Hundreds of years ago, poor immigrants were forced to become indentured servants to repay the cost of their passage to the U.S. by performing years of hard labor. This practice lives on for U.S. physicians-in-training, who have no choice but to serve years of indentured servitude to teaching hospitals in order to qualify for a medical license or board certification. We know them as medical residents.

In recent months, the announcement that Hahnemann University Hospital would be closing in September has cast a pall of uncertainty over the future of hundreds of residents who suddenly did not know how or whether they would complete their training. Instead of helping residents find new hospitals that would best support their education, Hahnemann executives, in dealing with Chapter 11 bankruptcy proceedings, simply auctioned its 550 residency slots to the highest bidders, a consortium of regional hospitals, for a sum of $55 million.

The hospital’s recent “sale” of medical residents and their residency slots showcases how some teaching hospitals have subordinated their training mission in favor of the pursuit of profits.

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The residents were commoditized and sold as chattels to the highest bidder. Had this occurred to any other group, there would almost certainly have been public outrage. Curiously, there was little protest by entities that oversee the education and well-being of resident physicians. The response from the Association of American Medical Colleges was half-hearted, with a representative telling the Philadelphia Inquirer that the sale “was a big surprise.” Medicare objected to the sale, not because it should be illegal to treat residents as transferable property but because the sale would not allow Medicare to recoup past overpayments to Hahnemann.

To independently practice medicine, students must complete multiyear residencies at accredited hospitals after they graduate from medical school. Once they are matched with a program during the fourth year of medical school, their multiyear funding is tied to the program with which they’ve matched for the duration of their training. Finding a new position mid-way through residency is not trivial, making the instability of a residency program highly stressful for residents.

Teaching hospitals have argued over the years that training physicians comes at a substantial expense. But studies show that graduate medical education programs positively affect hospital finances to the tune of $160,000 to $218,000 per resident physician. In the U.S., Medicare funds a fixed number of residency slots with direct government grants of at least $100,000 per resident — and that does not include the market value of services provided by the resident during his or her training. This amounts to about $15 billion a year in government funding for residencies.

The Hahnemann sale underscores how few strings are attached to this support.

The labor market for residents is controlled by nonprofit teaching hospitals through an intentionally monopolistic entity: the National Resident Matching Program. It is responsible for matching students with residency slots at teaching hospitals during their last year of medical school. These training programs are accredited by the Accreditation Council for Graduate Medical Education. Prospective residents can apply only through a single standardized process called The Match, which allows them to express a preference for where they would like to work, but ultimately locks them into a multiyear employment contract with a single hospital.

The National Resident Matching Program is exempt from antitrust regulation, joining a few other entities such as Major League Baseball and labor unions.

This framework allows a sticky web of private governing bodies in medicine, including the Association of American Medical Colleges, the National Resident Matching Program, the Accreditation Council for Graduate Medical Education, and a consortium of hospitals, to dictate the compensation and training conditions for medical residents.

The market power of this arrangement can be illustrated by resident salaries, which have not increased more than an average of 3.2% per year over the last 30 years. After completing four years of medical school, residents are paid about the same hourly wage as members of hospital cleaning staffs. Their non-negotiated salary ranges from $54,000 to $56,000 and reflects compensation for 60 to 100 hours of work per week, averaging 80 hours per week each month.

Residents are paid substantially less than nurse practitioners and physician assistants, but are required to work almost twice the number of hours, all in the name of training. Depending on whether residents pursue subspecialty fellowship training, they typically train for at least three to eight years, while shouldering a median debt of $200,000.

Residents serve as a reliable and skilled labor source for the hospitals in which they train. But hospital bureaucrats do not tie the value of these young men and women to appropriate compensation. The $55 million offered by local Philadelphia hospitals for 550 residency slots is a pittance when juxtaposed against future gains. The $55 million deal would pay for itself within one year because of the $100,000 annual government per-resident payments.

The sale of Hahnemann’s residency slots remains in flux as a California-based entity later stepped in with an offer of $60 million.

These uncertainties are anxiety-provoking for the residents whose life is on hold until the executives at Hahnemann release their contracts. Regardless of the price, the sale of Hahnemann’s residency slots sends an insidious message: Residents are indentured servants who can be bought and sold.

All teaching hospitals collude to some extent to treat residents as indentured servants. Hospital administrators and faculty members know full well the market value of residents, but undervalue their contributions. Through The Match, hospitals, and overseers of graduate medical education have leveraged their power to not only secure government funding for residency slots but also to cap residents’ salaries. Leveraging the teaching mission to bolster profit margins is nakedly opportunistic, and is underscored by the sale of Hahnemann’s residents.

Congress and the public need to hold teaching hospitals accountable for improving wages and working conditions of the residents they claim to train.

Kim-Lien Nguyen, M.D., is a cardiologist and an assistant professor of medicine at the David Geffen School of Medicine at UCLA. The views expressed are those of the author.

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  • Stop crying in your beer. During residency we never focused on the salary. We were there for the education and development of total commitment to the patient. You have a complaint if low quality residency programs don’t educate but the salary is beside the point

    • Dan, what’s your point? Residents shouldn’t be compensated fairly because they are getting educated at the same time?

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