ABSTRACT

During the second half of the twentieth century, medical school financing in the United States underwent major changes as research and then clinical practice became significant sources of revenue.  The availability of these revenue sources was associated with a steady increase in the size of the medical school faculty.  The medical student teaching program was subsidized, in term of faculty time and financial support, from the other medical school missions.  This “black box” of cross subsidy has been challenged by the emergence of “managed care” in the 1990s.  Faculty members are under pressure to be increasingly productive in research and clinical practice, which affects the amount of unreimbursed time that they can devote to teaching.  As a response, some medical schools are working to develop systems to cost out and to reimburse the various missions of the medical school (teaching, research, and clinical service) through distinct revenue streams.  This article summarizes medical school financing during the twentieth century and describes the new financing models that are emerging.