[Federal Register Volume 73, Number 10 (Tuesday, January 15, 2008)]
[Notices]
[Pages 2510-2511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-525]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration


Small Rural Hospital Improvement Grant Program

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Notice for public comment.

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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

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errors 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: [email protected]. 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.

FOR FURTHER INFORMATION CONTACT: Jennifer Chang, at the above address, 
telephone number 301-443-0835.

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.

    Dated: January 7, 2008.
Elizabeth M. Duke,
Administrator.
 [FR Doc. E8-525 Filed 1-14-08; 8:45 am]
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