With outside forces straining their two largest funding sources, medical schools must bank on grants and research contracts for a larger share of their revenues, according to a new study.
The report, sponsored by a group lobbying Congress for more Medicare funding, was published in the Sept. 1 Journal of the American Medical Association. It documented an erosion in teaching hospital and faculty practice plan revenues attributable to Medicare reductions and managed care.
That's significant because medical schools receive about half their revenues from those sources (See chart).
"In contrast to practice plan and hospital support of medical school programs, the growth in revenue from federal research grants and contracts has been generally stronger and more consistent in the past two years," the study said. "An appreciable number of schools have witnessed a constant-dollar decline in their practice plan or hospital support during the past two years."
Roughly 40% of the 125 medical schools that participated in the study reported a decline in revenues from practice plans and hospitals between fiscal 1997 and fiscal 1998.
Some schools blamed the Balanced Budget Act of 1997, which mandated reductions in Medicare's graduate medical education payments to teaching hospitals.
The Association of American Medical Colleges, which conducted the financial study, is lobbying Congress to roll back some of those scheduled reductions.
"We're facing declining reimbursement to both hospitals and physicians, and that ripples through the system," said Bill Gleason, associate dean of administration at the Medical College of Virginia in Richmond, which is part of state-run Virginia Commonwealth University.
The MCV receives about one-third of its revenues from MCV Hospitals in Richmond and other area hospitals that participate in its teaching programs.
However, medical schools also have experienced an upswing in revenues from grants and research contracts, the study said. That income rose nearly 9% to $10.3 billion from fiscal 1996 to fiscal 1998, according to the study.
"There is reason to believe that research dollars will continue to increase," said Jack Krakower, a co-author of the study and the AAMC's director of institutional data systems. "There's a longstanding commitment on the part of the federal government to support biotechnological research, and some of the tobacco settlement dollars may be sent in that direction."
That's not good news for all medical schools, however. "The top research schools will always do well in grants and contracts," the MCV's Gleason said, adding that the MCV receives 19% of its revenues from that source. "For the rest of us, there's an awful lot of competition for those dollars. So I wouldn't say it's an ongoing, reliable source of revenue, but it is a big source."