Graduate medical education: financing at the crossroads

Teaching hospitals are concerned about the new competitive environment because their costs are generally higher than those of nonteaching hospitals. Many of the higher costs of teaching hospitals derive from their educational programs, the nature of the patient diagnostic case mix; losses on charity care; and their role in the introduction of new and more effective methods for prevention, diagnosis, and treatment of illness. All of these functions are important to the missions of teaching hospitals, and all make teaching hospitals more expensive to operate than nonteaching hospitals. While a solution to the problem of financing graduate medical education will not ensure teaching hospital financial health, a solution to the financing of graduate medical education will provide a more equitable environment in which teaching hospitals can compete. The basic question to be answered in the price competitive environment is, "can the teaching hospital continue to attract patients at a competitive price and maintain financial support for its educational programs at current levels?" Teaching hospitals are a diverse group of highly complex institutions performing medical education and research services for the nation and providing both basic and tertiary patient care. The current emphasis on reexamining national policies in light of more limited public resources places teaching hospitals and their vital activities at significant risk if their special nature and role are not appreciated.