Eliminating Residents Increases the Cost of Care

Academic health centers are facing a potential reduction in Medicare financing for graduate medical education (GME). Both the Medicare Payment Advisory Commission and the National Commission on Fiscal Responsibility and Reform (Deficit Commission) have suggested cutting approximately half the funding that teaching hospitals receive for indirect medical education. Because of the effort that goes into teaching trainees, who are only transient employees, hospital executives often see teaching programs as a drain on resources. In light of the possibility of a Medicare cut to GME programs, we undertook an analysis to assess the financial risk of training programs to our institution and the possibility of saving money by reducing resident positions. The chief administrative officer, in collaboration with the hospital chief financial officer, performed a financial analysis to examine the possibility of decreasing costs by reducing residency programs at the University of Massachusetts Memorial Medical Center. Despite the real costs of our training programs, the analysis demonstrated that GME programs have a positive impact on hospital finances. Reducing or eliminating GME programs would have a negative impact on our hospital's bottom line.