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THE VA AFFILIATED NONPROFIT RESEARCH AND EDUCATION CORPORATIONS
In 1988, Congress passed legislation that allowed VA medical centers to establish nonprofit research corporations (NPCs), forming a unique partnership that dramatically broadened VA's ability to accept private and non-VA public funds to support VA's research program.
In 2006, eighty-eight NPCs reported
previous year revenues totaling $227 million. This represents 18 percent
of VA's total research funding from all sources. Individual
corporation's revenues ranged from $8,000 to more than $30 million with
thirty-four foundations reporting income of more than $1 million. Although it was originally anticipated that the NPCs would primarily accept clinical research grants from private sector organizations, administration of non-VA federal grants is increasing. Grants from other federal agencies including NIH, DOE, CDC, DoD, and NSF amounted to
55 percent of the NPCs' total revenues in 2005.
NPC expenditures on behalf of over 5,090
NPC-administered research projects totaled $204 million, over half of which was used to pay salaries for clinical research nurses, technicians and other research personnel. The average administrative expense was
15 percent of total expenditures, reflecting efficient management and low overhead.
Supporting VA Research and Education with More than Money
Legislation passed by Congress on November 16, 1999, expanded the authority of the NPCs to include education as well as research, and the NPCs
have begun administering education funds and activities. VA regulations require that every expenditure by an NPC must support research
or education. Within this principle, the NPCs have tremendous latitude in how they serve their affiliated medical centers and principal investigators. Low administrative overhead charges and a high level of service
¾
quick turnaround on hiring personnel, processing paperwork, and ordering supplies and equipment
¾
are major features of the NPCs.
However, many NPCs do much more to promote research. Several have established fully functioning clinical research centers within their VAMCs to increase efficient management of clinical trials. One has hired a cadre of clinical research nurses who assist principal investigators with all aspects of studies from preparing the grant proposal through submission of the final study results. Others facilitate identification of research sponsors and grant-making organizations, and make the initial contact on behalf of the investigator. Many provide seed funding and bridge money to investigators. Several sponsor year round or summer research internships and mentoring programs for local college students.
Examining the activities of an NPC is one way to counter the misperception that research is a liability rather than an asset to a
VA medical center. In supporting a large number of clinical trials, the NPCs provide a
significant amount of patient care by NPC nurses and offer patients the
latest drugs at no cost to VA. Further, NPCs often cover the expense of
upgrading research space; purchase research equipment; support travel
related to recruiting research staff; donate pharmaceutical, custodial,
secretarial, and clerical staff; conduct seminars on study results; and
make equipment such as computers, faxes and copiers available to
researchers. Added to the intangible benefits of improved patient care and the intellectual excitement
that pervades a medical center with a successful research program, it is clear that the NPCs are an asset to VA in ways far beyond simply providing a mechanism to administer research
and education funds.
Balancing VA Oversight with Flexibility
To reduce the risks inherent in allowing so many private entities to operate in concert with
VA, but not under VA's direct control, Congress mandated multiple layers of national and local oversight of the NPCs. However, to ensure that the NPCs act as a "flexible funding mechanism for approved
research and education," Congress
has been intentionally reticent about operation of the NPCs, leaving this largely up to local preferences. As a result, each NPC has a unique style and plays a singular role in supporting
training and research at its medical center according to its own locally developed policies and procedures. When management questions arise, the executive directors and NPC boards strive mightily to accommodate principal investigators' requests while remaining cognizant of the constraints imposed on the NPCs and the possibility of IG and Comptroller General scrutiny.
A Good Idea that Grew
During a 1998 ceremony commemorating the tenth anniversary of authorization of the NPCs, retired Congressman Sonny Montgomery said, "Ten years ago these foundations were just an idea. Obviously they were a good idea. Now I can't imagine VA research without them." The VA-NPC partnership continues to
evolve, but there is broad agreement that the relationship has positive benefits for VA research and researchers.
With passage of PL 100-322 in 1988, the Department of Veterans Affairs Health Administration's Medical, Prosthetic and Rehabilitation, and Health Services Research program entered a new phase. This legislation dramatically broadened VA's ability to conduct research by authorizing the establishment of nonprofit research corporations affiliated with VA medical centers and, through these corporations, opening the door to new sources of research funding.
Legally, the corporation has traditionally been a creature of the state. With the arrival of federalism and privatization in government, however, many variations have arisen and a number of federally chartered corporations have been formed to serve specific purposes. Congress broke new ground in establishing a unique arrangement at the Department of Veterans Affairs. Other federal agencies have congressional authority to establish or manage corporations; only VA has separate, state-chartered corporations scattered throughout the country, each of which can be scrutinized by several levels of federal investigators at any time.
Congress establishes the statutory missions of the Department of Veterans Affairs, as well as its organization and mechanisms for carrying out those missions. Congress specifically prohibits executive branch departments from establishing or acquiring a corporation to act as an agency of the government except pursuant to statutory authority.
Prior to 1988, private and non-VA federal funds available to support VA-approved research could be administered only through ill-suited mechanisms such as the General Post Fund, established primarily to give gifts to veterans and to administer their bequests, which has restrictive policies regarding transfers of funds. Alternatively, non-VA funds were administered by the affiliated medical school which significantly reduced the amount available for research projects by charging substantial "overhead"
rates and retaining such amounts for university purposes. Clearly, a more effective mechanism for handling non-VA research funds was needed.
The 1988 legislation allowed state chartered nonprofit research corporations to provide a flexible funding mechanism to administer non-VA research funds. Making these corporations separate, state-chartered entities was important in delineating the separation between VA and the corporations, and in providing the convenience and oversight of local management. Making them subject to federal oversight provided assurance that they would be operated in accordance with the highest standards
of fiscal and administrative management.
These NPCs are based loosely on the Henry M. Jackson Foundation for the Advancement of Military Medicine which carries out cooperative research projects with the Uniformed Services University of the Health Sciences (USUHS); allows interaction between military and civilian personnel; and encourages medical professionals to participate in work that benefits both military and civilian medicine. Some federal agencies sponsor Federally Funded research and Development Centers (FFRDCs) which are actually contractors to the government. FFRDCs are administered by universities, nonprofit organizations or industrial firms, and are established to meet a special long-term R&D need of an agency that cannot be met as effectively by existing government or private resources.
In comparison, the initial purpose of the VA affiliated NPCs was to facilitate research at the VA medical centers where they have been established. Subsequently, Congress expanded their authority to include supporting VA’s patient and staff education and training missions. All funds administered by the NPCs must be used to support research related activities or education and training.
To keep the statute brief, Congress left it up to VA to develop appropriate regulations for the VA NPCs which are specified in
VHA Handbooks 1200.17 and 1400.2. In addition, a compendium of General Counsel opinions issued in response to specific questions has fleshed out the "do's and don'ts" of operating a VA
affiliated NPC.
Supporting VA Research and Medical Care
The VA affiliated nonprofit research corporations enhance the VA research program in five major ways:
- The NPCs provide a flexible funding mechanism for private and public grants to support VA-approved research. Corporation funded research projects bring additional resources to VA in a time of increasingly constrained federal funding. Ironically, because the VA research program has been largely flatlined for several years, a number of NPCs administer more projects and larger budgets than their affiliated VA research office.
- The NPCs bring additional resources to VA that ultimately benefit veterans' medical care. Nurses and doctors hired to administer research projects also provide care for veterans during the course of studies. Computers, copiers, and medical equipment are among the many purchases made by corporations to support research projects, but which also enhance care for veterans.
- Corporation funded research increases veterans' access to the latest drugs and technology. By participating in development of new treatments, veterans are offered new medications in a closely supervised setting. Veterans benefit from the improved treatments and the extra care they receive when they participate in an approved study. The overwhelming majority of corporation funded research is clinically focused with a direct impact on patient care.
- The NPCs help to attract high caliber physicians to careers in VA. The additional funds made available through grants and donations to the corporations greatly increase opportunities for VA researchers to secure research funding and foster VA's commitment to research. The corporations' success is highly dependent on the VA research infrastructure and the VA's ability to attract intellectually inquisitive investigator-clinicians to careers in VA.
- The NPCs generally have low indirect cost rates, ensuring that more resources may be available for research or may be retained for the benefit of the affiliated VA medical center. The administrative overhead rates of these corporations are extremely low, generally around
10%. Thus, a large share of research funds is available to actually support the research and related activities, equipment, supplies, personnel, etc. As successful as these corporations have become in enhancing the VA research program, the funds they administer can never replace a robust federal VA research appropriation.
Conclusion
As government moves toward privatization, the VA affiliated nonprofit research corporations will continue to make a substantial contribution to the success of the VA research program. This unique partnership of a public agency and private nonprofits has already proven its worth and has demonstrated a value that exceeds the amount they administer each year on behalf of VA research.
By Barbara West, Executive Director, NAVREF, and Jeff Green, VA Counsel, Office of General Counsel. Excerpted from article in Federal Practitioner
November 1996. (Updated in 2000)
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