August 18, 2003

Medical Residents' Antitrust Suit

The nation's medical establishment has grown increasingly anxious about an antitrust suit contending that residents are forced to participate in a system that ensures they work long hours and receive low pay.

-- Neil A. Lewis, "Medical Establishement Hopes to Thwart Residents' Lawsuit"

Today's New York Times carries an interesting item on an antitrust suit filed by several young doctors. The plaintiffs maintain that the National Resident Matching Program (aka Match) "keeps salaries artificially low — the annual pay for residents is about $40,000 and varies only marginally regardless of region or speciality — and crushes any competition that might force teaching hospitals to offer better conditions like shorter working hours." The defendants (the Times describes the "principal defendants" as "medical schools and teaching hospitals" but without specifying how many are involved -- my impression is that it involves very many) maintain that the suit "has no merit" and have filed a motion to dismiss. But though they "express confidence that they would prevail in court," the Times reports, they

are so worried that in recent weeks they have asked their allies in the Senate to enact legislation that would derail the suit, inoculating them from damages that might otherwise run into the hundreds of millions of dollars.

That sounds like a rather dubious line of defence: your case has no merit under the existing law, therefore we must change the existing law. Toward the end of the article, the Times notes that it is very "rare for Congress to intervene once litigation is under way, though it did so in 1995 to protect charities that were being sued for colluding in setting rates on donated annuities."

I don't know enough either about antitrust legislation or about the Match program to have a firm opinion one way or another as to whether this lawsuit is a good idea. It seems a bold move, and I have to wonder whether they can pull it off. The plantiffs are "trying to have the suit made a class action, meaning that it would apply to any person who graduated from medical school in the four years before it was filed, four years being the maximum under the statute of limitations for antitrust violations." This will be no easy feat, and the hospitals and schools will obviously use every tool at their disposal to fight it every step of the way. And though the article has a lot of say about the defendants' attempts to stop the suit, it doesn't give any indication of how many residents and former residents are behind the plaintiffs. If the case does make it to court (it was filed in May 2002 and is currently before a federal district judge in DC, who has not yet ruled on the defendants' motion to dismiss), the plaintiffs will have a tough time playing David to the medical establishment's Goliath. Federal court litigation is extremely expensive and time-consuming: they will need a lot of support, and a lot of money.

I can't help noticing that one of the defendants' arguments sounds strikingly familiar (and to my ears, rings similarly hollow): "The industry's defense of that system has long been that a residency is not a job per se but instead a continuation of medical education in which the resident ought to be entirely immersed." The apprenticeship line, which is now most often invoked to defend the labor practices of systems that don't look anything like ye merrie olde guilds that once employed people who could fairly be described as apprentices. There are of course many entry-level and junior-level jobs that involve a good deal of on-the-job training and further education. They are jobs nonetheless: "job" and "training/education" are not mutually exclusive categories. My position on this issue: if it's not "a job per se," then neither should any money received be deemed "income per se," and you shouldn't have to report and pay taxes on your earnings. If you get a T-4 slip, you are working for pay at a real job, no matter how much, or how little, you are learning (and also, of course, no matter how much, or how little, you are earning).

Posted by Invisible Adjunct at August 18, 2003 09:39 AM

They may have a valid case. However, a case can also be made that the incomes of doctors (after graduation) have been systematically *inflated* by policies that have kept medical school enrollments lower than they would be in a market-clearing environment. You can't have it both ways, doc (and aspiring doc).

Posted by: David Foster at August 18, 2003 12:41 PM

Does it count as an important difference between the residents' situation and those of many PhD students, that the residents are more or less guaranteed to get decent-paying (or, for many, rather-more-than-merely-decent-paying) jobs once they complete their training?

Posted by: JW at August 18, 2003 02:26 PM

Between rising malpractice insurance rates and declining insurance-company reimbursements, I'm not sure how decent a doctor's pay is these days. (Then again, the average fresh-out-of-med-school doctor is probably much better off than the average fresh-out-of-grad-school adjunct.)

Posted by: Seth Gordon at August 18, 2003 03:00 PM

Rule of thumb -- those seeking to constrain the basic operation of the labor market bear the burden of proof. Note what residents *aren't* asking for: unionization/collective bargaining. No, all they want is a competitive market where they can get two offers and negotiate directly with potential employers. This wouldn't be threatening to any other employer in the US, I would guess.

I suppose the resident programs will argue that some similacrum of a market exists as programs compete to win places on preospective residents' match list. But if so, what damage would ending the match do?

Posted by: BAA at August 18, 2003 04:14 PM

I know that new MD's work insanely long hours--my father is a physician--but I have to say that $40,000 is, um, probably a little higher than the salaries of most of the folks who read IA's blog--and so it's hard for me to have much sympathy.

Posted by: Kevin Walzer at August 18, 2003 04:51 PM

The medical residency matching program was implimented in the 1950s to avoid a market failure that was occuring in the market for new medical residents. The type of market failure that was occuring was that hospitals and medical students sought each other out individually through informal channels in order to 'lock in' certain students before they actually were eligible to become residents. This reached the point were residents and hospitals were signing contracts years in advance of actual employment -- widely considered undesirable because (a) employers felt compelled to offer contracts without seeing students last years of grades (b) students felt compelled to spent large amounts of time searching for residencies. The matching program was an attempt to correct this type of strategic behavior and its undesirable outcome.

My understanding is that the matching algorithm has come under attack largely because it is perceived to confer too much power to the employer - the hospital. While I don't claim to be an expert on the algorithm used to match residents to hospitals (I only know that it is based on ranked preferences of hospitals and applicants), I would speculate that this is probably true, since the algorithm is likely to also prevent bidding wars for medical residents. However, nothing prevents hospitals from offering preferable wages and working conditions that would change the rankings of interns such that they would be more likely to get their prefered candidates.

It seems to me that it is not so the match program per say that keeps salaries for residents low, but the requirement that they must have a period of residency to practice medicine - just as the requirement of a Ph.D. to be a college professor keeps the wages of ABDs low, even in professions with high demand for Ph.D.s.

Posted by: Matilde at August 18, 2003 04:54 PM

For the purposes of an antitrust suit, it matters not a whit that residents make an ok amount of $ by some absolute standard. The question is whether there is a conspiracy to keep the pay artificially low. I don't find Matilde's market failure defense very compelling (although I am sure she is accurately conveying the arguments used, so nothing personal here). On argument (a) if employers were not comfortable taking on students without seeing final grades, well then make contracts contingent on this. Happens all the time. Competition may push an employer to forego this but it is equivalent to pushing up the prices. Argument (b) is not wrong but probably irrelevant. It is ALWAYS easier from an administrative point of view to have some centralized mechanism assign people to slots. But who is to say it is wrong for someone to spend a lot of time searching for a place that is going to take up all of your time for the next 3-5 years?

Posted by: gerald garvey at August 18, 2003 08:50 PM

For those who might be interested in more information on this topic, I found this very informative summary of the matching algorithm and issues concerning its design at The Society of Industrial and Applied Mathematics webpage.

The article includes a nifty summary of the game theory behind the algorithm, and discussions of how it might limit price competition. Most interestingly, on the latter point - (1) while the algorithm itself does not in theory prohibit implicit contracts between potential matches, the group that administers the algorithm does, which is probably the best case for an antitrust suit, (2) it's not clear that removing the matching algorithm would bring price competition to the market; salaries for residents were poor before the algorithm was implimented and markets with similar traits typically exhibit competition in offer timing, not in price.

Posted by: Matilde at August 19, 2003 09:08 AM

I wouldn't be at all surprised if the pre-match program salaries were kept low because the hospitals conspired to do so. The competition for more desirable students could have been carried out by the early contracting process mentioned above (i.e., if a promising third-year student was offered a position in a desirable hospital/location/program at a low salary, he/she might well take it, rather than 'rolling the dice' during the fourth year).

Posted by: Barry at August 19, 2003 09:44 AM

I am a lawyer not a physician. I have no experience with the matching system. I am not an anti-trust guru, but if the hospitals are running to congress now, they must think their case is very weak.

I read the paper Matilde linked and it was very interesting, but, what they were describing as the pre-match world is the way that the market for law graduates works today.

I have been on both sides of that market and it is a pretty miserable experience. It is true that law grads make more than MD's in their first few years, if and it is a big if, they work for a 200+ lawyer firm. OTOH it is also true that they work very long hours and firms do not compete for law students by offering more leisure. ROFL.

I discount all comments by economists about all of the residents at one institution recieving the same pay. Until they know each other and know their specialties etc. it will be impossible to pay them differently without encouraging vicious internicine war.

Posted by: Robert Schwartz at August 20, 2003 01:48 AM

The solution to this dispute is quite simple:
(1) Declare that the medical residents are members of "teams" that compete in a "league."
(2) Declare that therefore they are subject to NCAA Amateur regulations.
(3) Pay them nothing at all, just as we do for the professional athletes who compete on top level college teams.
(4) It will now be illegal even to give them gifts.
(5) That will teach them.

- The Precision Blogger

Posted by: Precision Blogger at August 21, 2003 05:13 PM

Precision Blogger,
Would you really want to receive medical care from people who aren't even paid for the work they do? Would you put your child/spouse/significant other/best friend/mother in the hands of the members of such a medical underclass?

Posted by: Invisible Adjunct at August 21, 2003 08:25 PM

IA -- I think The Precision Blogger was being satirical about College Sports not advocating a serious course of action. And it was pretty droll

Posted by: Robert Schwartz at August 23, 2003 03:52 PM

I think you are right. Mea culpa!

Posted by: Invisible Adjunct at August 23, 2003 04:30 PM

As someone seeking admission to medical school and wanting to become a doctor, I want Precision Blogger to know that their comments are very cruel. Residency is a somewhat thankless job in a profession that demands constant self-sacrifice. Residents work 100 hours per week, up to 24 per shift, and only make $7 per hour. Keep in mind that residents must make many life and death decisions on little sleep and little food. We need to reform the residency system now to protect the rights of residents, the credibility of medical institutions, and safety of patients. Eliminating The Match may not be the answer, but something must be done.

Posted by: David Carrigan at December 16, 2003 02:04 PM

My 2 cents. I'm going through match process now.

The average residentís salary is around $40000, about $8.16 an hour (calculated on the new 80 hour work week, allowing for 3 weeks of non-paid vacation, and getting paid time and a half over 40 hours). Depending on the residency program, a first year residentís salary can start as low as $34,250 and max out in a five year residency around $50,000. Each year the salary, on average, increases anywhere from $1,000-$2000.

So letís compare this to other medical professions starting salaries. The average starting salary for an RN in 2003 (according to is $37,000-39,000 with an average hourly wage ranging from $17.65 to $21.00 depending on the hospital and specialty. On an 80 hour work week with 3 weeks of non-paid vacation, this would be well over $80,000. An LPN starting salary averaged about $11.88 in 2001 (according to which would be over $58,000 working 80 hours a week with 3 weeks of non-paid vacation. The average nurse practitioner makes $57,000 in his/her first year with an average hourly wage of $30.12 (over $147,000 a year on an 80 hour work week with 3 weeks of non-paid vacation). The average starting physician assistant salary was $59,839 in 2001 (according to AAPA Physician Assistant Census Survey) and salaries vary widely from $50,000 to $100,000+ (and these are ~40 hour a week jobs). (For some more sobering numbers, go to )

I've seen 5th year surgical residents operate with the attending overseeing the surgery but never scrub in. The 5th year resident makes $46,000. The attending makes $200,000+ a year. Seem fair?

Posted by: Mark at January 5, 2004 09:52 PM