Alternative funding for academic medicine: Experience at a Canadian health sciences center

In 1994 the School of Medicine of Queen's University in Kingston, Ontario, its clinical teachers, and the three principal teaching hospitals initiated a new approach to funding, the Alternative Funding Plan, a pragmatic response to the inability of fee-for-service billing by clinical faculty to subsidize the academic mission of the health sciences center. The center was funded to provide a package of service and academic deliverables (outputs), rather than on the basis of payment for physician clinical activity (inputs). The new plan required a new governance structure representing stakeholders and raised a number of important issues: how to reconcile the preservation of physician professional autonomy with corporate responsibilities; how to gather requisite information so as to equitably allocate resources; and how to report to the Ontario Ministry of Health and Long-term Care in order to demonstrate accountability. In subsequent iterations of the agreement it was necessary to address issues of flexibility resulting from locked-in funding levels and to devise meaningful performance measures for departments and the center as a whole. The authors conclude that the Alternative Funding Plan represents a successful innovation in funding for an academic health sciences center in that it has created financial stability, as well as modest positive effects for education and research. The Ontario government hopes to replicate the model at the province's other four health sciences centers, and it may have applicability in any jurisdiction in which the costs of medical education outstrip the capacity of faculty clinical earnings.