The Pros and Cons, Profits and Costs of Teaching Hospitals

Teaching hospitals are exactly what they sound like – healthcare centers where doctors also act as teachers to medical students and residents. What makes the concept somewhat unique is that it isn't all about the academics; these hospitals are still businesses, hosting real patients and treating real diseases in a setting that doesn't allow for homework extensions or "do overs" on tests.

Are teaching hospitals worth it? Administrators have to consider multiple factors before inviting graduate medical students through their doors. First and foremost, there's the issue of cost. Health insurers and government agencies, particularly Medicare, traditionally cover the cost of medical students through broad subsidies. These payments are designed to cover numerous expenses related to med student education, such as resident salaries, malpractice premiums, and administrative costs. But the bulk of the funding actually goes to indirect healthcare expenses, particularly the higher costs associated with having sicker patients (teaching hospitals are also some of the country's biggest medical centers, including Mount Sinai Medical Center in New York and Barnes Jewish Hospital in St. Louis).

But of course, this funding is only useful if it covers the total cost of graduate medical education (GME). In 1996, Congress passed the Balanced Budget Amendment, which capped the funding for hospital residencies. And yet, the number of medical students continues to rise, and now hospital administrators have to either turn residents away or dip into their own piggy banks to cover the extra costs. Some hospitals are able to secure outside funding to make up the difference, but otherwise many medical centers are lucky to break even.

Financial officers seem uncertain that medical residents increase profitability at all, despite the increased funding, manpower, and reputation that accompany teaching hospitals. And that raises another question: are teaching hospitals better in the quality of service they provide?

If you're about to go into surgery, chances are you wouldn't feel completely comfortable knowing that a resident will be wielding the scalpel. But remember that "resident" doesn't necessarily mean med school newbie: a surgical resident could gain five or even ten years of experience in the position before earning a spot as an attending physician. And because these hospitals place a premium on learning, they attract top doctors who are at the forefront of research and are highly experienced in treating complex illnesses.

So it seems there might be a reason that even the best financial minds are uncertain of the benefit of teaching hospitals – at least from an administrative point of view. There are too many indirect elements that come into play, from the costs of employing less experienced doctors to the pros of maintaining a larger and more academically minded staff. Hospital administrators might not be able to run a quick cost-benefit analysis, but it's worthwhile to consider the web of financial factors, as well as how they might change in the future. As the federal budget shrinks under the pressure of ballooning debt and the number of people seeking medical treatment surges, hospitals' budgets will need to respond in kind.

Becker Hospital Review
List of Teaching Hospitals
Fierce Health Finance
U.S. News Health News
Modern Healthcare

About the Author:
Iris Stone is a freelance writer, editor, and business owner who has written on a range of topics. She has experience covering content on medicine, healthcare, and career training, as well as education. Iris is also interested in science and mathematics and is currently studying to be a physicist. Check out her Google+ Profile.

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