The effects of residency training programs on the financial performance of Veterans Affairs medical centers.

This study examines financial performance and physician productivity in Veterans Affairs teaching hospitals following the elimination of a separate payment for the indirect costs of medical education. Financial performance of teaching hospitals in the VA system was no worse than nonteaching peers even without a teaching subsidy. Residents were found to provide patient care but this contribution to output was offset by indirect teaching costs of resident training. Physicians were less productive in teaching hospitals, possibly reflecting the time spent in training and supervising residents, while nurses were more productive. Finally, as staff size increases, the indirect costs of medical education decrease. Future downsizing of residency programs would financially benefit smaller-staffed VAMCs; larger-staffed facilities would lose.