Med School Probe May Prove Costly

If the impending Congressional probe into the Harvard Medical School's use of federal overhead funds reveals any wrongdoing, the University may lose more than just hundreds of thousands of dollars.

The University could lose face, and the Medical School may lose ground in ongoing negotiations for a new "indirect cost" rate with the Department of Health and Human Services.

A similar federal probe at Stanford University led to an aggressive criminal investigation by the Naval Investigation Service (NIS).

And discoveries that administrators misappropriated federal funding may lead to a reevaluation of their rate of government reimbursement for indirect costs--expenditures that are meant to be connected with grant research needs.

Stanford has one of the highest indirect cost rates in the country. Harvard Medical School currently has the highest such rate.

As of December 26, NIS has been "aggressively looking into criminal allegations of criminal misconduct" at Stanford, according to a member of the House Oversight and Investigations subcommittee, the team that is investigating Stanford and will begin a similar probe at the Medical School in March.

At Stanford the subcommittee found the university had tagged as indirect costs such expenses as the depreciation on a 72-foot yacht and floral decorations for the home of President Donald Kennedy '52. Stanford has agreed to pay back nearly $700,000 to the government, said the investigator, who spoke on condition of anonymity.

If similar discoveries are made at the Medical School, a criminal investigation could follow, bringing embarrassment to the University with it. The subcommittee member said the team currently has no evidence of misconduct at the school.

Harvard has not been officially notified of the probe, according to the subcommittee member and University News Office Director Peter Costa.

"We have had no indication about any federal investigation," Costa said. "It's speculation right now."

"We wait for offical notification," Costa said. The federal investigator said the University would likely be notified "when the investigation begins," which could be as early as March 1.

If a probe uncovers any improprieties, the Medical School could also lose strength in its negotiating stance for an increased indirect cost rate with the Department of Health and Human Services (HHS).

The school now has a provisional indirect cost agreement with HHS of 88 percent, in effect since July 1.

This means that for every dollar that the government awards the Medical School in grant monies, the University is entitled to an additional 88 cents, which is meant to reimburse research-related costs. Indirect costs can include expenses such as lighting, heating, renovating laboratories and building new research buildings.

In the 1990 fiscal year, the University received over $18 million from the National Institute of Health (NIH) in reimbursement for indirect costs for the Medical School, according to Robert F. Moore, supervisory program analyst for the division of research grants at NIH.

NIH, which provides the bulk of the Medical School's research dollars, awarded the school $30 million dollars in grants over the fiscal year, according to Moore.

Those monies were provided to the Medical School under the previous HHS agreement of 77 percent, which expired June 30. The provisional rate of 88 percent will stand until a new agreement is drawn up.

But two problems confront the Medical School in its negotiations for an increase in the indirect cost rate.

The investigation, which will already probably delay a new contract with HHS, could have a significant negative impact on any agreement if it uncovers wrongdoing.

If the probe concludes that the Medical School has had too high an indirect cost rate in the past, then HHS will be less likely to increase the school's rate.

In addition, the school has requested an unusually high indirect cost increase--a 25-point jump to 102 percent--which would give the University more than one dollar in indirect cost reimbursement for every dollar in Medical School research grants.

The school's proposed rate is not likely to be accepted by HHS and may be significantly reduced, according to an informed source.

In addition, if the new contract results in a lower indirect cost than the provisional agreement of 88 percent, then the University will have to pay back the excess received under the provisional cap, the source said