The fact that residents aren't paid much by the hospitals doesn't mean that the hospitals aren't making a net profit, it would normally be evidence that it is profitable for the hospitals. Even working 100 hour weeks all year that salary would only come to $65k leaving another $85k to be accounted for. Some of that is benefits and some is the time used by doctors to train the residents and by hospital administrators to oversee them. But the residents also do work for the hospital that would otherwise have to be done by doctors or nurses. So I'd expect that they are profit centers for the hospital but I'm willing to be convinced otherwise if someone can come up with numbers.
The hospital doesn't directly receive money for work done. In many cases they get paid for a procedure done by a doctor, but don't get paid for the exact same procedure done by a resident, so it matters who does the work because that directly affects revenue.
They still bill a healthy profit on the procedure done by the resident by way of room fees, equipment fees, lab fees, imaging fees, diagnostic fees, nursing care fees, PT fees, and so forth.
> You have too much faith in the free market. There are all kinds of things that could cause hospitals to not hire more residents.
So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit".
Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk.
Here's a practical argument: perhaps combined with the uncertainty of the above calculation, administrators are humans, for whom the inertia of the status quo "this is just how it's done" is powerful.
That's all speculation, just like your purely economic argument is just speculation. What would provide actual insight would be some understanding of why residencies are unprofitable, if it's true that they are.
> Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk.
No, that doesn't add up. Hospitals only receive $80,000 per resident from Medicare. If residency programs were profitable at level P, they could increase them from N residents to M residents, where (80000 + P)N < P M[0].
Furthermore, hospitals that currently don't receive any money from Medicare would simply expand self-funded programs, because they wouldn't be losing anything by doing so[1].
There's also no way that hospitals would be doing so much to preserve a mere $80,000 stipend, because increasing the number of physicians is in their best interest - it allows them to decrease their expenses (physician salaries) in the long run.
> That's all speculation, just like your purely economic argument is just speculation.
No, it's not speculation; it's exactly what hospitals, government employees, elected officials, and industry analysts have pretty much all been saying for decades. And it's supported by the actual evidence at hand, including all of the financial figures that they publish.
[0] Of course this doesn't work if P is a decreasing function of either N or M, which is the entire point - it is decreasing, and in fact, is already negative for the current value of N.
[1] Except, of course, if P is negative - which it is.
As we've gone on in this thread, you've provided an increasing amount of actual details on how this works (thanks!) and now express knowledge of external sources that back this up (though citations to those would be useful). Your initial claim read to me as just, "it's simple free market incentives", which is not the same as the more full picture we've gotten as we've gone on, which now includes more analysis of how the Medicare incentive might play out for different decision makers. I feel like that was peoples' point (at least it was mine): an indirect "follow the money and don't worry about why it works the way it does" argument was not sufficient. So thanks for taking the time to fill in a bunch of gaps!
I still think you may be downplaying the impact of the risk calculation hospitals have to make regarding their ability to receive the stipend now or in the future. It may be only 80k, but clearly that 80k is enough to incentive many hospitals to have residents, so it must be material to them to some extent.
Your point about increasing supply of doctors being in hospitals' interest in the long run is interesting, but this is the same training conundrum everyone has: it is often difficult to make the decision to invest in the near term when the payoff is not realized until much later.
I'm sure you're right about all this in general - training people is a tricky and expensive problem for every industry.
Not really, it's just that most people here are simply relying on the very good heuristic that most markets, government (mis-)managed or free, are chock-full of perverse incentives.
In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions.
> In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions.
So you're saying that hospitals which receive no funding from Medicare eschew this potential profit center (a residency program) so that their rival hospitals can keep receiving funding from Medicare and make an even larger profit?
This makes even less sense than the other theory being proposed, which is that hospitals are eschewing short-term profit in order to increase the expenses they have to pay in the long-term.
> they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions.
only holds up for schools with existing residency positions, which there are many without. If a residency were profitable without the subsidies, one would expect to see those non-teaching hospitals launching residency programs. Especially so because they don’t have to worry about threatening the subsidies which they aren’t receiving.
> So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit".
My wife is in med school, here's my argument based on what I see in her education.
Training doctors is fucking hard.
Profits and business and all of that jazz plays a part, sure.
What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions. It takes a lot of work for a senior physician to include a medical student or resident in their daily activities. On top of already having a stressful job, dealing with naivety and inexperience of young doctors makes it very unattractive for doctors to want to participate in the process.
> Training doctors is fucking hard. What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions.
Yes, and I don't mean to discount the challenges in finding and compensating enough physicians properly for even agreeing to do this in the first place!
Put another way, what I was saying before is that, even if the costs were linear, hospitals couldn't pay for it (without external funding). But as you point out, the costs aren't linear, which makes it even harder.
Or put yet another way, we can't easily increase the number of residents we train to practice medicine, because we don't have enough people trained to practice medicine in order to train them.
This isn't unique to medicine; we have the same problem with law too[0]. Heck, I even know startups that have complained that they don't have the bandwidth they need to hire and train more people.
