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A Crisis of Trust Gesundheit Acad Med Dec 2019 Commentary
A Crisis of Trust Gesundheit Acad Med Dec 2019 Commentary
This published ahead-of-print manuscript is not the final version of this article, but it may be cited and
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Author: Gesundheit Neil MD, MPH
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Title: A Crisis of Trust Between U.S. Medical Education and the National Board of Medical Examiners
DOI: 10.1097/ACM.0000000000003131
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Copyright © by the Association of American Medical Colleges. Unauthorized reproduction of this article is prohibited.
Academic Medicine
DOI: 10.1097/ACM.0000000000003131
A Crisis of Trust Between U.S. Medical Education and the National Board of Medical
Examiners
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N. Gesundheit is professor of medicine and senior associate dean for medical education,
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Correspondence should be addressed to N. Gesundheit, Stanford School of Medicine,
Educational Programs and Services, 1265 Welch Rd., MSOB x321, Stanford CA 94305-5404;
Editor’s note: This is an Invited Commentary on Carmody JB, Rajasekaran SK. On Step 1
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mania, USMLE score reporting, and financial conflict of interest at the National Board of
Disclaimer: The comments represent the views of the author and not necessarily those of
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Stanford University.
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Abstract
This Invited Commentary is an independent opinion piece and companion to the Perspective by
Carmody and Rajasekaran that appears in this issue of Academic Medicine. The National Board
profession in the United States. According to publicly available tax data, the NBME, which has
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increased its number of income-enhancing products, had revenues of $153.9 million (M) and net
assets of $177.6M in 2017, earnings (revenue less expenses) of $39.7M in 2013-17, and a highly
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compensated management team. Medical students are ultimately the source of nearly all the
NBME’s revenue, and the NBME has contributed to the growth of medical student debt. The
NBME has operated as a monopoly since its agreement in the early 1990s with the Federation of
State Medical Boards to co-sponsor the United States Medical Licensing Examination (USMLE).
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Although the NBME has developed valuable products and is ostensibly governed by a capable
board, the NBME has inherent financial conflicts of interest and may be benefiting from the
current “Step 1 mania” undermining undergraduate medical education. Here, the author makes 4
recommendations to reestablish the trust of the U.S. medical education community in the
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NBME: (1) the NBME should recuse itself from current discussions and policy-making decisions
related to changes in the score reporting of the USMLE Step 1 exam; (2) the NBME should
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disclose and be transparent about all aspects of its finances; (3) new NBME products, changes in
independent of the NBME; and (4) the NBME (and USMLE) should not charge students or
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The National Board of Medical Examiners (NBME) is a powerful, well-funded organization and
gatekeeper to the medical profession; it sells products and services and provides state medical
boards with a common system for licensing physicians in the United States. Here, I comment on
the Perspective by Carmody and Rajasekaran in this issue of Academic Medicine that explores
whether the NBME’s score-reporting policy, along with its current products and services,
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constitutes a conflict of interest.1 Specifically, I explore the history and more recent financial
growth of the NBME; I argue that the NBME constitutes a self-regulated monopoly; I examine
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the influence of what Carmody and Rajasekaran characterize as “Step 1 mania”; and I outline 4
steps the NBME can take to regain the trust of the medical education community.
Founded 5 years after the Flexner Report of 1910, the NBME was established with the noble
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goal of creating a rational, standardized system by which physicians could demonstrate their
knowledge and suitability to practice medicine. The underlying goal of the NBME was to serve
the public and ensure that practicing physicians in the United States met standards of
For its first 75 years, the NBME competed with an alternate pathway to licensure, the Federation
Licensing Exam (FLEX) administered by the Federation of State Medical Boards (FSMB). In
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1992, the NBME and FSMB engaged in a collaborative agreement to cosponsor and unify their
licensure exams in the form of the United States Medical Licensing Examination (USMLE). The
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USMLE initially comprised 3 parts, and in 2004 the NBME and FSMB added a fourth clinical
competency component, Step 2-CS (clinical skills). The NBME has primary oversight of Step 1
and Step 2-CK (clinical knowledge); the organizations share oversight of Step 2-CS; and the
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The Financial Growth of the NBME: A Nonprofit with Growing Revenues, Margins, and
Net Assets
Organizations, such as the NBME, that receive 501(c)(3) status under the U.S. Internal Revenue
Code are considered nonprofits and, as such, do not have owners or shareholders and cannot
distribute earnings; however, these registered nonprofits are often encouraged by their governing
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boards and market forces to grow their revenues and increase net assets.
The NBME reports its financial status to the Internal Revenue Service (IRS) annually on IRS
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Form 990 (the nonprofit equivalent of IRS Form 1120 for corporations and Form 1040 for
individuals). Although financial details of the NBME’s operations are not provided in the
organization’s 2018 annual report,2 IRS Tax Forms 990 are available to the public.3 In 2017 the
NBME reported program service revenue of $153.9 million (M) and earnings (revenue less
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expenses) of $8.0M.3 Over the 5-year period from 2013 to 2017, the NBME’s overall program
service revenue was $712.1M, with an annual growth rate of 5% per year.3 The aggregate
earnings during this 5-year period were $39.7M.3 The NBME’s profit margin ratio, defined as net
income (revenue less expenses) divided by net sales (program service revenue) over this 5-year
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period was approximately 6%. For comparison purposes, the margins of the for-profit companies
Walmart, Target, and Ford Motor Company over this same period averaged, respectively, 3%,
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4%, and 4%.4 Because of these years of positive revenue and robust margins, the NBME’s net
Carmody and Rajasekaran have dug deeper into NBME’s finances and have shown that the
organization’s revenues more than tripled between 2001 and 2017, far outpacing inflation.1 The
fee for Step 1, a main revenue generator, increased from $435 in 2004 to $630 in 2019, again
exceeding the rate of inflation.1 Further from 2008 to 2017 the NBME workforce grew to include
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more than 200 employees earning more than $100,000 per year.1 In 2017, the NBME’s retiring
president received over $1M, and the incoming president received over $820,000, in total
compensation.3 Fourteen employees earned more than $400,000.3 This compensation for top
NBME executives in 2016-17 was easily in the top 0.5% of charitable nonprofits, according to
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CEOs.5(pp9-10)
In many ways, the NBME has become a big business, with growing revenues of more than
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$700M over the 5-year period ending in 2017, new products, positive earnings of nearly $40M
during this same period, strong margins, and highly paid staff and executives. While this growth
and financial health is in many ways to the credit of NBME management, the figures also
highlight the inherent risk of placing the organization at the nexus of key decision-making
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regarding requirements for the use of its products.
The High NBME Fees Increase the Cost of Medical Education and Medical Student Debt
Notably, the consumers of NBME services and products are medical students, which as Carmody
and Rajasekaran outline, has consequences for the students themselves and medicine.1 Medical
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students ultimately pay the cost of nearly all of NBME services, in direct and indirect charges.
The direct cost for U.S. applicants who take the USMLE is $630 for each step exam: Step 1 and
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Step 2-CK. Costs are approximately 50% higher for international medical graduates. Students
incur further direct costs when they purchase NBME practice exams. Because the Step 1 and
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Step 2-CK tests have become high-stakes exams, most medical students take NBME-sponsored
practice exams—the Comprehensive Basic Science Self-Assessment (CBSSA) for Step 1, and
the Comprehensive Clinical Science Self-Assessment Exam (CCSSA) for Step 2-CK—at a cost
of $60 per exam. The number of CBSSA exams purchased by medical students grew 10-fold
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between 2005 and 2016.1 With the growth of Step 1 mania, practice exams have become one of
the largest areas of product and profit margin growth at the NBME.1 Because of the popularity of
practice exams, the NBME constantly refreshes its offerings (“forms”), ensuring strong revenues
for this product. Although anxiety about Step 1 is well established, anxiety over Step 2-CK has
also been increasing, and medical students are purchasing increasing numbers of CCSSA tests,
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also at a cost of $60 per test. Assuming medical students each purchase a total of 5 Step 1 and
Step 2-CK practice exams, then additional expenses incurred equal $300 per applicant. The
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additional cost of Step 2-CS ($1,290) and Step 3 ($875) bring the total expenses incurred directly
by students for USMLE services to $3,725 (which does not include expenses for traveling to the
Step 2-CS test site). These expenses do not include supplementary preparatory (“test prep”)
NBME knowledge (shelf) exams during their clinical training. The cost of these exams to
medical schools is approximately $46 per exam per student. Further, assuming that students take
at least 5 shelf exams during medical school, the cost for this additional testing, when passed on
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as student fees or tuition, is at least $230 per student. Students may bear the burden of additional
expenses incurred by medical schools that use the NBME’s Customized Assessment Services
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(CAS); this service allows schools to create exams from the USMLE question bank.
Not including expenses for CAS, the total fees for USMLE services are approximately $4,000
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(including both indirect and direct costs) per U.S. medical student.
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To summarize thus far, the cost of USMLE assessments is significant, particularly in light of the
high and rapidly rising medical student debt, which now approaches a median of $200,000.6 The
NBME, while registered as a 501(c)(3) nonprofit, enjoys large revenues and strong margins,
employs a highly paid executive staff, and charges significant fees that contribute to medical
student debt.
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The NBME is a Self-Regulated Monopoly
As mentioned, prior to 1992-94, most states accepted two pathways for medical licensure, the
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NBME and the FLEX. The 1992 agreement to merge licensure testing created a monopoly—that
monopolies, whether for-profit or nonprofit, are regulated by an outside, impartial board that
safeguards the public trust against the risk of abuse. As an example, electricity and natural gas
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services in southern California are provided nearly exclusively by the Southern California Edison
(SCE) Company. Any change in pricing for SCE’s services must be approved by the California
Public Utilities Commission (CPUC). CPUC commissioners are appointed by the governor and
confirmed by the California State Senate. When SCE registers to raise its rates for electricity, it
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must document, for the CPUC, the greater cost of generating electricity or purchasing natural
gas, any alternative sourcing that it has sought, and the effect of the price increase on
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communities. Public hearings often take place wherein the company faces scrutiny and must
defend its pricing decisions. CPUC commissioners then vote to approve or reject SCE’s
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proposals. In short, neither SCE nor its board unilaterally set SCE’s rates.
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By contrast, the NBME is regulated by an internal board, and changes in pricing strategies or
new products do not require approval by a public group or an indisputably independent body,
such as the Liaison Committee on Medical Education of the Association of American Medical
Colleges (AAMC) or the AAMC’s Council of Deans. Although the NBME has a sizeable and
diverse 80-member board, it is not clear whether changes in pricing structures are openly
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discussed and debated beyond perhaps closed meetings of the NBME Executive Board (of
approximately 10 members). In addition, the expertise of the members of the NBME Executive
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Board is primarily education. In contrast to a public utility that is prevented from monopolistic
abuses by external regulation, few checks and balances help control and regulate the NBME. The
price charged for Step 1 and Step 2-CK examinations, as an example, can be raised without
extensive justification or the scrutiny of the medical education community. The NBME can also
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raise its passing cut-off score for Step 1 and Step 2-CK without strong, evidence-based
justification that a higher number predicts greater clinical success. More exam failures generate
more revenue both from re-testing and from increased sales of practice materials to students
hoping to surpass the higher bar (see below). While it may not be the organization’s intent, the
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Given that the NBME benefits from re-testing and test preparation materials, its board members
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are likely not objective participants or arbiters of the current Step 1 score reporting debate. The
organization’s desire for growth and influence may be jeopardizing its original noble mission
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The NBME Is a Registered Nonprofit, But It Is Not Charitable
Perhaps equally distressing to medical students as the cost of USMLE testing is that the NBME
and FSMB charge full fees to students who fail and must re-take any of the 4 USMLE exams.
This policy of charging a re-testing fee is in line with the policy of the American Board of
Medical Specialties, but there is a key difference. Medical specialists who take board exams are
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licensed physicians on the threshold of earning average salaries of approximately $300,000
annually.7 Medical students taking USMLE exams have a mean debt of $200,0006 and are on the
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threshold of 3 to 7 years of training before they are able to begin to pay off debt. Thus, in
addition to the humiliation, psychological damage, and stigma of failing a licensing exam, a
medical student bears the added burden of paying a second test fee. Given my years working
with students, I can attest to the financial struggles students face. One medical student I
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mentored required 3 attempts before passing Step 2-CS and incurred $4,000 of debt in the
process. Surely the NBME and FSMB, with significant net assets and an IRS classification in a
category that includes charities, can be more charitable in their treatment of physicians in
training.
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National debate about the disproportionate emphasis placed by graduate medical education
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(GME) program directors (PDs) on the USMLE Step 1 exam has been accelerating, especially
given the negative consequences not only on medical students and their mental health but also on
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undergraduate medical education (UME).8 As the primary sponsor of Step 1, the NBME will
undoubtedly bear financial consequences for any change to the format or grading of the Step 1
exam; thus, how the NBME interacts with the decision to change Step 1 score reporting is a
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Some of the concerns about the Step 1 exam and Step 1 mania have been discussed previously in
this journal8,9 and in other forums. The dilemma has 3 basic aspects:
1. The Step 1 exam is used by many residency fields and PDs as a gatekeeper or filter, even
though it was designed as a pass/fail exam and has no rigorous data to validate its use to
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2. Because of the way many residency PDs use Step 1, the exam is perceived by students as
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3. Because of this perception, many medical students make achieving a high Step 1 score
their foremost objective for their pre-clerkship studies. They downgrade other topics and
At Stanford, despite a faculty with 8 Nobel laureates and extensive clinical facilities that include
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5 teaching hospitals, some medical students virtually ignore the pre-clerkship curriculum in favor
of one or more parallel curricula they create on their own. Their teachers are First Aid
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additional resources designed to help students maximize their Step 1 score.8 As the Step 1 exam
approaches, classrooms and voluntary laboratory exercises are lightly attended. Students
decrease interactions with one another. Community clinics, normally supported by medical
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students, are understaffed. Moreover, although this parallel curriculum no doubt has some merit,
many of the techniques it inculcates are aimed to improve factual recall rather than
understanding; that is, as Wartman has described, they focus on building “information” rather
than the higher goal of building “knowledge.”11 Information is easily and reliably obtained in
clinical practice by using a search tool on a smart phone, laptop, or portable tablet computer.
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Why graduate students would forego an in-depth and multidimensional medical curriculum that
helps them achieve knowledge and an understanding of medicine for, instead, learning tools that
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primarily encode memorization of facts might seem inexplicable. But students do, and the reason
The NBME, whether by intent or happenstance, has been the beneficiary of Step 1 mania. With
the increasing pressure to perform well on Step 1, students have used NBME practice exams and
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resources to boost their Step 1 scores. In response to rising national scores, which are in turn the
result of better espionage by the burgeoning Step 1 prep industry, the NBME has asked question
developers to create new material, often resulting in the testing of obscure and less relevant facts.
This pursuit of medical trivia has affected medical education. For example, in the endocrine
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physiology course that I have taught for 20 years, when my teaching colleagues and I discuss
hormonal signaling, we review the mechanisms and diversity of signal transduction and the ways
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that it can be modulated and disrupted. We discuss more than 50 hormones, but emphasize that
memorizing exactly how each hormone signals is not important since specifics can always be
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looked up if they become relevant to patient care or research. Yet students report that our advice
has been misguided; the Step 1 exam, in some iterations, has indeed tested for detailed facts
about specific hormone signaling mechanisms. This drive for detail appears to define the
“excellent” candidate for PDs who use Step 1 as a guide to identifying trainees worthy of
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acceptance into their residency programs. Thus, the Step 1 exam has badly distorted the priorities
of U.S. medical students. Assessment drives curriculum (even if inadvertently),12 and the current
Step 1 climate has had a severe and adverse effect on curriculum development and student-
faculty engagement.
As mentioned, this issue of Academic Medicine features a timely exposé by Carmody and
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Rajasekaran.1 The InCUS (Invitation Conference on USMLE scoring) meeting held in March
2019 was an opportunity to discuss the topic of Step 1 score reporting (Pass/Fail vs. numerical
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score) and its effect on students and medical education, but the fact that the NBME and FSMB
were organizers at the epicenter of the meeting undermined its legitimacy. I agree with Carmody
and Rajasekaran: the NBME has a deep and inescapable financial conflict of interest in
determining the future direction of the Step 1 exam. Below, I outline 4 steps, including recusal
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from discussion and decision-making on the topic of Step 1 score reporting, that the NBME can
committee, and free retesting—will implement checks and balances with regard to the activities
of the NBME and will begin the process of restoring confidence in the organization.
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1. The NBME should recuse itself from current discussions and decision-making about the
The NBME may feel that it “owns” the Step 1 exam, but medical educators (including UME
faculty and GME PDs), students (future physicians), and state medical boards should be the true
owners of the exam. The NBME’s primary role is to implement a licensing exam to safeguard
the public, not to influence medical education. Because of the NBME’s conflicts of interest, as
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described by Carmody and Rajasekaran1 and with which I agree, the NBME should recuse itself
from participating in discussions and decision-making about changes to the grade reporting,
The NBME’s annual reports must show the organization’s full finances, including the sources
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and amounts of revenues and expenses. The NBME should disclose salaries paid to the most
highly compensated employees, which can be shown in an anonymized format. Annual reports
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must also describe the decisions made by the NBME’s Compensation Committee. This
information is currently missing from its 2018 56-page annual report.2 For-profit corporations
regularly provide this information either in their annual reports or in quarterly 10-K forms. The
NBME’s size and importance to medical education demand a higher level of transparency than
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the organization has heretofore provided. Disclosing the information on annual IRS Form 990 is
required by law, but it is hidden from easy public view and, thus, is not sufficient.
3. New products, changes in prices for current products, and changes to pass thresholds
The NBME provides required services for which there is no competition; therefore, changes to
its products and pricing should be approved by an independent oversight committee. Currently
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the NBME maintains a board comprised of approximately 80 diverse and talented members,
mostly medical educators, who represent many constituencies and provide vision for the
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larger board.2 This system provides the appearance of independence, but NBME management
may still exert influence in the selection of some board members. Despite the talented
constituents of the NBME board and its smaller executive board, the AAMC or another suitable
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third-party should organize a financial oversight committee that is unquestionably and fully
independent of the NBME. Any new product, change in pricing, or change in pass threshold of
as an oversight committee reviews and approves changes to prices charged by a public utility
company. Similarly, given the NBME’s status as sole provider of required services, the
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committee members must be appointed through an unquestionably independent process.
4. The NBME should not charge a fee for retaking a failed licensing exam
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Failure on a licensing exam achieves its purpose—to identify a student who needs to improve
knowledge and/or skills in the tested area—but recognizing that students suffer humiliation and
psychological trauma when they fail an exam is important. Adding a steep re-testing fee is
unnecessary and compounds harm incurred by a student who is likely already in debt. Given the
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NBME’s considerable net assets of nearly $180M and positive earnings of $40M in 2013-17, this
In Sum
The NBME, although registered as a 501(c)(3) nonprofit, has grown to become a powerful
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organization that resembles a for-profit corporation. It enjoys significant revenue and earnings,
has increased its offerings of revenue-enhancing products, and employs a highly compensated
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executive management team. Medical students are ultimately the source of nearly all the
NBME’s revenue. The growth of the NBME has coincided with and contributed to the increase
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in medical student debt, which is at historically high levels. The NBME has operated essentially
as a monopoly since its agreement in the early 1990s with the FSMB to co-sponsor the 4-part
USMLE, which is required for licensing physicians in the United States. Although the NBME
has developed many valuable products and is ostensibly governed by a talented and capable
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board, the NBME has inherent financial conflicts of interest, appears to profit from its status as
gatekeeper to the medical profession, and should, therefore, recuse itself (or be forced to be
recused) from discussions or policy-making decisions related to changing the grade reporting of
(and other aspects related to) the USMLE Step 1 exam. Further, the NBME should be transparent
in all aspects of its finances, and new NBME products and pricing structures should be approved
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by an independent oversight entity. Finally, the NBME should not charge medical students and
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Although this Invited Commentary and the accompanying article by Carmody and Rajasekaran
have addressed concerns about the NBME,1 similar concerns likely apply to the NBME’s partner
organization, the FSMB. Next steps should include scrutinizing its practices and any real or
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References
1. Carmody JB, Rajasekaran SK. On Step 1 mania, USMLE score reporting, and financial
conflict of interest at the National Board of Medical Examiners. Acad Med. XXX.
2. National Board of Medical Examiners. Engagement and Action: 2018 Annual Report.
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https://www.nbme.org/PDF/Publications/2018Annual-Report.pdf. Accessed November 27,
2019.
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8. Chen DR, Priest KC, Batten JN, Fragoso LE, Reinfeld BI, Laitman BM. Student perspectives
on the “Step 1 climate” in preclinical medical education. Acad Med. 2019; 94;302-304.
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