HONOLULU – As private equity firms continue to invest in and profit from U.S. hospitals with residency programs, the American Medical Association (AMA) adopted policy during the Interim Meeting of its House of Delegates aimed at providing protections for residents who train at these teaching hospitals. The new policy makes specific recommendations encouraging residency programs to demonstrate transparency on mergers and acquisitions—particularly as it relates to private equity; uphold comprehensive policies to protect trainees, including those not funded by Medicare, to ensure the obligatory transfer of funds after institution closure; and empower designated institutional officials to be involved in decision-making to advance transparency and accountability in protection of their residents, fellows, and attending physician faculty.

The new policy, which was informed by a report of the AMA’s Council on Medical Education, is in response to concern over recent incidents where private equity has impacted graduate medical education (GME), such as the sudden Hahnemann University Hospital closure in Pennsylvania in fall 2019—which left more than 570 residents and fellows without required malpractice insurance coverage and without a spot in a training program.

“While positive developments have been made to implement protections for residents since the unexpected closure of Hahnemann, we are concerned that these changes are only temporary and may not lead to lasting change or prevent dramatic teaching hospital closures from happening again as a result of private equity investment,” said AMA Immediate Past Board Chair Bobby Mukkamala, M.D. “We will continue to advocate for protections for residents who train in residency programs at private equity-owned teaching hospitals and encourage sponsoring institutions to monitor these programs to minimize disruptions to residency training—not only to ensure continuity of excellent education for physicians-in-training but also ensure they’re able to continue providing much needed care for the communities and patients they serve. This is critically important for safety-net hospitals in underserved urban and rural areas that provide essential services to our most at-risk patients.”

Under the new policy, the AMA is also calling for changes to the Public Service Loan Forgiveness Program to expand eligibility for medical student trainees at for-profit hospitals; support for publicly funded research; and public statements from physician associations, boards, and societies about the impact of private equity on residency training to heighten awareness among the physician community.

Private equity firms are known to invest in health systems and in health care to make a profit, often by merging multiple health care practices, reducing staff, and closing portions of a hospital or health care practice’s operations. To help address these negative trends, the new policy affirms that the academic mission of an institution or medical education program should not be compromised by a clinical training site’s fiduciary relationship to an external corporate or for-profit entity. The policy also encourages physicians who are contemplating corporate investor partnerships to consider the ongoing education and welfare for residents who train under physicians in that practice, including the financial implications of existing funding that is used to support that training.

The AMA will continue to support efforts to financially and professionally protect residents and fellows displaced by unexpected teaching hospital closures and will advocate that full residency funding follows trainees of a suddenly closed institution to the new location and that funding stays with the institution for the duration of the displaced resident’s term. Following the closure of Hahnemann, the AMA engaged legal counsel to represent the displaced Hahnemann residents and fellows in bankruptcy proceedings, which settled in March 2020. In addition, the AMA and AMA Foundation helped fund grants to offset relocation expenses for the affected physicians.