Solving the Shortage in Primary Care Physicians

New York Times
Published: December 14, 2013

Again and again, we hear that the country has too few doctors, particularly for primary care. And Obamacare is supposed to make the shortage much worse in the coming years as more Americans become insured and try to shoehorn themselves into already crowded medical offices.

But why, exactly, are doctors in such short supply?

I had always assumed the culprit was medical school enrollment. But when I looked into those numbers, I found that they are actually increasing noticeably. Thanks to the opening of new medical schools and expanded admissions at existing ones, enrollment is projected to rise by 30 percent between 2002 and 2017, according to the Association of American Medical Colleges. That’s in addition, mind you, to the swelling number of med students studying abroad, with the goal of eventually practicing in the United States.

It turns out that the real bottleneck is at the post-med-school step: residencies, those supervised, intensive, hazing-like, on-the-job training programs that doctors are required to go through before they can practice on their own.

There has been little growth in residency slots; they totaled 113,000 in 2011-12, from 96,000 a decade earlier. Exactly why residencies have not increased faster is a subject of great debate in the health care industry.
Hospitals, doctors and med students usually give the same explanation: Congress is too stingy.

After all Congress, through Medicare, subsidizes the vast majority of residency slots, at $10.1 billion annually, or an average of $112,642 per resident per year. Congress froze the number of subsidized positions in 1997, and hospitals argue that the best way to train more doctors is for Congress to open the spigot and fund more jobs.

Obviously Washington is not keen on doling out more money for anything right now, especially not for Medicare. But there’s a bigger problem with that argument: It’s not clear that hospitals actually need taxpayer money to pay for more residents, because those residents might actually be turning a profit for those hospitals right now. It’s hard to know, though, because hospital accounting is so opaque.

Residents definitely impose a lot of costs, besides the salaries they earn. Those salaries are fairly low — about $50,000 to $65,000 a year, just slightly more than hospital janitors on an hourly basis. The enormous number of hours they work — about 80 hours a week — is crucial in these calculations. Their 80 hours may not be as productive as 80 hours spent by their supervisors would be, but they’re still providing some valuable services during that time, said Uwe E. Reinhardt, a health economist at Princeton and contributor to The Times’s Economix blog. Relative to other personnel alternatives, like hiring more nurse practitioners or physician assistants, residents provide relatively cheap, skilled labor.

Costs are only part of the story. “Hospitals don’t like to acknowledge that there’s anything other than a cost part of the equation,” said Gail Wilensky, a health economist who is a co-chairwoman of the Institute of Medicine’s Committee on Governance and Financing of Graduate Medical Education.

Dr. Wilensky says that most likely, hospitals lose money on residents in the first year, when the doctors just out of med school waste a lot of time and money on unnecessary tests and treatments. But residents’ value goes up rapidly because the learning curve is steep, while their salary increases are not.

In fact, one data point that suggests hospitals are currently making a lot of money on the more seasoned residents is the quantum leap in compensation on the day doctors convert their status from trainee to attending physician, under a new job contract. How can a doctor be worth paying only $60,000 on Friday and then at least twice that on Monday? Does the doctor’s marginal revenue product — that is, how profitable the doctor is for the employer — actually surge that much?

We don’t know exactly how profitable individual residents are for hospitals because the hospitals can’t or won’t do the complicated accounting to figure it out, at least not publicly. But we can guess, at least, where hospitals believe they make the most money, based on how they’ve allocated their residency slots (both those Medicare subsidizes, and the 17,000 additional jobs that health care organizations have managed to create through other funding in the last decade).

There’s another problem. The types of residencies with the most growth are not necessarily the ones that are most critical for the country’s public health needs. They’re more often in the lucrative specialties that America’s fee-for-service billing system rewards. Think anesthesiology and neurology, and not primary care or pediatrics, where hospitals are more likely to lose money for many years in training a resident because of America’s crazy payment system.

“Under our current system, despite the fact that they’re getting huge amounts of federal money, there is no requirement that hospitals bring on residents in any kind of work-force-accountable way,” said Dr. Fitzhugh Mullan, a physician and health policy professor at George Washington University. “So they’re doing what businesses do, by bringing in residents that are most valuable to them.”

In other words, hospitals are behaving rationally according to the incentives set up by law. Which brings us back to what Congress can do to help shape the health care work force. Merely funneling more taxpayer money to the doctor training system, as hospitals and med schools hope is done, is not likely to solve the problem. The money needs to be directed in a more deliberate, intelligent way.

There are, of course, other ways to reorganize the health system to alleviate the primary-care doctor shortage. Lawmakers might allow nurse practitioners, pharmacists and other nondoctor clinicians to provide more services, for example. But reshaping the physician work force through targeted subsidies for residents might be a good first step.