TEACHING HOSPITAL COSTS - IMPLICATIONS FOR ACADEMIC MISSIONS IN A COMPETITIVE MARKET

Context.-As the managed care environment demands lower prices and a gr eater focus on primary care, the high cost of teaching hospitals may a dversely affect their ability to carry out academic missions. Objectiv e.-To develop a national estimate of total inpatient hospital costs re lated to graduate medical education (GME). Design.-Using Medicare cost report data for fiscal year 1993, we developed a series of regression models to analyze the relationship between inpatient hospital costs p er case and explanatory variables, such as case mix, wage levels, loca l market characteristics, and teaching intensity (the ratio of interns and residents to beds). Setting and Participants.-A total of 4764 non federal, general acute care hospitals, including 1014 teaching hospita ls. Major Outcome Measures.-Actual direct GME hospital costs and estim ated indirect GME-related hospital costs based on the statistical rela tionship between teaching intensity and inpatient costs per case. Resu lts.-In 1993, academic medical center (AMC) costs per case were 82.9% higher than those for urban nonteaching hospitals tactual cost per cas e, $9901 vs $5412, respectively). Non-AMC teaching hospital costs per case were 22.5% higher than those for nonteaching hospitals tactual co st per differences in case, $6630 vs $5412, respectively). After adjus tment for case mix, wage levels, and direct GME costs, AMCs were 44% m ore expensive and other teaching hospitals were 14% more costly than n onteaching hospitals. The majority of this difference is explained by teaching intensity. Total estimated US direct and indirect GME-related costs were between $18.1 billion and $22.8 billion in 1997. These est imates include some indirect costs, not directly educational in nature , related to clinical research activities and specialized service capa city. Conclusions.-The cost of teaching hospitals relative to their no nteaching counterparts justifies concern about the potential financial impact of competitive markets on academic missions. The 1997 GME-rela ted cost estimates provide a starting point as public funding mechanis ms for academic missions are debated. The efficiency of residency prog rams, their consistency with national health workforce needs, financia l benefits provided to teaching hospitals, and ability of AMCs to main tain higher payment rates are also important considerations in determi ning future levels of public financial support.