In the past, cross-funding between medical and academic budgets has been commonly practiced at university medical departments in Germany. Recent developments have however, generated pressures to enforce the separation of funding for both areas, as intended by law, and to distribute them on the basis of performance. A pilot project at Münster University Hospital, initiated by the German Federal Ministry for Research and Education in 1998, is described here. The main aim of the project was to find ways of distinguishing between research and teaching areas, on the one hand, and health care on the other, in terms of documenting performance and itemizing costs.