Accounting for Teaching Hospitals’ Higher Costs and What to Do About Them

Academic health centers (AHCs) have higher costs per case and also lower margins than either other teaching hospitals or community hospitals. The differences in margins stem mostly from differences in the intensity with which similar patients are treated, as well as hospitals' ability to generate revenue to cover the costs of that greater intensity, rather than graduate medical education per se. How much patient care capacity should be supported in AHCs and who should be treated with the greater intensity they offer are open questions. If there is to be a public trust fund to subsidize AHCs, it should be financed from general revenues. (November 2003)