There are two especially awkward phases of life for most physicians: adolescence and residency. Both are sort of in-between states, where you are not quite what you left behind but not yet fully what you are moving toward. Is a resident a learner or a worker? Depends on who you ask, and the answer has changed over time. For example, when I was a resident we belonged to a union (!) – the Committee of Interns and Residents (CIR). Except the CIR wasn’t a true union, because we were considered students rather than employees, and therefore not able to unionize. At the same time, we were able to continue to defer payments on student loans because we were still “in school.” Since then, the National Labor Relations Board has ruled that residents are actually employees and therefore entitled to organize (the CIR is now affiliated with the SEIU), while the IRS has ruled similarly, and residents must begin making student loan payments. Win some, lose some.
The uncertainty carries over to the issue of federal funding for graduate medical education. Currently Medicare, Medicaid, Veteran’s Affairs, and the states pay approximately $16 billion annually to hospitals to offset the cost of having residents and fellows. Part of that covers the salaries and benefits of the trainees (direct GME), while the majority offsets the additional costs associated with medical training (indirect GME), such as lower productivity for supervising physicians, additional testing ordered by trainees, etc. (I should note that this generally does not include pediatric residents and fellows, as children’s hospitals do not treat Medicare patients. A separate, much smaller [$265 million] stream of Children’s Hospital GME funding is available, but unlike the Medicare money, it must be approved annually during the budget process.)
The rationale for this funding is that the training of physicians benefits society. Teaching hospitals would have no financial incentive to train physicians who can, after all, go work anywhere when they are done. Therefore, government should help pay for ensuring a supply of trained medical professionals.
Buried in a recent Institute of Medicine report on the state of graduate medical education, a small but notable group of health economists questioned that rationale. They argue that residents provide a greater economic benefit to their hospitals than the salaries they receive; therefore, government GME funding is simply a subsidy of those hospitals. The fact that most hospitals actually have more residents than they get funding for (the number was capped in the 1990s) is evidence that the hospitals must see them as a good investment.
If true, this might argue for using that $16 billion for other purposes, as those economists urge. However, as I’ve already indicated, it’s not all that clear cut. It is true that residents provide work that is of benefit to the hospitals that employ them as well as to the attending physician staff. But much of this work takes the form of documenting and performing other tasks that can be – and in non-teaching hospitals, is – done by nurses or advanced practice providers. And it isn’t clear that the work done by a resident provides more value than what could be done by these others, as the economists imply. For one thing, residents rotate to different areas of the hospital each month, and often between hospitals. There is a constant learning curve that in most cases sharply limits the benefit of the work compared with what you would get with a stable staff. Moreover, the ratio of useful work increases with years of residency, but once residents enter their last (and most “productive”) year of training and really hit their stride, they leave. In simple economic terms, most hospitals would actually be better off hiring non-residents for those tasks.
I do believe there is a unique value to a hospital of having physicians-in-training. It’s not, as these economists argue, cheap labor. Rather, it takes the form of the academic, intellectually challenging and stimulating environment that residents create. It’s part of the reason I and many of my colleagues have always wanted to be at a teaching hospital. That, however, is difficult to quantify. In the current health care environment, with ever greater economic pressure, hospitals may be less willing to invest in such an intangible benefit without the GME funding.
Also, while it may be partly coincidental, teaching hospitals tend to be the care provider of last resort in a community. The mission of caring for everyone regardless of ability to pay tends to go hand in hand with the education mission. Part of the indirect cost of a teaching program is the large percentage of patients for whom the actual costs of care are not covered (Medicare, Medicaid, uninsured). Yes, it’s a subsidy, but not for the bottom line of the hospital. It’s a subsidy of the safety net we provide, masked as a subsidy for training future physicians.
There are certainly improvements we can make in the way GME is paid for. For example, the program could do a better job of prioritizing undersupplied primary care fields (including pediatrics). But arguing that GME funding is a form of corporate welfare for hospitals, and that the costs of training residents should be left to the marketplace, is not going to get us more of the right kinds of doctors, or better care for patients.