Understanding reimbursement for pharmacy residents.

n most hospitals in the United States, Medicare patients make up a substantial portion of the total number of patients treated. As a result, the Health Care Financing Administration (HCFA), which manages the Medicare program, reimburses for its share of certain expenses associated with the training and education of health care professionals. Medicare reimbursement must therefore be considered during cost– benefit analysis of any new or existing training and education programs. The complicated rules and regulations of Medicare reimbursement are particularly important to the justification and continual cost– benefit analysis of pharmacy residency programs. Background. A general understanding of Medicare reimbursement of residency programs for health care professions might be useful during discussions with administrative and financial executives. Currently, the costs of pharmacy residency programs are reimbursable under different rules than those that apply to medicine, osteopathy, dentistry, and podiatry residency programs. In the past, however, reimbursement for pharmacy residency programs and for other approved programs (such as some nursing and radiology technician training programs) was more closely tied to the same rules that applied to medicine, osteopathy, dentistry, and podiatry. Making the distinction between the two sets of rules might be useful for educating executives and financial managers. Graduate medical education pass-through costs. Direct costs of medical education (e.g., allocated overhead costs, salaries of interns and residents) are excluded from the Medicare definition of inpatient operating costs covered by the prospective pricing system (PPS). This means that the direct costs of approved medical education activities are not included in hospital-specific, regional, or national payment rates to hospitals under the PPS but continue to be reimbursed on the basis of reasonable costs.1 These expenses are frequently referred to as graduate medical education (GME) costs and are sometimes called GME pass-through costs because they are not reimbursed on the basis of the PPS but, rather, pass through the PPS, thus avoiding the reimbursement limitations imposed by the PPS. To qualify for exclusion from the PPS, interns’ and residents’ services must satisfy the provisions of Section I Appendix D