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Responding to potential reductions in federal research funding
Recent federal proposals to cut research funding are raising concerns about impacts on innovation, public health, and U.S. global competitiveness. These cuts threaten to derail scientific progress and undercut research institutions that have long subsidized federally funded work.
Despite perceptions in Washington, research institutions often bear significant costs. A 2015 study by the Association of American Medical Colleges and Huron found institutions contribute an additional 53 cents for every federal dollar received (see chart below). Some grants even require institutional cost-sharing.
To fill this gap, institutions typically rely on philanthropy, hospital and physician services revenue, and intellectual property income (see chart below). However, inflation, lower reimbursements, and costly technologies are straining these sources. Budget cuts would deepen this financial pressure.
A recent U.S. District Court injunction blocking proposed cuts to the National Institutes of Health (NIH) indirect cost rates gives institutions a moment to plan. The question is: how can they build resilience against future disruptions?
A game plan: The FORwARd framework
To tackle this uncertainty, institutions can turn to a structured approach called FORwARd: Financial Optimization for Research and Academic Resilience. This process includes four steps: scenario planning, intervention prioritization, impact analysis, and response strategy.
- Scenario planning: Asking what could happen
The scenario planning phase involves a visioning exercise during which institutional leaders critically assess the potential impact of various federal funding reductions and estimate possible funding gaps. Leaders should consider scenarios such as:
- What if indirect revenue decreases by 20%? By 35%?
- What if entire research programs face suspension?
- What if clinical practice margins deteriorate significantly, limiting health system contributions to the research mission?
The output of this phase should be at least two scenarios with estimated funding gaps, intended as orders of magnitude rather than exact financial figures, which will help prioritize strategic actions moving forward.
- Intervention prioritization: Developing an inventory of solutions
In the intervention prioritization phase, leaders develop an inventory of actionable “levers” that could be pulled to either enhance revenue or reduce costs, thereby addressing the funding gaps identified.
On the revenue side, options include tapping new funding sources, ramping up philanthropy, making better use of restricted funds, or pushing commercialization. For cost-cutting, think streamlining administrative tasks, optimizing lab space, sharing infrastructure, freezing hires, tweaking salaries, outsourcing non-essentials, or trimming less critical programs.
For example, Duke University recently announced several cost reduction measures, including a hiring freeze, salary adjustments, and suspension of capital spending. The university plans to take additional steps to drive efficiency and reduce costs.
By the end of this phase, institutions should have an inventory of financial improvement interventions prioritized based on their potential financial impact, ease of implementation, and cultural considerations.
- Impact analysis: Crunching the numbers
Now, it’s time to get specific. In the impact analysis phase, institutions perform a more specific financial assessment of the top-priority interventions, calculating their financial benefits and practicality. Institutions might start with a handful of high-impact options, diving deeper into others only if needed.
For example, Huron is assisting several academic medical centers with an assessment of their endowments and quasi-restricted funds to determine whether they were using those funds optimally. Through this exercise, we have found significant opportunities to replace discretionary funds with restricted funds, improving their current financial position and long-term financial sustainability.
By the end of this step, institutions should have a solid lineup of workable ideas, each with a clear estimate of potential financial improvement.
- Response strategy: Getting ready to act
Finally, the response strategy phase involves developing detailed implementation plans for each scenario identified during scenario planning. Each scenario’s tactical road map should outline clear project governance structures, an effective communications strategy, prioritized actions, clearly assigned roles and responsibilities, and a robust management plan.
The deliverable of this phase is a ready-to-activate tactical plan that allows rapid institutional response should any anticipated funding disruptions occur.
Why act now?
The FORwARd framework—scenario planning, intervention prioritization, impact analysis, and response strategy—gives research institutions a clear path to weather federal funding cuts. By acting proactively, institutions can protect their research missions and keep driving innovation, even in tough times. The message is simple: don’t wait. Start planning today to stay resilient tomorrow.
Contact us to learn more.
Authored by Rick Rohrbach, Managing Director, Huron
