Regardless of how hospitals make up for the deficit, the fact remains that hospitals lose out when they can’t overwork their residents. Residents are paid well under the real market value of the services they provide.

They assumed that if one resident could not work more than 16 hours per shift (at an hourly rate of $8.65/hour), then the hospital not transfer the “excess work from residents” to more residents, but rather to the highly paid “substitute providers.” That is not a fair assumption.

A more sensible assumption is that a hospital, being sensitive to costs, will simply hire more residents. If each resident is only paid $8.65 per hour, then the hospital would likely transfer the excess work to more residents, instead of to the more highly paid “substitute providers.”

“Methods: We used published data to estimate labor costs associated with transferring excess work from residents to substitute providers, and we examined the effects of our assumptions in sensitivity analyses. Next, using a probability model to represent labor costs as well as mortality and costs associated with preventable adverse events, we determined the net costs to major teaching hospitals and cost-effectiveness across a range of hypothetical changes in the rate of preventable adverse events.”

So, yes, the study did assign monetary values to decreases in errors and increases efficiency. Even after taking these into account, the total cost of reform still came to $1.6 billion dollars.

Although I have not studied the article, I question whether the 16-hour per shift limit actually costs money. I suspect it saves money as a result of fewer errors and increased efficiency. There have been many studies showing that people are prone to make more mistakes and are less efficient once they have worked more than 8 hours in a shift. Those studies support government policies for payment of overtime pay to employees. Did the article consider the costs that result from the long work hours?