Federal funding disruptions roil health system-led research

Johns Hopkins University researchers testing out technology to improve epilepsy diagnoses were in a state of shock last month when the federal grant funding payment system suddenly went offline. They're worried that disruption may not be the last.

Federal grant funding interruptions and planned cuts have delayed clinical trials and discouraged researchers, the effects of which could be felt by patients, health systems and the healthcare workforce for years. Limiting federal grant support would squeeze providers' operating budgets and constrain research projects, health systems and researchers said.

Related: How NIH funding cuts could cost providers billions of dollars

For example, Johns Hopkins Hospital in Baltimore, Thomas Jefferson University Hospital in Philadelphia and University of Maryland Medical Center in Baltimore are testing the data analytics tool, EpiScalp. About $5.5 million in National Institutes of Health grant funding over eight years fueled research leading to the development of the software, which uses brain imaging data to hone epilepsy diagnoses, Sridevi Sarma, an associate professor of biomedical engineering and vice dean for graduate education at Johns Hopkins, said. The software has helped bring down misdiagnoses of epilepsy from an average of 30% to about 6%, results from a retrospective January study published in the Annals of Neurology show.

When the White House Office of Management and Budget last month ordered federal agencies to freeze funding, Sarma and her team could not send payments to hospitals in the prospective trial, she said. The FDA is less likely to approve a new treatment or product without ongoing data to prove its efficacy.

While the payment system was only down for about a week, the interruption caused a lot of anxiety, Sarma said.

“We were in a panic state,” Sarma, who leads the project, said.

The funding freeze, along with a cap on the NIH payment rate for overhead costs linked to new and existing grants, sent shockwaves throughout the industry. The federal government sent a message to providers and academics that casts doubt on the viability of their research projects.

“When someone tells you, ‘We are cutting a substantial amount, and it seems indiscriminately,’ it does ask what the future of biomedical research is,” Dr. Dan Cooper, a pediatric pulmonologist and a pediatrics professor at University of California, Irvine, said. NIH grants have propelled his research on how exercise can improve the treatment of children with cystic fibrosis, asthma and sickle cell disease.

“Everyone is on pins and needles right now,” Cooper said.

Courts have issued temporary restraining orders to restore payments and block the rate cut. But even the threat of funding reductions has delayed or derailed projects, researchers said. If the courts uphold the cuts, higher healthcare costs, tighter margins and worse patient outcomes will follow, researchers warned.

“The federal funding freeze opened everyone’s eyes to how quickly things can move and go away,” Cristina Freyre Batt, senior vice president of federal policy at the Healthcare Association for New York State, said. “It has brought into question whether or not to begin new research because providers don’t want to put patients in that situation.”

New York hospitals do not have the financial reserves to weather funding disruptions, Batt said.

If sudden payment changes force researchers to pause clinical trials, even temporarily, it could result in higher sunk costs. Organizations have paid for the staff and infrastructure to conduct the research, the costs of which they cannot recoup amid funding delays.

“Hospitals don’t have the operating margin, which is a median of 0% in New York State, to absorb these sunk costs,” Batt said.

Capping funding for indirect research costs could further strain hospitals and lead to lower credit ratings, as well as limited borrowing capacity, analysts said. A policy that was slated to go into effect last week would've capped the indirect cost payment rate for new and existing grants at 15%, threatening billions of dollars in NIH grant funding distributed to health systems each year.

If these cuts go through, the University of Pennsylvania would lose out on nearly a quarter of a billion dollars a year in federal funding, a spokesperson said. UPenn was one of many academic health systems, cancer centers and hospital associations that warned of the negative consequences stemming from limiting federal grant support.

Representatives from the University of California system, Fred Hutchinson Cancer Center, University of Chicago and Washington University said capping the indirect cost payment rate would be catastrophic, gutting hundreds of millions of dollars annually from their annual budgets and limiting their ability to bolster cybersecurity, improve lab facilities and ultimately stunt progress to find cures for diseases like Alzheimer's.

Individual researchers like Johns Hopkins’ Sarma would feel the pinch, too. Cutting NIH funding would mean fewer postgraduate students could work on research, leading to a drop in productivity and publication frequency, she said.

Fewer researchers may pursue a career in healthcare because of the threats to grant funding, experts said.

If the FDA doesn’t approve EpiScalp, patients with epilepsy will continue to be misdiagnosed at a high rate, leading to higher healthcare costs and worse outcomes as patients receive the wrong medication and additional testing, Sarma said.

“It becomes a downward spiral until the lights are turned off,” she said. “Funding from the government allows us to do research, and one discovery could save so many lives.”