Cost-benefit analyses of California family practice residencies

Several national commissions have recommended that family practice residency training be subsidized, but without stating how much support is needed. Financial studies of graduate medical education have used the methods of cost allocation or joint-products cost analysis. Previous cost-allocation studies indicate that one third of family practice residency costs are met by extramural subsidy. Cost reports of eight California public hospitals with a single family practice residency program were evaluated for the 1984-85 fiscal year. Discrepancies in the education costs reported to Medicare and those reported in state hospital disclosure reports demonstrate the arbitrary nature of the cost-allocation method. The Medicare medical education reimbursement was an average of $20,444 per resident. State and federal grants provided an average of $5,190 per resident. The Medicare payments and grants met an average of 35.7% of the education costs reported to Medicare. A joint-products cost analysis was used to estimate the pure cost of education in an 18-resident family practice residency. Replacing the residency with salaried physicians would have decreased the hospital's net return by $143,534. If neither grants nor Medicare education payments had been received, elimination of the program would have increased hospital net return by $428,083.