Germane Solution has exciting news to share from the recent CMS 2025 IPPS Proposed Rules. In evaluating the positive feedback and execution of the Section 126 Distribution of 1,000 newly funded positions or “slots”, CMS has decided to add an additional round of distributions to take place in 2026. While this is a separate “section”, the same application rules apply as section 126. To further place a focus on mental health services, CMS is requiring the 50% or 100 positions of the new funding to go to funding psychiatry residency or fellowship programs.
One of the common misconceptions of the Section 126 process is that it was designed as a safety relief valve for hospitals operating over their cap to receive additional funding for their existing residents. Instead, CMS specifically created this redistribution process to provide funding only for expanding existing programs or creating new programs. To date, CMS has distributed 400 of the 1,000 positions and has received applications for the third round of 200 positions to be distributed later this year for use in AY 2025-2026.
While this opportunity provides funding for hospitals that were previously capped, it has proved to be a difficult funding mechanism to depend on for an entirely new program. Hospitals and health systems are required to commit to funding the new programs prior to receiving confirmation from CMS that the funding will be available for the program. Where we have seen these opportunities be more beneficial is for expansion of existing programs which allows for the flexibility of not recruiting additional residents or fellows if the funding is not received.
If your institution is currently capped and is interested in starting new or expanding existing programs, Germane Solutions can evaluate your existing operations and assist with recommending the optimal program sizes and strategy for applying for new funding positions through Section 126 and 4122.