financial implications of increasing class size marc j kahn, md, mba tulane

Financial Implications of Increasing Class Size

Marc J Kahn, MD, MBATulane

How much does it cost to educate a medical student?

Henry’s Hotdogs

Parable

Henry’s Hotdogs is a small business that sells hotdogs by the road. Henry borrowed money from the local bank to fund this business venture. During the first week, Henry spent $50 to sell 25 hotdogs. Over the next several weeks, Henry had the following expenses:

Week Cost Hotdogs sold

2 $57 32

3 $42 17

4 $64 39

5 $86 61

How to figure out costs:

10 20 30 40 50 60 700

10

20

30

40

50

60

70

80

90

100

Number sold

Cost

Y-intercept = fixed costs

Slope= variable costs

Lets do the same for medical schools

MSPS Database from the AAMC gives 7 sources of revenue for each medical school

Assume only three streams part of medical education:

Total Tuition and Fees

Total Government and Parent Support

Total Revenue from Gifts and Endowment

Methods (cont.) Categories of revenue not used:

Total Federal Research and Grants

Other Grants and Contracts

Hospital Transfers

Other Revenues

RevenueCosts Allocate 60% of revenue to cost (Ridley et

al, Academic Med 2002)

Sensitivity analysis using 50% and 40%

Results

Sensitivity Analysis

a As published in Ridley GT, Skockelak SE, Farrell PM. Mission aligned management and allocation: successfully implemented model of mission-based budgeting. Acad Med. 2002;77(2):124-9.b All 28 are Private Schools

Results

Covering Costs*33%

Not Covering Costs*

67%Private

9%

Public91%

Private,

100%

0

2

4

6

8

10

12

14

16

18

$10 $12.5 $15 $17.5 $20 $22.5 $25 $27.5 $30 $32.5 $35 $37.5 $40 $42.5 $45 $47.5 $50 $52.5 $55 $57.5 $60 $62.5

Nu

mb

er

of

US

Sch

oo

ls

How much schools charge each student, in thousands

Averagecost of

educating one medical student for

one year($62,877)

Low end of 95% CI for avg. cost to educate one

med student($38,226)

* “Schools covering costs” charge their students more than $38,226—the low end of the 95% confidence interval for cost-per-student (no schools charged as much as the mean cost-per-student of $62,877). Calculations for public schools and private schools are based on in-state and out -of-state tuition and fees, respectively, reported in the AAMC Tuition and Student Fees Survey.

Figure 2: What percentage of US schools are covering the costs of medical education at $38,226 (lower 95%CI)?

Conclusions Based on our cost analysis, medical schools

are not covering costs with tuition revenue

Our best point estimate of the cost required to educate a medical student in the US is $62,877

Increasing class sizes by 30% will cost an average of at least $5 million per school

Investigators Danny A. Schieffler, PhD

Benjamin Azevedo, BA

Richard A. Culbertson, PhD

Marc J. Kahn, MD, MBA

Tulane University School of Medicine and School of Public Health and Tropical Medicine