Residents Are Underpaid, But You Knew That

A handful of notable free tuition experiments aside, the combination of rising medical school costs, vocational pressures, life-quality issues, and reimbursement battles has clearly had a chilling effect on many lower-paying specialties and continues to funnel medical students into procedural fields and surgical subspecialties.

An individual student’s personal calculus aside, the broader question is still worth answering, particularly as doctor’s compensation is once again in the news:

Taking into account the whole picture including student loans, a delayed start in the workforce, and high hours—is medicine worth it?

Well, we’re not going to answer that question today.

But we are going to briefly discuss one of the financial downsides of becoming a practicing physician: residency. This is perhaps compounded even more now with the blurring “provider” divide, where midlevels like NPs are increasingly able to create a similar if not substantially broader practice to resident physicians while also being able to make adult financial progress (paying off loans, meaningfully saving for retirement) immediately after school (and can even change specialties with little friction!).

All of that is a massive, thorny issue. But for this short post, I’d just like to quickly share two interesting data points that vindicate all you residents out there frustrated with watching your loan balances balloon.

Funding is nice, but cheap labor is cheap labor

The first is from a (not new) paper by UC Berkeley’s Nicholas Roth titled “The Costs and Returns to Medical Education.” The paper looks at medical school and training as a combination of financial and opportunity costs and calculates the relative return for different fields (I discussed it at length here if you’re curious), but it has an interesting statistic toward the beginning.

After Congress passed the 1997 Balanced Budget Act, which capped government payments to hospitals for residents, hospitals added over 4,000 more residents than the government would support. This suggests that market forces are at work as hospitals try to hire residents until the marginal value of an additional resident is zero. It also suggests that hospitals profit from additional residents long after the point when our government stops funding resident education.

That’s fascinating because it dovetails perfectly with the narrative all residents believe that hospitals benefit from their cheap labor despite the ludicrous claims that it “costs more” to educate a trainee. (Right, because if that were the case, why ever hire a midlevel fresh out of school?)

The Residency Fire Sale

And if there was any further doubt, look no further than the recent Hahnemann bankruptcy fire sale for corroboration. When the hospital went under, they tried to sell their 570 residents slots as a tidy parcel to the highest bidder as if their residents were a commodity like office furniture. The winning bid was $55 million, meaning that even in an absurd market situation with a desperate seller, each resident was worth about $100k, not too far from what Medicare provides for each residency slot (again under the pretense that it costs about as much money extra to the institution to train a resident as they actually earn in salary).

Details Matter, But It’s Not Pretty

Of course, not all residents are created equal from a finance perspective. There are both intra-speciality and inter-specialty differences. While attending compensation is generally tied to the generated revenue, all residents of a given training level at an institution are paid the same amount. For an easy example, a radiology resident at a program that has 24/7 attending coverage provides much less bankable value than a resident who takes independent night call.

Of course, I see zero chance of this changing meaningfully in the near (or any?) future, but given the renewed political discussion of physician compensation and the growing role of non-physician providers, it’s worth pointing out that the reality on the ground (low trainee salaries, huge opportunity cost for additional training time) is a system construct that stakeholders should address when considering the future of medical training.

Parting Question

In the “non-profit” world of academic medicine, why do institutions need to profit from training doctors?


Anonymus 11.21.19 Reply

Very simply, academic hospitals don’t NEED to profit off of residents, but they do because they can. If we assume capitalism values making a profit in any way possible, then the question becomes why are they allowed to exploit resident labor?

No one stops them. Unlike masters and Ph.D. students, resident physicians rarely unionize locally. (or if they do, they are subjected to attitudes like these – The current resident union (CIR) hasn’t done anything on the behalf of residents since the 90s when they merged into a larger union that also represents fast workers, janitors, and home care aides. Before that time, they were effective in getting maternity leave and reduced call schedules to 1 in 3 (back in the 1970s).

Furthermore, there is no professional organization designed around the resident. In fact, currently practicing physicians are allowed to help determine how many resident training spots are available through the AMA and other professional bodies. I can’t help but wonder why they would want to increase the number of spots – and their competition in the marketplace – ever. The AAMC actively worked against residents when they contested the legality of the Match.

And without a residency, an American medical degree (MD or DO) is essentially useless. It confers no power to practice medicine but does confer a staggering amount of debt. Residents feel trapped into entering the Match, accepting whatever salary and conditions they can get, then trapped into finishing residency.

I don’t know if residents will ever truly see better pay or working conditions unless they stand up for themselves and MAKE hospitals start treating them like the value-generators and life-savers they are.

Ben 11.24.19 Reply

All good points. Individuals and even most organizations have so little input into any part of the process, it’s disheartening. No one thinks the NBME is doing good job, but their stranglehold on all of medical school is iron-tight. No one thinks the premed requirements or MCAT are any good, but the AAMC has a monopoly there too. At every checkpoint, the process needs an overhaul.

Yessar 11.26.19 Reply

Thank you for this valuable input. Our current circumstances are only a natural outcome when corporate capitalism is given a free hand to do what it wants. The goal is to maximize profit regardless and always.
Medical Residents are not the only ones suffering … Most “wage-workers” are.
Medical Residents/Fellows are not only underpaid … they are overworked too. Inhumanely so. And we don’t need “RCTs” to prove that.
The education debt, the student loans, the medical debt, the wage stagnation (if not decline), the attrition in benefits … and the totalitarianism of a Wage-Job.

What comes to mind is Naom Chomsky’s reference to the concept of “Labor Market Flexibility” … this,naturally, applies to medical residents too.

The solution will not come from the people in power.

Panscan 11.30.19

It’s crony capitalism. There are layers of regulations built into the system that prevent residents from earning appropriate value.

Let’s take a hypothetical situation. Let’s pretend an MD grad doesn’t want to go to residency. Why couldn’t they do a PA/NP type role or something similar? Why can an NP change their area of “expertise” tomorrow, while a MD has to do 3+ years of residency?

I also don’t understand how residents are compensated in terms of earnings relative to training. Someone’s value increases exponentially throughout residency. A rads resident who can take independent call is infinitely more valuable than one who cannot. A surgical chief resident who can start and finish cases all by themselves is infinitely more valuable than the intern who can barely string together a coherent presentation. The compensation structure should reflect that.

ForTheChildren 11.30.19 Reply

Completely agree that the value of residents exponentially increases as training progresses, but all levels are severely underpaid. Residents are usually paid a yearly salary, but divided out by the number of hours worked, it’s barely over minimum wage.
Independent call is also huge. There are times where I manage an entire floor of patients, take “mommy calls” and tell the adult ED attendings how to manage pediatrics appropriately. My value is extremely high, but my lay does not reflect that.
Also, attendings make an RVU portion based off the number of patients I see. The more I see, the more money they make. Because I see patients independently and efficiently, I generate a large number of extra RVU’s for them that I don’t profit from because I still make the same salary regardless.

Seth Carter, DO 12.01.19 Reply

I guess I’m one of the exceptions. I felt that I received a fairly decent wage for someone who had just graduated medical school, especially when benefits where factored into the equation. I also had the opportunity to learn first-hand from amazing physicians in a way that medical school could never provide. Furthermore, my fellow residents and I were sheltered (for the most part) from the repercussions of bad medical decision making because attendings would steer us away from the poor ideas toward the much more prudent ones. That meant less malpractice law suits. Sure, we could admit patients, write orders, and discharge patients, but we still had a lot to learn, and we were being paid in addition to all the training.

I also take issue with those who say we didn’t get paid enough to pay for cost of living in addition to paying down our student loans. My residency paid us less than the national average, but I was still able to cover the cost of having a small family (three of us) and make significant contributions towards my student loans. I even paid a third of my loans off before finishing residency.

The reality is that too many people have terrible money management skills. They buy overpriced cars they don’t need, take out a mortgage on a home that only an attending can afford, and have the most expensive phone for the most expensive phone plan. We all made more than enough money to live comfortably, make token contributions toward retirement, and make decent payments on our student loans. Those who say otherwise shouldn’t be giving advice about what hospitals should and shouldn’t be paying their residents. They would likely run the hospital into the ground, leading to more patients having less access to care.

Ben 12.01.19 Reply

Money management aside, the point here is not whether residency provides a liveable wage. It’s that, on the whole, residents are underpaid for value generated. Again, if a PA or NP fresh out of school commands a higher salary than even the most seasoned resident, then clearly the market believes that inexperienced labor is still valuable. Some of that difference could be explained away with academic time and administrative burdens for ACGME compliance, but probably not all. Whether or not you think people shouldn’t complain doesn’t really change the argument.

I should probably also point out that your n=1 finance example isn’t particularly helpful? Cost of living and debt amounts vary wildly. Given your statements, you presumably lived in a low cost-of-living area and had significantly less than average debt. I too lived very comfortably when I was a resident. But the idea that most residents could pay off a third of their loans (or do much more than cover accruing interest) if they just drove a beater given the average graduating debt is nonsense. And while lifestyle certainly impacts that too, tuition alone is enough to make things challenging in repayment.

I can’t even completely blame people who don’t want to have to count every penny through their entire 20s when this would not be the case in any other field.

Looking at a total dollar salary in isolation of the ready comparisons (or the extrapolated hourly wage) shortchanges a politically complex situation.

Jock 12.02.19 Reply

Hanhemman’s resident sale was eye opening… in the opposite direction. We are only worth our annual Medicare reimbursement?….then we aren’t worth much. If we are generating hundreds of thousands in profit shouldn’t spots be valued in the millions? Don’t underestimate the administrative costs of running a program; recruiting and retaining high quality directors, instructors, administrators, support staff, clinical faculty isn’t cheap. Figure in benefits, insurance, struggling residents and the drag we put on teams until we get competent is real. Of course we should get paid more but we shouldn’t be surprised when programs try to maximize value. People will act in their self interests. Yelling at hospitals won’t get anything done because we have no leverage. We need fundamental policy change to accomplish anything.

Ben 12.02.19 Reply

I don’t disagree with any of that, with the exception that the Hahnemann bankruptcy situation is a true fire-sale with a large number of spots auctioned off in bulk and at a bulk-discount. Very few places could absorb those people, and the winning bid came from a local conglomerate.

Regardless, I wouldn’t suggest residents are generating massive windfall profits. But they don’t have to be in order to be underpaid, in aggregate. Again, there are certainly situations where they generate very little revenue. As I mentioned, a radiology resident in a program without independent call generates almost no bankable value at all save on procedural rotations.

Adam Freilich 12.03.19 Reply

I am a resident in anesthesiology at a program in Chicago. I definitely generate more revenue for the hospital than the CRNAs since they do not have to take call and do not work overnights or weekends. Their benefits are probably similar to mine, yet their salary is at least 2-3x my salary. It would be nice to at least be paid a fair market rate based on their salary. Even a gradual increase in salary over 4 years of training commensurable with experience to eventally meet their salary during residency would be a nice improvement.

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