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In today's continually changing health care environment, there is serious concern that medical students are not being adequately prepared to provide optimal health care in the system where they will eventually practice. To address this problem, the Health Resources and Services Administration (HRSA) developed a $7.6 million national demonstration project, Undergraduate Medical Education for the 21st Century (UME-21). This project funded 18 U.S. medical schools, both public and private, for a three-year period (1998-2001) to implement innovative educational strategies. To accomplish their goals, the 18 UME-21 schools worked with more than 50 organizations external to the medical school (e.g., managed care organizations, integrated health systems, Area Health Education Centers, community health centers). The authors describe the major curricular changes that have been implemented through the UME-21 project, discuss the challenges that occurred in carrying out those changes, and outline the strategies for evaluating the project.The participating schools have developed curricular changes that focus on the core primary care clinical clerkships, take place in ambulatory settings, include learning objectives and competencies identified as important to providing care in the future health care system, and have faculty development and internal evaluation components. Curricular changes implemented at the 18 schools include having students work directly with managed care organizations, as well as special demonstration projects to teach students the knowledge, skills, and attitudes necessary for successfully managing care. It is already clear that the UME-21 project has catalyzed important curricular changes within 12.5% of U.S. medical schools. The ongoing national evaluation of this project, which will be completed in 2002, will provide further information about the project's impact and effectiveness.