Funds Flow Trends – Integration and Incentive Alignment

A renewed interest in funds flow among academic medical centers (AMCs) is driven by efforts to improve integration across missions and incent behavior across a set of strategic goals.  Interest is also driven by a need to improve the financial performance of all assets as AMCs face funding reductions for each mission:  teaching, research, and clinical care.

ECG believes that AMCs will need to manage all sources of funds in a much more integrated fashion.  Efficient delivery of each service must be incorporated into system goals such that leaders have incentives in place to manage resources more effectively in order to maintain a financial performance that continues to allow the institution to invest in strategic priorities.  These investments must be done as an integrated institution.  Ramifications for departments include changing how reserves are accumulated and distributed.

Academic efforts will need to be better defined and managed, as well.  Administrative leadership efforts by role should be clear, and education and training efforts should be tracked in an accurate and transparent manner.  In addition, institutional research support and investments should be approved at a system-wide level and driven by the institution’s strategic plan.

Sources of funds are not expected to change, although we do expect to see more collaborations and partnerships that will need to be anticipated in a funds flow model.  New funds flow models should be driven by integration, as reflected in new funds flow policy and accountability.

Compensation is a critical component in any funds flow work.  There are many changes that should be part of a thoughtful funds flow model, such as new reimbursement models, increased reporting requirements, and a focus on patient outcomes.  Incentives can include achievement of a strategic objective.  These incentives can and should vary by department and specialty in their specific measures, with system-wide strategic objectives being a higher percentage of senior leaders’ models.

ECG has identified a set of principles that we believe reflect an integrated funds flow model.  As AMCs begin refining their funds flow models, a more integrated approach will be critical to the financial and strategic success of the organization.

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