The managed care revolution is sweeping the country as a result of intense marketing on the part of managed care organizations and the widespread belief that price-sensitive managed care systems will control health costs. Although few believe that managed care alone can adequately stem the growth of nation health care spending, competition based on price has emerged as a powerful force in the health care sector. Academic health center (AHCs) stand to suffer with this new managed care regime because their special missions of teaching, research, and highly specialized clinical care make them more expensive than nonacademic hospitals and place them at a noncompetitive disadvantage. The traditional focus of the acute care hospital with individual departmentally designed programs will be narrow. Major changes will be required on the part of AHCs if they are to survive and preserve patient volume, maintain the integrity of medical education, advance scientific research, and provide highly specialized care. AHCs will have to make unprecedented adjustments in virtually every phase of their operations, particularly in the areas of clinical decision making and speedy patient-related information flow. A premium will be placed on multidisciplinary, inclusive medical services that can assume total health care risks for large populations. New ways of educating students in ambulatory settings with an emphasis on outcomes and population-based health will be needed along with the traditional responsibility of pursuing new approaches to the diagnosis, treatment, and prevention of disease. The extent to which managed care will ultimately alter the traditional role of AHCs in the American health care system is unclear, but successful adaptation in the short term will require them to respond broadly, flexibly, and in a timely fashion to the anticipated health care scene.