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$55M for 550 residents

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  • $55M for 550 residents

    The $55 million bid that won Hahnemann residency slots was ‘a big surprise’

    A popular matter of debate at my institution, and I suspect many others, is the question of whether residents add financial value or are a financial liability. Usually the debate is framed as something like "look at all of the work we do for you, try to replace us at a market rate and what would you have to pay that person?" vs. "we're giving you an education, you should be grateful for your salary." Ultimately there are so many variables that I think it's hard to come up with an answer. This Hahnemann story provides an interesting angle. Looks like the market has spoken and 550 residency slots are worth $55M. Hard to imagine another industry where one company closes and then is able to sell its employees to another.

  • #2
    Meh. $100k per slot. For a return of ~$50k/slot/yr for the indefinite future? Surprised they didn't go for more...


    (I'm surprised they can be SOLD, but...)


    • #3
      how does this work, so do those residents have to go to those hospitals? It's like being bought and sold... or is it just the funding itself that is being bought and sold?




      • #4
        I believe from a prior post that this years residents were picked up by some local or specific institutions. I would think the contract (1yr) would follow.

        Next years contracts would obviously belong to whoever bought it. Curious how disruptive it is to a residents training, whether spots are renewed to taken away, and the fellowship application process.
        Change is coming for sure.


        • #5
          Its only hard to put a price on it because it would be a lot of work and they dont want anyone to see how much it is.

          Sure, residents are getting an education, but they are paying for it. There is no way that a hospital would be able to bill or function in any way without them. The pay is so low that at least surgical ones likely cover their salary every month, its not even a real question.

          Its easy to see when you see how academic vs. any other hospitals run.

          In a lawsuit about resident pay, it was even a line of reasoning during the trial, that hospitals couldnt pay them market rate or any more really since they would go bankrupt. That and many hospitals have more residents than their allotment, so they are "self pay" etc...they dont do that out of the goodness of their hearts.

          Obviously they arent worth as much at the beginning as they end, and of course Im not sure how the billing works.


          • #6
            This would be an awesome financial analysis, and one that’s not incredibly difficult to do, but that would require in depth knowledge of the patient mix and volumes at one of the bidding hospitals.

            Cost: $X millions

            Cash flows:
            Direct GME payments
            Indirect GME payments based on projected Medicare billing
            Salaries and benefits of next best alternative (NP/PA) - Resident Salaries and benefits
            Squishy productivity calculation

            Is your return better than your cost of capital? If yes, offer $Y up to the point it isn’t.