dition to conducting research and training, academic health centers provide health care services to a large number of medically underserved populations, often indigent patients, as well as provide the bulk of specialized care. The continued provision of these important public services may be threatened by the growing dominance of managed care and cost-focused health care delivery markets.

Medical schools are heavily dependent on two primary sources of funds: clinical revenues (from the provision of patient care) and research revenues (from grants and contracts) (Figure 2-1). In private, research-intensive medical schools, the relative dependence on grants (which are mostly from federal government sources, but which also include nonfederal funds) and clinical revenues from hospitals and practice plans become proportionately larger in the absence of state and local support. These revenue sources support a wide array of education, research, and clinical care programs. In private, research-intensive medical schools, the proportion of total expenditures that come from tuition and fees, endowment earnings, and state support averages only 10 percent, whereas the proportion for public, research-intensive medical schools is about 18 percent. Thus, both private and public medical schools rely heavily on the clinical revenues generated by faculty.

The 35-year trend in the source of revenues within academic health centers is shown in Figure 2-2. In fiscal year 1961, the United States had 85 medical schools with aggregate expenditures of $430 million (current dollars), of which 40 percent was raised from federal (NIH) research funds. By 1996, there were 125 medical schools with total expenditures of over $32 billion, but only 19 percent came from federal research funds. In contrast to money from federal funding, clinical revenues rose from less than 5 percent to well over 50 percent (Figure 2-2). Some of these revenues provided cross-subsidies for academic objectives; in fiscal year 1993, for example, about 10 percent of revenues from faculty practice plans were estimated to support biomedical research.

Figure 2-1 Growth in medical education in the United States from 1960 to 1996, as measured by revenues (in log billions of dollars). Source: AAMC, 1998.

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