Two developments profoundly modified the single mission of U.S. medical schools to educate physicians: the decision of the federal government to develop federal research programs within the nation's universities rather than in separate research institutes; and the entry of the federal government into the purchase of health services through the Medicare and Medicaid programs. The presence of biomedical research in the schools has created dilemmas for educators and administrators. The schools need to deploy large amounts of capital for research, they find a decreasing relevance of new research knowledge to medical practice, and they see a great need to increase interdepartmental collaboration. These factors create a new kind of tension that may make the medical school of the next generation less attractive as the exclusive institution in which biomedical research is conducted within the university. At the same time, cuts in federal funding for health services have caused medical schools to organize their faculties into practice plans. If the plans feel cuts in income because of federal reimbursement mandates, there will probably be controversy among faculty members about the plans' continuing contributions to the schools. A hypothetical scenario illustrates the plight of a medical school faced with a significant reduction in funds to support health services.