Title 42 — The Public Health and WelfareRelease 119-73
§256e Program of payments to children’s hospitals that operate graduate medical education programs
Title 42 › Chapter CHAPTER 6A— - PUBLIC HEALTH SERVICE › Subchapter SUBCHAPTER II— - GENERAL POWERS AND DUTIES › Part Part D— - Primary Health Care › Subpart subpart ix— - support of graduate medical education programs in children’s hospitals › § 256e
Summary
The Secretary must pay each children’s hospital two yearly payments in the listed fiscal years (2000–2005, 2007–2011, 2014–2018, and 2019–2023): one to cover direct costs of running approved graduate medical residency programs and one to cover indirect costs (like care for sicker patients and extra teaching costs). The direct payment equals a per‑resident amount multiplied by the hospital’s average full‑time equivalent (FTE) residents, using a formula based on historical data and updated by the consumer price index. The indirect payment is set by the Secretary based on case mix and the residents‑to‑beds ratio and must match the total money appropriated for indirect payments. Payments are estimated before each fiscal year and sent in 12 monthly interim installments, with up to 25% held back to prevent overpayment and a year‑end reconciliation to recoup or pay any difference. If Congress does not provide enough money for a year, payments are cut pro rata. If a hospital fails to give the required annual report or gives incomplete information, its payment may be cut by 25% after a 30‑day chance to fix the problem. The required report covers types of training offered, positions recruited and filled, training for underserved populations, changes in training and quality/safety work, and how many graduates stay in the hospital’s service area; residents counted are FTEs at the hospital or those who spend more than 75% of training time there. The Secretary must summarize these reports and the program for Congress by the end of fiscal years 2018 and 2022. Definitions: “approved graduate medical residency training program” — an approved hospital residency program; “children’s hospital” — a hospital with a Medicare agreement that is excluded from the inpatient prospective payment system and treats mainly children; “direct graduate medical education costs” — the direct costs of running residency programs. Congress authorized the following yearly amounts for direct payments: FY2000 $90,000,000; FY2001 $95,000,000; FY2002–2005 such sums as may be necessary; FY2007–2011 $110,000,000 each year; FY2014–2018 $100,000,000 each year; FY2019–2023 $105,000,000 each year (FY2000 direct funds remain available through the end of FY2001). For indirect payments Congress authorized: FY2000 $190,000,000; FY2001 $190,000,000; FY2002–2005 such sums as may be necessary; FY2007–2011 $220,000,000 each year; FY2014–2018 $200,000,000 each year; FY2019–2023 $220,000,000 each year. The Secretary may also use up to 25% of total amounts above $245,000,000, but not more than $7,000,000, to pay qualifying free‑standing hospitals that meet the listed criteria; those payments follow the same rules, use per‑resident amounts no larger than the main program, require the same reports, and leftover funds can be redistributed or used for quality bonuses.
Full Legal Text
Title 42, §256e
The Public Health and Welfare — Source: USLM XML via OLRC
(a)The Secretary shall make two payments under this section to each children’s hospital for each of fiscal years 2000 through 2005, each of fiscal years 2007 through 2011, each of fiscal years 2014 through 2018, and each of fiscal years 2019 through 2023, one for the direct expenses and the other for indirect expenses associated with operating approved graduate medical residency training programs. The Secretary shall promulgate regulations pursuant to the rulemaking requirements of title 5 which shall govern payments made under this subpart.
(b)(1)Subject to paragraphs (2) and (3), the amounts payable under this section to a children’s hospital for an approved graduate medical residency training program for a fiscal year are each of the following amounts:
(A)The amount determined under subsection (c) for direct expenses associated with operating approved graduate medical residency training programs.
(B)The amount determined under subsection (d) for indirect expenses associated with the treatment of more severely ill patients and the additional costs relating to teaching residents in such programs.
(2)(A)The total of the payments made to children’s hospitals under paragraph (1)(A) or paragraph (1)(B) in a fiscal year shall not exceed the funds appropriated under paragraph (1) or (2), respectively, of subsection (f) for such payments for that fiscal year.
(B)If the Secretary determines that the amount of funds appropriated under subsection (f)(1) for a fiscal year is insufficient to provide the total amount of payments otherwise due for such periods under paragraph (1)(A), the Secretary shall reduce the amounts so payable on a pro rata basis to reflect such shortfall.
(3)(A)(i)The amount payable under this section to a children’s hospital for a fiscal year (beginning with fiscal year 2008 and after taking into account paragraph (2)) shall be reduced by 25 percent if the Secretary determines that—
(I)the hospital has failed to provide the Secretary, as an addendum to the hospital’s application under this section for such fiscal year, the report required under subparagraph (B) for the previous fiscal year; or
(II)such report fails to provide the information required under any clause of such subparagraph.
(ii)Before imposing a reduction under clause (i) on the basis of a hospital’s failure to provide information described in clause (i)(II), the Secretary shall provide notice to the hospital of such failure and the Secretary’s intention to impose such reduction and shall provide the hospital with the opportunity to provide the required information within a period of 30 days beginning on the date of such notice. If the hospital provides such information within such period, no reduction shall be made under clause (i) on the basis of the previous failure to provide such information.
(B)The report required under this subparagraph for a children’s hospital for a fiscal year is a report that includes (in a form and manner specified by the Secretary) the following information for the residency academic year completed immediately prior to such fiscal year:
(i)The types of resident training programs that the hospital provided for residents described in subparagraph (C), such as general pediatrics, internal medicine/pediatrics, and pediatric subspecialties, including both medical subspecialties certified by the American Board of Pediatrics (such as pediatric gastroenterology) and non-medical subspecialties approved by other medical certification boards (such as pediatric surgery).
(ii)The number of training positions for residents described in subparagraph (C), the number of such positions recruited to fill, and the number of such positions filled.
(iii)The types of training that the hospital provided for residents described in subparagraph (C) related to the health care needs of different populations, such as children who are underserved for reasons of family income or geographic location, including rural and urban areas.
(iv)The changes in residency training for residents described in subparagraph (C) which the hospital has made during such residency academic year (except that the first report submitted by the hospital under this subparagraph shall be for such changes since the first year in which the hospital received payment under this section), including—
(I)changes in curricula, training experiences, and types of training programs, and benefits that have resulted from such changes; and
(II)changes for purposes of training the residents in the measurement and improvement of the quality and safety of patient care.
(v)The numbers of residents described in subparagraph (C) who completed their residency training at the end of such residency academic year and care for children within the borders of the service area of the hospital or within the borders of the State in which the hospital is located. Such numbers shall be disaggregated with respect to residents who completed residencies in general pediatrics or internal medicine/pediatrics, subspecialty residencies, and dental residencies.
(C)The residents described in this subparagraph are those who—
(i)are in full-time equivalent resident training positions in any training program sponsored by the hospital; or
(ii)are in a training program sponsored by an entity other than the hospital, but who spend more than 75 percent of their training time at the hospital.
(D)Not later than the end of fiscal year 2018, and the end of fiscal year 2022, the Secretary, acting through the Administrator of the Health Resources and Services Administration, shall submit a report to the Congress—
(i)summarizing the information submitted in reports to the Secretary under subparagraph (B);
(ii)describing the results of the program carried out under this section; and
(iii)making recommendations for improvements to the program.
(c)(1)The amount determined under this subsection for payments to a children’s hospital for direct graduate expenses relating to approved graduate medical residency training programs for a fiscal year is equal to the product of—
(A)the updated per resident amount for direct graduate medical education, as determined under paragraph (2); and
(B)the average number of full-time equivalent residents in the hospital’s graduate approved medical residency training programs (as determined under section 1395ww(h)(4) of this title during the fiscal year.
(2)The updated per resident amount for direct graduate medical education for a hospital for a fiscal year is an amount determined as follows:
(A)The Secretary shall compute for each hospital operating an approved graduate medical education program (regardless of whether or not it is a children’s hospital) a single per resident amount equal to the average (weighted by number of full-time equivalent residents) of the primary care per resident amount and the non-primary care per resident amount computed under section 1395ww(h)(2) of this title for cost reporting periods ending during fiscal year 1997.
(B)The Secretary shall estimate the average proportion of the single per resident amounts computed under subparagraph (A) that is attributable to wages and wage-related costs.
(C)The Secretary shall establish a standardized per resident amount for each such hospital—
(i)by dividing the single per resident amount computed under subparagraph (A) into a wage-related portion and a non-wage-related portion by applying the proportion determined under subparagraph (B);
(ii)by dividing the wage-related portion by the factor applied under section 1395ww(d)(3)(E) of this title for discharges occurring during fiscal year 1999 for the hospital’s area; and
(iii)by adding the non-wage-related portion to the amount computed under clause (ii).
(D)The Secretary shall compute a national average per resident amount equal to the average of the standardized per resident amounts computed under subparagraph (C) for such hospitals, with the amount for each hospital weighted by the average number of full-time equivalent residents at such hospital.
(E)The Secretary shall compute for each such hospital that is a children’s hospital a per resident amount—
(i)by dividing the national average per resident amount computed under subparagraph (D) into a wage-related portion and a non-wage-related portion by applying the proportion determined under subparagraph (B);
(ii)by multiplying the wage-related portion by the factor applied under section 1395ww(d)(3)(E) of this title for discharges occurring during the preceding fiscal year for the hospital’s area; and
(iii)by adding the non-wage-related portion to the amount computed under clause (ii).
(F)The Secretary shall update such per resident amount for each such children’s hospital by the estimated percentage increase in the consumer price index for all urban consumers during the period beginning October 1997 and ending with the midpoint of the Federal fiscal year for which payments are made.
(d)(1)The amount determined under this subsection for payments to a children’s hospital for indirect expenses associated with the treatment of more severely ill patients and the additional costs associated with the teaching of residents for a fiscal year is equal to an amount determined appropriate by the Secretary.
(2)In determining the amount under paragraph (1), the Secretary shall—
(A)take into account variations in case mix among children’s hospitals and the ratio of the number of full-time equivalent residents in the hospitals’ approved graduate medical residency training programs to beds (but excluding beds or bassinets assigned to healthy newborn infants); and
(B)assure that the aggregate of the payments for indirect expenses associated with the treatment of more severely ill patients and the additional costs related to the teaching of residents under this section in a fiscal year are equal to the amount appropriated for such expenses for the fiscal year involved under subsection (f)(2).
(e)(1)The Secretary shall determine, before the beginning of each fiscal year involved for which payments may be made for a hospital under this section, the amounts of the payments for direct graduate medical education and indirect medical education for such fiscal year and shall (subject to paragraph (2)) make the payments of such amounts in 12 equal interim installments during such period. Such interim payments to each individual hospital shall be based on the number of residents reported in the hospital’s most recently filed Medicare cost report prior to the application date for the Federal fiscal year for which the interim payment amounts are established. In the case of a hospital that does not report residents on a Medicare cost report, such interim payments shall be based on the number of residents trained during the hospital’s most recently completed Medicare cost report filing period.
(2)The Secretary shall withhold up to 25 percent from each interim installment for direct and indirect graduate medical education paid under paragraph (1) as necessary to ensure a hospital will not be overpaid on an interim basis.
(3)Prior to the end of each fiscal year, the Secretary shall determine any changes to the number of residents reported by a hospital in the application of the hospital for the current fiscal year to determine the final amount payable to the hospital for the current fiscal year for both direct expense and indirect expense amounts. Based on such determination, the Secretary shall recoup any overpayments made and pay any balance due to the extent possible. The final amount so determined shall be considered a final intermediary determination for the purposes of section 1395oo of this title and shall be subject to administrative and judicial review under that section in the same manner as the amount of payment under section 1395ww(d) 11 See References in Text note below. of this title is subject to review under such section.
(f)(1)(A)There are hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, for payments under subsection (b)(1)(A)—
(i)for fiscal year 2000, $90,000,000;
(ii)for fiscal year 2001, $95,000,000;
(iii)for each of the fiscal years 2002 through 2005, such sums as may be necessary;
(iv)for each of fiscal years 2007 through 2011, $110,000,000;
(v)for each of fiscal years 2014 through 2018, $100,000,000; and
(vi)for each of fiscal years 2019 through 2023, $105,000,000.
(B)The amounts appropriated under subparagraph (A) for fiscal year 2000 shall remain available for obligation through the end of fiscal year 2001.
(2)There are hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, for payments under subsection (b)(1)(B)—
(A)for fiscal year 2000, $190,000,000;
(B)for fiscal year 2001, $190,000,000;
(C)for each of the fiscal years 2002 through 2005, such sums as may be necessary;
(D)for each of fiscal years 2007 through 2011, $220,000,000;
(E)for each of fiscal years 2014 through 2018, $200,000,000; and
(F)for each of fiscal years 2019 through 2023, $220,000,000.
(g)In this section:
(1)The term “approved graduate medical residency training program” has the meaning given the term “approved medical residency training program” in section 1395ww(h)(5)(A) of this title.
(2)The term “children’s hospital” means a hospital with a Medicare payment agreement and which is excluded from the Medicare inpatient prospective payment system pursuant to section 1395ww(d)(1)(B)(iii) of this title and its accompanying regulations.
(3)The term “direct graduate medical education costs” has the meaning given such term in section 1395ww(h)(5)(C) of this title.
(h)(1)The Secretary is authorized to make available up to 25 percent of the total amounts in excess of $245,000,000 appropriated under paragraphs (1) and (2) of subsection (f), but not to exceed $7,000,000, for payments to hospitals qualified as described in paragraph (2), for the direct and indirect expenses associated with operating approved graduate medical residency training programs, as described in subsection (a).
(2)(A)To qualify to receive payments under paragraph (1), a hospital shall be a free-standing hospital—
(i)with a Medicare payment agreement and that is excluded from the Medicare inpatient hospital prospective payment system pursuant to section 1395ww(d)(1)(B) of this title and its accompanying regulations;
(ii)whose inpatients are predominantly individuals under 18 years of age;
(iii)that has an approved medical residency training program as defined in section 1395ww(h)(5)(A) of this title; and
(iv)that is not otherwise qualified to receive payments under this section or section 1395ww(h) of this title.
(B)In the case of a freestanding children’s hospital that, on April 7, 2014, meets the requirements of subparagraph (A) but for which the Secretary has not determined an average number of full-time equivalent residents under section 1395ww(h)(4) of this title, the Secretary may establish such number of full-time equivalent residents for the purposes of calculating payments under this subsection.
(3)Payments to hospitals made under this subsection shall be made in the same manner as payments are made to children’s hospitals, as described in subsections (b) through (e).
(4)The direct and indirect payment amounts under this subsection shall be determined using per resident amounts that are no greater than the per resident amounts used for determining direct and indirect payment amounts under subsection (a).
(5)A hospital receiving payments under this subsection shall be subject to the reporting requirements under subsection (b)(3).
(6)(A)If the payments to qualified hospitals under paragraph (1) for a fiscal year are less than the total amount made available under such paragraph for that fiscal year, any remaining amounts for such fiscal year may be made available to all hospitals participating in the program under this subsection or subsection (a).
(B)For purposes of distributing the remaining amounts described in subparagraph (A), the Secretary may establish a quality bonus system, whereby the Secretary distributes bonus payments to hospitals participating in the program under this subsection or subsection (a) that meet standards specified by the Secretary, which may include a focus on quality measurement and improvement, interpersonal and communications skills, delivering patient-centered care, and practicing in integrated health systems, including training in community-based settings. In developing such standards, the Secretary shall collaborate with relevant stakeholders, including program accrediting bodies, certifying boards, training programs, health care organizations, health care purchasers, and patient and consumer groups.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
section 1395ww(d) of this title, referred to in subsec. (e)(3), was in the original “section 1186(d) of such Act” and was translated as reading “section 1886(d) of such Act”, meaning section 1886(d) of the Social Security Act, to reflect the probable intent of Congress, because the Social Security Act does not contain a section 1186 and section 1395ww(d) of this title relates to review of inpatient hospital service payments.
Amendments
2018—Subsec. (a). Pub. L. 115–241, § 2(1), substituted “each of fiscal years 2014 through 2018, and each of fiscal years 2019 through 2023,” for “and each of fiscal years 2014 through 2018,”. Subsec. (b)(3)(D). Pub. L. 115–241, § 2(2), inserted “and the end of fiscal year 2022,” after “fiscal year 2018,” in introductory provisions. Subsec. (f)(1)(A)(vi). Pub. L. 115–241, § 2(3)(A), added cl. (vi). Subsec. (f)(2)(F). Pub. L. 115–241, § 2(3)(B), added subpar. (F). 2014—Subsec. (a). Pub. L. 113–98, § 2(a)(1), substituted “through 2005, each of fiscal years 2007 through 2011, and each of fiscal years 2014 through 2018” for “through 2005 and each of fiscal years 2007 through 2011”. Subsec. (b)(3)(D). Pub. L. 113–98, § 2(b), substituted “Not later than the end of fiscal year 2018” for “Not later than the end of fiscal year 2011” in introductory provisions. Subsec. (f)(1)(A)(v). Pub. L. 113–98, § 2(a)(2)(A), added cl. (v). Subsec. (f)(2)(E). Pub. L. 113–98, § 2(a)(2)(B), added subpar. (E). Subsec. (h). Pub. L. 113–98, § 3, added subsec. (h). 2006—Subsec. (a). Pub. L. 109–307, § 2(a)(1), inserted “and each of fiscal years 2007 through 2011” after “for each of fiscal years 2000 through 2005”. Subsec. (b)(1). Pub. L. 109–307, § 2(b)(1), substituted “paragraphs (2) and (3)” for “paragraph (2)” in introductory provisions. Subsec. (b)(3). Pub. L. 109–307, § 2(b)(2), added par. (3). Subsec. (c)(2)(E)(ii). Pub. L. 109–307, § 2(c)(1), substituted “applied under section 1395ww(d)(3)(E) of this title for discharges occurring during the preceding fiscal year” for “described in subparagraph (C)(ii)”. Subsec. (e)(1). Pub. L. 109–307, § 2(a)(2), substituted “12” for “26”. Subsec. (e)(2). Pub. L. 109–307, § 2(c)(2), struck out first sentence which read as follows: “The Secretary shall withhold up to 25 percent from each interim installment for direct and indirect graduate medical education paid under paragraph (1).” Subsec. (e)(3). Pub. L. 109–307, § 2(c)(3), substituted “made and pay” for “made to pay”. Subsec. (f)(1)(A)(iv). Pub. L. 109–307, § 2(a)(3), added cl. (iv). Subsec. (f)(2). Pub. L. 109–307, § 2(a)(4)(A), substituted “subsection (b)(1)(B)” for “subsection (b)(1)(A)” in introductory provisions. Subsec. (f)(2)(D). Pub. L. 109–307, § 2(a)(4)(B)–(D), added subpar. (D). 2004—Subsec. (d)(1). Pub. L. 108–490, § 1(a)(1), substituted “costs associated with” for “costs related to”. Subsec. (d)(2)(A). Pub. L. 108–490, § 1(a)(2), inserted “ratio of the” after “hospitals and the” and “to beds (but excluding beds or bassinets assigned to healthy newborn infants)” before semicolon. 2000—Subsec. (a). Pub. L. 106–310, § 2001(a), substituted “2000 through 2005” for “2000 and 2001” and inserted at end “The Secretary shall promulgate
Regulations
pursuant to the rulemaking requirements of title 5 which shall govern payments made under this subpart.” Subsec. (c)(2)(F). Pub. L. 106–310, § 2001(b), substituted “Federal fiscal year for which payments are made” for “hospital’s cost reporting period that begins during fiscal year 2000”. Subsec. (e)(1). Pub. L. 106–310, § 2001(c), inserted at end “Such interim payments to each individual hospital shall be based on the number of residents reported in the hospital’s most recently filed Medicare cost report prior to the application date for the Federal fiscal year for which the interim payment amounts are established. In the case of a hospital that does not report residents on a Medicare cost report, such interim payments shall be based on the number of residents trained during the hospital’s most recently completed Medicare cost report filing period.” Subsec. (e)(2). Pub. L. 106–310, § 2001(d), inserted “and indirect” after “interim installment for direct” and inserted at end “The Secretary shall withhold up to 25 percent from each interim installment for direct and indirect graduate medical education paid under paragraph (1) as necessary to ensure a hospital will not be overpaid on an interim basis.” Subsec. (e)(3). Pub. L. 106–310, § 2001(e), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “At the end of each fiscal year for which payments may be made under this section, the hospital shall submit to the Secretary such information as the Secretary determines to be necessary to determine the percent (if any) of the total amount withheld under paragraph (2) that is due under this section for the hospital for the fiscal year. Based on such determination, the Secretary shall recoup any overpayments made, or pay any balance due. The amount so determined shall be considered a final intermediary determination for purposes of applying section 1395oo of this title and shall be subject to review under that section in the same manner as the amount of payment under section 1395ww(d) of this title is subject to review under such section.” Subsec. (f)(1)(A)(iii). Pub. L. 106–310, § 2001(f)(1), added cl. (iii). Subsec. (f)(2)(C). Pub. L. 106–310, § 2001(f)(2), added subpar. (C). Subsec. (g)(2). Pub. L. 106–310, § 2001(g), substituted “with a Medicare payment agreement and which is excluded from the Medicare inpatient prospective payment system pursuant to section 1395ww(d)(1)(B)(iii) of this title and its accompanying
Regulations
” for “described in section 1395ww(d)(1)(B)(iii) of this title”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2004 Amendment Pub. L. 108–490, § 1(b), Dec. 23, 2004, 118 Stat. 3972, provided that: “The
Amendments
made by subsection (a) [amending this section] shall apply to payments for periods beginning with fiscal year 2005.”
Reference
Citations & Metadata
Citation
42 U.S.C. § 256e
Title 42 — The Public Health and Welfare
Last Updated
Apr 6, 2026
Release point: 119-73