Growing Your Own: Hospital Recruitment and Retention

A hospital and a medical school team up to provide medical training and ensure a good crop of future physicians to work in the hospital. 

In 2012, Arnothealth, a community-based hospital system located in Elmira, New York, engaged in a collaborative effort with Lake Erie College of Osteopathic Medicine (LECOM).

LECOM initiated contact with the hospital system and capitalized the initial project. LECOM subsidized the cost of a regional dean who served as director of medical education to develop medical student clinical rotations and Graduate Medical Education (GME) programs.

The transition from a community hospital system ethos to an academic health system profoundly changed the culture of the institution and had a positive impact on recruitment of both primary care and specialist physicians.

Nationally, health care systems are struggling to survive given the ongoing decline in reimbursement and ever-increasing challenge of recruitment and retention of physicians.

Nowhere is the recruitment problem more critical than in the southern tier of New York State, where data from the Healthcare Association of New York State 1 show that 33 percent of hospitals have had to reduce or eliminate specialty services because of an inability to recruit physicians.

Additionally, 76 percent of hospitals had to hire temporary physicians to maintain adequate staffing. In rural areas, 86 percent of hospital CEOs rank recruitment and retention of physicians as a major issue facing them. 2

Further, many health care system experts state the fundamental indicator of success in a health care system is their primary care market share.3

Yet it is difficult if not impossible to maintain market share, let alone expand it, without effective recruitment. Lost revenue and disruption of patient care is substantial when a physician leaves for retirement or other employment.

The recruitment challenge only gets worse as the new breed of physician is more mobile than ever and places a greater emphasis on lifestyle than any previous generation.4 A significant majority of new graduates are electing to work part time.5

Recent data from Merritt Hawkins indicates that almost 61 percent of all new graduate physicians are electing to work for a health system or large multispecialty group practice rather than pursue private practice.6 In fact, 70 percent of physicians do not remain in their first job for longer than two years.7

As a result, physician turnover is at historically high levels. The need for a steady supply chain of future physicians is critical to the long-term success of a health care system. Evidence suggests that residents trained in rural settings are more likely to practice in a rural environment.8


In 2012, ArnotHealth initiated its relationship with LECOM and instituted student clerkships and prepared applications for GME programs. In 2013, residency training programs accredited by the American Osteopathic Association were started in the following specialties:

  • Internal medicine
  • Family medicine
  • General surgery
  • Traditional rotating internship


  • Orthopedics
  • Internal medicine residents (rotating via subspecialty rotations in rheumatology and endocrinology)


  • Cardiology
  • Endocrinology n Geriatrics


  • Psychiatry
  • Radiology
  • Emergency medicine


  • Gastroenterology
  • Critical care

ArnotHealth has a house staff of 45 residents and plans on growing its cap to just over 100 within five years.


Beyond recruitment and retention, GME programs bring numerous advantages to your health care system. The major benefits are:

  • House staff coverage enables community physicians to have an improved quality of life, as they are not encumbered by frequent calls and disruptions to their patient and personal hours.
  • Senior resident physicians can provide a higher level of hospital care than midlevel hospital providers, as their training is more extensive and clinical skill set more versatile.
  • There is a substantial cost savings for the hospital as resident physicians are less expensive compared to full-time attending physician hospitalist /midlevel staff in house.9,10
  • Opportunity to expand key service lines that are needed in the community but have been stilted due to a lack of qualified providers. In Elmira, for example, there has long been a need for more providers of psychiatric services due to a psychiatry service line that has not achieved optimal efficiency. It is now being expanded with the creation of a psychiatry residency program.
  • The development and enhancement of care to underserved populations. For example, ArnotHealth has expanded care to an underserved population by developing a primary care office in downtown Elmira.
  • Improved provider satisfaction at teaching institutions.11


As with all new programs, the health care system administration must be sold on the financial aspects of developing a GME program and the potential return on investment. The collaboration with LECOM was beneficial for ArnotHealth as LECOM provided guidance and funding to start the new GME initiative.

Medicare subsidizes virtually all GME training in the United States. Despite the projections for a physician shortage, GME funding has been frozen at many existing hospitals due to the 1997 Balanced Budget Act that capped residency slots at the 1996 levels.12

The only hospitals eligible for training are those that have never had GME of any kind and thus have not yet initiated their cap. The majority of hospitals in the United States are not teaching hospitals. Many of these large institutions are not affiliated with GME teaching programs and have not established their respective caps.

To determine whether it is fiscally viable for an institution to establish GME programs, an analysis of the Medicare inpatient utilization and collection must be conducted. The following information is needed:

  1. The hospital’s Medicare inpatient percentage of utilization using the Medicare inpatient days divided by the total hospital days.
  2. The Medicare inpatient collected DRG revenue, excluding exempt rehabilitation and/or psychiatry beds, for the last fiscal year. Medicare revenue can be traditional and/or Medicare contract (HMO).
  3. The average daily census.
  4. The Medicare Case Mix Index (CMI).13

This information is then used to calculate the projected Direct Medical Education (DME) and Indirect Medical Education (IME) funding. The DME funding is designed to cover Medicare’s share of the residents’ and faculty’s salaries, benefits and other administrative expenses.12

The IME funding is an added reimbursement on each Medicare discharge to help offset the added costs of providing care with GME programs. The sum of the DME and the IME make up the aggregate amount of funding a hospital can expect annually per resident amount (PRA).

Nationally the PRA varies greatly depending on the geographic region and the percentage of Medicare patients. Some institutions are as high as $155,000 per resident, while others are as low as $64,000.12 One can figure roughly about $9,000 per month in expenses per resident.

Growing YOUR OWN PLJ graphics 1.jpg

In the university hospital setting, faculty may be compensated by the medical school affiliate. In the community hospital, faculty is compensated primarily via the hospital’s GME funding stream, which includes a productivity component. However, GME programs can positively contribute to the bottom line if managed and executed correctly.

The GME program at ArnotHealth has been a financial success. This does not include either the added revenue from the residency clinic operations or the potential cost savings from residents providing house staff coverage.


The benefits of hiring residents trained at your institution are:

  • Resident physicians know your medical staff well and have familiarity with the EMR system. This can save months of training and keep the startup costs considerably lower.
  • Your faculty and medical staff will have the opportunity to evaluate their clinical skills firsthand. The best residents can then be offered positions within your system.
  • Your residents are already known to the community and can quickly build a robust practice
  • Enhanced succession planning as new residents can be retained earlier to assume the practice of physicians who are retiring or leaving practice.
  • Resident physicians can increase the market share in your primary region and expand the health care services into new communities.

ArnotHealth has already realized the recruitment benefits of training its own with four resident physicians hired to work within the health system and four more with interest over the next two years.

plj grow your own 4.jpgDue to our teaching programs there has been greater success in attracting new physicians to the community. Further, the academic environment has reinvigorated some of the senior physicians (i.e., local dermatology) who have chosen to remain in practice and continue teaching.


Beyond the recruitment and retention benefits, the GME program at ArnotHealth expanded the quality of care offered to the underserved population.

The hospital converted a former subspecialty office into a primary care office run primarily by family medicine and internal medicine residents with attending physicians who serve as preceptors. The office has been remarkably successful over the past year and a half, expanding from 300 patients per month to 1,200 patients per month.

The resident clinic has enabled greater access to care for patients by offering extended hours and same-day appointments and has become the primary care referral center for the large number of unassigned patients seen in the emergency department and hospital.

Grow Your Own PLJ Graphic 3.jpg


Initiating new GME programs in a non-teaching health system requires a paradigm shift and is not always an easy sell to the medical staff. Change is difficult, even more so for physicians who are being pressured in every way imaginable, from lower reimbursement to greater demands on their productivity. There is no one path to ensure success; however, an effective strategy for initiation of new GME programs should include:

  • Develop an affiliation with a medical school as ArnotHealth did with LECOM to help provide direction and potential capital. This also will provide student rotations and facilitate faculty development as well as support research and scholarly activity requirements for accreditation of new residency programs.
  • Perform a fiscal analysis to first determine your eligibility to receive CMS funds. First, determine from your Medicare intermediary if your institution has ever trained residents. This is to determine if your institution has a “virgin” cap. Second, based on your Medicare data complete a pro forma on your Medicare data to establish the projected reimbursements and expenses from the addition of GME programs.
  • Hire a chief academic officer with vision and an understanding of the GME accreditation standards and the early development of Graduate Medical Education Committee (GMEC) to facilitate execution of the new programs.
  • Identify enthusiastic internal physicians who will cham­pion the GME vision and will work to use their sufficient resources to develop residency training programs in their respective areas.
  • A firm commitment from senior administration to stay the course as this is a culture shock for the institution. Support from all of the medical staff is impossible but many of the naysayers will become supportive over time as they realize the benefits of having house staff cover their patients and the intellectual challenge of engaging with resident physicians.
  • Facilitate academic affiliations with other institutions as you may need some specialized rotations that are not available at your institution (e.g., transplant surgery, trauma and pediatric intensive care).
  • A thorough understanding of Medicare teaching physician requirements and system-wide policies to incorporate the GME program in the medical staff policies. The chief compliance officer of your institution must be involved to develop and modify existing policies and procedures.

Developing GME at your institution will be a tremendous challenge and can be facilitated with a collaborative effort between a health system and a medical school. Despite challenges, the institution will reap benefits that will not only lead to a steady supply of future physicians but will also positively change the culture, improve provider satisfaction and enhance patients’ access care.

Richard Terry, DO, MBA, is assistant dean of regional clinical education at Lake Erie College of Osteopathic Medicine (LECOM) and the chief academic officer of the Lake Erie Consortium for Osteopathic Medical Training (LECOMT). He also serves as designated institutional officer at Arnot Ogden Medical Center in Elmira, New York.

Nathan Brown, OMS IV, is attending the Lake Erie College of Osteopathic Medicine, Bradenton, Florida campus, and is planning on a career in family medicine USC Master of Medical Management.


  1. HANYS’S Survey Finds Increased Need for Primary Care Physicians. Health Association of New York State (HANYS), April 2, 2014. Retrieved from­findsincreased-need-primary-care-physicians.cfm.
  2. Glasser, M., Peters, K., and MacDowell, M. Rural Illinois hospital chief executive officers’ perceptions of provider shortages and issues in rural recruitment and retention. The Journal of Rural Health, 22(1):59-62, Winter 2006.
  3. Gamble, M. Building a Competitive Model for Market Share and Primary Care: Q&A with Marc Halley. Becker’s Hospital Review, Aug 23, 2012. Retrieved from­physicianrelationships/building-a-competitive-model-for-market-share-and­primarycare-qaa-with-marc-halley.html.
  4. Pugno, P., and others. Results of the 2001 national resident matching program: family practice. Family Medicine, 33(8):594-601, Sep 2001.
  5. Glicksman, E. Wanting It All: A New Generation of Doctors Places Higher Values on Work-Life Balance. AAMC Reporter, May 2013.. Retrieved from
  6. Merritt Hawkins. Merritt Hawkins’ 2015 Survey of Final-Year Medical Residents. Retrieved from­resident.aspx.
  7. Gesenway, D. Leaving So Soon?. Today’s Hospitalist, Oct 2011. Retrieved from
  8. Xierali, I. M., and others. Increasing graduate medical education (GME) in critical access hospitals (CAH) could enhance physician recruitment and retention in rural America. The Journal of the American Board of Family Medicine, 25(1):7-8, Jan-Feb 2012.
  9. America Medical Group Association (AMGA). 2013 AMGA Medical Group Compensation and Financial Survey. Retrieved from http://www.cejkasearch. com/compensation-data/mid-level-compensation-data/.
  10. Peckham, C. Residents: Will They Ever Pay Off Medical School Debt? Medscape Business of Medicine, Aug 15, 2014. Retrieved from http://www.
  11. Horowitz, C.R., and others. What do doctors find meaningful about their work?. Annals of Internal Medicine,138(9):772-5, May 6, 2003.
  12. O’Shea, J.S. Reforming Graduate Medical Education in the U.S. the Heritage Foundation. Backgrounder #2983, 2014. Retrieved from http://­educationin-the-us.
  13. Terry, R. GME Finance: Updates. Santa Fe, NM: Association of Osteopathic Directors and Medical Educators (AODME), Apr 2014.

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