Perspective

Abstract

Medical schools conduct research, provide clinical care, and educate future physicians and scientists. Each school has its own unique mix of revenue sources and expense sharing among the medical school, faculty practice plan(s), parent university, and affiliated hospital(s). Despite these differences, revenues from clinical care subsidize the money-losing research and education missions at every medical school.In this perspective, the authors discuss the flow of funds among a medical school, its faculty practice plan(s), parent university, and affiliated hospital(s). They summarize where medical school revenues come from, how revenues and expenses flow within a medical school and between a medical school and its partners, and why understanding this process is crucial to leading and managing such an enterprise. They conclude with recommendations for medical schools to consider in developing funds flow models that meet their individual needs and circumstances: (1) understand economic drivers, (2) reward desired behaviors, (3) enable every unit to generate a positive margin, (4) communicate budget priorities, financial performance, and the use of institutional resources, and (5) establish principles for sharing resources and allocating expenses among entities within the institution.Medical schools should develop funds flow models that are transparent, aligned with their strategic priorities, and reward the behaviors necessary to produce effective collaboration within and across mission areas.