Who Should Pay for Resident Work Hour Reform?

The countless news stories and articles describing the unsafe conditions caused by sleep-deprived medical residents have triggered fear in the public. But now it's hospital administrators' turn to worry because curtailing resident work hours could be more costly than they originally thought.

The Institute of Medicine released a report in December 2008 recommending new standards that would reduce resident work hours to improve patient safety. The IOM report estimated the cost of implementing the reforms at approximately $1.7 billion. But a new cost analysis says shifting residents' work to alternate provides could cost between $1.1-$2.5 billion.

That's about $3.2 million annually per teaching hospital, says Teryl K. Nuckols, MD, lead author on the report, internist at the David Geffen School of Medicine at University of California, Los Angeles, and researcher at RAND Corporation.

Although the IOM's recommendations have not yet been adopted by the Accreditation Council for Graduate Medical Education (ACGME), which implemented the current standards in 2003, graduate medical educators and hospital executives are already asking where funding for new reforms is going to come from. Most GME programs don't have an extra $3.2 million burning a hole in their budgets.

"The question that needs to be answered is whether teaching hospitals should be expected to shoulder [this] financial burden or not, and if not, where should the money come from," says Nuckols.

As policy makers determine how to fund duty hour reform, they may consider the cost of implementing reforms to society versus those of teaching hospitals. The cost analysis looks at the financial implications associated with both increases and reductions in medical errors for society and teaching hospitals.

For example, if duty hour reforms lead to fewer medical errors, the costs associated with those errors are reduced, such as the potential for lost wages if a patient cannot return to work, additional medication, or in-home medical care.

Nuckols calculated that a hypothetical 10% increase in preventable adverse events will cost teaching hospitals $183 per admission, and $266 for society if hospitals employ alternative care providers, such as attending physicians, midlevel providers, nurses, and laboratory technicians.

A 10% decrease would result in a $99 cost per admission for teaching hospitals and $17 for society. The cost for society is free if there is an 11.3% decrease in preventable adverse events.

"Even if these reforms are extremely successful, teaching hospitals will be out a substantial amount of money," Nuckols says.

Because these costs are based on hypothetical scenarios, there's a chance the actual amount hospitals will have to pay alternate providers will be much higher, says Kenneth S. Polonsky, MD, chairman of the Department of Medicine at Washington University in St. Louis School of Medicine.

For example, the report stated that the base case hourly wage paid to an attending physician to cover residents would be $58. "In areas where there are physician shortages, people are not going to be lining up for the opportunity to earn $58 to cover the shift from midnight to 5 a.m. so that the resident can get some sleep," Polonsky explains.

"It's either going to get passed on to patient, paid by the government, or picked up by the hospital, leaving less available for a variety of other things that could be useful," Polonsky says. Or, it could be a combination of all three of those entities.

The cost analysis report lists possible options for funding new duty hour mandates, such as reducing residents' salaries, increasing faculty physicians' workload without additional compensation, allowing profitability or quality of care to decline, cutting clinical services, or not implementing the recommendations.

"None of [these] are very attractive options," Nuckols says.

With such a large cost associated with these reforms, Polonsky says hospital executives should be weary of the fact that there's no strong evidence to demonstrate that the IOM's recommendations will actually improve patient care. This is a large sum of money to throw at a problem without a guarantee that it will work.

Instead, Polonsky urges hospitals to implement pilot tests of some of these recommendations. Once evidence exists to determine whether their effectiveness, they should become requirements.