On December 17, the Centers for Medicare & Medicaid Services (CMS) released a hospital inpatient final regulation to implement the legislative changes to Medicare direct graduate medical education and indirect medical education payments to teaching hospitals. These changes were part of the Consolidated Appropriations Act of 2021 and included a requirement for 1,000 new Medicare-funded medical residency positions. The number of residency slots represents the largest increase in more than 25 years and advances key priorities to close the health care equity gap and enhance the health care workforce in rural and underserved communities.

The CAP supported the proposals through its public comments earlier in the year. The CAP said that increased Medicare funding for medical residency positions for all medical specialties will help ease current physician shortages and bolster the foundation of our health care system. The CAP stressed that shortages are also occurring in overlooked specialty areas such as pathology, and that additional funding for medical residency positions in pathology should be considered, especially in rural areas.

The agency will phase in 1,000 new residency slots over five years beginning with 200 positions available in fiscal year 2023 and each subsequent year until 1,000 have been distributed. Applications for the new residency slots must be submitted by March 31, 2022. Hospitals will be notified of the increases awarded by January 31, 2023, and positions will be effective July 1, 2023.

The agency also finalized its policy to prioritize applications from qualifying hospitals operating residency programs serving underserved populations by using its Health Resources and Services Administration’s score in allocating full-time equivalent (FTE) residents.

The CMS is modifying its proposal that limited the number of residency positions to each hospital to no more than one FTE each year. Instead, the CMS will allow five FTEs per year, with the maximum award amount contingent on the length of the program for which the hospital is applying.