreement is 

reflected, each participating hospital 

would be held to its adjusted IME and 

adjusted direct GME caps as agreed to 

and specified in the emergency 

Medicare GME affiliation agreement. 

We note that in the IPPS final rule 

published in the Federal Register on 

August 11, 2004 (69 FR 49142), we state 

‘‘* * * hospitals that receive section 

422 cap increases from CMS and 

participate in a Medicare GME 

affiliation agreement under § 413.79(f) 

on or after July 1, 2005 may only 

affiliate for the purposes of adjusting 

their 1996 FTE caps (adjusted for new 

programs and any other reductions 

under section 1886(h)(7)(A) of the Act) 

for direct GME and IME. The additional 

slots that a hospital receives under 

section 422 of the MMA may not be 

aggregated and applied to the FTE 

resident caps of any other hospitals.’’

Similarly, we are providing that any 

slots gained under section 422 of the 

MMA may not be used in any 

emergency Medicare GME affiliation 

agreement. 

We are providing examples below of 

the emergency Medicare GME affiliation 

agreements and discussing the 

ramifications of the provisions. 

Example I 

For the training year beginning on 

July 1, 2005, Hospital A and Hospital B 

have a regular Medicare GME affiliation 

agreement in which Hospital A (which 

has IME and direct GME caps of 20 

FTEs) agrees to transfer 10 FTEs to 

Hospital B (which has IME and direct 

GME caps of 15 FTEs). Under the 

regular affiliation agreement, Hospital B 

now has adjusted caps of 25 FTEs and 

Hospital A has adjusted caps of 10 FTEs 

for both IME and direct GME. As a 

result of Hurricane Zeta on November 1, 

2005, Hospital A sustained damage to 

its inpatient facilities (reducing its 

occupancy by 20 percent or more) and 

has displaced residents that it needs to 

send to other hospitals for training. 

Hospital A is located in a section 1135 

emergency area, and the first day of the 

section 1135 emergency period is 

November 1, 2005. In this case, Hospital 

A is a home hospital as defined under 

§ 413.75(b), and is permitted to enter 

into an emergency Medicare GME 

affiliation agreement as specified at 

§ 413.79(f)(6). 

In Example I above, Hospital B was 

not affected by the hurricane (that is, 

Hospital B was able to continue training 

residents at the same level it was before 

the hurricane, and is training the 

maximum number of residents under its 

FTE caps as adjusted by the existing 

Medicare GME affiliation agreement 

with Hospital A). We note that Hospitals 

A and B may modify their regular 

Medicare GME affiliation agreement, if 

necessary, no later than June 30, 2006, 

under the requirements as specified at 

§ 413.79(f)(5). In this case, Hospital B 

does not qualify as a home hospital 

since its inpatient occupancy was not 

reduced by 20 percent or more even 

though it was located in the area 

covered by the section 1135 waiver. 

Hospital A elects to enter into an 

emergency Medicare GME affiliation 

agreement with host Hospitals C and D 

in two other States because those 


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hospitals are well-situated to provide 

residents displaced from Hospital A 

with an appropriate training experience. 

Accordingly, all of the hospitals (A, C, 

and D) in the emergency Medicare GME 

affiliated group must submit copies of 

the emergency Medicare GME affiliation 

agreement to CMS and to the CMS FIs 

servicing the hospitals participating in 

the emergency Medicare GME affiliation 

agreement by June 30, 2006 (in this case, 

June 30, 2006 is the later of 180 days 

after the section 1135 emergency period 

begins (November 1, 2005) or by June 30 

of the relevant training year). In Table 

I below, we list the FTE resident cap 

information that the emergency 

Medicare GME affiliation agreement, 

included for the first effective period, 

which was submitted to CMS and the 

CMS FI on June 30, 2006. 

TABLE I.—EMERGENCY MEDICARE GME AFFILIATION AGREEMENT DUE TO HURRICANE ZETA FOR EFFECTIVE PERIOD—

NOVEMBER 1, 2005 TO JUNE 30, 2006 

Hospital name Provider No. 

IME cap before emergency 

affiliation 

Direct GME 

cap before 

emergency 

affiliation 

Adjusted IME 

cap under the 

emergency 

affiliation 

Adjusted Direct GME cap 

under the 

emergency 

affiliation 

Hospital A ............................................................................. 19–9999 10 10 1 (¥9) 1 (¥9) 

Hospital C ............................................................................ 45–9999 10 10 14 (+4) 14 (+4) 

Hospital D ............................................................................ 33–9999 10 10 15 (+5) 15 (+5) 

As indicated in Example I above, 

Hospital B was not affected by the 

hurricane, and therefore did not 

participate in an emergency Medicare 

GME affiliated group. However, 

Hospital A is required to attach a copy 

of the existing Medicare GME affiliation 

agreement it has with Hospital B to the 

emergency Medicare GME affiliation 

agreement submitted to CMS and its FI 

to document its adjusted cap of 10 FTEs. 

Hospitals C and D are similarly required 

to attach copies of all existing Medicare 

GME affiliation agreements that they 

may be participating in as of July 1, 

2005, (including any regular or 

emergency affiliation agreements) in 

order to document their caps. 

To further illustrate this policy 

continuing with the above example, 

Hospital C, which has an adjusted direct 

GME cap under the emergency Medicare 

GME affiliation of 14 FTEs, could count 

up to four displaced FTE residents 

during the first effective year assuming 

that Hospital C can document that these 

FTEs are from programs in the section 

1135 emergency area. However, upon 

cost report settlement, the CMS FI 

determined that Hospital C has actually 

trained a total of 16 FTEs during the 

cost reporting period. Since each 

participating hospital will be held to 

their adjusted IME and adjusted direct 

GME caps as agreed to and specified in 

the emergency Medicare GME affiliation 

agreement, the CMS FI would only 

allow four of the six additional FTEs 

Hospital C trained pursuant to the 

emergency Medicare GME affiliation 

agreement. 

Example II 

Alternatively, assume that both 

Hospitals A and B from Example I above 

are affected by the same hurricane, both 

qualify as a home hospital, and both 

need to participate in an emergency 

Medicare GME affiliation with host 

Hospitals C and D in the other States. 

We note that while Hospitals A and 

B may modify their existing Medicare 

GME affiliation agreement on or before 

June 30, 2006, Hospitals A and B may 

find it easier to reflect the changes in 

training (and the resultant shift of FTE 

resident caps) due to Hurricane Zeta 

through the emergency Medicare GME 

affiliation agreement. In this scenario, 

Hospitals A and B may execute an 

emergency Medicare GME affiliation 

agreement in which the emergency 

Medicare GME affiliated group includes 

Hospitals A, B, C, and D. In Table II 

below, we list the FTE cap information 

that the emergency Medicare GME 

affiliation agreement included for the 

first effective period, which was 

submitted to CMS and the CMS FI on 

June 30, 2006. 

TABLE II.—EMERGENCY MEDICARE GME AFFILIATION AGREEMENT DUE TO HURRICANE ZETA FOR EFFECTIVE PERIOD—

NOVEMBER 1, 2005 TO JUNE 30, 2006 

Hospital name Provider No. 

IME cap before 

emergency 

affiliation 

Direct GME 

cap before 

emergency 

affiliation 

Adjusted IME 

cap under the 

emergency 

affiliation 

Adjusted Direct GME cap 

under the 

emergency 

affiliation 

Hospital A ............................................................................. 19–9999 10 10 1 (¥9) 1 (¥9) 

Hospital B ............................................................................. 19–8999 25 25 10 (¥15) 10 (¥15) 

Hospital C ............................................................................ 45–9999 10 10 19 (+9) 19 (+9) 

Hospital D ............................................................................ 33–9999 10 10 25 (+15) 25 (+15) 

We note that the pre-existing regular 

Medicare GME affiliation agreement 

between Hospitals A and B which predated the disaster is still in effect 

according to existing affiliation 

agreement rules; therefore Hospitals A 

and B must account for any FTE 

resident cap transfers specified in the 

regular affiliation agreement when they 

enter into the emergency Medicare GME 

affiliation agreement with host 

Hospitals C and D. In addition, a copy 

of Hospital A and B’s regular Medicare 

GME affiliation agreement must be 

attached to the emergency Medicare 

GME affiliation agreement that is 

submitted to CMS and the hospitals’

CMS FIs. 

3. Submission Process 

Submissions of emergency Medicare 

GME affiliation agreements should be 

sent to: 

Centers for Medicare & Medicaid 

Services, Division of Acute Care, 

Attention: Elizabeth Truong or Renate 

Rockwell, Mailstop C4–08–06, 7500 


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Security Boulevard, Baltimore, MD 

21244. 

‘‘Emergency Medicare GME 

Affiliation Agreement’’ should be 

clearly labeled on the outside envelope. 

4. Application of Existing Rules 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘APPLICATION OF EXISTING 

RULES’’ at the beginning of your 

comments.] 

a. New Teaching Hospitals 

Immediately after a disaster, home 

hospitals are in the best position to 

determine where their residents should 

be sent to continue with their residency 

training. Although home hospitals may 

send their residents to train at existing 

teaching hospitals, in some cases, 

hospitals affected by a disaster may 

need to send residents to non-teaching 

hospitals (that is, hospitals that have not 

included any residents training in 

approved medical residency training 

programs on a previous Medicare cost 

report) to continue their training. 

The following discussion is intended 

to inform hospitals of how CMS will 

determine the GME payments to the 

host hospital in the case where home 

hospitals choose to send displaced 

residents to host hospitals that were 

previously non-teaching hospitals. 

These host hospitals will become new 

teaching hospitals once they begin to 

train residents from the home hospitals 

as part of an approved medical 

residency training program. As a new 

teaching hospital, such a hospital 

initially will have IME and direct GME 

FTE resident caps of zero (based on the 

number of residents training in the 1996 

base year for FTE resident caps). 

However, the new teaching hospital, by 

participating in an emergency Medicare 

GME affiliation agreement, can receive a 

temporary cap increase in order to count 

the displaced FTE residents for 

purposes of IME and direct GME 

payments. 

As a new teaching hospital, the 

hospital will not have an existing per 

resident amount for direct GME 

payment purposes. The per resident 

amounts for these hospitals will be 

established as specified at § 413.77(e) 

(just as any other new teaching hospital 

would have its per resident amount 

established). The new teaching 

hospital’s per resident amount is 

established based on the lower of the 

hospital’s direct GME costs per resident 

in its base year, or the updated weighted 

mean value of the per resident amounts 

of all hospitals located in the same 

geographic wage area as specified at 

§ 413.77. Therefore, it is very important 

for a new teaching host hospital to incur 

direct GME costs in its base year and to 

document all of the direct GME costs it 

incurs (for example, the residents’

salaries, fringe benefits, any portion of 

the teaching physician salaries 

attributable to GME, and other direct 

GME costs) for the displaced residents 

it is training; otherwise the host hospital 

risks being assigned a very low per 

resident amount in accordance with our 

regulations. If the host, new teaching 

hospital incurs no GME costs in the 

relevant base year, its per resident 

amount would be zero dollars. We 

advise hospitals to refer to the 

provisions at § 413.77(e) for the rules 

concerning the establishment of a new 

teaching hospital’s per resident amount. 

In accordance with section 1886(h) of 

the Act and our regulations at § 413.77, 

once the base year per resident amount 

is established, it is fixed and not subject 

to adjustment to reflect costs incurred in 

years subsequent to the base year that 

might be associated with new programs 

or additional residents. 

b. Shared Rotational Requirements 

As specified at § 413.79(f)(2), each 

hospital in a regular Medicare GME 

affiliated group must have a shared 

rotational arrangement with at least one 

other hospital participating in the 

Medicare GME affiliation agreement. All 

of the hospitals within the Medicare 

GME affiliated group would therefore be 

connected by a series of shared 

rotational arrangements. As defined at 

§ 413.75(b), a shared rotational 

arrangement ‘‘means a residency 

training program under which a 

resident(s) participates in training at 

two or more hospitals in that program.’’

We are specifying at § 413.79(f)(6) that 

hospitals that are members of an 

emergency Medicare GME affiliated 

group are not required to participate in 

a shared rotational arrangement with the 

other hospitals participating in the 

emergency Medicare GME affiliation 

agreement. We are implementing this 

provision because we recognize that 

members of an emergency Medicare 

GME affiliated group may be 

geographically dispersed across the 

country, which would make it difficult 

for residents to participate in shared 

rotational arrangements. Additionally, 

after a disaster, affected hospitals may 

not have the resources available to 

participate in shared rotational 

arrangements with host hospitals 

situated around the country. For 

example, hospitals may not have the 

financial capability to continuously 

transport residents between States. 

Therefore, we are exempting 

participants in emergency Medicare 

GME affiliations from the shared 

rotational requirements. 

c. Weighted FTE Counts (‘‘3-Year 

Rolling Average’’) 

As specified at § 412.105(f)(1)(v) and 

§ 413.79(d), a ‘‘3-year rolling average’’ is 

applied to a hospital’s count of FTE 

residents to calculate IME and direct 

GME payments for a cost reporting 

period (that is, the number of FTEs used 

to calculate payments is the average of 

the number of FTE residents reported 

for the current year, the prior year, and 

the penultimate year). For example, if 

the hospital trained 115 FTE residents 

(for IME) in the current cost reporting 

period, 100 FTEs in the prior cost 

reporting period, and 100 FTEs in the 

penultimate cost reporting period, then 

the IME payment would not be based 

solely on the 115 residents trained in 

the current year. Rather, the IME 

payment in the current year would be 

based on the 3-year rolling average FTE 

count (that is, (115 + 100 + 100) / 3 

which equals 105 FTEs). 

Thus, if a hospital increases its 

number of FTE residents, as a result of 

the 3-year rolling average rule, the 

hospital would be able to count only 

one third of the additional FTE 

residents in that year, two-thirds of the 

additional FTEs for the next year, and 

the full number in the third year 

(assuming there are no other changes in 

the number of FTE residents training in 

subsequent years). Conversely, if a 

hospital decreases its number of FTE 

residents in the current year, then the 3- 

year rolling average minimizes the effect 

of the reduced GME payments based on 

the reduced level of training over the 

next 3 years. Home hospitals that have 

reduced the number of FTE residents 

training at their hospitals would benefit 

under this provision since only onethird of the FTE resident reduction will 

apply in the first cost reporting year in 

which an emergency period is declared. 

The 3-year rolling average provision, as 

specified at § 412.105 and § 413.79(d), 

will be applied to all hospitals in the 

emergency Medicare GME affiliation, 

and their associated FTE resident counts 

while the agreement is in effect. This 

provision is the same as applied under 

existing regulations in which hospitals 

participating in a Medicare GME 

affiliation agreement(s) are subject to the 

3-year rolling average. 

However, there is an exception to the 

application of the 3-year rolling average 

rules for closed program and closed 

hospital regulations as specified at 

§ 413.79(d)(6). In the case of host 

hospitals that participate in emergency 

Medicare GME affiliated groups relating 

to the section 1135 emergency declared 


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following Hurricanes Katrina and Rita, 

which occurred in 2005, we understand 

that, based on the Q&A we posted on 

the CMS Web site discussing 

application of the closed program and 

closed hospital regulations to these 

hospitals, there was an expectation 

among host hospitals that the displaced 

FTE residents they accepted for training 

would be exempt from application of 

the 3-year rolling average, and that the 

host hospitals would immediately be 

permitted to include all of those 

residents in their FTE resident counts. 

Many host hospitals, believing that the 

existing regulations regarding closed 

hospitals and closed programs would be 

applied, took in displaced residents 

with the reasonable expectation that 

they would be able to count those 

additional residents as FTEs not subject 

to the 3-year rolling average rules 

specified at § 412.105 and § 413.79(d). 

In recognition of this expectation, we 

are providing for a time-limited 

exception to the 3-year rolling average 

rules so that a host hospital 

participating in an emergency Medicare 

GME affiliation agreement relating to 

Hurricanes Katrina and Rita and 

training residents in excess of its cap, 

consistent with the rolling average 

provisions applicable for closed 

programs as specified at § 413.79(d)(6), 

will exclude from the 3-year rolling 

average FTE residents associated with 

displaced residents from August 29, 

2005, to June 30, 2006. All host 

hospitals in an emergency Medicare 

GME affiliated group will be subject to 

the existing 3-year rolling average 

requirements beginning on July 1, 2006. 

Accordingly, we revised § 413.79(f) by 

adding a new paragraph (6) to provide 

for more flexibility in Medicare GME 

affiliations for home hospitals located in 

section 1135 emergency areas to allow 

the home hospitals to efficiently find 

training sites for displaced residents. 

Under the flexibility provided by the 

emergency Medicare GME affiliated 

group provisions as specified at 

§ 413.79(f)(6), decisions regarding the 

transfer of FTE resident cap slots, 

including how to address situations 

where the home hospital was training a 

number of residents in excess of its cap 

before the disaster, and the tracking of 

those FTE resident slots, would be left 

to the home and host hospitals to work 

out among themselves. The home and 

host hospitals are, however, required to 

include much of this information in 

their emergency Medicare GME 

affiliation agreements as specified under 

§ 413.79(f)(6). Furthermore, since 

hospitals may amend the emergency 

Medicare GME affiliation agreement (on 

or before June 30 of the relevant 

academic year) to reflect the actual 

training situation among the hospitals 

participating in the emergency Medicare 

GME affiliated group, hospitals are 

provided with greater flexibility to 

accommodate any changing residency 

training circumstances within the 

emergency Medicare GME affiliated 

group. We note that the emergency 

Medicare GME affiliated group 

provisions promulgated herein are 

intended for the purpose of providing 

for continued training of residents 

displaced from a section 1135 

emergency area, and not to enable 

hospitals to merely shift and change 

FTE resident caps with other hospitals 

in the country (for instance, in order to 

maximize Medicare IME and direct 

GME payments). 

III. Provisions of the Interim Final Rule 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘PROVISIONS OF THE 

INTERIM FINAL RULE’’ at the 

beginning of your comments.] 

We are revising the Medicare GME 

regulations at § 412.105, § 413.75(b), and 

§ 413.79(f) to implement an emergency 

Medicare GME affiliated group policy 

that will only apply to certain home 

hospitals in a section 1135 emergency 

area and host hospitals that accept 

displaced residents from a home 

hospital. 

Section 412.105 Special Treatment: 

Hospitals That Incur Indirect Costs for 

Graduate Medical Education Programs 

In § 412.105, we revised paragraph 

(a)(1)(i) to specify that special treatment 

for hospitals that incur indirect costs for 

GME programs also applies to the 

emergency Medicare GME affiliated 

groups. 

In addition, we revised paragraph 

(f)(1)(vi) to specify that hospitals that 

are part of the same Medicare GME 

affiliated group or emergency Medicare 

GME affiliate group may elect to apply 

the limit at paragraph (f)(1)(iv) of this 

section on an aggregate basis, as 

specified in § 413.97(f). 

Section 413.75 Direct GME Payments: 

General Requirements 

In § 413.75(b), we added the 

definition of an ‘‘Emergency Medicare 

GME affiliated group,’’ and within this 

definition, we specify the meaning of 

‘‘Home hospital’’ and ‘‘Host hospital,’’

and we define ‘‘Section 1135 emergency 

area or section 1135 emergency period.’’

Section 413.79 Direct GME Payments: 

Determination of the Weighted Number 

of FTE Residents 

In § 413.79(f), we revised the 

introductory text to specify that a 

hospital may receive a temporary 

adjustment to its FTE cap, which, 

except as provided in subsection (6)(iv), 

is subject to the averaging rules at 

§ 413.79(d), to reflect residents added or 

subtracted because the hospital is 

participating in a Medicare GME 

affiliated group or an emergency 

Medicare GME affiliated group as 

defined at § 413.75(b). 

In § 413.79(f)(6), we set forth the 

requirements for emergency Medicare 

GME affiliated group. 

In paragraph (f)(6)(i), we specify the 

requirements for the emergency 

Medicare GME affiliation agreement that 

each hospital participating in the 

emergency Medicare GME affiliated 

group must submit. Specifically, each 

participating hospital must submit an 

emergency Medicare GME affiliation 

agreement that is written, signed, and 

dated by responsible representatives of 

each participating hospital, and the 

emergency Medicare GME affiliation 

agreement must include the following: 

• Specify the effective period of the 

emergency Medicare GME affiliation 

agreement (which must, in any event, 

terminate at the conclusion of two 

academic years following the academic 

year in which the section 1135 

emergency period began). 

• List each participating hospital’s 

IME and direct GME FTE caps in effect 

before the emergency Medicare GME 

affiliation agreement (including any 

adjustments to those caps in effect as a 

result of other Medicare GME affiliation 

agreements but not including any slots 

gained under § 413.79(c)(4)). 

• Specify the total adjustment to each 

participating hospital’s FTE caps in 

each academic year that the emergency 

Medicare GME affiliation agreement is 

in effect, for both direct GME and IME, 

that reflects a positive adjustment to the 

host hospital’s direct and indirect FTE 

caps that is offset by a negative 

adjustment to the home hospital’s (or 

hospitals’) direct and indirect FTE caps 

of at least the same amount. The sum 

total of adjustments to all the 

participating hospitals’ FTE caps under 

the emergency Medicare GME affiliation 

agreement may not exceed the aggregate 

adjusted FTE caps of the hospitals 

participating in the emergency Medicare 

GME affiliated group. A home hospital’s 

IME and direct GME FTE cap reductions 

in an emergency Medicare GME 

affiliation agreement are limited to the 

home hospital’s IME and direct GME 


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FTE resident caps at § 413.79(c)(1) 

through (c)(3) or § 413.75(b), that is, as 

adjusted by any and all existing 

affiliation agreements as applicable. 

• Attach copies of all existing 

Medicare GME affiliation agreements 

and emergency Medicare GME 

affiliation agreements in which the 

hospital is participating at the time the 

emergency Medicare GME affiliation 

agreement is executed. 

In paragraph (f)(6)(ii), we specify that 

each participating hospital must submit 

the emergency Medicare GME affiliation 

agreement to CMS and submit a copy to 

the CMS FI. Specifically, an emergency 

Medicare GME affiliation agreement 

must be submitted to CMS with a copy 

to the CMS FI by the later of 180 days 

after the section 1135 emergency period 

begins or by July 1 of the academic year 

in which the emergency Medicare GME 

affiliation agreement is effective. 

In paragraph (f)(6)(iii), we specify that 

during the effective period of the 

emergency Medicare GME affiliation 

agreement, hospitals in the emergency 

Medicare GME affiliated group are not 

required to participate in a shared 

rotational arrangement as defined at 

§ 413.75(b). 

In paragraph (f)(6)(iv), we specify the 

host hospital exception from the rolling 

average for the period from August 29, 

2005 to June 30, 2006. We also specify 

how to determine the FTE resident 

count for a host hospital that is counting 

a number of displaced residents in 

excess of its cap for the period from 

August 29, 2005, through June 30, 2006. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Effective Date and Waiver of 

Proposed Rulemaking 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘EFFECTIVE DATE AND 

WAIVER OF PROPOSED 

RULEMAKING’’ at the beginning of 

your comments.] 

The Administrative Procedure Act 

(APA) normally requires a 30-day delay 

in the effective date of a final rule. This 

delay may be waived, however, if an 

agency finds for good cause that the 

delay is impracticable, unnecessary or 

contrary to the public interest, and 

incorporates a statement of the finding 

and the reasons for it in the rule issued. 

The Secretary is subject to a similar 

requirement pursuant to section 

1871(e)(1)(A)(ii) of the Act. Further, 

under section 1871(e)(1)(A) of the Act, 

the Secretary is prohibited from 

applying substantive changes in policy 

retroactively unless the Secretary 

determines that retroactive application 

is necessary to comply with statutory 

requirements, or that the failure to apply 

the change retroactively would be 

contrary to the public interest. 

We find that good cause exists to 

waive the 30-day delay in effective date 

because it would be contrary to the 

public interest to delay the effective 

date of this interim final rule with 

comment period. We find further that 

failure to apply the provisions of this 

interim final rule with comment period 

retroactively to August 29, 2005, which 

is the first date on which there was an 

emergency area and emergency period 

under section 1135 of the Act resulting 

from the impact of Hurricane Katrina, 

would be contrary to the public interest. 

Due to the infrastructure damage and 

disruption of operations experienced by 

medical facilities, and the consequent 

disruption in residency training, caused 

by Hurricanes Katrina and Rita in 

August of 2005, there is urgent need for 

the regulation changes provided in this 

interim final rule with comment period 

to be applied retroactively. Existing 

regulations do not adequately address 

the issues relating to Medicare GME 

payment policy faced by hospitals that 

are located in the emergency areas 

addressed in this rule, or those faced by 

hospitals that assisted the stormimpacted hospitals with their residency 

programs. We believe failure to apply 

the regulatory changes retroactively 

would be contrary to the public interest 

because hospitals affected by Hurricanes 

Katrina and Rita could otherwise face 

dramatic disruptions in their Medicare 

GME funding, with possible dire effects 

on their GME programs and financial 

stability. 

Specifically, the training programs at 

many teaching hospitals in New Orleans 

and surrounding areas were temporarily 

closed or significantly reduced in the 

aftermath of the hurricanes, and the 

displaced residents were transferred to 

other hospitals to continue their training 

programs in other parts of the country. 

While some residents may eventually 

return to the hurricane-affected 

hospitals, others may need to remain 

where they were transferred for an 

extended period of time. Immediate 

regulatory changes are required in order 

to maintain Medicare GME funding 

relating to displaced residents training 

at various hospitals outside of the 

emergency area, and at the same time, 

to enable the hurricane-affected 

hospitals to rebuild incrementally their 

GME programs. Existing regulations 

relating to closed hospitals and closed 

residency training programs, and 

relating to Medicare GME affiliation 

agreements, contain certain limitations, 

explained more fully in section II.A 

above, that render them inapplicable or 

ineffective to address the issues faced by 

hospitals as a result of disruptions 

caused by Hurricanes Katrina and Rita. 

We also ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register and invite public comment on 

the proposed rule. The notice of 

proposed rulemaking includes a 

reference to the legal authority under 

which the rule is proposed, and the 

terms and substance of the proposed 

rule or a description of the subjects and 

issues involved. This procedure can be 

waived, however, if an agency finds 

good cause that a notice-and-comment 

procedure is impracticable, unnecessary 

or contrary to the public interest and 

incorporates a statement of the finding 

and supporting reasons in the rule 

issued. We find that good cause exists 

to waive the requirement for publication 

of a notice of proposed rulemaking and 

public comment prior to the effective 

date of this rule because such a 

procedure would be impracticable and 

contrary to the public interest. In order 

to respond to the urgent needs of the 

hospitals and GME programs affected by 

Hurricanes Katrina and Rita, as 

described more fully above, it is 

necessary for these regulations to take 

effect retroactively to August 29, 2005. 

The ordinary notice-and-comment 

procedures would serve to delay (or, in 

some cases, preclude) hurricane-affected 

hospitals and GME programs from 

responding effectively to their 

circumstances by availing themselves of 

the flexibility permitted under this 

interim final rule effective as of August 

29, 2005. 

VI. Collection of Information 

Requirement 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘COLLECTION OF 

INFORMATION REQUIREMENT’’ at the 

beginning of your comments.] 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 


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18664 Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

Section 413.79 Direct GME payments: 

Determination of the weighted number of 

FTE residents 

Section 413.79(f)(6)(ii) states that each 

hospital in the emergency Medicare 

GME affiliated group must submit an 

emergency Medicare GME agreement in 

the manner specified in paragraph (iv) 

and include the following information: 

(A) Each participating hospital and its 

provider number. 

(B) Specify the effective period of the 

emergency Medicare GME affiliation 

agreement. 

(C) List each participating hospital’s 

IME and direct GME FTE caps in effect 

before the emergency Medicare GME 

affiliation agreement. If the hospital was 

already a member of a Medicare GME 

affiliated group as defined at § 413.75(b) 

before entering into the emergency 

Medicare GME affiliation agreement, the 

emergency Medicare GME affiliation 

agreement must be premised on the FTE 

caps of the hospital as adjusted per the 

Medicare GME affiliation agreement. 

(D) Specify the total adjustment to 

each hospital’s FTE caps in each year 

that the emergency Medicare GME 

affiliation agreement is in effect, for 

both direct GME and IME, that reflects 

a positive adjustment to one hospital’s 

direct and indirect FTE caps that is 

offset by a negative adjustment to the 

other hospital’s (or hospitals’) direct and 

indirect FTE caps of at least the same 

amount. The sum total of adjustments to 

all the participating hospital’s FTE caps 

under the emergency Medicare GME 

affiliation agreement may not exceed the 

aggregate adjusted caps of the affiliated 

group. 

(E) Attach copies of all existing 

Medicare GME affiliation agreements 

and emergency Medicare GME 

affiliation agreements the hospital is 

participating in at the time the 

emergency Medicare GME affiliation 

agreement is executed. 

The burden associated with this 

requirement is the time and effort it 

would take for the GME affiliated 

hospital to develop and submit the 

emergency Medicare GME affiliation 

agreement. It is difficult for us to 

determine estimated annual burden 

because we do not know how many 

hospitals will be affected in any given 

disaster. It would depend on what 

resources are available to the affected 

hospitals after sustaining damage from 

the disaster. This could take a few hours 

per hospital or much longer depending 

on if they keep records available and 

current. Hospitals also have to 

coordinate with other hospitals to draw 

up an affiliation agreement which may 

take more time if the hospitals have to 

negotiate. 

If you comment on these information 

collection and record keeping 

requirements, please mail copies 

directly to the following: 

Centers for Medicare & Medicaid 

Services, Office of Strategic Operations 

and Regulatory Affairs, Division of 

Regulations Development, Attn.: 

Melissa Musotto, CMS–1531–IFC, Room 

C5–14–03, 7500 Security Boulevard, 

Baltimore, MD 21244–1850. 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503, 

Attn: Carolyn Lovett, CMS Desk Officer, 

CMS–1531–IFC, 

carolyn_lovett@omb.eop.gov. Fax (202) 

395–6974. 

VII. Regulatory Impact Analysis 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘REGULATORY IMPACT 

ANALYSIS’’ at the beginning of your 

comments.] 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 (as amended 

by Executive Order 13258, which 

merely reassigns responsibility of 

duties) directs agencies to assess all 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). 

This rule is not a major rule since we 

anticipate that the cost to the Medicare 

program will be $32.3 million for the 

10-month period between August 29, 

2005 and June 30, 2006. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6 million to $29 million in any 1 

year (for details, see the Small Business 

Administration’s regulation that set 

forth size standards for health care 

industries at (65 FR 69432)). We believe 

that the impact on the affected hospitals 

will not be significant and will not 

affect a substantial number of small 

entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. This rule is not 

anticipated to have a significant effect 

on small rural hospitals since the 

provisions of this rule will most likely 

be used by large teaching hospitals that 

have established residency programs 

and the capacity to train a larger 

complement of displaced residents. The 

majority of this type of teaching hospital 

is located in non-rural areas. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

That threshold level is currently 

approximately $120 million. This rule 

will not have an effect on State, local, 

or tribal governments in the aggregate 

and the private sector costs will be less 

than the $120 million threshold. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 


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This rule will not have a substantial 

effect on State or local governments. 

B. Anticipated Effects 

This interim final rule with comment 

period modifies the current GME 

regulations as they apply to Medicare 

GME affiliated groups to provide for 

greater flexibility in training residents in 

approved residency programs during 

times of disaster. Specifically, this rule 

implements provisions for ‘‘emergency 

Medicare GME affiliated groups’’ to 

address the needs of teaching hospitals 

that are forced to find alternate training 

sites for residents that were displaced 

by a disaster. 

We believe that there are limited 

effects to modifying the existing 

Medicare GME affiliations to allow for 

emergency affiliation agreements. We 

note that we are not allowing hospitals 

to count for Medicare IME or direct 

GME payment purposes additional FTE 

residents that had not been counted by 

Medicare before a qualifying emergency. 

Hospitals participating in emergency 

Medicare GME affiliated groups are held 

to their respective FTE resident caps as 

specified by the emergency affiliation 

agreement. IME and direct GME 

payments to the hospitals under this 

provision will not be based upon any 

FTE residents in excess of the caps 

specified under the emergency Medicare 

GME affiliation agreements. However, 

Medicare spending may be affected by 

differences in the per resident amounts, 

resident to bed ratios, and Medicare 

utilization rates of host hospitals and 

home hospitals. 

For purposes of comparing the 

existing closed program or closed 

hospital provisions to the emergency 

Medicare GME affiliation provisions, we 

have calculated a financial impact of the 

time-limited exception to the 3-year 

rolling average provision for the 10- 

month period between August 29, 2005, 

and June 30, 2006. This impact is 

premised on the fact that for 10 months, 

host hospitals would be permitted to 

count an additional two-thirds of 

displaced FTE residents, rather than 

only one-third of the displaced FTEs 

that they could count if the displaced 

FTEs would be included in the 3-year 

rolling average. 

In estimating the impact of the 10- 

month exception, we estimated the cost 

based on the FY 2006 projected national 

average per resident amount and the 

average Medicare utilization rate for 

direct GME purposes, and the average 

resident to bed ratio for IME purposes. 

In addition, we estimate that 

approximately 293 FTE residents will be 

affected. Accordingly, we believe that 

the impact on combined direct GME, 

operating IME and capital IME 

payments will be approximately $32.3 

million for the 10-month period 

between August 29, 2005 and June 30, 

2006. 

C. Alternatives Considered 

We considered amending the closed 

program regulations, at § 413.79(h), to 

apply to partially closed programs. 

However, due to the complexity of 

training programs where residents train 

at multiple hospitals, there are many 

potential difficulties that can arise in 

applying this policy to address disaster 

situations. Typically, residents in a 

program spend time training during the 

year at multiple hospitals, some of 

which may have been affected by the 

disaster, while others may not have 

been affected. Additional complexity 

can arise through the interaction of the 

home and host hospital’s FTE resident 

caps. Each one of the home hospitals 

involved could be training a number of 

FTE residents above their respective 

IME and direct GME FTE resident caps. 

Since the closed program provisions are 

resident-specific, that is, the host 

hospital’s cap adjustment is tied to the 

specific resident who was displaced, as 

specified at § 413.79(h), documentation 

would be required to account for each 

resident’s FTE time spent training at 

each of the home and host hospitals. 

Additionally, because the policy under 

§ 413.79(h) is ‘‘resident-specific’’, the 

host hospital would only receive a 

temporary cap adjustment for as long as 

the specific residents are displaced. 

Therefore, home and host hospitals 

would need to provide a very detailed 

accounting of each resident’s training as 

required at § 413.79(h)). The 

documentation that would be required if 

the change in policy was to amend the 

closed program regulations would prove 

to be too burdensome for many 

hospitals. 

D. Conclusion 

For these reasons, we are not 

preparing analyses for either the RFA or 

section 1102(b) of the Act because we 

have determined that this rule would 

not have a significant economic impact 

on a substantial number of small entities 

or a significant impact on the operations 

of a substantial number of small rural 

hospitals. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 412 

Health facilities, Kidney diseases, 

Medicare, Puerto Rico, Reporting and 

recordkeeping requirements. 

42 CFR Part 413 

Health facilities, Kidney disease, 

Medicare, Puerto Rico, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

chapter IV as set forth below: 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh), Sec. 124 of Pub. L. 106–113, 113 

Stat. 1515, and Sec. 405 of Pub. L. 108–

173117, Stat. 2266. 

Subpart G—Special treatment of 

certain facilities under the prospective 

payment system for inpatient 

operating costs 

■ 2. Section 412.105 is amended by—

■ A. Republishing the introductory text. 

■ B. Revising paragraph (a)(1)(i). 

■ C. Republishing paragraph (f) 

introductory text. 

■ D. Revising paragraph (f)(1)(vi). 

The revisions read as follows: 

§ 412.105 Special treatment: Hospitals that 

incur indirect costs for graduate medical 

education programs. 

CMS makes an additional payment to 

hospitals for indirect medical education 

costs using the following procedures: 

(a) * * * 

(1) * * * 

(i) Except for the special 

circumstances for Medicare GME 

affiliated groups, emergency Medicare 

GME affiliated groups, and new 

programs described in paragraphs 

(f)(1)(vi) and (f)(1)(vii) of this section for 

cost reporting periods beginning on or 

after October 1, 1997, and for the special 

circumstances for closed hospitals or 

closed programs described in paragraph 

(f)(1)(ix) of this section for cost reporting 

periods beginning on or after October 1, 

2002, this ratio may not exceed the ratio 

for the hospital’s most recent prior cost 

reporting period after accounting for the 

cap on the number of allopathic and 

osteopathic full-time equivalent 

residents as described in paragraph 

(f)(1)(iv) of this section, and adding to 

the capped numerator any dental and 

podiatric full-time equivalent residents. 

* * * * * 


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(f) Determining the total number of 

full-time equivalent residents for cost 

reporting periods beginning on or after 

July 1, 1991. 

* * * * * 

(vi) Hospitals that are part of the same 

Medicare GME affiliated group or 

emergency Medicare GME affiliated 

group (as defined in § 413.75(b) of this 

subchapter) may elect to apply the limit 

as paragraph (f)(1)(iv) of this section on 

an aggregate basis, as specified in 

§ 413.79(f) of this subchapter. 

* * * * * 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES: PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR 

SKILLED NURSING FACILITIES 

■ 3. The authority citation for part 413 

continues to read as follows: 

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

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

1881, 1883, and 1886 of the Social Security 

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

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

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

124 of Pub. L. 106–113, 113 Stat. 1515. 

Subpart F—Specific categories of 

costs 

■ 4. In § 413.75, paragraph (b) 

introductory text is republished, and the 

definition for ‘‘Emergency Medicare 

GME affiliated group’’ is added in 

alphabetical order to read as follows: 

§ 413.75 Direct GME payments: General 

requirements. 

* * * * * 

(b) Definitions. For purposes of this 

section and § 413.76 through § 413.83, 

the following definitions apply: 

* * * * * 

Emergency Medicare GME affiliated 

group means at least one home hospital 

and one or more host hospitals, as those 

terms are defined below, that meet the 

requirements at § 413.79(f)(6). For 

purposes of an emergency Medicare 

GME affiliated group, the following 

definitions apply: 

(1) Home hospital means a hospital 

that—

(i) is located in section 1135 

emergency area; 

(ii) had its inpatient bed occupancy 

decreased by 20 percent or more as the 

result of a section 1135 emergency 

period so that it is unable to train the 

number of residents it originally 

intended to train in that academic year; 

and 

(iii) needs to send the displaced 

residents to train at a host hospital. 

(2) Host hospital means a hospital 

training residents displaced from a 

home hospital. 

(3) Section 1135 emergency area or 

section 1135 emergency period mean, 

respectively, a geographic area in 

which, or a period during which, there 

exists—

(i) An emergency or disaster declared 

by the President pursuant to the 

National Emergencies Act or the Robert 

T. Stafford Disaster Relief and 

Emergency Assistance Act; and 

(ii) A public health emergency 

declared by the Secretary pursuant to 

section 319 of the Public Health Service 

Act. 

* * * * * 

■ 5. Section 413.79 is amended as 

follows: 

■ A. Revising paragraph (f) introductory 

text. 

■ B. Adding a new paragraph (f)(6). 

The revisions and additions read as 

follows: 

§ 413.79 Direct GME payments: 

Determination of the weighted number of 

FTE residents. 

* * * * * 

(f) Medicare GME affiliated group. A 

hospital may receive a temporary 

adjustment to its FTE cap, which, 

except as provided in paragraph 

(f)(6)(iv) below, is subject to the 

averaging rules at § 413.79(d), to reflect 

residents added or subtracted because 

the hospital is participating in a 

Medicare GME affiliated group or an 

emergency Medicare GME affiliated 

group (as defined at § 413.75(b)). Under 

this provision—

* * * * * 

(6) Emergency Medicare GME 

affiliated group. 

Effective on or after August 29, 2005, 

home and host hospitals as defined at 

§ 413.75(b) may form an emergency 

Medicare GME affiliated group by 

meeting the requirements provided in 

this section. The emergency Medicare 

GME affiliation agreement may be made 

effective beginning on or after the first 

day of a section 1135 emergency period, 

and terminates no later than at the 

conclusion of two academic years 

following the academic year during 

which the section 1135 emergency 

period began. 

(i) Each hospital in the emergency 

Medicare GME affiliated group must 

submit an emergency Medicare GME 

affiliation agreement that is written, 

signed, and dated by responsible 

representatives of each participating 

hospital in the manner specified in 

paragraph (ii) and includes the 

following information: 

(A) List each participating hospital 

and its provider number; and indicate 

whether each hospital is a home or host 

hospital. 

(B) Specify the effective period of the 

emergency Medicare GME affiliation 

agreement (which must, in any event, 

terminate at the conclusion of two 

academic years following the academic 

year in which the section 1135 

emergency period began). 

(C) List each participating hospital’s 

IME and direct GME FTE caps in effect 

before the emergency Medicare GME 

affiliation agreement (including any 

adjustments to those caps in effect as a 

result of other Medicare GME affiliation 

agreements but not including any slots 

gained under § 413.79(c)(4)). 

(D) Specify the total adjustment to 

each participating hospital’s FTE caps 

in each academic year that the 

emergency Medicare GME affiliation 

agreement is in effect, for both direct 

GME and IME, that reflects a positive 

adjustment to the host hospital’s direct 

and indirect FTE caps that is offset by 

a negative adjustment to the home 

hospital’s (or hospitals’) direct and 

indirect FTE caps of at least the same 

amount. The sum total of adjustments to 

all the participating hospitals’ FTE caps 

under the emergency Medicare GME 

affiliation agreement may not exceed the 

aggregate adjusted FTE caps of the 

hospitals participating in the emergency 

Medicare GME affiliated group. A home 

hospital’s IME and direct GME FTE cap 

reductions in an emergency Medicare 

GME affiliation agreement are limited to 

the home hospital’s IME and direct GME 

FTE resident caps at § 413.79(c) or 

§ 413.79(f)(1) through (f)(5), that is, as 

adjusted by any and all existing 

affiliation agreements as applicable. 

(E) Attach copies of all existing 

Medicare GME affiliation agreements 

and emergency Medicare GME 

affiliation agreements in which the 

hospital is participating at the time the 

emergency Medicare GME affiliation 

agreement is executed. 

(ii) Time for submission of the 

emergency Medicare GME affiliation 

agreement. For the year during which 

the section 1135 emergency was 

declared, each participating hospital 

must submit an emergency Medicare 

GME affiliation agreement to CMS and 

submit a copy to the CMS fiscal 

intermediary by the later of 180 days 

after the section 1135 emergency period 

begins or by June 30 of the academic 

year in which the emergency Medicare 

GME affiliation agreement is effective. 

Emergency Medicare GME affiliation 

agreements for the subsequent 2 

academic years must be submitted by 

the later of 180 days after the section 


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Federal Register / Vol. 71, No. 70 / Wednesday, April 12, 2006 / Rules and Regulations 18667 

1135 emergency period begins or by July 

1 of each year. 

(iii) Exemption from the Shared 

Rotational Arrangement Requirement. 

During the effective period of the 

emergency Medicare GME affiliation 

agreement, hospitals in the emergency 

Medicare GME affiliated group are not 

required to participate in a shared 

rotational arrangement as defined at 

§ 413.75(b). 

(iv) Host Hospital Exception from the 

Rolling Average for the Period from 

August 29, 2005 to June 30, 2006. To 

determine the FTE resident count for a 

host hospital that is training residents in 

excess of its cap, a two step process will 

be applied. First, subject to the limit at 

paragraph (f)(6)(i)(D) of this section, a 

host hospital is to exclude the displaced 

FTE residents that are counted by a host 

hospital in excess of the hospital’s cap 

pursuant to an emergency Medicare 

GME affiliation agreement from August 

29, 2005, to June 30, 2006, from the 

current year’s FTE resident count before 

applying the three-year rolling averaging 

rules under § 413.75 (d) to calculate the 

average FTE resident count. Second, the 

displaced FTE residents that are 

counted by the host hospital in excess 

of the host hospital’s cap pursuant to an 

emergency Medicare GME affiliation 

agreement from August 29, 2005, to June 

30, 2006, are added to the hospital’s 3- 

year rolling average FTE resident count 

to determine the host hospital’s FTE 

resident count for payment purposes. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: March 31, 2006. 

Mark B. McClellan, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: April 4, 2006. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 06–3492 Filed 4–7–06; 3 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 63 and 64 

[IB Docket No. 04–226; FCC 05–91] 

Mandatory Electronic Filing for 

International Telecommunications 

Services and Other International 

Filings 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule, announcement of 

effective date. 

SUMMARY: This document announces the 

effective date of the rules published in 

the Federal Register on July 6, 2005. 

The rules eliminate paper filings and 

require applicants to file electronically 

all applications and other filings related 

to international telecommunications 

services that can be filed through the 

International Bureau Filing System 

(IBFS). 

DATES: The amendments to 47 CFR 

63.19(d), 63.21(a), 63.21(h), 63.21(i), 

63.25(b), 63.25(c), 63.25(e), 63.53(a)(1), 

63.53(a)(2), 63.701 introductory text and 

(j); 64.1001(a), 64.1001(f), 64.1002(c) 

and 64.1002(e) published at 70 FR 

38795, July 6, 2005 are effective April 

12, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Peggy Reitzel or JoAnn Ekblad, Policy 

Division, International Bureau, (202) 

418–1460. 

SUPPLEMENTARY INFORMATION: On May 

11, 2005 the Commission released a 

Report and Order, a summary of which 

was published in the Federal Register. 

See 70 FR 38795 (July 6, 2005). We 

stated that the rules were effective on 

August 5, 2005 except for 47 CFR 

63.19(d), 63.21(a), 63.21(h), 63.21(i), 

63.25(b), 63.25(c), 63.25(e), 63.53(a)(1), 

63.53(a)(2), 63.701 introductory text and 

(j); 64.1001(a), 64.1001(f), 64.1002(c) 

and 64.1002(e) which required approval 

by the Office of Management and 

Budget (OMB). The information 

collection requirements were approved 

by OMB. (See OMB Nos. 3060–0357, 

3060–0454, 3060–0686, 3060–0944, 

3060–1028, 3060–1029.) This 

publication satisfies our statement that 

the Commission would publish a 

document announcing the effective date 

of the rules. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

[FR Doc. 06–3506 Filed 4–11–06; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Part 212 

[DFARS Case 2003–D106] 

Defense Federal Acquisition 

Regulation Supplement; Transition of 

Weapons-Related Prototype Projects 

to Follow-On Contracts 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD has adopted as final, 

with changes, an interim rule amending 

the Defense Federal Acquisition 

Regulation Supplement (DFARS) to 

implement Section 847 of the National 

Defense Authorization Act for Fiscal 

Year 2004. Section 847 authorizes DoD 

to carry out a pilot program that permits 

the use of streamlined contracting 

procedures for the production of items 

or processes begun as prototype projects 

under other transaction agreements. 

DATES: Effective Date: April 12, 2006. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Robin Schulze, Defense Acquisition 

Regulations System, OUSD (AT&L) 

DPAP (DARS), IMD 3C132, 3062 

Defense Pentagon, Washington, DC 

20301–3062. Telephone (703) 602–0326; 

facsimile (703) 602–0350. Please cite 

DFARS Case 2003–D106. 

SUPPLEMENTARY INFORMATION: 

A. Background 

DoD published an interim rule at 69 

FR 63329 on November 1, 2004, to 

implement Section 847 of the National 

Defense Authorization Act for Fiscal 

Year 2004 (Pub. L. 108–136). Section 

847 authorizes DoD to carry out a pilot 

program for follow-on contracting for 

the production of items or processes 

begun as prototype projects under other 

transaction agreements. Contracts and 

subcontracts awarded under the 

program may be treated as those for the 

acquisition of commercial items; and 

items or processes acquired under the 

program may be treated as developed in 

part with Federal funds and in part at 

private expense for purposes of 

negotiating rights in technical data. 

One association submitted comments 

on the interim rule. A discussion of the 

comments is provided below. 

1. Comment: Definition of 

nontraditional defense contractor. The 

respondent noted that the definition in 

the rule is consistent with the statutory 

definition at 10 U.S.C. 2173, but stated 


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