# Do medical residencies turn a profit **URL:** \ **Category:** Factual Questions\ **Created:** [July 20, 2014, 7:59pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618 "2014-07-20T19:59:00Z")\ **Posts on this page:** 14\ **Page:** 1
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [July 20, 2014, 7:59pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/1 "2014-07-20T19:59:00Z")
It is my understanding that this is a bottleneck in having enough physicians for our population (the US is below the OECD average and, I think, has a lower % of PCPs vs specialists). Although doesn’t the AMA try to keep physician supply (via 4 year degree slots) low to increase wages and job security also? With a medical resident you have a highly trained person working 80 hours a week for 50k a year. That works out to about $13/hr. It is my understanding that there isn’t currently funding to expand residencies, but shouldn’t these be turning a profit rather than costing money? A highly trained medical expert working for $13/hr should be an economic net and not a loss. Or are there other costs I’m not seeing. ---
**Author:** ![USCDiver](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/uscdiver/32/354_2.png) [@USCDiver](https://boards.straightdope.com/u/USCDiver)\ **Post date:** [July 20, 2014, 8:29pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/2 "2014-07-20T20:29:49Z")
Firstly, the AMA is not involved in the physician supply chain (that I’m aware of). Medical Schools are accredited by the [Association of American Medical Colleges](https://www.aamc.org/) and Residency Programs are accredited by the [Accreditation Council for Graduate Medical Education](https://www.acgme.org/acgmeweb/). Second, resident salaries are paid by the Hospitals they work at in conjunction with monies they receive from Medicare which is basically frozen at this point. The residents are not “highly trained medical experts working for $13/hr”. They are undertrained medical novices being taught by Attending Physicians who are usually paid at less than the ‘going rate’ for their specialty. To answer your question, though most residencies are not money makers because they tend to be at facilities that have a large volume of uninsured or underinsured patients. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [July 20, 2014, 9:42pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/3 "2014-07-20T21:42:10Z")
[http://usatoday30.usatoday.com/news/health/2005-03-02-doctor-shortage\_x.htm](http://usatoday30.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm) > [@](#): > > The government spends about $11 billion annually on 100,000 medical residents, or roughly $110,000 per resident. The number of residents has hovered at this level for the past decade, according to the Accreditation Council for Graduate Medical Education. So I’m still confused. Medical residents are providing a useful medical service aren’t they? And they are being paid about what a CNA would for that service. I do not understand the system as I’ve never been in medical school and have no desire to go. Do medical residents end up pulling physicians out of doing clinical work so they can supervise and teach the residents, and does that result in money lost for the hospital? if the government is spending 110k per resident, and a resident’s salary is half that where does the other half go? Are residents such a drain that they need the other 60k to keep the system of residents solvent? I thought the AMA lobbied to keep the number of medical schools and residencies capped out of fear of a doctor glut (which I’m guessing is code for lower wages and job security). > **[CURBING THE SUPPLY OF PHYSICIANS; WHO SAID WE HAVE TOO MANY DOCTORS?...](https://www.nytimes.com/1986/06/29/business/curbing-the-supply-of-physicians-who-said-we-have-too-many-doctors.html)** ---
**Author:** ![Fishtar](https://avatars.discourse-cdn.com/v4/letter/f/ed655f/32.png) [@Fishtar](https://boards.straightdope.com/u/Fishtar)\ **Post date:** [July 21, 2014, 12:26am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/4 "2014-07-21T00:26:26Z")
> [@USCDiver](#): > > Firstly, the AMA is not involved in the physician supply chain (that I’m aware of). Medical Schools are accredited by the [Association of American Medical Colleges](https://www.aamc.org/) and Residency Programs are accredited by the [Accreditation Council for Graduate Medical Education](https://www.acgme.org/acgmeweb/). > > Second, resident salaries are paid by the Hospitals they work at in conjunction with monies they receive from Medicare which is basically frozen at this point. But…the AMA lobbies hard to make sure the Medicare monies stay frozen. Which effectively puts a cap on the number of residencies and therefore a cap on medical students. So the AMA is fully involved in the supply chain. As the article posted by Wesley Clark shows, the AMA is fully against a competitive free market in medicine. And, during the recent health care debates, I have yet to see a single politician talk about this… Imagine if there was a cap on the number of plumbers. And you could be put in jail for plumbing without a license. And you needed a prescription to buy PVC or have you water tested… . ---
**Author:** ![USCDiver](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/uscdiver/32/354_2.png) [@USCDiver](https://boards.straightdope.com/u/USCDiver)\ **Post date:** [July 21, 2014, 12:31am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/5 "2014-07-21T00:31:51Z")
> [@Wesley\_Clark](#): > > [USATODAY.com - Medical miscalculation creates doctor shortage](http://usatoday30.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm) > > So I’m still confused. Medical residents are providing a useful medical service aren’t they? And they are being paid about what a CNA would for that service. > > I do not understand the system as I’ve never been in medical school and have no desire to go. > > Do medical residents end up pulling physicians out of doing clinical work so they can supervise and teach the residents, and does that result in money lost for the hospital? > > if the government is spending 110k per resident, and a resident’s salary is half that where does the other half go? Are residents such a drain that they need the other 60k to keep the system of residents solvent? > > I thought the AMA lobbied to keep the number of medical schools and residencies capped out of fear of a doctor glut (which I’m guessing is code for lower wages and job security). > > [http://www.nytimes.com/1986/06/29/business/curbing-the-supply-of-physicians-who-said-we-have-too-many-doctors.html](http://www.nytimes.com/1986/06/29/business/curbing-the-supply-of-physicians-who-said-we-have-too-many-doctors.html) AMA may be lobbying Congress to maintain the caps. I wouldn’t be surprised but I’m not a member of AMA, so I don’t keep up with them much. Think of the residents as being a proxy for the care provided by their attending physician. The actual medical care is bring provided under the auspices (license, billing, malpractice, etc) of the attending who is supervising them for that patient. On many services there will be multiple residents providing some degree of care to the patient, but in the end, the only professional bill sent to the patient comes from the Attending. And often, because those patients don’t pay much (either because they are un-insured or low reimbursement like Medicaid) the Attending can’t collect enough from these patients to cover their own salary. So the amount spent on the resident is used to pay their salary as well as prop up money losing services. The closest analogy I can think of is the Master/Apprentice system. Whether you’re getting some fancy gilded armor made by the Master himself or some basic horseshoes made by the Apprentice, you’re paying the Master who is responsible for housing and feeding the apprentice as well as keeping up the shop. ---
**Author:** ![Yeah](https://avatars.discourse-cdn.com/v4/letter/y/dbc845/32.png) [@Yeah](https://boards.straightdope.com/u/Yeah)\ **Post date:** [July 21, 2014, 5:05am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/6 "2014-07-21T05:05:26Z")
> [@Fishtar](#): > > Imagine if there was a cap on the number of plumbers. And you could be put in jail for plumbing without a license. Plumbers aren’t licensed where you live? “In Minnesota, more classroom time is required to become a cosmetologist than to become a lawyer. Becoming a manicurist takes double the number of hours of instruction as becoming a paramedic.” > **[Another View: States' overzealous licensing laws lead to 'why?'](https://www.desmoinesregister.com/story/opinion/columnists/2014/07/20/another-view-kleiner-licensing/12889299/)** > > In Minnesota, more classroom time is required to become a cosmetologist than to become a lawyer. Becoming a manicurist takes double the number of hours of instruction as becoming a paramedic. In Louisiana, the only state in the country that requires... ---
**Author:** ![usedtobe](https://avatars.discourse-cdn.com/v4/letter/u/ec9cab/32.png) [@usedtobe](https://boards.straightdope.com/u/usedtobe)\ **Post date:** [July 21, 2014, 7:26am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/7 "2014-07-21T07:26:16Z")
Every time I see a nephrologist at the big University of California clinic, I always get the Resident or someone doing a Fellowship - you can tel because: A. There are no business cards in the display with their name. B. They always call in the same, tired senior Nephrologist who spends 4 minutes determining that, yup, you’re still sick, but not quite sick enough for us to do anything. Come back in 3 months. I tried dealing with their Pain Management people - the MD turns me over to the poor resident who was ready to drop and said: “Is his pain muscle or bone?” We went into an exam room where he stumbled through a couple of almost-relevant questions and proclaimed “muscle”. WRONG: 3 Orthopedists and a MRI say Osteoarthritis - bone. So no, these folks are not yet fully fledged, and require other MD’s to actually insure proper treatment. ---
**Author:** ![Hilarity\_N.Suze](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hilarity_n.suze/32/6223_2.png) [@Hilarity\_N.Suze](https://boards.straightdope.com/u/Hilarity_N.Suze)\ **Post date:** [July 21, 2014, 7:49am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/8 "2014-07-21T07:49:45Z")
> [@Wesley\_Clark](#): > > [USATODAY.com - Medical miscalculation creates doctor shortage](http://usatoday30.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm) > > So I’m still confused. Medical residents are providing a useful medical service aren’t they? And they are being paid about what a CNA would for that service. > > I… Medical residents are trainees, and at first they are probably much less useful than CNAs, although they know more. They do end up providing useful services but they also spend a lot of time standing around watching while other doctors, including more senior residents, do the actual work. If you’re scheduling elective surgery, don’t schedule it in July. That’s when the new residents come in. (Anyway that used to be the rule. My own rule is, don’t schedule elective surgery ever.) ETA: CNAs don’t get $100K a year, either. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [July 21, 2014, 11:21am UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/9 "2014-07-21T11:21:28Z")
A recent [NYT article](http://www.nytimes.com/2013/12/15/business/solving-the-shortage-in-primary-care-doctors.html?_r=0)that sheds some small amount of light … > [@](#): > > Costs are only part of the story. “Hospitals don’t like to acknowledge that there’s anything other than a cost part of the equation,” said Gail Wilensky, a health economist who is a co-chairwoman of the Institute of Medicine’s Committee on Governance and Financing of Graduate Medical Education. > > Dr. Wilensky says that most likely, hospitals lose money on residents in the first year, when the doctors just out of med school waste a lot of time and money on unnecessary tests and treatments. But residents’ value goes up rapidly because the learning curve is steep, while their salary increases are not. > > In fact, one data point that suggests hospitals are currently making a lot of money on the more seasoned residents is the quantum leap in compensation on the day doctors convert their status from trainee to attending physician, under a new job contract. How can a doctor be worth paying only $60,000 on Friday and then at least twice that on Monday? Does the doctor’s marginal revenue product — that is, how profitable the doctor is for the employer — actually surge that much? > > We don’t know exactly how profitable individual residents are for hospitals because the hospitals can’t or won’t do the complicated accounting to figure it out, at least not publicly. But we can guess, at least, where hospitals believe they make the most money, based on how they’ve allocated their residency slots (both those Medicare subsidizes, and the 17,000 additional jobs that health care organizations have managed to create through other funding in the last decade). > > There’s another problem. The types of residencies with the most growth are not necessarily the ones that are most critical for the country’s public health needs. They’re more often in the lucrative specialties that America’s fee-for-service billing system rewards. Think anesthesiology and neurology, and not primary care or pediatrics, where hospitals are more likely to lose money for many years in training a resident because of America’s crazy payment system. > > “Under our current system, despite the fact that they’re getting huge amounts of federal money, there is no requirement that hospitals bring on residents in any kind of work-force-accountable way,” said Dr. Fitzhugh Mullan, a physician and health policy professor at George Washington University. “So they’re doing what businesses do, by bringing in residents that are most valuable to them.” > > In other words, hospitals are behaving rationally according to the incentives set up by law. … No question that the payor mix at many training programs is not the most profitable of all possible mixes. But those losses are underwritten to no small degree by the money hospitals make off of the cheap labor residents represent, mostly in the specialties. ---
**Author:** ![Keeve](https://avatars.discourse-cdn.com/v4/letter/k/f07891/32.png) [@Keeve](https://boards.straightdope.com/u/Keeve)\ **Post date:** [July 21, 2014, 3:25pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/10 "2014-07-21T15:25:00Z")
> [@USCDiver](#): > > The residents are not “highly trained medical experts working for $13/hr”. They are undertrained medical novices being taught by Attending Physicians who are usually paid at less than the ‘going rate’ for their specialty. Unless I’m mistaken, a result of this trainee status is that they do not pay for their own malpractice insurance, but are covered by the hospital’s policy. > [@NYTimes](#): > > How can a doctor be worth paying only $60,000 on Friday and then at least twice that on Monday? Does the doctor’s marginal revenue product — that is, how profitable the doctor is for the employer — actually surge that much? No, the profitability does not suddenly go up. But the doctor’s personal expenses did suddenly surge over that weekend. As did the expenses of every other doctor in his class. So as I see it, it’s an example of supply and demand. The trainees don’t demand so much, and the ones who pay for their insurance demand a lot. And the employers recognize that reality and pay accordingly. ---
**Author:** ![OldGuy](https://avatars.discourse-cdn.com/v4/letter/o/3bc359/32.png) [@OldGuy](https://boards.straightdope.com/u/OldGuy)\ **Post date:** [July 21, 2014, 5:25pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/11 "2014-07-21T17:25:47Z")
> [@Yeah](#): > > Plumbers aren’t licensed where you live? "In Minnesota, more classroom time is required to become a cosmetologist than to become a lawyer. > [Another View: States' overzealous licensing laws lead to 'why?'](http://www.desmoinesregister.com/story/opinion/columnists/2014/07/20/another-view-kleiner-licensing/12889299/) I’d certainly ask that man for a cite. I don’t think you can even take the bar exam in any state anymore unless you’ve graduated from law school. And you can’t get into law school without an undergraduate degree – at least for the most part. I suspect you can study to be a cosmetologist right to of high school, and I’m not even sure that wold be required. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [July 21, 2014, 8:15pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/12 "2014-07-21T20:15:44Z")
> [@Keeve](#): > > Unless I’m mistaken, a result of this trainee status is that they do not pay for their own malpractice insurance, but are covered by the hospital’s policy.No, the profitability does not suddenly go up. But the doctor’s personal expenses did suddenly surge over that weekend. As did the expenses of every other doctor in his class. So as I see it, it’s an example of supply and demand. The trainees don’t demand so much, and the ones who pay for their insurance demand a lot. And the employers recognize that reality and pay accordingly. You are not mistaken in the first part but you are in the second. No an employed physician does not suddenly have his/her expenses go up. Like a resident his employer pays his/her malpractice. And by second year residents are not “medical novices.” Yes they are still in training. Yes they are still learning. But more from the third year residents and fellows (and nurses) than from the attendings in most cases. They do provide the “auspices” and bills go out in their names. In teaching hospitals the attending salaried by the institution for both his clinical and his non-clinical responsibilities (teaching, research, administrative work …); his/her pay is not directly proportional to the collections made on his patients. ---
**Author:** ![Keeve](https://avatars.discourse-cdn.com/v4/letter/k/f07891/32.png) [@Keeve](https://boards.straightdope.com/u/Keeve)\ **Post date:** [July 21, 2014, 8:52pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/13 "2014-07-21T20:52:18Z")
**Dseid** , thank you. ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [July 21, 2014, 9:55pm UTC](https://boards.straightdope.com/t/do-medical-residencies-turn-a-profit/693618/14 "2014-07-21T21:55:03Z")
You’re welcome. The NYT article captures the dilemma fairly well. Here’s how it plays out: Teaching hospitals usually (not always\*) are located such that they have poor payor mixes and attract sicker patients. Many barely break even, or don’t, when all is said and done. Attendings accept a salary often less than they’d be able to pull in private practice for a variety of reasons, often including the chance to spend some portion of their time doing research and less doing clinical medicine. Also for the benefit of having residents and fellows around to do most of the clinical work. Some even like to teach! Residents act as billing amplifiers for these attendings, the proceeds of which go to the institution. By having residents they can supervise the care of, and bill for the care of, many more patients than they could in the same amount of work as a non-academic physician. Procedure codes pay lots more than do other codes pay. Specialist have more procedures. More billed “under the auspices” of a specialist makes more for the institution than more billed by the generalist. Residents amplify that difference by multiplying the number of charges each attending is able to bill. Hence the perverse incentizing of academic programs to train more specialists than primary care physicians: they balance the budget on the backs of the residents. The profit they make on them offsets other losses. Now certain aspects of health care reform _may_ gradually change that calculus as we move further away from straight fee for service and more to Accountable Care Organizations (which include academic institutions as members along with physician groups and community hospitals) getting rewarded on population-wide outcome metrics and normed by the degree of co-morbities within the population. But “may” is not “will” and the transition is a work in bumpy progress. \*It always cracks me up that in Chicago Northwestern’s Pediatric Hospital, now caled Lurie’s, previously Childrens Memorial, has a huge charity fund raising arm while they have the best payor mix of any of the region’s pediatric institutions. University of Chicago on the South side, now that place _needs_ the fiscal help!