It's not really at the programs discretion. The RRC has requirements for graduation. Unless your PGY-1 year included a large number of the required rotations (unlikely unless it was a transitional year and you picked all the rotations), you can't get credit. Remember, the most credit you can get for an entire IM, FM, or any other residency is only 6 months towards a 3 year EM residency.
Some of the 1-4 programs have both a 1-4 and a 2-4 track, which is likely how your friend is doing it.