Quality and Cost of Care by Hospital Teaching Status: What Are the Differences?

Context: The relative performance of teaching hospitals has been discussed for decades. For private and public insurers with provider networks, an issue is whether having a major teaching hospital in the network is a “must.” For traditional fee‐for‐service Medicare, there is an issue of adequacy of payment of hospitals with various attributes, including graduate medical education (GME) provision. Much empirical evidence on relative quality and cost has been published. This paper aims to (1) evaluate empirical evidence on relative quality and cost of teaching hospitals and (2) assess what the findings indicate for public and private insurer policy.

Methods: Complementary approaches were used to select studies for review. (1) Relevant studies highly cited in Web of Science were selected. (2) This search led to studies cited by these studies as well as studies that cited these studies. (3) Several literature reviews were helpful in locating pertinent studies. Some policy‐oriented papers were found in Google under topics to which the policy applied. (4) Several papers were added based on suggestions of reviewers.

Findings: Quality of care as measured in process of care studies and in longitudinal studies of long‐term survival of cancer patients tends to be higher at major teaching hospitals. Evidence on survival at 30 days post admission for common conditions and procedures also tends to favor such hospitals. Findings on other dimensions of relative quality are mixed. Hospitals with a substantial commitment to graduate medical education, major teaching hospitals, are about 10% to 20% more costly than nonteaching hospitals. Private insurers pay a differential to major teaching hospitals at this range’s lower end. Inclusive of subsidies, Medicare pays major teaching hospitals substantially more than 20% extra, especially for complex surgical procedures.

Conclusions: Based on the evidence on quality, there is reason for patients to be willing to pay more for inclusion of major teaching hospitals in private insurer networks at least for some services. Medicare payment for GME has long been a controversial policy issue. The actual indirect cost of GME is likely to be far less than the amount Medicare is currently paying hospitals.

Keywords: graduate medical education, health outcomes, hospital cost, Medicare.

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