Executive Summary: A resident does not cost only the stipend, and a resident does not generate a fixed amount of revenue nationally. Model compensation, benefits, faculty, administration, program expenses, incremental GME reimbursement, attributable clinical contribution, coverage/operational effects, payer mix, and expected physician retention. Use local assumptions and a downside case. Our team at BeaconGME can help you with this analysis for free and explore private investment if it’s of mutual benefit, reach out to us here.
Start with actual compensation
The 2025 AAMC stipend survey reported an unweighted national average PGY-1 stipend of $68,166. The average rose by postgraduate year. [1] [2]
Use your institution’s payroll in the final model. Add benefits, payroll taxes, insurance, and other employer-paid costs.
The stipend is the first line, not the total cost.
Add GME administration
An expansion can increase work for the program coordinator, GME office, recruitment team, credentialing staff, and education team.
Classify each expense as fixed or incremental. A coordinator already supporting 18 residents may have capacity for two more. A larger expansion may require another FTE. ACGME requirements are also a factor here and will be different for specific specialties and resident FTEs.
Price faculty time and supervision
Faculty cost can change the economics more than the resident stipend.
Document whether the added resident requires:
- more core faculty
- more protected teaching time
- additional attending coverage
- lower faculty clinical productivity
- new rotation capacity
ACGME reviews complement increases against available clinical, educational, and other resources. [3]
Use the actual operational change. Do not assign a generic faculty percentage to every program.
Faculty FTE directed at residency activities should not be viewed solely as an opportunity cost. This is particularly true when factoring in broader program dynamics like specialty service line and PGY. FTE devoted to a PGY5 orthopedic surgery resident will generate different tangible and intangible value than a PGY1 internal medicine resident for instance. Call coverage and non-clinical activities that residents develop more autonomy with as they progress through their training, have intangible but modellable benefits that many times offsets the perceived opportunity cost of attending FTE devoted to residency activities.
Include program infrastructure
Add incremental costs for education, examinations, simulation, technology, work space, call rooms, recruitment, travel, licenses, malpractice, and accreditation-related activity.
Some expenses occur once. Others recur each year. Separate both categories.
Need the number for your hospital?
BeaconGME can provide a free model of your position using your specialty, PGY mix, cap position, payer mix, staffing plan, and operating assumptions.
Calculate incremental Medicare support
CMS calculates DGME using the hospital’s updated per-resident amount, weighted resident FTEs, and Medicare patient load. [4]
IME uses a different inpatient payment adjustment that includes the resident-to-bed ratio. [5]
For each added resident, classify the expected Medicare effect:
- incremental DGME and IME
- incremental DGME only
- incremental IME only
- no material incremental Medicare support
- uncertain pending reimbursement review
Do not multiply average historic GME revenue per resident by a new above-cap FTE.
Add Medicaid and other funding
Review state Medicaid GME rules, state appropriations, grants, philanthropy, and private funding. Include confirmed recurring amounts at full value.
Probability-adjust competitive or temporary funding. State the assumption beside the number.
Naturally, non-dilutive funds often take precedence. If you’ve leveraged other sources and your expansion still requires funding, private investment funds can be a very valuable avenue for your health system. If you want to learn more about how BeaconGME’ s co-investments into your residency program can help you, contact our team here.
Model clinical contribution with attribution rules
This section needs the most discipline and is often error prone.
A resident participates in patient care, but the incremental financial effect depends on specialty, postgraduate year, supervision, demand, billing rules, and whether the added capacity changes throughput.
Split the analysis into four categories:
Professional contribution
Calculate services that become possible because the program expands. Use collectible reimbursement or contribution margin, not gross charges.
Facility contribution
Measure incremental cases, procedures, encounters, or service capacity when the added resident changes throughput.
Ancillary contribution
Include imaging, laboratory, pathology, pharmacy, or other services only when they are tied to incremental activity. Avoid double counting.
Coverage value
Use actual avoided expenses when the resident replaces premium coverage, moonlighting, external call coverage, APP alternatives, or temporary staffing.
A common misperception is that professional and facility contributions cannot be calculated on a per resident basis given how medical billing in GME works. This is not true; it can be modeled accurately and our team at BeaconGME can show you how that model impacts your residency expansion goals. We do this for you for free at no charge.
Model post-training workforce value separately
Residency can create a recruiting relationship with future attending physicians. AAMC reports that 55.7% of physicians who completed residency from 2015 through 2024 practice in the state where they trained. [6]
That is a state retention statistic. It is not a hospital retention rate.
Use your own graduate retention history when available. Then compare retained graduates with recruiting expenses, vacancy time, locum use, and turnover. Our BeaconGME early career track fellows program can help you retain residents for a minimum of a year or two after their residency training. This generates massive value to your health system. You can learn more about it here.
AAPPR reported a median physician time to fill of 118 days in its 2025 benchmarking report. Oncology searches reached a median 332 days. [7]
Use one CFO equation
At a high level:
Net incremental residency value = funding + attributable clinical contribution + avoided coverage and recruiting expense + expected retention value − compensation − benefits – faculty FTE − administration − program expense
Then run three scenarios. The downside case should remove uncertain grants, use conservative clinical attribution, and assume no graduate retention.
A program that remains acceptable under the downside case gives leadership a more durable decision basis.
Classify the decision correctly
An added position can be:
- financially accretive
- strategically justified
- mission justified
- economically unsupported at current assumptions
All four conclusions are possible. A useful model identifies which one applies.
Send BeaconGME the specialty and proposed number of positions.
We can build a free hospital-specific funding and economics analysis for review with GME and finance leadership.
Sources
[1] Association of American Medical Colleges. AAMC Survey of Resident/Fellow Stipends and Benefits.
[2] American Medical Association. Resident physician pay still rising, but growth trails inflation.
[3] Accreditation Council for Graduate Medical Education. Guide to the Common Program Requirements: Resident complement.
[4] Centers for Medicare & Medicaid Services. Direct Graduate Medical Education (DGME).
[5] Centers for Medicare & Medicaid Services. Indirect Medical Education (IME).
[6] Association of American Medical Colleges. 2025 Report on Residents: Executive Summary.
[7] Association for Advancing Physician and Provider Recruitment. 2025 benchmarking report: physician recruitment demand and time to fill.
