Ehh ... I disagree on almost all accounts here:
1. Let me preface it by saying that I respect both your opinion and the fact that you know way more about this than me.
2. If you shut down or gave up schools that paid for rotation sites, you'd create a wave of Caribbean schools that would happily pay for those sites and a glut of hospitals that would be happy to have the cash. From what I understand, it's actually an issue with rotation sites in NY. Apparently, SGU and a few others pay hospitals up there handsomely for the spots ... and it seems like the hospitals have no problem with this arrangement.
3. Be careful when you discuss sending students out of state for clinical rotations. There are two types of of schools that do this in my opinion:
a. The one that does it because they have no choice. They set up as a branch campus (etc), expanded without much of a clinical base, and need to do this to survive. I have no problem with people who dislike this model. Personally, I think it's the model of the future and you'll see WAY more of it in both the MD and DO world - what are you going to do, try to open a non-profit hospital from scratch and try to balance these astronomical costs by tuition costs and faculty physicians working in the clinic, or just piggy back off an established school and network for spots???
b. The schools that do this because they have solid reputations with a variety of hospitals and people WANT to do rotations in these areas for residency connections, establishing themselves where they want to live, etc. Take a look at KCOM for example. They are attached to a decent hospital and very busy, highly staffed faculty clinic. We send 15-20 (I think) students through rotations here each year, but it could probably be expanded to fit everyone if they wanted it that way. However, in the 120 years KCOM has been around, they've established sweet connections with popular DO rotation sites - Des Peres in MO, the DO track in MI, etc, and this is where students want to rotate, make an impression, and obtain a residency. It works well for all parties involved, and the school CHOOSES to do this. In my opinion, there is nothing wrong with this model.