January 30, 2001
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On January 12, 2001, the Health Care Financing Administration (HCFA) proposed a rule under which, when made final, Medicare will pay hospitals and certain other facilities for the costs incurred for the training of psychologists in qualified clinical psychology internship training programs.¹ If a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency, or hospice program runs a psychology internship program, then such facility (called ?provider? in this summary) may qualify for Medicare reimbursement.²

Currently, psychology internship training programs are ineligible for Medicare reimbursement for the costs of training. Providers may include psychology internship training costs as part of their normal operating costs under the inpatient prospective payment system, but providers do not receive reimbursement directly for costs associated with psychology training.

How Medicare will pay for psychology training: For psychology internship training programs that qualify, the proposed rule will allow Medicare payment for Medicare's share of a provider's net cost of training on a reasonable cost basis.

Net cost is a provider's total allowable educational costs that are directly related to training under the program reduced by any revenues received from tuition and student fees (such as sale of textbooks or provision of room and board). Total allowable costs include trainee stipends and teacher compensation, but do not include costs:

• associated with patient care,
• incurred by related organizations,
• which would constitute a redistribution of costs from an educational institution to a provider, or
• that have been or are currently being borne through community support for the program.³ Community or other support received by a program may be offset from its total allowable cost.

Medicare's share of costs (known as ?apportionment?) means that Medicare will pay for that portion of services provided by a training program that is utilized by patients who are Medicare beneficiaries, as opposed to other patients.

Reasonable cost means essentially the necessary cost of the service, according to Medicare law.

To qualify for funding, a provider's psychology internship training program must:

1. Be recognized by a national approving body or State licensing authority. The American Psychological Association and the Association of Psychology Postdoctoral and Internship Centers would most likely qualify as national approving bodies, based on their similarity to acceptable approval bodies for other eligible health care professional training programs.
2. Operate the clinical training portion of the program.⁴ A provider must meet all of the following requirements to be considered the operator of a psychology training program.⁵ A provider must--
   • Directly incur the clinical training costs.
   • Have direct control of the clinical training curriculum.
   • Control the administration of the clinical training portion. This includes:
   • collection of tuition (where applicable).
   • control the maintenance of payroll records of teaching staff or students, or both (where applicable).
   • be responsible for day-to-day clinical training operation. (A provider may contract with another entity to perform some administrative functions, but the provider must maintain control over all aspects of the contracted functions.)
   • Employ the teaching staff of the clinical training portion.
3. Enhance the quality of inpatient care at the provider. This standard is not described. It is likely a loose standard, and one that is met by a demonstration that the quality of inpatient care is enhanced in some manner by operation of the psychology internship training program.

¹ Medicare recognizes that "clinical psychologists" participate in services delivery. The term "clinical psychologist" is broadly defined in Medicare law to mean an individual who holds a doctoral degree in psychology and is licensed or certified, on the basis of the doctoral degree, by the State in which he or she practices, at the independent practice level of psychology to furnish diagnostic, assessment, preventive, and therapeutic services directly to patients. Therefore, an internship training program, whether labeled a ?clinical? program or otherwise, will qualify if it trains psychologists who will become doctoral level psychologists.

² The proposed rule permits payment for certain nonprovider operated health professional training programs. Psychology training programs do not meet the requirements of this limited exception and therefore must be provider-operated. This exception is for those few health care professional training programs in universities and hospitals under common ownership and control and eligible for reasonable cost reimbursement before October 1, 1989.

³ The Health Care Financing Administration (HCFA), which administers Medicare payment for health care professional training programs, emphasizes that Congress mandates that Medicare pay for training only in the absence of ?community support.? Community support is a broad term to generally encompass all non-Medicare sources of funding, including State and local government appropriations and university costs associated with training, but does not include private grants, gifts and endowments.

⁴ The word ?portion? means training in the internship training program, as distinguished from instruction in the university setting.

⁵ HCFA emphasizes that there must be a clear separation between provider training and college or university instruction. HCFA's rationale is that the Medicare program was not intended to reimburse universities for the costs of health care professional education, but rather to reimburse providers for services that benefit Medicare beneficiaries during training. Therefore the proposed rule requires all of the ?operated by? standards be met to demonstrate that a provider is running a program and bearing its costs.