The Economics of New Faculty Hires in Basic Science

Purpose To compare the streams of expenses and revenues associated with investment in a cohort of basic science investigators at the University of Rochester School of Medicine & Dentistry for seven years. Method The authors evaluated a medical school's financial investment in 25 basic science faculty who were hired between 1999 and 2004 to expand basic science research. The authors compared direct and indirect costs with the extramural grant support generated by these investigators through 2006. To facilitate a comparison of investments made and grants generated, the authors calculated present value (in 2006 dollars) of revenues and expenses using the school's approximate cost of capital. Results Of the 25 faculty members hired, 24 (96%) remained at the school through 2006. From 1999 to 2006, the school invested a total of $69.0 million ($33.1 million in start-up costs and $35.9 million in indirect costs) to support the faculty members. Through 2006, these faculty members generated $99.7 million in extramural grant revenue ($70.7 million in direct grant revenue and $29.1 million in indirect grant revenue). Whereas the faculty generated $1.45 in total grant revenue per dollar invested, start-up expenses and incomplete recovery of indirect costs required the school to add 40 cents to every grant dollar generated to achieve financial equilibrium. Conclusions Investments in basic science research, even when successful, may require significant financial subsidies from academic health centers. Acad Med. 2009; 84:26-31.