"Mission-Aligned Funds Flow": Effect on Clinical Departments

Academic medical centers struggle with the high cost of care, reduced reimbursement, intense competition, and low profit margins. Many factors, including a high proportion of publicly insured patients, a model rewarding procedural specialties, and research and educational support burden, led to faculty salary inequities, physician disengagement, and difficulty recruiting.

UC Davis Health implemented an aligned funds flow model in July 2021 to create a mission-aligned model in which all departments had financial margins to optimize recruitment, retention, research, and teaching.

The 3-year experience (academic years 2021-2024) with this model at UC Davis Health was characterized by physician compensation, physician recruitment, and profit increases. Total collections for departments increased by 4% in the first year, 0.2% in the second year, and 11.3% in the third year of funds flow. Total productivity increased by 4.9% during the first year, 3.6% during the second year, and 8.4% during the third year. Salaries increased in all departmental categories in year 3. Productivity and collections per faculty member increased during the first year and were stable during the second and third years. Parity among procedural, primary care, and hospital-based service lines was improved because departmental revenue was agnostic to payer mix and hospital agreements were more formulaic. The hospital contribution to funds flow increased from $67 million in 2022 to $101 million in 2024.

Regular communication and transparency are critical to ongoing trust and success with implementation of sustaining funds flow. The new model resulted in improved physician compensation and increased hiring. However, the implementation of funds flow had a negative fiscal effect on the academic medical center, and sustainability may require fine-tuning to balance affordability. The authors plan to convert outpatient primary care to productivity-based models and decrease time-limited support for new faculty from 2 years to 1 year.