Estimating the mission-related costs of teaching hospitals

Academic health centers and other teaching hospitals face higher patient care costs than nonteaching community hospitals face, because of their missions of graduate medical education (GME), biomedical research, and the maintenance of standby capacity for medically complex patients. We estimate that total mission-related costs were $27 billion in 2002 for all teaching hospitals, with GME (including indirect and direct GME) and standby capacity accounting for roughly 60 and 35 percent of these costs, respectively. To assure their continued ability to perform important social missions in a competitive environment, it may be necessary to reassess the way in which these activities are financed.