Does It Cost More to Train Residents or to Replace Them?

A Look at the Costs and Benefits of Operating Graduate Medical Education Programs

by Barbara O. Wynn, Robert Smalley, Kristina M. Cordasco

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The policy issue underlying this study is whether Medicare support for graduate medical education (GME) should be restructured to differentiate between programs that are less costly or are self-sustaining and those that are more costly to the sponsoring institution and its educational partners. The authors used available literature, interviews with individuals involved in operating GME programs, and analysis of administrative data to explore how the financial impact of operating residency training programs might differ by specialty. The study does not quantify the variation in financial impact, but it provides a framework for examining both the costs and benefits of operating GME programs to the sponsoring institution and its educational partners. It also identifies the major factors that are likely to affect financial performance and influence program offerings and size.

Marginal financial impacts are more likely to influence sponsor decisions on changes in GME program size and offerings and help explain why GME program expansions are occurring without additional Medicare funding. If the hospital has service needs, there is a marginal benefit to adding a resident, particularly in the more-lucrative specialty and subspecialty programs, before considering the additional benefits of any Medicare GME-related revenues.

Table of Contents

  • Chapter One


  • Chapter Two

    Direct GME Costs

  • Chapter Three

    Indirect Effects of Operating Residency Training Programs

  • Chapter Four

    GME Direct Benefits

  • Chapter Five

    Summary of Findings and Discussion

  • Appendix A

    2008 Direct GME Costs, Payments, and Sources of Funding

  • Appendix B

    Faculty-to-Resident Ratios and Time Spent in GME-Related Activities

  • Appendix C

    Analyses of California OSHPD Data

  • Appendix D

    Medicaid 2009 GME Payments

The research described in this report was sponsored by the Medicare Payment Advisory Commission, and was produced within RAND Health, a division of the RAND Corporation.

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