Marginal ambulatory teaching cost under varying levels of service utilization

The ambulatory component of residency training jointly produces two products, namely, training and patient services. In costing educational programs of this type, two approaches are frequently taken. The first considers the total costs of the educational program, including training and patient services. These costs are usually constructed from historical accounting records. The second approach attempts to cost the joint products separately, based upon estimates of future changes in program costs, if the product in question is added to or removed from the program. The second approach relates to typical decisions facing the managers of medical centers and practices used for teaching purposes. This article reports such a study of costs in a primary-care residency training program in a hospital outpatient setting. The costs of the product, i.e., on-the-job training, are evaluated using a replacement-cost concept under different levels of patient services. The results show that the cost of the product, training, is small at full clinical utilization and is sensitive to changes in the volume of services provided.