Clinical revenues used to support the academic mission of medical schools, 1992-93

Abstract

This is the report of a study undertaken by the Association of America n Medical Colleges to estimate the total amount of clinical revenues that are used to support the academic mission of U.S. medical schools. The study was prompted by an awareness that recent market-driven changes in health care organization and financing threaten the structure of medical school financing that has evolved over the last half-century. A total of 60 medical schools (48%) participated in the study. The results, projected for all 126 U.S. medical schools, indicate that faculty practice plans in 1992-93 provided an estimated $2.4 billion in support for medical school academic programs. (1992-93 was the latest year for which complete financial data were available.) This amount represents 28 cents of every faculty-practice-plan dollar collected that year. The primary way in which faculty practice plans support academic programs is by underwriting clinical faculty time spent in academic activities, but direct transfers of funds, from the practice plan to the school and departments, also play a major role. The major beneficiary of faculty-practice-plan support is research, defined broadly to include a range of scholarly activities, at an estimated level of $816 million for all U.S. schools. This is followed by undergraduate medical education, at $702 million, graduate medical education, at $594 million, and other, largely undifferentiated academic support at $244 million. In addition to faculty practice plan revenues, teaching by volunteer faculty contributed another $545 million in imputed-dollar support of academic programs, bringing the total level of support to nearly $3 billion. Volunteer faculty teaching was divided nearly evenly between undergraduate and graduate medical education. Hospitals may also provide clinical revenues in support of the academic mission by applying hospital funds to academic programs and by absorbing academic-program expenses that are not otherwise reimbursed. However, unravelling the complex web of subsidies and cross-subsidies that characterizes medical school-hospital relationships proved to be beyond the capability of the present investigation. There is considerable evidence that changes in health care organization and financing will make it unlikely that the current level of support from practice plans and volunteer faculty can be sustained and that in some cases it is already diminishing. The restructuring of medical school financing to absorb the impact of this decline of support, which comes on top of reductions in indirect cost recoveries and pressures to lower state appropriations, constitutes one of the major challenges medical schools will face in the years ahead.