Volunteer Preceptor Rule Needs Revision

A proposed regulation by CMS goes against the agency's own definition of a key term governing direct graduate medical education, or DGME, and indirect graduate medical education, or IME, payments to hospitals that send residents to community-based preceptors. Moreover, the proposal flies in the face of legislative intent. So says a recent letter from five family medicine organizations, including the Academy, to the federal agency. Based on these shortcomings, CMS should withdraw the proposed rule, the groups say.

In a March 26 letter to Leslie Norwalk, acting administrator of CMS, the AAFP, Society of Teachers of Family Medicine, Association of Family Medicine Residency Directors, Association of Departments of Family Medicine and North American Primary Care Research Group called for dropping CMS' requirement that teaching hospitals pay volunteer preceptors for the time the preceptors spend teaching residents.

The letter is part of an ongoing effort to convince CMS to rescind or alter its policy, which increases teaching hospitals' costs for community-based education and discourages residency programs from training residents in nonhospital settings. The regulation has a particularly negative impact on family medicine residency training programs, which rely heavily on community-based preceptors who volunteer to train residents.

However, "recognizing that CMS is unlikely to comply" with the request to drop the payment requirement, the five organizations urge the agency to alter the proposed regulation to be consistent with other Medicare-related rules and to comply with congressional intent.

The letter notes that CMS is internally inconsistent in its Medicare rules. The current IME and DGME proposal stipulates that hospitals must pay "all or substantially all" -- defined in the proposal as 90 percent -- of the costs associated with teaching residents in community settings. Hospitals are permitted to count residents' salaries and fringe benefits toward that 90 percent threshold. If those costs don’t reach the threshold, the hospitals also must include the preceptors' salaries and fringe benefits during the time they are teaching.

However, CMS uses a 75-percent threshold as the definition of "substantially all" in Medicare's regulatory language implementing the Stark Rule, which bans Medicare payment for services when a physician refers care to an entity in which the physician or his or her family members have a financial interest.

"We see no valid reason for CMS to interpret the term 'substantially all' differently in the nonhospital site context than (CMS officials) do for the Stark provisions," the letter says. Moreover, courts also have defined "substantially all" as being 75 percent or greater in other contexts. "With this background of a previously codified interpretation by CMS, as well as courts' interpretations each designating the term 'substantially all' to mean 75 percent or greater, the 90-percent threshold proposed by CMS in this rule is too high," the letter says.

The letter also says that the rule contradicts congressional language in the Balanced Budget Act of 1997, or BBA, which mandated that Medicare provide DGME and IME funding for training in nonhospital settings. In report language accompanying the BBA, the congressional conference committee included "new permission for hospitals to rotate residents through nonhospital settings, which include primarily ambulatory care settings, without reduction in indirect medical education funds."

By withholding Medicare IME funds to hospitals that fail to pay volunteer preceptors, the CMS rule does, in fact, reduce IME support, the letter says.

Other comments in the letter note that