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Here is why this is so frustrating for prospective doctors: To practice medicine, trainees are required to complete a three- to seven-year residency at an accredited hospital program. (This is following four years of medical school.) Unlike the traditional labor market, medical students don’t choose where they work; they are assigned and locked into multiyear employment contracts with a single hospital via the Match, a standardized application process based on the 1962 Gale-Shapley algorithm, which is controlled by nonprofit teaching hospitals. Each year in mid-March, anticipation and anxiety permeate the air of medical school atriums as fourth-year medical students receive envelopes matching them to residency programs.
Student preferences for where they would like to work are taken into account, but ultimately, trainees are left with little bargaining power once they have been assigned positions. This allows teaching hospitals and the Accreditation Council for Graduate Medical Education to set both compensation and work conditions for residents as they deem fit. This dynamic, where everything is optimized in one sweeping scramble, also makes finding a new residency position after a hospital closes excruciatingly difficult.
The Centers for Medicare & Medicaid Services, or CMS, funds a fixed number of graduate medical education positions with $15 billion in taxpayer funds, paying $100,000 to a hospital per hired trainee. But a typical salary range for residents is around $50,000 to $65,000 (though each hospital will pay an additional $15,000 per resident in educational and malpractice spending). This means that not only are hospitals generating at least a 20 percent profit margin on this government funding, but the amount also excludes the market value of the medical services provided by those residents—which the hospitals still bill for—and the additional $168,000 to $218,000 in total operating cost savings for hospitals per employed resident. It’s no surprise, then, that hospitals are fervently bidding for Hahnemann’s coveted residency slots. A consortium of Northeast hospitals bid $55 million for the 550 positions. A bid of $60 million came in from a California health care firm shortly after.
Student preferences for where they would like to work are taken into account, but ultimately, trainees are left with little bargaining power once they have been assigned positions. This allows teaching hospitals and the Accreditation Council for Graduate Medical Education to set both compensation and work conditions for residents as they deem fit. This dynamic, where everything is optimized in one sweeping scramble, also makes finding a new residency position after a hospital closes excruciatingly difficult.
The Centers for Medicare & Medicaid Services, or CMS, funds a fixed number of graduate medical education positions with $15 billion in taxpayer funds, paying $100,000 to a hospital per hired trainee. But a typical salary range for residents is around $50,000 to $65,000 (though each hospital will pay an additional $15,000 per resident in educational and malpractice spending). This means that not only are hospitals generating at least a 20 percent profit margin on this government funding, but the amount also excludes the market value of the medical services provided by those residents—which the hospitals still bill for—and the additional $168,000 to $218,000 in total operating cost savings for hospitals per employed resident. It’s no surprise, then, that hospitals are fervently bidding for Hahnemann’s coveted residency slots. A consortium of Northeast hospitals bid $55 million for the 550 positions. A bid of $60 million came in from a California health care firm shortly after.
Private Equity Is Trying to Sell Medical Residencies for Profit
Not only would this hurt residents—it would hurt patients.
slate.com