As discussed in our article “Is It Time to Abolish the Dean’s Tax?,“ schools of medicine (SOMs) have often applied a top-line professional revenue tax—the dean’s tax—to provide an additional source of funding to the academic enterprise. This approach is proving to be outdated, as market forces are driving increased financial integration of the AMC component entities (SOMs, health systems, and faculty group practices). Recognizing the need for continued reinvestment in the academic enterprise and alignment between affiliates, forward-thinking AMCs are eliminating the dean’s tax and revising historical financial arrangements. These arrangements are disproportionately funded by the health system and are often partially circular in nature, as the dean’s tax may cause or increase a clinical operating deficit of the faculty group practice, as depicted in figure 1.
Revisiting these arrangements provides an opportunity to:
- Reduce or eliminate long-standing backstop-based funding to clinical departments.
- Promote financial sustainability and transparency.
- Simplify contractual negotiations.
- Reduce administrative burden.
- Facilitate greater financial integration among the component entities.
Institutions seeking to eliminate legacy financial arrangements and modernize the overall approach to academic investment should consider a range of approaches, factors impacting their design, and best practices for the financial relationship.
Published May 5, 2021
