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I Adil E. Shamoo declare that I have not received any Federal grant or contract in the past two fiscal years.

NA REF

National Association of Veterans' Research and Education Foundations

5018 Sangamore Road, Suite 300 Bethesda, MD 20816 301.229.1048 Email: navref@navref.org FAX: 301.229.0442 Web:www.navref.org

Statement for the Record Submitted by the

National Association of Veterans' Research and Education Foundations
Regarding the Suspension of Research at the West Los Angeles VA Medical Center
Before the Subcommittee on Oversight and Investigations and the

Subcommittee on Health of the

Committee on Veterans Affairs
April 21, 1999

The National Association of Veterans' Research and Education Foundations (NAVREF) appreciates
the opportunity to submit a statement for the record to clarify issues regarding research-related
reimbursement and cost sharing between VA medical centers and VA-affiliated nonprofit research
corporations (NPCs). These are complex issues that we feel need more explanation than was
provided during the April 21 joint hearing regarding the March 22 suspension of research at the West
Los Angeles VA medical center.

1. Mandatory Reimbursement of the Medical Care Appropriation

As stated frequently by VA General Counsel, a guiding principle of the VA research program is that
VA approved research is VA research. Consequently, upon approval by the local VA medical
center R&D Committee, all research becomes VA research regardless of funding source-VA,
university, corporation or other—and is subject to the same regulations, constraints, privileges,
protections and support. VA appropriated funding for research is considered to be intramural
funding; support from all other sources is considered to be extramural funding.

Regulations CFR 17.101(g) and M-1, Part I, Chapter 15. 21 (Attachment A) specify mandatory
reimbursement to the VA medical care appropriation for research related costs associated with
patient care. Reimbursement is required only when medical services are provided to a veteran purely
as part of an approved research project or to a patient who is not eligible for services as a veteran.

MP-4, Part V. 6C.08 a. (Attachment A) addresses VA administrative support services provided to
medical research programs and states: Costs of administrative support services to Medical Research
programs will be borne entirely by the Medical Care appropriation. “Administrative support
services" include supply, building management, human resource management, fiscal services, etc.
Section 6C.08 b. provides that the medical care appropriation will bear the entire cost of physician,
dentist, and nursing services associated with research, unless otherwise approved by VA

2. Voluntary Cost Sharing

Research is both a cost and a benefit to VA. Last year, medical care appropriation support for research was estimated to be approximately $310 million, the bulk of which was clinical staff time physicians and nurses. However, there are many off-setting factors, including voluntary cost sharing by the NPCs. While an exact accounting is difficult, an analysis of a single diabetes clinical study administered by an NPC revealed a $54,000 net gain to the VAMC in donated patient care services and drugs. Additionally, there are important intangible benefits from research such as improved care for veterans and an increased ability to recruit top quality physicians.

Regardless of the offsetting benefits, NAVREF has long recognized that VA medical centers cannot always support all the costs of extra-and intramurally-funded research. At many VA medical centers, the extramural research program is significantly larger than the intramural program and may strain research administrative support services that are tied to the size of the intramural, VA appropriated program. For example, Institutional Review Board (IRB) administrative costs are paid by the research appropriation; physician time spent serving on an IRB is paid by the medical care appropriation. This causes two problems:

1. If the extramurally funded program is as big or bigger than the intramurally funded program, administrative support dollars for the IRB pegged to the size of the intramural program may be inadequate to serve the entire research program at the facility.

2. Medical center management is understandably reluctant to use scarce medical care appropriation dollars to pay clinicians for time spent serving on an IRB instead of seeing patients.

To address the problem of how to provide necessary services in support of extramurally funded research, NAVREF encourages the NPCs to develop systems of voluntary cost sharing and many have done so. Consistent with VA General Counsel's affirmation that the NPCs are not prohibited sources under VA's gift authority, NPCs can and often do make research related in-kind and cash "gifts" to VA medical centers including:

Donating IRB administrative staff, clinical nurses, pharmacists, custodians and animal facility workers.

■ Purchasing and donating furniture, office and research equipment, and supplies. Providing seed money so investigators can develop new grant proposals as well as bridge funding to maintain laboratories between projects.

Setting up an endowment to ensure that there will be permanent stream of funding to be spent at the discretion of the board of directors and VA research service administrators.

Supporting the costs of recruiting clinicians with a research interest.

Paying all or part of a VA medical center's hazardous waste disposal costs and other bills that increase as a result of NPC-funded research.

Helping pay the cost of upgrading outdated or creating new research space.

The list could go on and on. However, the point is that despite some constraints, the NPCs can and generally do make substantial contributions to the research program, and, indirectly, to clinical services at the affiliated VA medical center.

Clarification of Issues Raised in Testimony During the April 21 Hearing

1. The VERA research allocation is a well-intentioned effort to recognize that research support has an impact on the medical care appropriation. Unfortunately, this is an imperfect and largely ineffectual means of addressing the problem because 1) there is no accountability requiring that the research allocation be returned to the facility that earned it or that it be spent on medical care services in support of research (largely staff time) and 2) the VERA allocation is simply recycled medical care money rather than “new” money.

2. A VA medical center may not charge an NPC for services the medical center is obligated to support (by statute or regulation) unless a VA-approved contracting mechanism is used to reach a mutually acceptable agreement providing that the corporation will pay for certain services. 3. When reimbursement of the medical care appropriation is required, such reimbursement must be provided to the medical care appropriation. It may not be directed to the research appropriation. 4. NPCs can and do provide research related in-kind and cash contributions to VA medical centers. For example, in 1998, the board of directors of the Brentwood Biomedical Research Institute (BBRI), the NPC affiliated with the West Los Angeles VA medical center, approved cash donations to the medical center in support of the VA research program. One was for $225,000 comprising a cash donation plus a write-off of debt the VA research program owed BBRI for staff provided to VA under the Intergovernmental Personnel Act. The second, in late 1998, was a cash gift of $204,000. Also in late 1998, the BBRI board committed approximately $180,000 to hire and donate BBRI staff to the VA research service to support IRB services through the remainder of the 1999 federal fiscal year.

Conclusion and Recommendations

NAVREF has long been aware of problems related to medical care support for the VA research program. These problems are being exacerbated as the VA-funded portion of the program shrinks as a percentage of the total VA research enterprise. NAVREF does not recommend any change in the guiding principal-VA-approved research is VA research. Rather, NAVREF recommends that VA engage in equitable cost sharing of the research sponsored by all of its research partners. Of course, off-setting contributions should be factored into any such cost sharing determinations.

NAVREF regularly encourages the NPCs and VA to pursue cost sharing opportunities. For example:

1. More NPCs now charge pharmaceutical companies a fee for IRB review and use the resulting funds to hire and donate IRB support staff.