Wednesday, March 28, 2007

The Economics of Residency Part III: Payment

Many people don't know this, but Medicare, when they aren't collecting money from residents paychecks as employees, actually gives every residency program a student stipend for every resident that they take. This can be a six figure stipend. In that same vein, hospitals are not allowed to bill for the work that residents due. If my understanding of this process is correct, this stipend is actually modified as a ratio of the Medicare work done at the hospital (Someone please correct me on this one point if I am mistaken). Hospitals pay residents and provide all benefits given to residents with this stipened. The astute observer who read my previous post would notice that this leaves the hospital with a hefty payment in exchange for training the resident. This of course, leads to another contradiction.

Hospitals receive a significant benefit for having residents available. They cover the floors, they operate on low level cases with minimal supervision, they "move the meat" so to speak in the ED, and they provide 24 hour call coverage that often prevents attendings with hospital priveleges from having to come in at 2:00 AM. Hospitals cannot bill for resident's work directly, but they can bill for hospital services, and because residents often perform these services, the hospital bills for them indirectly.

Moreover, because resident's cannot bill when they are actually performing higher level physician functions, there is a perverse incentive to engage residents in scut work. A resident costs the same whether he does 100 blood draws or scrubs in on an interesting case beyond his current skill level. However, when he does 100 blood draws, the hospital doesn't have to hire a phlebotomist. This saves them money. If he scrubs in on an interesting case beyond his skill level (where he might learn something), the hospital not only cannot charge for his presence in the room, but he will actually slow down the attending physician who CAN bill. Thus, the incentive is exactly the opposite of what would be expected from a residency program.

Flying in the face of many years of tradition, I hereby move that the Medicare stipend be removed and residents be allowed to bill for the work that they do. This would accomplish two things:

1. Hospitals would have an economic incentive to use residents efficiently. Having a resident actually engaged in productive activity is probably better for educational purposes than having them engaged in scut. Also, this would put residents on the same billing level atleast as the hospital PAs and NPs, diminishing the backwards incentive for hospitals to not hire necessary coverage. Higher resident billing rates would reduce incentive for having them do the work of ancillary staff.

2. Programs would have an economic incentive tfor teaching residents skills early, as the program could actually benefit economically from having a resident who could bill for those cases. The resident should also be able to bill as an assistant. As unfond as I am of Medicare, if they absolutely must be involved, paying the resident as an assistant rather than giving the program a lump sum would be a much better incentive.

Also, as long as residency is required for certification, hospitals should be required to reimburse residents atleast a portion of what they actually generate. I'd love to let the market sort out this mess, but that can't happen within the controlled licensing system. Until the system changes, residents cannot fairly negotiate these rates themselves, and there has to be some sort of legitimate recompense for work completed.

There is however, a significant barrier to implementation of any change towards autonomy. Like most things these days, it lies in liability. Stick around for my next post on malpractice.


Anonymous Anonymous said...

As a closeted capitalist with strong liberal leanings I would generally approve of your market-focused approach, but its application in this arena is, I think, naive, selfish and inhumane (sorry).

That said, I think your proposal about how to pay residents makes a lot of sense.

I would like to hear some of the potential problems with your suggestion as well.


5:43 PM  
Blogger MiamiMed said...

Thanks for the reply.

I think that when we talk about inhumane, we need to realize what the current system actually does. I'm not opposed to charity. I just don't believe that charity is a justification for force. If you believe that me wanting to have control over whom I am charitable to and how charitable I am is selfish, then I am quite guilty.

With regards to resident payment, and the potential problems with the system, I'd love to hear your opinion as to what they are. These ideas are still pretty rough on my part, and I'd love some backup in terms of defining a better way.

12:43 PM  
Anonymous Anonymous said...

This is exactly the problem with policy proposals that value equality over freedom. Most "compassionate" or "humane" programs effectively coerce citizens to participate in charity. How this is noble, or moral, or whatever you would like to call it is lost on me. Of course, the alternative is to leave legislation out of charity, and leave free individuals the decision whether or not to participate. What this demonstrates is the idea that voters are generous with other people's time and money, but not with their own.

2:26 PM  

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