Revenues derived from the provision of clinical medical services have also helped support core academic programs and undergraduate and graduate medical education and have built what are now called AHCs. in fact, the revenues from the provision of clinical services generated at AHCs over the past four decades have contributed significantly to excellent clinical care and to outstanding basic and clinical research. AHCs have also fostered the U.S. biotechnology industry and have served as an important safety net for health care delivery, particularly for those who are disadvantaged and most in need.

However, the market-driven shift away from cost reimbursement and fee-for-service revenue sources has eroded the clinical revenue margins that previously provided AHCs with substantial discretionary funds to support basic and clinical research. In addition, the ongoing transformation of health care delivery under managed care has resulted in a migration of care out of the hospital and into ambulatory-care settings. Moreover, managed care tends to emphasize general medicine as opposed to specialized care. These changes not only have affected the ability of AHCs to conduct clinical research, which is closely tied to specialty training, but also may have narrowed the scope of the research agenda. For the period from 1986 to 1995, data suggest that for the 13 medical schools in regions where managed care has achieved a high level of penetration (over 40 percent) there has been a slower rate of growth in NIH funding—and, consequently, a declining share of and rank in the proportion of NIH funding—relative to that for medical schools in markets where managed care has achieved low (under 20 percent) or medium (20 to 40 percent) levels of penetration (Figure 2-3).

Figure 2-2 U.S. medical school revenues as a  percentage of total revenues. Source: AAMC, 1998.