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> The fact that residents aren't paid much by the hospitals doesn't mean that the hospitals aren't making a net profit, No, the fact that hospitals don't just

> The fact that residents aren't paid much by the hospitals doesn't mean that the hospitals aren't making a net profit, No, the fact that hospitals don't just hire more residents is what demonstrates that it's not profitable for hospitals to simply hire more residents.

akvadrako 9y ago
You have too much faith in the free market. There are all kinds of things that could cause hospitals to not hire more residents.
- chimeracoder 9y ago
  > You have too much faith in the free market. There are all kinds of things that could cause hospitals to not hire more residents. So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit".
  - jjoonathan 9y ago
    Not really, it's just that most people here are simply relying on the very good heuristic that most markets, government (mis-)managed or free, are chock-full of perverse incentives. In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions.
    - chimeracoder 9y ago
      > In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions. So you're saying that hospitals which receive no funding from Medicare eschew this potential profit center (a residency program) so that their rival hospitals can keep receiving funding from Medicare and make an even larger profit? This makes even less sense than the other theory being proposed, which is that hospitals are eschewing short-term profit in order to increase the expenses they have to pay in the long-term.
      - jjoonathan 9y ago
        If there's nobody else willing to pay $150k/yr (because it isn't a fair market rate), how would they turn it into a profit center, exactly?
        traek 9y ago
        S/he’s saying that this argument > they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions. only holds up for schools with existing residency positions, which there are many without. If a residency were profitable without the subsidies, one would expect to see those non-teaching hospitals launching residency programs. Especially so because they don’t have to worry about threatening the subsidies which they aren’t receiving.
  - sanderjd 9y ago
    Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk. Here's a practical argument: perhaps combined with the uncertainty of the above calculation, administrators are humans, for whom the inertia of the status quo "this is just how it's done" is powerful. That's all speculation, just like your purely economic argument is just speculation. What would provide actual insight would be some understanding of why residencies are unprofitable, if it's true that they are.
    - chimeracoder 9y ago
      > Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk. No, that doesn't add up. Hospitals only receive $80,000 per resident from Medicare. If residency programs were profitable at level P, they could increase them from N residents to M residents, where (80000 + P)N < P M[0]. Furthermore, hospitals that currently don't receive any money from Medicare would simply expand self-funded programs, because they wouldn't be losing anything by doing so[1]. There's also no way that hospitals would be doing so much to preserve a mere $80,000 stipend, because increasing the number of physicians is in their best interest - it allows them to decrease their expenses (physician salaries) in the long run. > That's all speculation, just like your purely economic argument is just speculation. No, it's not speculation; it's exactly what hospitals, government employees, elected officials, and industry analysts have pretty much all been saying for decades. And it's supported by the actual evidence at hand, including all of the financial figures that they publish. [0] Of course this doesn't work if P is a decreasing function of either N or M, which is the entire point - it is decreasing, and in fact, is already negative for the current value of N. [1] Except, of course, if P is negative - which it is.
  - SkyPuncher 9y ago
    > So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit". My wife is in med school, here's my argument based on what I see in her education. Training doctors is fucking hard. Profits and business and all of that jazz plays a part, sure. What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions. It takes a lot of work for a senior physician to include a medical student or resident in their daily activities. On top of already having a stressful job, dealing with naivety and inexperience of young doctors makes it very unattractive for doctors to want to participate in the process.
    - chimeracoder 9y ago
      > Training doctors is fucking hard. What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions. Yes, and I don't mean to discount the challenges in finding and compensating enough physicians properly for even agreeing to do this in the first place! Put another way, what I was saying before is that, even if the costs were linear, hospitals couldn't pay for it (without external funding). But as you point out, the costs aren't linear, which makes it even harder. Or put yet another way, we can't easily increase the number of residents we train to practice medicine, because we don't have enough people trained to practice medicine in order to train them. This isn't unique to medicine; we have the same problem with law too[0]. Heck, I even know startups that have complained that they don't have the bandwidth they need to hire and train more people. [0] https://news.ycombinator.com/item?id=15758207 https://news.ycombinator.com/item?id=15758207

akvadrako 9y ago

You have too much faith in the free market. There are all kinds of things that could cause hospitals to not hire more residents.

chimeracoder 9y ago
> You have too much faith in the free market. There are all kinds of things that could cause hospitals to not hire more residents. So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit".
- jjoonathan 9y ago
  Not really, it's just that most people here are simply relying on the very good heuristic that most markets, government (mis-)managed or free, are chock-full of perverse incentives. In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions.
  - chimeracoder 9y ago
    > In this case, the likely culprit is that accepting residents for less than $150k/yr in sponsorship sabotages their ability to claim that the fair market value of residency training is $150k/yr, and they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions. So you're saying that hospitals which receive no funding from Medicare eschew this potential profit center (a residency program) so that their rival hospitals can keep receiving funding from Medicare and make an even larger profit? This makes even less sense than the other theory being proposed, which is that hospitals are eschewing short-term profit in order to increase the expenses they have to pay in the long-term.
    - jjoonathan 9y ago
      If there's nobody else willing to pay $150k/yr (because it isn't a fair market rate), how would they turn it into a profit center, exactly?
      - traek 9y ago
        S/he’s saying that this argument > they've calculated that the marginal benefit from accepting a single resident at a lower cost does not outweigh the risk of being forced to provide the same discount to their existing residency positions. only holds up for schools with existing residency positions, which there are many without. If a residency were profitable without the subsidies, one would expect to see those non-teaching hospitals launching residency programs. Especially so because they don’t have to worry about threatening the subsidies which they aren’t receiving.
- sanderjd 9y ago
  Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk. Here's a practical argument: perhaps combined with the uncertainty of the above calculation, administrators are humans, for whom the inertia of the status quo "this is just how it's done" is powerful. That's all speculation, just like your purely economic argument is just speculation. What would provide actual insight would be some understanding of why residencies are unprofitable, if it's true that they are.
  - chimeracoder 9y ago
    > Here's a purely economic argument: if there is an expected profit from self-funding but it is less than that from receiving the Medicare funding, and there is a perception that the Medicare funding only exists because the argument has successfully been made that self-funding is not profitable, then making the smaller profit from self funding would put at risk the possibility of receiving the larger profit through Medicare funding, and administrators might determine it is not worth the risk. No, that doesn't add up. Hospitals only receive $80,000 per resident from Medicare. If residency programs were profitable at level P, they could increase them from N residents to M residents, where (80000 + P)N < P M[0]. Furthermore, hospitals that currently don't receive any money from Medicare would simply expand self-funded programs, because they wouldn't be losing anything by doing so[1]. There's also no way that hospitals would be doing so much to preserve a mere $80,000 stipend, because increasing the number of physicians is in their best interest - it allows them to decrease their expenses (physician salaries) in the long run. > That's all speculation, just like your purely economic argument is just speculation. No, it's not speculation; it's exactly what hospitals, government employees, elected officials, and industry analysts have pretty much all been saying for decades. And it's supported by the actual evidence at hand, including all of the financial figures that they publish. [0] Of course this doesn't work if P is a decreasing function of either N or M, which is the entire point - it is decreasing, and in fact, is already negative for the current value of N. [1] Except, of course, if P is negative - which it is.
- SkyPuncher 9y ago
  > So far, in this entire thread, nobody has been able to offer one explanation that doesn't ultimately boil down to either "hospitals don't actually want to increase their profit". My wife is in med school, here's my argument based on what I see in her education. Training doctors is fucking hard. Profits and business and all of that jazz plays a part, sure. What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions. It takes a lot of work for a senior physician to include a medical student or resident in their daily activities. On top of already having a stressful job, dealing with naivety and inexperience of young doctors makes it very unattractive for doctors to want to participate in the process.
  - chimeracoder 9y ago
    > Training doctors is fucking hard. What I've seen is none of that really matters because hospitals can't even get enough qualified staff to support more residency positions. Yes, and I don't mean to discount the challenges in finding and compensating enough physicians properly for even agreeing to do this in the first place! Put another way, what I was saying before is that, even if the costs were linear, hospitals couldn't pay for it (without external funding). But as you point out, the costs aren't linear, which makes it even harder. Or put yet another way, we can't easily increase the number of residents we train to practice medicine, because we don't have enough people trained to practice medicine in order to train them. This isn't unique to medicine; we have the same problem with law too[0]. Heck, I even know startups that have complained that they don't have the bandwidth they need to hire and train more people. [0] https://news.ycombinator.com/item?id=15758207 https://news.ycombinator.com/item?id=15758207