Fiscal Intermediary Determinations of Hospitals' Graduate Medical Education Costs for the Medicare Base Year

The Medicare system for reimbursing teaching hospitals for graduate medical education (GME) costs uses a formula approach based on each hospital's average GME cost per physician intern and resident for a designated base year. Our audit was made to determine whether Medicare's fiscal intermediaries (FI) have adequately audited the GME costs and resident counts for the base year, and correctly established each hospital's average GME costs per resident. We found significant problems with the FI audits involving the accuracy of resident counts. As a result, we recommended in individual reports to the FIs recovery of $14.4 million for past years. In this final report we are recommending that the Health Care Financing Administration (1) direct its FIs to emphasize in future audits of the payment years the accuracy of the FTE resident counts, (2) monitor the effectiveness of these audits, and (3) consider analyzing and comparing GME payments under the new payment methodology with actual GME costs, as part of its oversight responsibilities.