Abstract
This paper examines the indirect costs of primary care residency in terms of ambulatory care site productivity and the influence of graduate medical education (GME) subsidies on the employment of primary care residents. Using a sample of hospitals and health centers in New York City (NYC), we find that most facilities employ significantly more primary care residents relative to nonresident primary care physicians than would be dictated by cost-minimizing behavior in the production of primary care. We also find evidence that New York's GME subsidy encourages the "overemployment" of residents, while the Medicare GME subsidy does not. We conclude that the trade-off between productivity and teaching is more serious in primary care than in inpatient settings, and that facilities heavily involved in ambulatory care teaching will be at a competitive disadvantage if GME subsidies are not targeted specifically for primary care.