Graduate Medical Education Financing in the US Department of Veterans Affairs

The US Department of Veterans Affairs (VA) has partnered with academic medical centers and programs since 1946 to provide clinical training for physician residents. Ranking second in federal graduate medical education (GME) funding to the Centers for Medicare and Medicaid Services (CMS), the $850 million VA GME budget annually reimburses > 250 GME-sponsoring institutions (affiliates) of 8000 GME programs for the clinical training of 49,000 individual residents rotating through > 11,000 full-time equivalent (FTE) positions.¹ The VA also distributes $1.6 billion to VA facilities to offset the costs of conducting health professions education (HPE) (eg, facility infrastructure, salary support for VA instructors and preceptors, education office administration, and instructional equipment).² The VA financial and educational contributions account for payment of 11% of resident positions nationally and allow academic medical centers to be less reliant on CMS GME funding.^3,4 The VA contributions also provide opportunities for GME expansion,^1,5,6 educational innovations,^5,7 interprofessional and team-based care,^8,9 and quality and safety training.^10,11 The Table provides a comparison of CMS and VA GME reimbursability based on activity.

GME financing is complex, particularly the formulaic approach used by CMS, the details of which are often obscured in federal regulations. Due to this complexity and the $16 billion CMS GME budget, academic publications have focused on CMS GME financing while not fully explaining the VA GME policies and processes.^4,12-14 By comparison, the VA GME financing model is relatively straightforward and governed by different statues and VA regulations, yet sharing some of the same principles as CMS regulations. Given the challenges in CMS reimbursement to fully support the cost of resident education, as well as the educational opportunities at the VA, the VA designs its reimbursement model to assure that affiliates receive appropriate payments.^4,12,15 To ensure the continued success of VA GME partnerships, knowledge of VA GME financing has become increasingly important for designated institutional officers (DIOs) and residency program directors, particularly in light of recent investigations into oversight of the VA’s reimbursement to academic affiliates.^16-18 This report describes VA GME reimbursement and, where applicable, VA and CMS reimbursement policies are compared to highlight similarities, differences, and common principles.

VA AUTHORITY

While the VA’s primary mission is “to provide a complete hospital medical service for the medical care and treatment of veterans,” early VA leaders recognized the importance of affiliating with the nation’s academic institutions.¹⁹ In 1946, the VA Policy Memorandum Number 2 established a partnership between the VA and the academic medical community.²⁰ Additional legislation authorized specific agreements with academic affiliates for the central administration of salary and benefits for residents rotating at VA facilities. This process, known as disbursement, is an alternative payroll mechanism whereby the VA reimburses the academic affiliate for resident salary and benefits and the affiliate acts as the disbursing agent, issuing paychecks to residents.^21,22

Resident FUNDING

By policy, with rare exceptions, the VA does not sponsor residency programs due to the challenges of providing an appropriate patient mix of age, sex, and medical conditions to meet accreditation standards.⁴ Nearly all VA reimbursements are for residents in affiliate-sponsored programs, while just 1% pays for residents in legacy, VA-sponsored residency programs at 2 VA facilities. The VA budget for resident (including fellows) salary and benefits is managed by the VA Office of Academic Affiliations (OAA), the national VA office responsible for oversight, policy, and funding of VA HPE programs.

Resident Salaries and Benefits

VA funding of resident salary and benefits are analogous with CMS direct GME (DGME), which is designed to cover resident salary and benefits costs.^4,14,23 CMS DGME payments depend on a hospital’s volume of CMS inpatients and are based on a statutory formula, which uses the hospital’s resident FTE positions, the per-resident amount, and Medicare’s share of inpatient beds (Medicare patient load) to determine payments.¹² The per-resident amount is set by statute, varies geographically, and is calculated by dividing the hospital’s allowable costs of GME (percentage of CMS inpatient days) divided by the number of residents.^12,24

By comparison, the VA GME payment reimburses for each FTE based on the salary and benefits rate set by the academic affiliate. Reimbursement is calculated based on resident time spent at the VA multiplied by a daily salary rate. The daily salary rate is determined by dividing the resident’s total compensation (salary and benefits) by the number of calendar days in an academic year. Resident time spent at the VA facility is determined by obtaining rotation schedules provided by the academic affiliate and verifying resident clinical and educational activity during scheduled rotations.

Indirect Medical Education Funding

In addition to resident salary and benefits, funds to offset the cost of conducting HPE are provided to VA facilities. These funds are intended to improve and maintain necessary infrastructure for all HPE programs not just GME, including education office administration needs, teaching costs (ie, a portion of VA preceptors salary), and instructional equipment.

The Veterans Equitable Resource Allocation (VERA) is a national budgeting process for VA medical facilities that funds facility operational needs such as staff salary and benefits, infrastructure, and equipment.² The education portion of the VERA, the VERA Education Support Component (VESC), is not managed by the OAA, but rather is distributed through the VERA model to the general budget of VA facilities hosting HPE (Figure). VESC funding in the VA budget is based on labor mapping of physician time spent in education; other labor mapping categories include clinical care, research, and administration. VA facility VESC funding is calculated based on the number of paid health profession trainees (HPTs) from all professions, apportioned according to the number of FTEs for physician residents and VA-paid HPTs in other disciplines. In fiscal year 2024, VA facilities received $115,812 for each physician resident FTE position and $84,906 for each VA-paid, non-GME FTE position.

The VESC is like CMS's indirect GME funding, termed Indirect Medical Education (IME), an additional payment for each Medicare patient discharged reflecting teaching hospitals’ higher patient care costs relative to nonteaching hospitals. Described elsewhere, IME is calculated using a resident-to-bed ratio and a multiplier, which is set by statute.^4,25 While IME can be used for reimbursement for some resident clinical and educational activities(eg, research), VA VESC funds cannot be used for such activities and are part of the general facility budget and appropriated per the discretion of the medical facility director.