Financial Barriers to Rural Graduate Medical Education: Medicare Funding Methods for Sole Community and Medicare-Dependent Hospitals.

Purpose: Policymakers are exploring options to address rural-urban physician maldistribution, including reducing rural residency training barriers. This study estimated Medicare graduate medical education (GME) reimbursement that sole community hospitals (SCHs) and Medicare-dependent hospitals (MDHs) are disqualified from receiving compared with hospitals under the Prospective Payment System (PPS) and calculated the GME reimbursement per resident for MDHs and SCHs under different scenarios.

Method: This simulation study used Healthcare Cost Report Information System data on hospitals that had been SCHs or MDHs between 2011 and 2021 and did not have any resident full-time equivalents (FTEs) in the most recent year. Reimbursements were calculated under the PPS and hospital-specific rate (HSR), assuming all other hospital financing elements remained unchanged, apart from adding resident FTEs.

Results: A total of 242 hospitals were identified as current or recent SCHs or MDHs with an average daily census of 25 or more and no residents in their most recent cost reports; 139 (57.4%) were paid under the HSR. The median (interquartile range) reimbursement per resident was $179,442 ($153,078-$208,412) under PPS and $107,294 ($85,134-$128,259) under HSR, a difference of nearly $70,000 per resident. The median opportunity cost per FTE was approximately $73,000 for SCHs and approximately $65,000 for MDHs. No significant per-resident differences were observed in the GME payments based on program size. Due to higher GME payments from PPS vs HSR, the number of hospitals defaulting to HSR decreased, and by the end of the third year of the program, more than 10% hospitals switched from HSR to PPS.

Conclusions: Under the current health care and GME reimbursement method, SCHs and MDHs face considerable financial barriers to launching or participating in GME programs. Policy adjustments to address this barrier may incentivize more rural facilities to launch or participate in GME, potentially mitigating the geographic maldistribution of physicians.