The National Association of Veterans’ Research and Education Foundations (NAVREF) appreciates the opportunity to submit a statement for the record of the February 23, 2010, hearing of the Health Subcommittee of the House Committee on Veterans Affairs.

NAVREF is proud to be the voluntary membership association of the more than 80 nonprofit research and education corporations (NPCs) established by Department of Veterans Affairs (VA) medical centers and operated in accordance with 38 USC §§7361-7366.  Last year, NPCs administered over $250 million in private sector and non-VA federal funding on behalf of VA investigators and educators conducting approximately 4,000 research studies and education activities at VA facilities across the nation. 

The purpose of this statement is to convey NAVREF’s views on VA’s request for legislative authority to establish a “Central Nonprofit Corporation for VA Research.”  VA’s proposal is described in Volume II, Medical Programs and Information Technology Programs of the Department’s FY 2011 Funding and FY 2012 Advance Appropriations Request, pages 1I-20 and 1I-21.

Despite careful consideration, NAVREF is unable to support VA’s proposal for a central nonprofit because:

• VA fails to make a compelling case for what a central VA nonprofit could accomplish that the existing NPCs cannot;
• The proposal contains so little detail about how VA and a central VA nonprofit would interact that NAVREF is forced to consider potentially problematic possibilities; and
• Absent from VA’s justification is how a central VA nonprofit would further VA’s research mission which is to “to discover knowledge, develop VA researchers and health care leaders, and create innovations that advance health care for our veterans and the nation.”  

NAVREF and its member NPCs fully appreciate the advantages of public/private nonprofit partnerships.  As “flexible funding mechanism[s] for the conduct of VA research” [38 USC §7361(a)], NPCs confer substantial advantages on VA medical centers.  Through careful stewardship of funds entrusted to them by private sector grants, cooperative research and development agreements (CRADAs) for industry-sponsored studies and non-VA federal awards, NPCs have provided innumerable benefits to the VA facility research programs and VA investigators.   Over the twenty-two years since they were first authorized by Congress, NPCs have helped to foster vibrant VA research enterprises at VA medical centers across the country through contributions of research personnel; equipment; supplies; facility improvements; compliance training; grant writing, submission and management services; travel support and much more.  Because VA already has more than 80 nonprofits, we feel that it is incumbent on VA to make a more convincing case for authority to establish a new and untested form of VA nonprofit.  Toward that end, we recommend that in order for a central VA nonprofit to warrant consideration: 

1. VA should provide compelling justification for a central VA nonprofit that clearly articulates what the proposed central VA nonprofit could accomplish that the existing NPCs cannot.

In our view, some NPCs are already accomplishing the stated objectives of the central VA nonprofit, and more could do so if given the opportunity, particularly under the updated NPC authority that is presently close to final enactment in HR 2770 and title VIII of S. 1963.

VA’s justification for a central VA nonprofit hinges in part on its desire to “carry out national medical research and education projects.” However, VA has a long history of successfully managing complex, multi-site studies involving thousands of subjects through its Cooperative Studies Program (CSP) and its Health Services Research and Development (HSR&D) program.  As a result, we are uncertain of the need for a central VA nonprofit to accomplish what has long been a major strength of the VA research program.

Also, while the updated NPC authority awaiting enactment will clarify that NPCs may administer multi-site studies, they have been doing so for years [see Multi-Center Studies. OGC Opinion 023(11/4/99)].  Further, NPCs have increasingly partnered with VA to administer non-VA funds for CSP studies since the longstanding relationship between the Office of Research and Development (ORD) and the Friends Research Institute (FRI) had to be terminated in 2004 when misuse of non-VA funds directed to FRI for CSP studies came to light.  [See OIG administrative investigation Report No. 03-03053-115; March 22, 2004].  (Please note that FRI is not one of the more than 80 VA NPCs.  ORD’s relationship with FRI pre-dated authorization of the NPCs in 1988 but continued until 2004.)

Since termination of the FRI relationship, NPCs associated with medical centers where VA has CSP Coordinating Centers (CSPCCs) – Hines, Illinois; Palo Alto, California; West Haven, Connecticut; and Perry Point near Baltimore, Maryland – have worked closely with CSPCC personnel to set up efficient systems and MOUs that allow accountable management of non-VA federal funding, and private sector funds contributed by industry partners, for CSP and other centrally directed VA studies.  Recent examples include NPC facilitation of the ACCORD (diabetes) and ALLHAT (hypertension) studies and the shingles vaccine trials.  Additionally, an NPC not associated with a CSPCC currently administers over $15 million annually in NIH funding for multi-site studies led by a single VA principal investigator. 

Another justification that VA uses in support of a central VA nonprofit is found in the statement, “While current NPCs work well with their current authority to manage studies in their specific jurisdictions, few of the individual NPCs have all the skill sets needed to coordinate more complex efforts.”  Although some NPCs may lack all the “skill sets” needed to coordinate more complex efforts, we believe that more could readily acquire those skills – or hire new personnel with the necessary skills – if given greater opportunity for responsibility for multi-site studies.  It should be noted that many NPCs – even some of those associated with relatively large VA research programs – have not reached their full potential because so much non-VA funding for research performed in VA facilities is administered by entities other than VA or NPCs, primarily universities and university-affiliated nonprofits.

2. VA should establish that centralized administration of research is an appropriate model for VA. 

First, it should be noted that the purposes of the central VA nonprofit stated in the proposal are strikingly similar to the statutory authority given to the Department of Defense (DoD) to establish the Henry M. Jackson Foundation (HJF) for the Advancement of Military Medicine (10 USC §178) in 1985.  HJF has one primary university affiliation (Uniformed Services University of the Health Sciences), has relationships with more than 160 military medical and other organizations worldwide, and employs 1,800 personnel providing a broad array of research and clinical services. 

We are uncertain how well the HJF model would suit VA even though we understand that VA does not intend for the central VA nonprofit to supplant medical center-based NPCs, except possibly where the research programs are very small.  The centralized HJF model was considered when legislation proposing the NPCs was the subject of congressional hearings (H. Rept. 100-373).  It is our understanding that after review, the centralized model was rejected in favor of a decentralized approach more suitable for VA which has affiliations with 107 medical schools and more than 5,000 affiliation agreements with some 1,200 other health professional colleges and universities. 

For over 20 years, VA’s decentralized approach using local NPCs has demonstrated effective support of the VA research and education missions through on-site (most NPC offices are located in VA facilities or very nearby) research support services for VA investigators while working closely with the medical center personnel responsible for the conduct and oversight of research at each facility.  Indeed, for a short time VA had centralized research support offices – the Eastern and Western Research and Development Offices (ERDO and WRDO).  These offices administered VA-appropriated funds for sites with just a few projects, but they were closed after a few years.

We agree that it makes little sense for facilities with very few research projects to incur the effort, expense and responsibility of maintaining their own NPC.  However, legislation already passed by the House and Senate in HR 2770 and title VIII of S. 1963 respectively, and presently awaiting final resolution of their minor differences, offers a means for these facilities to access the benefits of NPCs through voluntarily sharing one NPC among two or more VAMCs.  By pooling funds, consolidating management and avoiding duplication, such as having one audit instead of three, or one executive director instead of three, “multi-medical center research corporations” (MMRCs) will preserve the advantages of the close relationship NPCs have with the facilities and investigators they serve while reducing overhead.  These MMRCs will offer smaller research programs a locally accountable option which is likely to be nearby, if not onsite, for management of their research projects and education activities.  We see no need for the option of remote, possibly Washington-based, services a central VA nonprofit would offer.

3. To preserve the integrity of the intramural nature of the VA research program, VA should clarify that the central VA nonprofit would accept only non-VA federal and private sector funds.

We further question the suitability of an HJF-like authority for VA because, unlike DoD and NIH, which have authority to conduct research both intra- and extramurally, a core tenet of the VA Research and Development program is that it is solely an intramural research program.  If – and that is a big “if” because the proposal contains so few details – authority for the central VA nonprofit would encompass reciprocal contracting or the ability to pass VA-appropriated funds through to VA or non-VA entities (as HJF does for some DoD funds), we believe that would compromise the long held intramural nature of the VA research program.  Ultimately, this would reduce its effectiveness as a recruitment and retention tool for high quality clinician-investigators who in turn focus their research on conditions prevalent among veterans and who provide optimum care for veterans.  We may be reading too much into the proposal, but we feel it is important to state that NAVREF would be opposed to any measures that could have the unintended consequence of altering the intramural nature of VA research.

4. VA should describe what legal mechanisms available to VA would be used to engage with a central VA nonprofit. 

Although we are unable to discern from the proposal how VA and the central VA nonprofit would interact to each other (what are “cooperative arrangements”?), it appears that justification for the central VA nonprofit may entail plans for VA to use VA-appropriated funds to contract with the central VA nonprofit for services.  We regularly hear that VA hiring mechanisms are ill-suited for research projects because these require prompt hiring to meet time-limited funder deadlines and the ability to terminate employees when their services are no longer needed.  These problems may be an underlying reason for seeking a central VA nonprofit authority which perhaps would function as a private sector contractor to meet VA’s fluctuating research staffing needs.  However, in our view contracting with a central VA nonprofit may be problematic from the perspective of compliance with federal hiring and contracting statutes and regulations.  As a result, we encourage the subcommittee to determine how VA and the central VA nonprofit would engage with each other. 

It should be noted that to the extent allowed by law, NPCs already routinely help VA research facilities meet their temporary staffing needs using the Intergovernmental Personnel Act (IPA) authority (5 USC §§3371-3375 and 5 CFR part 334).  This allows VAMCs to work with NPCs to acquire the services of skilled research personnel, who are considered to be VA employees for most purposes except pay and benefits, quickly and only for the time their services are needed. 

5. Compliance with federal ethics statutes applicable to federal employees regarding conflicts of interest as well as membership on the board of directors and staffing by VA or non-VA personnel should be addressed satisfactorily before congressional approval is given.

It has taken over twenty years of regular consultation with VA policymakers, attorneys, and overseers; two modifications of the original NPC authority; and most recently, a thorough updating and clarification of the NPC authority, to resolve the many ambiguities inherent in the public/private partnership embodied in the NPCs.  To avoid similar protracted uncertainty, a number of matters not addressed in the proposal should be resolved before the subcommittee considers approving an authority for a central VA nonprofit. 

For example, would VA personnel serve on the board of the central VA nonprofit?  How much influence would VA personnel have over funding, management and expenditures of the central VA nonprofit?  Also, how would potential conflicts of interest be addressed?  It took VA and NAVREF many years to grasp the implications of the federal ethics statutes, particularly those found at 18 USC §208 and §209, when applied to VA personnel associated with NPCs, and to manage potential conflicts.  In our view, these questions should be fully answered in advance to avoid putting VA employees who may interact with the central VA nonprofit at risk of unwittingly violating federal ethics statutes.

6. Congress should ensure that funds that could be appropriately managed by local mechanisms may not be directed to the central VA nonprofit.

As noted above, we firmly believe in the advantages of local administration and local accountability for VA research.  Also, it is important to note that ultimately, every research project requires a PI and a site where the research is actually conducted.  As a result, and assuming the central VA nonprofit would not have its own laboratories or patients, we are concerned that the central VA nonprofit may add an unnecessary layer of bureaucracy and administrative expense to VA research.  Consequently, we feel there must be a compelling reason for a central VA nonprofit to administer a project as opposed to longstanding local mechanisms such as NPCs.

Additionally, we are having difficulty envisioning what “national medical research and education projects” VA would engage in that NPCs could not administer.  VA’s genomic research initiative has been cited as an example, but we have not yet fully grasped why a designated NPC could not accept non-VA federal or private sector funds made available for this initiative.  Nor have we been able to discern how a central nonprofit would fulfill the regulatory requirements for local oversight of human subjects research. 

Further, we encourage the subcommittee to ask VA how the central VA nonprofit would allow VA to “compete for non-VA funding at a national level.”  NPCs and VA-affiliated universities have historically supported VA PIs in their applications for non-VA funding whatever the source, scope or amount.  We are uncertain what funding “at a national level” means or what types of non-VA funding a central VA nonprofit could apply for that excludes applications submitted by VA PIs through NPCs or VA-affiliated universities.  That said, if a central VA nonprofit were to compete for the same non-VA federal and private sector research funding opportunities as PIs supported by NPCs, the result may be a reduction in NPCs’ ability to provide much needed research infrastructure support at the facility level.  

7. There must be sufficient justification for the substantial investment of funds and effort establishing a central VA nonprofit would require.

While we assume that statutory approval to establish a central VA nonprofit would also authorize start up funding from the R&D appropriation, we are concerned about the use of R&D appropriated funds for two reasons.  First, allocating $200,000 for start up of a central VA nonprofit would take funds away from ongoing VA research.  Second, the proposed budget of $200,000 for each of the first two years appears far too low, particularly if this nonprofit would be incorporated and managed in the Washington, DC area.  Even if VA relied on VA attorneys and accountants to assist with incorporation and filing for exemption from federal taxes, and VA provided office space, utilities and other government resources, a central VA nonprofit would require an executive director experienced in nonprofit establishment and management as well as skilled in research administration.  Additionally, it is likely that a central VA nonprofit would require a bookkeeper experienced in nonprofit accounting and administrative staff.  Annual salaries alone are likely to add up to far more than $200,000 during the first few years.

Also, two years seems to be a very short time-frame for the central VA nonprofit to become self-sustaining.  It would have to charge funders for its administrative services as well as those of any organizations to which it passes through funds.  VA should anticipate that some funders would pay little or no indirect costs and as a nonprofit affiliated with a federal agency, its federal indirect cost rate is likely to be relatively low because federal agencies will not fund facility costs of another federal agency.  These factors clearly portend a much higher cost to the federal budget than the unrealistic start up estimate noted in the proposed budget and continuing for a longer time period.  In our view $400,000 for each of the first three years would be a more realistic estimate.

Conclusion

Strikingly missing from the central VA nonprofit’s purposes is any discussion of how a central VA nonprofit would benefit veterans or further VA’s research mission.  We do not view serving as a “focus for interdisciplinary interchange and dialogue” among VA personnel and researchers from other federal and non-federal entities as appropriate justification for a central VA nonprofit.  Rather, the ultimate test should be whether it would foster advances in treatments for conditions prevalent among veterans and high quality care for the veteran population VA serves. 

Again, NAVREF is unable to take a position in support of VA’s proposal for a central nonprofit. If VA pursues such an authority, we hope that the above discussion offers the subcommittee a framework for determining why such an authority is needed when there are already so many VA-affiliated nonprofits providing a wide variety of services in support of VA research and education.  

Thank you for considering our views.  Questions or comment may be directed to Barbara West, executive director, NAVREF, at bwest@navref.org or 301-656-5005.