Competition or Set-Aside?

One hundred million dollars can make a big impact -- especially at a struggling academic hospital. That’s why more than a half dozen colleges have applied for a federal grant that Senator Christopher J. Dodd (D-Connecticut) inserted into the health care overhaul bill last year. But the grant in question, which would finance construction at a university hospital, has been mired in controversy because of Dodd’s ties to one applicant: the University of Connecticut.

November 19, 2010

One hundred million dollars can make a big impact -- especially at a struggling academic hospital. That’s why more than a half dozen colleges have applied for a federal grant that Senator Christopher J. Dodd (D-Connecticut) inserted into the health care overhaul bill last year. But the grant in question, which would finance construction at a university hospital, has been mired in controversy because of Dodd’s ties to one applicant: the University of Connecticut.

Colleges and universities that applied for the grant -- at least seven of the 27 institutions that met at least some of the eligibility criteria -- have remained quiet as the situation played out in the media. But now, as the award date approaches, one institution vying for the grant is breaking its silence in hopes of ensuring that the review process is legitimate.

“I thought it was important enough and the amount is large enough that there be some scrutiny of the process that goes along to ensure [corruption] doesn’t happen,” said Doug Wasitis, director of federal relations at Indiana University. “Is it an open competition or not?”

Dodd initially pushed the grant through anonymously, but once his identity came out, so did the critics. They pointed out that the narrow criteria clearly applied to the University of Connecticut, and many called the grant an earmark for the university. While acknowledging his support for his home state's flagship institution, Dodd has gone out of his way to maintain that the grant is competitive.

In a statement sent to Inside Higher Ed, Dodd spokesman Bryan DeAngelis wrote, “Senator Dodd strongly supports UConn’s application for this funding and will continue to advocate on their behalf. However, the U.S. Department of Health and Human Services will ultimately decide which institution receives funding under this program.”

But since these events began to unfold, institutions have been watching carefully to see how legitimate the competition really is. Wasitis said suspicion of a “wired” grant has been brewing since Dodd first admitted that he was the one who attached the grant to the health reform bill last winter. As the proposal solicitation process moved forward, he grew even more skeptical about the fairness of the competition, but Indiana did apply for the grant. “All along from the beginning, that was planted in our minds,” Wasitis said. “We want to make sure that the proposals are viewed on a level playing field.”

Officials at Connecticut have not hesitated to make it known that the university is relying on the grant to fund a $362 million renovation and expansion of the university's John Dempsey Hospital. Connecticut Governor M. Jodi Rell signed a law in June setting aside $240 million in state bonds to cover the bulk of the plan; one stipulation of the grant is that the applicant must have a plan to cover the rest of the cost.

In his October letter to the university community, Philip E. Austin, who is back serving as interim president at Connecticut after retiring from the job in 2007, wrote that, despite the fact that the grant is not an earmark and several institutions are eligible, “Our case is a strong one, our documentation is equally strong, and I am cautiously optimistic that our efforts will meet with success.”

If Connecticut does not win the grant, Austin will have until June 30 to come up with an alternative source of funding, lest the bond authorization be terminated and the project put on hold. “Essentially, we’d be back to the drawing board,” said Jeffrey Beckham, spokesman for the state Office of Policy and Management. The university would have to devise a new plan, which would in turn require approval from the governor and legislature next year.

James Walter, the University of Connecticut's head of communications, said there is no backup plan as of yet. “Frankly, we put all our attentions on getting the award and certainly if we do, we’ll be very, very pleased,” he said. “If we don’t, we’re going to have to regroup a little bit and then determine what our next steps are.”

The Health Resources and Services Administration, a division of the U.S. Department of Health and Human Services, is expected to announce the grant winner in mid-December. The proposal solicitation was issued Aug. 18 and applications were due Oct. 4.

Grant-eligible institutions must house an academic health center and the state’s sole public academic medical and dental school, and the state's governor must certify that the applicant has demonstrated that: the facility is critical to providing greater access to health care in the state; it is essential for the continued financial viability of the aforementioned school and health center; the grant money comprises no more than 40 percent of the project cost; and the state has a plan to cover the remainder of the cost.

The Indiana University School of Medicine wants the money to help fund its new $754 million Wishard Memorial Hospital, whose construction was approved in a measure that 85 percent of Marion County voters supported last year. The Indianapolis facility will feature a 327-bed inpatient hospital, a 90-bed emergency department and an 11-story hospital tower, and is expected to create 4,400 jobs.

Connecticut's Dempsey Hospital, meanwhile, has been struggling financially for some time and Dempsey is “considered too small and outdated to be financially viable,” according to the University of Connecticut Health Center.

The fact that the grant criteria seemed so clearly framed for Connecticut is but one reason for Indiana's concerns. Wasitis also questions what he said was the unusual lack of a webinar to guide applicants (a practice common in grant procedures), the fact that the grant is going to only one institution when the legislation did not specify that it could not be distributed among multiple institutions, and the composition of the review committee.

Some of those points are disputable, though. The grant says the $100 million should be appropriated to “a” health care facility that provides research, inpatient tertiary care, or outpatient clinical services. And though there was no webinar to speak of (which HRSA officials said is not strange because procedures vary by grant), the agency did post a frequently asked questions page during the latter part of the solicitation period. Wasitis suspects that posting was in response to his and other institutions’ inquiries for support, though other applicants contacted by Inside Higher Ed said they were not concerned about it.

Indeed, all of the other universities whose officials responded to interview requests -- many of whom have talked among themselves about the grant -- reported full confidence in the review process (which is, of course, still under way).

“I saw the buzz back in December when this kind of came to light, and I saw the statements from Senator Dodd at the time, saying this was an open competition,” said Jerry Friedman, director of government relations at Ohio State University, a grant applicant. “If he backed away and said, ‘No, this is an earmark for UConn'... that would be a different discussion. I think the issue is, if someone feels that way, then they would not put in the effort to draft a proposal.”

HRSA's director of communications, Martin Kramer, said that grant applications and review processes depend on the size and purpose of the award, and that this particular competitive grant is consistent with the agency’s standard review process. “HRSA procedures always vary by program,” he said. “This was handled as we would any other program of similar size.”

The application review committee includes non-federal employees with expertise in the areas of health care services, health facility construction and design, health professions training and health care finance. Wasitis, of Indiana, questions whether experts in those particular areas have the ability to judge which proposal is best equipped to increase access to quality health care. But, he acknowledges, “while it’s not a standard practice, this is not a standard proposal.... We remain hopeful that all of the proposals will be reviewed.”

Citizens Against Government Waste, a taxpayers' rights group critical of all earmarks and pork-barrel spending, publicly opposed the health care bill's myriad add-ons. Its media director, Leslie Paige, says this grant is just another example of the extraneous special-interest additions to the bill. “It was such a gigantic bill that there was going to be stuff stuck in there for various people, but this was one of the big ones,” she said. “If it’s written in such a way so as to favor one group of people, so it’s a foregone conclusion, that’s a problem.”

The University of Minnesota’s new Academic Ambulatory Care Center, for which its Board of Regents last month approved up to $150 million in bonds, has been in development for several years but was shelved for lack of funding. If the institution doesn’t win the grant, the program will return to the back burner. “We just simply at this point in time do not have the financial capacity to construct this new center,” said Richard Pfutzenreuter, chief financial officer at the University of Minnesota. “There rarely is an opportunity to apply for a grant of this type to build a facility.”

Pfutzenreuter said that while Minnesota did consider the grant’s ties to Connecticut when deciding whether to apply, whatever concerns he may have had were alleviated by what appears to be a fair process: the application was laid out clearly, all of the applications will be scored and returned to the applicants, and the review committee includes individuals with a range of expertise. “We thought long and hard about whether to put the effort forward, given how this grant sort of evolved through the process,” he said. “We felt at the end of the day that it was going to be a fair process, and we still believe that.”

“We’re not naïve,” Pfutzenreuter added. “It wasn’t just something that the federal lobbyists and legislators would be able to pressure the process and get their way.”


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