By Scott Dance, The Baltimore Sun
10:07 PM EST, March 7, 2014
Along with the Johns Hopkins University's distinction for its nation-leading haul of federal research dollars comes another for charging the government more for utilities, administrative staff and real estate than any other institution.
The federal government spent nearly $172 million in its 2012 fiscal year to reimburse the university for so-called overhead expenses associated with nearly $646 million of federally sponsored research. Both of those figures led the nation that year.
Even as science advocates bemoan cuts to National Institutes of Health's research budget, the overhead costs NIH pays institutions remain a perennial target for some congressional budget cutters. Besides depleting the federal treasury, such costs threaten to consume funding for the real research, critics say. But the univerities argue the money is critical to support that research: Without high-tech labs and equipment and administrative support staff, experiments wouldn't get done.
Reimbursements for research-related overhead costs are based on rates institutions negotiate with the federal government. Hopkins' rate is among the 70 highest of nearly 500 higher education institutions, while the University of Maryland, Baltimore's rate falls around the national average, according to NIH data.
Meanwhile, the amount of money available for research has suffered under the automatic federal budget cuts known as sequestration. The cuts took $1.5 billion out of NIH's budget in fiscal 2013. Though $1 billion was restored in December, science advocates worry the agency's research sponsorship is stagnating or declining.
While there are no proposals to cap or trim NIH overhead payments in Congress, questions about them pop up over and over again. Rep. Andy Harris, a Republican who represents Maryland's 1st District, has explored the issue, but he declined to comment for this article.
Rep. Stephen Burgess, a Texas Republican, also has targeted NIH costs. He and others have argued that grants should be awarded competitively based on which institution can perform research for the lowest cost.
"I would like for our oversight committee on Energy and Commerce to ask some questions about that and perhaps even have a hearing, and we're working that way," Burgess said last month.
Even the Obama administration considered establishing a flat reimbursement rate for research costs at all universities before backing away from the idea last year.
A recent Government Accountability Office report found that continued growth in the overhead costs eventually could reduce the number of research projects NIH could support, "posing a risk to scientific discoveries and knowledge."
Higher-education officials and research advocates caution that trimming or capping overhead cost reimbursements will make it more expensive for universities to pursue research. Already, institutions say they don't receive full reimbursement for all they spend on research infrastructure. And new regulations meant to make research safer, more humane and more ethical also add to costs.
"There is no way that I could conduct my research without this assistance," said Dr. Dale Needham, an associate professor of pulmonary and critical care medicine at Hopkins who is the primary investigator on a project exploring ways to improve long-term outcomes for patients who suffer acute respiratory failure.
A federal grant began paying Needham's team $857,000 over four years in July; $328,000 of that came in the form of overhead reimbursements, according to NIH records. That includes the office space the team uses, accounting staff to handle payments to research subjects and purchasing of supplies, administrative staff to oversee regulatory compliance and budget and progress reports, and staff to conduct ethics reviews and compile paperwork, he said.
The help allows Needham to focus on the science, he said.
About 28 percent of NIH research spending historically has gone toward that overhead, or what the agency calls indirect costs, said Sally J. Rockey, NIH deputy director for extramural research, and that ratio hasn't changed.
But the GAO report exploring the indirect costs found that between fiscal years 2003 and 2012, indirect cost reimbursements grew 16.9 percent, while direct costs rose 11.7 percent.
The report, released in September at the request of Alabama Republican Sen. Jeff Sessions, also found that in fiscal 2012, almost 70 percent of indirect cost reimbursements went to 50 universities, about 10 percent of those receiving federal funds. Those top 50 institutions included both Hopkins and University of Maryland.
Universities negotiate with the government to determine the rate at which they can be reimbursed, undergoing a review every few years that scrutinizes how much space and resources are used for research, as opposed to teaching and other purposes.
Overhead reimbursements are determined by applying the rate to the direct science costs. For example, Hopkins's negotiated rate of 62 percent means the university can receive up to $620,000 in reimbursements for overhead associated with $1 million in federal spending on direct science costs.
Institutions with the highest reimbursement rates, of at least 75 percent, include the Massachusetts College of Pharmacy and Health Sciences, Wellesley College, Fordham University and Villanova University, according to NIH data. Urban and private institutions, as well as those that perform expensive and specialized research, tend to warrant the highest reimbursement rates, research officials said.
Hopkins' rate is on par with institutions such as Oberlin College, Xavier University and Quinnipiac University. The University of Maryland, Baltimore's rate of 53.5 percent ranks in the top 200 of nearly 500 institutions, falling around the average reimbursement rate.
Both Baltimore institutions say the reimbursements aren't enough to keep up with expenses.
"As the federal government negotiates lower rates with the university, there is greater under-recovery, and the university must make up the difference from other sources," Hopkins said in a statement.
That includes internally funding 27 percent of research overhead costs, officials said. Hopkins paid $87 million in such costs in 2009, the most recent year for which detailed data was available, officials said.
The university's rate has fallen from 68 percent in fiscal years 1996 and 1997, fluctuating on a downward trend since.
"It means we must be very selective about what research projects we take on, and funds that would have gone to other mission-critical activities, such as education, must be shifted to the support of research indirect costs," the statement said.
New regulations requiring anything from new ethical disclosures to larger animal cages also can make it more difficult for institutions to recover costs. Within institutions' reimbursement rates is a cap on how much they can seek for administrative costs, limiting them to an amount no more than 26 percent of direct science costs. University of Maryland officials said they exceed that 26 percent cap by about 10 percent.
"Every time you see a new regulation, we see a new expense, and we don't get reimbursed for that," said Bruce Jarrell, senior vice president for academic affairs.
New state-of-the-art facilities also strain budgets because they add new costs for insurance and utilities that aren't accounted for in reimbursements, said Kathleen Byington, the university's chief financial officer.
"A university takes a big risk when it builds a biomedical research facility," said Carrie Wolinetz, associate vice president for federal relations at the Association of American Universities. "The university is taking a gamble that when they put those scientists in those labs, they'll be able to get the research grants and get reimbursed for the costs they've already put into that space."
Fewer universities might be willing or able to take that risk if reimbursements are cut or threatened, said Tony DeCrappeo, president of the Council on Governmental Relations, a research advocacy group in Washington.
"Part of the beauty of our system is that scientists at any institution can do outstanding research," he said. "But if more and more costs get pushed onto the institutions, schools like Hopkins and others with the resources will get even more of the money because they'll be the only ones able to apply for the funding."
NIH research officials, who are not party to the reimbursement rate negotiations, said they disagreed with the GAO's findings, and with frequent criticisms from politicians who see the costs as "an easy target" for cuts.
"Our position at NIH is that for government research that we support, we should support the full cost of research," Rockey said. "We've seen a lot of receptivity once this is explained better on the part of Congress."
Baltimore Sun reporter John Fritze contributed to this article.
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