Costs Associated With Residency Training Texas Medicine February 2016

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Symposium on Medical Education — February 2016

Tex Med. 2016;112(2):44-49. 

By Lois L. Bready, MD, and M. Philip Luber, MD

Texas needs more physicians to care for a rapidly growing population, and new physicians who complete medical training in Texas are likely to remain in the state to practice. The expansion of existing Texas medical schools, along with the development of new schools, has created a need for a corresponding increase in residency and fellowship (graduate medical education, or GME) positions in Texas, and the 2013 and 2015 legislative sessions have funded expanded GME support. While the Centers for Medicare & Medicaid Services pays for the majority of GME positions nationally, those numbers were capped in 1997. Growing populations, particularly in the southern states, have led many institutions — when funds are available — to increase GME positions "over the cap." Texas physicians need to be aware of costs associated with development of accredited GME positions, as well as other measures being taken to support the growth of the physician workforce in the state. 


As the focus on anticipated physician shortages sharpens in Texas and across the United States, it is now widely recognized that there are insufficient numbers of residency and fellowship positions, also known as graduate medical education (GME) positions, in Texas. This view has prompted the allocation of increased financial support for GME in the 2013 and 2015 legislative sessions. (See Table 1.) Physicians in Texas might understandably have questions about the costs of residency training. Readers whose professional work involves teaching and supervising residents and fellows probably have a good understanding of the costs involved in GME; for others, we hope this article will bring some clarity to a complex topic. 


In response to calls by the Association of American Medical Colleges (AAMC) to increase the number of medical graduates, new allopathic and osteopathic medical schools have opened, and existing medical schools have expanded their class sizes. GME expansion, however, has been significantly slower nationally, and the bottleneck of GME positions has been the subject of concern.1,2

In addition, the process by which new graduates enter residency training now includes an "all-in" provision by the National Resident Matching Program (NRMP). Thus, all GME programs within a sponsoring institution must use the match for filling their postgraduate year 1 (PGY-1) positions. This policy contributes to protections for program and applicant but does limit rapid expansion. Physicians who go to medical school and complete a residency in a single state tend to stay there to practice, making residency expansion a wise move for the state to combat physician shortages.

In Texas (2014-15), there are 3,303 residents and fellows in training (3,063 and 240 in programs accredited by the Accreditation Council for Graduate Medical Education [ACGME] and the American Osteopathic Association [AOA], respectively) in more than 640 programs (more than 620 ACGME and 20 AOA programs). The majority of programs are in metropolitan centers, in association with medical schools; rural GME training is addressed in another article in this symposium issue. (See "Experience-Based Lessons From Rural Texas Graduate Medical Education.")

Cost of GME

The cost of GME training has come under increasing scrutiny, as budgets at the federal, state, and local levels are squeezed, and hospitals and health systems are seeking ways to cut costs. We will summarize current funding mechanisms for GME and discuss the cost and the benefits of these training programs.

History of GME Funding 

Since 1965, most of GME has been funded by the federal government via Medicare. Medicaid, Veterans Affairs, the military, and local sources and sponsoring hospitals fund a smaller percentage. Two revenue streams run from Medicare to hospitals: Direct GME pays for the salaries of residents (and depending on the amount received, some costs of teaching faculty), and indirect GME compensates for the higher patient care costs related to the presence of teaching programs. An infographic titled "Demystifying What Medicare GME Payments Cover and How They're Calculated," published in the Aug. 11, 2015, issue of Academic Medicine, may be useful even to those with great experience in GME.3

In the Balanced Budget Act of 1997, Congress put a cap on the number and funding of GME positions it would fund in a given institution, based on 1996 data. The population has grown significantly since 1997; however, GME-sponsoring institutions in Texas, which are "above the cap," with patient loads that have increased, and for whom expansion of specific residency programs would make good economic sense, find limited options for such growth. They must self-fund or find other funding for any training positions above the cap. 

As medical schools increase the number of students they graduate, and new medical schools come on line, the mismatch between medical school graduates and available GME positions has continued to grow, particularly in Texas. The congressional cap on funded GME positions (particularly in a state where new graduates continue to increase) results in increasing difficulty for Texas graduates to find a residency position in the state and for some graduates of American medical schools to obtain any residency training positions at all. 

Early on, it was apparent that there was wide disparity among hospitals' direct graduate medical education payments by Medicare. Texas GME-sponsoring institutions are, in general, less generously supported than GME in some other states, and this continues today.4,5

Since 1997, there has been a steady stream of federal government proposals to significantly cut funding for GME, including the Medicare Payment Advisory Commission (MedPAC) 2010 report, the 2011 Joint Committee on Deficit Reduction ("Super Committee"), the Simpson-Bowles Commission, and the Obama administration's 2013 budget.6,7  

Many see GME as a public good, for which there is (or should be) public accountability,8 and over time ACGME accreditation has incorporated a more complete view of clinical outcomes of GME.9 At the same time, a growing chorus of voices proposes radically different funding mechanisms for GME.10,11

Individuals and institutions contemplating creation of new GME positions in Texas must know this carries significant costs.12-14 Every hospital faces a complex series of calculations when it contemplates either starting new GME programs or providing an alternate method of care with clinicians who are not in training, including nonphysician practitioners. As Matthiessen stated in 2009, "Assessing the financial impact of GME programs is challenging and complex, as their full costs and benefits are rarely accounted for in one cost center or reported on a single financial statement."15

The simplest calculation is to compare the direct costs of trainees — salaries, benefits, supervisors, and programmatic elements needed for accreditation by ACGME — and the direct cost of replacing residents with non-trainees. These include practicing physicians and nonphysician practitioners. This comparison puts aside the more complicated calculation of return on investment (ROI), which will be discussed later. Focusing on direct costs alone and ignoring ROI, the leadership of State University of New York Upstate Medical University calculated that more than a three-year period at University Hospital Housestaff hospitalist services saved $14.25 million compared with midlevel hospitalist services.16 This was due in part to the relatively low salaries and long hours (even with the ACGME's duty hours restrictions) put in by residents. Several scholars and experts13,17 provide useful financial analysis for GME's value. 

As with politics, all GME cost calculations are local. Positions funded within the Medicare cap involve different issues from those above the cap. Starting GME programs in hospitals without previous GME brings the opportunity to develop a new cap — and its resultant funding — but requires several years. Details about creating new GME programs and engaging in "cap-building" are useful resources to those considering this approach.18 Nuss et al14 outlines specific costs associated with the recent start-up of new GME programs in Georgia and is a "must read" for those contemplating entering or expanding GME. (See Table 2.)

In addition, the U.S. GME accreditation system is in the midst of major change. ACGME and AOA have agreed to a single accreditation system under ACGME. Beginning July 1, 2015, AOA-accredited GME programs entered a five-year window to apply for ACGME accreditation.19,20

Presently, the several new allopathic and osteopathic medical schools in development in Texas will compound the undergraduate medical education-GME mismatch. Time will tell what proportion of AOA-accredited GME programs move into ACGME accreditation. Hopefully, they all do, both to preserve GME positions in Texas and to preserve the Medicare-funded positions nationally. If programs close, those Medicare-funded positions may be permanently lost to the country.  

Specialty-specific issues are significant. Hospital leaders considering beginning a new GME program want to know what is affordable. For example, the ACGME requirements for family medicine residencies may make them financially attractive; in contrast, the requirements for multiple subspecialists make starting a pediatrics residency in a community hospital a much more difficult proposition.  

Looking beyond paying for trainee medical professionals versus non-trainee professionals, calculations of ROI must take into account other important factors. Elements of a favorable ROI include better quality of care; lower rates of adverse events; increased downstream referral rates; increased patient care and coverage; increased physician satisfaction and retention; the opportunity to care for otherwise underserved populations; broad education and professional development beyond GME; reduction in recruitment costs via retention of graduates; recruitment of nationally recognized physicians; community service projects; grant funding; national recognition via research and publications; and increase in public opinion, value, and prestige (market differentiation).15

Specifics of GME Costs

Providing GME involves costs, which people recognized in the 1990s when Medicare GME costs were calculated, per resident amounts (PRAs) were set, and funding caps were established. Over the past decade or so, several drivers have increased the required elements of residency training and, consequently, costs. 

Accreditation Requirements

Perhaps most fundamental in driving costs for GME are the ACGME institutional and program requirements, compiled in part by the ACGME broadly (the common program requirements) and in part by specialists in the particular fields (the review committees). These requirements outline aspects of training for each discipline of medicine: 

  • Patients: Program requirements mandate sufficient numbers of patients who have a variety and severity of illnesses and injuries to provide well-rounded training for the residents. GME-naïve hospitals considering developing GME must look at this carefully.
  • Clinical experiences: Driven by ACGME program requirements and by American Board of Medical Specialties (ABMS) requirements for a given specialty, residents must have minimum numbers of clinical experiences. ACGME review committees track the individual residents' clinical experiences as directed by the discipline's program requirements. In general, these cases are in specialized areas that require academic medical centers, i.e., they may not be performed/cared for at community hospitals.  

Teaching Faculty

As medical practice has become increasingly complex, residency training depends on well-trained (and well-maintained) physician supervisors and teaching faculty physicians. Clinicians who wish to become clinician-educators must invest substantial time and effort to learn about teaching, assessment, evidence-based medicine, team skills, research, scientific writing, and other factors, and must maintain continuous specialty certification themselves.21,22 Competitive research funding by some faculty members is required. All faculty members must have current ABMS certification (and for most, be enrolled in maintenance of certification). Some specialties require sub-board-certified subspecialty faculty (pediatrics, internal medicine, and others). 

Program Director

Every GME program must have a program director, a single faculty member who is responsible for all aspects of the program, who has scholarly productivity as defined by ACGME, and has paid, protected time to administer the program. In larger programs, ACGME review committees mandate one or more associate program directors. 

Program Coordinator

The program coordinator is a professional administrative role responsible for all organizational aspects of the program in support of the program director (NRMP match, accreditation matters, personnel files, licensure, malpractice coverage, board communications, resident support, and more) and plays an essential role in residency programs. 

Other Professionals

Residency training has always involved long hours and intense clinical commitment for residents, and as hospital employees, they "covered the service" of all patients. The frame of reference for GME accreditation has changed; now, expectations focus on the individual trainee's experiences, rather than the global care of all patients in the facility. 

Multiple factors have led to potential resident fatigue and impairment. Examples include higher acuity of hospitalized patients, pressure to shorten inpatient stays, complexity of determining cost-effective evaluation and treatment regimens, and use of electronic health records. Based on better understanding of sleep deprivation and fatigue, potentially detrimental effects on patients and fatigued physicians-in-training, and new knowledge in patient safety and quality, the ACGME duty-hour standards were modified in 2003 and 2011. This brought new costs to GME, as other practitioners had to fill the gaps. In addition to the duty-hour element of accreditation requirements, ACGME expects (and monitors for) a balance between clinical service and education — a significant evolution from GME of the past.23

Equipment, Other Programs, Services, and Support

Residents must have access to simulation labs to practice procedural and communication (huddles, crew resource management) skills. Some specialties require the presence of other accredited GME programs. Specialty equipment, services, and support personnel add costs to existing GME programs (see 

Other Required Educational Experiences

While residency training has long required some didactic time, many specialties must provide education and training above and beyond the general requirements (e.g., clinical research skills and Balint groups). 

Quality Improvement and Patient Safety (QIPS)

This training is one of the areas of greatest growth in GME over the past five years (as well as being one of the areas of greatest difference from earlier GME training). Residents must be engaged in QIPS didactics, in team-based quality projects, and in the real-world aspects of patient safety investigation/root cause analysis and failure modes and effects analysis. This area is a central focus for ACGME's Clinical Learning Environment Review (CLER) program, based on determining the quality of the hospital/health system workplace24 and the collaborative engagement of residents within the clinical system. Residents and faculty are expected to not only know the Joint Commission's national patient safety goals but to also be involved with the local health facilities' safety and quality initiatives.25 Some institutions have adopted alignment and incentive programs for residents, which support institution-wide quality initiatives, and have experienced significant successes and improvements in patient care.26,27

Accreditation Fees

ACGME accreditation fees,28 periodically adjusted and assessed annually, are $4,300 per program per year for programs with five or fewer residents and $5,200 per program per year for programs with more than five residents. The fee for a new program application is $6,200. While each program's fee is modest, the fees do add up. The aggregate annual invoice for the 55 ACGME-accredited programs at The University of Texas Health Science Center at San Antonio is more than $255,000.

Creation of New GME in Texas 

Creating new GME opportunities requires substantial investment, and with cap-setting, Medicare funding does not begin to flow until the residents are in place, so start-up funding is a critical first step. Even expansion of existing programs, while more affordable in the short term, carries incremental new costs. 

As a result of recent funding by the Texas Legislature, new GME positions and programs are being planned and created. This will lessen the mismatch between new medical graduates and GME positions available within Texas. According to Stacey Silverman, PhD, deputy assistant commissioner for Academic Quality in the Division of Academic Quality and Workforce at the Texas Higher Education Coordinating Board, the new positions and programs will lead to making Texas a resident-importer state. 

The significant increase in available funding for 2016-17, with anticipated continued availability of funds, makes ongoing GME planning and growth possible, and this will go a long way toward addressing physician shortages in Texas. (See Table 3.)

Lois L. Bready, MD, is vice dean for graduate medical education, and designated institutional official, and professor and vice chair in anesthesiology at The University of Texas Health Science Center at San Antonio.

M. Philip Luber, MD, is associate dean for graduate medical education and the Hugo A. Auler professor and vice chair for education in psychiatry at The University of Texas Health Science Center at San Antonio.



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Table 1. Medical Education Funding in Texas, 2015 Legislative Session    

  • $53 million for GME expansion grant programs, almost $40 million above 2014-15 funding levels;
  • $7 million more for primary care physician pipeline programs: $4 million -- or 31 percent -- above current funding for the existing family medicine residency program, and $3 million to restart the Statewide Primary Care Preceptorship Program;
  • A $20 million, or 22-percent, increase in biennial per-resident GME funding;
  • Steady funding for the primary care physician workforce innovations grant program; 
  • An additional $50 million, or 3-percent biennial increase, in medical student formula funding (excluding small class supplements);
  • Maintained funding for the State Physician Education Loan Repayment Program; 
  • A new loan repayment program for psychiatrists and other mental health professionals; and
  • An additional $8 million for mental health workforce training programs in underserved areas.    

Source: Texas Medical Association's It's Academic, July 2015 

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January 21, 2016