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January 01, 2022

Health Law Connections

The Fellow Penalty: New Developments and Possible Solutions

AHLA thanks the leaders of the Academic Medical Centers and Teaching Hospitals Practice Group for contributing this feature article.
  • January 01, 2022
  • David J. Vernon , Hooper Lundy & Bookman PC
  • Tim Johnson , Greater New York Hospital Association
Doctors and Nurses Looking at a White Board

In May 2021, the U.S. District Court for the District of Columbia (D.D.C.)1 handed down a decision favorable to teaching hospitals that has the potential to significantly impact how the Centers for Medicare & Medicaid Services (CMS) reimburses them for Medicare’s share of the costs associated with training doctors through approved medical residency training programs. The reimbursement issue at the heart of Milton S. Hershey Med. Ctr. v. Becerra is often referred to as the “Fellow Penalty,” a policy whereby CMS reimburses a teaching hospital less money for each additional “fellow” (i.e., a resident who is training beyond their initial residency period (IRP)) that the hospital trains in excess of its full-time equivalent (FTE) cap. CMS initially appealed the D.D.C. decision, but, in a surprise to many in the provider community, on August 20, 2021, CMS filed an unopposed motion for voluntary dismissal of its appeal at the D.C. Circuit. On August 23, 2021, the D.C. Circuit granted the motion and dismissed the appeal.2

  • Academic Medical Centers and Teaching Hospitals
  • Government Reimbursement

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