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Notice

Small Rural Hospital Improvement Grant Program

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AGENCY:

Health Resources and Services Administration, HHS.

ACTION:

Notice for public comment.

SUMMARY:

The Health Resources and Services Administration (HRSA) is seeking comments from the public on its plan to institute a permanent deviation from a policy in the Department of Health and Human Services (HHS), Grants Policy Directive (GPD) 3.01 governing indirect cost recovery for one of its grant programs. The GPD states “HHS considers activities conducted by grantees that result in indirect charges a necessary and appropriate part of HHS grants, and HHS awarding offices must reimburse their share of these costs.” Although HRSA typically reimburses grantees for their full share of administrative overhead represented in approved indirect cost rates (which can be up to 50 percent or higher), the Agency believes, in the case of its Small Rural Hospital Improvement Grant Program (SHIP), that full recovery of overhead expenditures would be detrimental to the ability to adequately conduct the activities mandated in the authorizing legislation.

The purpose of the SHIP grant program is to assist eligible small rural hospitals in implementing Prospective Payments Systems (PPS), compliance with the Health Insurance Portability and Accountability Act (HIPAA) regulations, and to reduce medical Start Printed Page 2511errors and to support quality improvement. Funding for the SHIP grant program is routed first through the State Offices of Rural Health (SORH); they are then distributed evenly by the SORH to the individual hospitals. This process creates efficiencies because of the large number of eligible hospitals and relatively small size of each award. In fiscal year 2007, $14,508,691 was awarded to 1,622 hospitals (approximately $8,945 each) in 46 States. Thus, the SORH is the official grantee of record for the State, as the recipient of the award and fiscal intermediary for the Federal government in distributing the funds.

It is in the best interest of the SHIP grant program to limit the total administrative cost recovery to 5 percent of the Federal award, thereby allowing 95 percent of available grant funds to be used to carry out the required program activities. Since the SHIP grant program began in FY 02, through FY 07, the administrative costs have been restricted. Indirect costs were not allowed and there was a five percent maximum of other costs, for administrative costs, within the grant guidance. The SORHs voluntarily decided to limit these cost categories. For FY 07, the average administrative charge was only 3.64 percent. Thus, the cap on administrative costs has worked well. Limiting administrative costs is necessary because 20 percent of SHIP grantees are located in academic settings that have established indirect cost rates in the range of 30 to 50 percent. Without a limitation on the amount of grant funds allocated for administrative costs, the SORH grantee could potentially charge its full indirect cost rate and the grant awards would be significantly less for each small rural hospital. As much as 50 percent of the grant award could be consumed by indirect costs, depending upon the host institution's indirect cost rate. This would significantly reduce the amount of funds available to initiate and maintain the activities of the grant. A limitation on administrative costs will ensure that each hospital, not an unintended source, receives the maximum amount of funding.

The limitations placed on these cost categories will ensure that the majority of funding is routed to the small rural hospitals, to be used for the prescribed intents and purposes of the grant program. A continued limitation on administrative costs for future SHIP grant cycles will help to assure that small rural hospitals receive the appropriated support, necessary to carry out the objectives of the grant program. The limitation would be applicable to all grantees of the Small Rural Hospital Improvement Grant Program.

DATES:

If you wish to comment on any portion of this notice, HRSA must receive comments by February 14, 2008.

ADDRESSES:

You may submit comments by any of the following methods:

  • E-mail: JChang@hrsa.gov. Include “Small Rural Hospital Improvement Grant Program” in the subject line of the message.
  • Mail: Jennifer Chang, Office of Rural Health Policy, Health Resources and Services Administration, 5600 Fishers Lane, Room 9A-42, Rockville, MD 20857.
  • Hand Delivery/Courier: Jennifer Chang, Office of Rural Health Policy, Health Resources and Services Administration, 5600 Fishers Lane, Room 9A-42, Rockville, MD 20857.

Docket: For access to the docket to read background documents or comments received, go to the Office of Rural Health Policy, Health Resources and Services Administration, 5600 Fishers Lane, Room 9A-42, Rockville, Maryland 20857, weekdays between the hours of 8:30 a.m. and 5 p.m. To schedule an appointment to view public comments, phone (301) 443-0835.

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FOR FURTHER INFORMATION CONTACT:

Jennifer Chang, at the above address, telephone number 301-443-0835.

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SUPPLEMENTARY INFORMATION:

The HRSA SHIP grant program is authorized by Section 1820(g)(3) of the Social Security Act, 42 U.S.C. 1395i-4. The purpose of the SHIP grant program is to help small rural hospitals perform any or all of the following: (1) Pay for costs related to implementation of PPS, (2) comply with HIPAA provisions of 1996 and (3) reduce medical errors and support quality improvement.

The SHIP grant program funds are geared towards assisting small rural hospitals that are essential access points for Medicare and Medicaid beneficiaries. Eligible small rural hospitals (49 available beds or less) are non-Federal, short-term general acute care facilities that are located in a rural area of the U.S. and the territories, including faith-based hospitals.

Because of the large number of hospitals and relatively small size of each award, the SHIP funds are routed through the SORH, then to individual hospitals. Eligible hospitals must submit a hospital application to their SORH, by the designated deadline, to receive funding. The SORH is the official grantee of record and acts as a fiscal intermediary for all hospitals within their State. In turn, the SORH verifies hospital eligibility and submits a single grant application to the Federal Government on behalf of all eligible hospital applicants in the State.

Since the SHIP program began in FY 02, through FY 07, the administrative costs have been restricted. Indirect costs were not allowed and there was a five percent maximum of other costs, for administrative charges, within the grant guidance. The limitations were placed on these cost categories to ensure that the majority of funding would be routed to the hospitals, to be used for the prescribed intents and purposes of the grant program. For FY 07, the SHIP grant program allocated $14,508,691 to a total of 1,622 hospitals in 46 States, which is about $8,945 per hospital. Without a limitation on the amount of grant funds allocated for administrative costs, the grantee could potentially charge its full indirect cost rate, thereby significantly reducing the funds available to small rural hospitals. Approximately 20 percent of the SORHs are housed in universities, which have established indirect cost rates ranging from 30 to 50 percent, or higher. Limiting the administrative cost recovery will continue to help ensure that small rural hospitals are continuously provided the support necessary to carry out the objectives of the grant program.

To maintain the limit on all administrative costs in the 2008 grant funding opportunity guidance, a request to deviate from the HHS GPD 3.01, Indirect Costs and Other Cost Policies was required. Such a request was submitted and approved by the HHS, Office of Grants Policy, Oversight and Evaluation, Assistant Secretary for Resources and Technology in November, 2007.

Public Comment

HRSA invites public comment on its intent to indefinitely limit the total administrative cost recovery to five percent of the Federal award for awardees of the Small Rural Hospital Improvement Grant Program.

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Dated: January 7, 2008.

Elizabeth M. Duke,

Administrator.

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[FR Doc. E8-525 Filed 1-14-08; 8:45 am]

BILLING CODE 4165-15-P