The traditional mission of an academic medical center is a 3-tiered goal to engage in tertiary clinical care, education, and research. However, the decline of the fee-for-service reimbursement system, the encroachment of managed care, the cost-containment strategies of payers, and the malpractice crisis have all contributed to the increasing difficulty of sustaining and fulfilling this mission. In addition, in the past 2 years, both academic medical centers and physician practices have had to cope with the imposition of resident work hour limitations, forcing many hospitals and practices to hire costly nurse practitioners and physician assistants to perform the work lost because of the duty hour restrictions.1 The cost to employ these healthcare providers is significantly greater than that expended for a resident, and it effectively takes 4 of these individuals to compensate for the loss of a single resident from a clinical service, often mandated by the shifts required in resident allocation to compensate for the lost work hours. These nonphysician providers work only one-half the number of hours as a resident and usually see only one-half as many patients. Both hospitals and physician practices are suffering as reimbursement continues to fall, costs continue to climb, and the malpractice crisis looms large. Many academic medical centers are struggling financially as a result of the current environment, and if financial conditions do not improve, the traditional academic mission may be forced to change.2 From a financial standpoint, options include further reductions in costs or even elimination of certain service lines found to be unprofitable. Although possible on a small scale, widespread adoption of this kind of policy would truly jeopardize the mission of academic medical centers across the country. The resource-based relative value system (RBRVS) was instituted in the late 1980s as Medicare set out to contain increasing costs in the healthcare system. However, several academic institutions have demonstrated that the system reimburses too little such that hospitals and practices may be losing money by performing certain types of procedures. The RBRVS system was instituted with the goal of containing costs, but the calibration was not intended to reimburse below costs. One obvious explanation for this discrepancy is that physician effort has been underestimated and thus underpaid. In addition, because academic medical centers usually are in the position that they accept all patients as part of their mission and thus tend to have more complex, more highly variable, and more costly cases than community hospitals, they have higher financial risk that is inadequately compensated by the RBRVS.3 Costs continue to increase and reimbursement remains inadequate. Although many academic medical centers continue to focus on cost containment at a macro level, there has been inadequate investigation into the relationship between hospital margin and the clinical practices. An unfortunate explanation for this is that most hospitals do not have adequate cost-accounting systems, and the information that is shared between medical centers and clinical practices is insufficient. Taheri and colleagues rigorously examined a trauma service line margin, finding that although losses were rare on fee-for-service patients, they were common on fixed-fee patients.4 This group proposed that payers potentially could game the system by moving patients to hospitals in which they had more favorable contracts, using as an example their own medical center where a fixed-fee trauma patient, on average, would result in a $500 loss for the hospital and trauma service. Academic medical centers are vulnerable to this kind of strategy by payers because of their obligation to accept all patients. Medical centers and practices across the country are putting considerable effort into cost containment, but as a result of the complexity of clinical care and the separation of hospital and practice operational data, little is known about what case mixes are profitable for practices, medical centers, or both. Because most hospitals and surgical services have only crude cost-accounting systems, neither hospitals nor practices have enough information to make appropriate and advantageous strategic decisions, giving payers a clear information advantage. As the financial situation becomes more precarious for both practices and medical centers, this information becomes increasingly important. Standard operational management from other industries demonstrates that optimizing a value chain in its entirety is always the best financial strategy for a whole system. Increasing the transparency and accuracy of the cost-accounting systems for both practices and hospitals, in addition to sharing more information, should lead us closer to this goal. The question remains which specialties produce high margins on the professional fee side and which produce high margins on the hospital side. Although few academic medical centers likely would consider managing risk by dropping entire surgical service lines, this information would allow hospitals and practices to see where better-negotiated reimbursement contracts need to be created, where further cost cutting might be most helpful, and where resources should be allocated. At a minimum, those service lines with high margins for both the hospital and the practice should be strongly supported, whereas those with negative margins for both should be more closely monitored. In certain situations, depending on the employment model, this creates a need for transfer of dollars between the institution and individual practices. This becomes particularly important for those services providing a high margin to the hospital where the professional fees generated do not adequately support the individual practitioners. Unfortunately, this situation is becoming all too common among surgical specialties where hospital reimbursement has remained strong and the Medicare payment to the practitioner has continued to be cut on a yearly basis. It is well known that other third party payers tend to follow Medicare's lead when it comes to physician reimbursement, thus creating the crunch on the professional fee side that the majority of surgeons now face. It is a sad commentary when the costs to a cardiac surgical practice exceed the payment received for performing a coronary artery bypass, a situation that currently exists in a number of regions in this country. Cardiac surgery, as well as a number of other surgical specialties, has provided a particularly vulnerable target to professional fee reductions despite the best efforts of the specialty societies to resist these changes. The dichotomy that exists between hospital reimbursement and professional fees has to be addressed, in many situations, by a funds flow model, and surgeons should be aware of their leverage when entering into negotiations regarding these types of models.