“Backbone” grants for nonprofits, illustrated by the HRSA SAC and RWHAP Part C EIS programs

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Human-service nonprofits face two basic challenges:?keeping the lights on?and providing integrated, case-managed services to meet client needs. Meeting the first challenge is obvious—if the nonprofit can’t cover basic costs like rent and salaries, the need for their services is irrelevant. The latter is trickier, since it usually takes a layer cake of grants, donations, and contracts to provide comprehensive services that really meet client needs.* To do this over the long term, it’s helpful to have at least one ongoing grant source that I’ll term a “backbone grant” for purposes of this post.

Two HRSA programs, both of which have RFPs on the street now, illustrate what backbone grants look like. In both cases, new applicants are eligible to compete with current grantees.

The?Service Area Competition?(SAC) provides three-year grants (often called “Section 330” or “Health Center” program grants) to Federally Qualified Health Centers (FQHCs) to provide primary health care to low-income patients. SAC grants are tagged for designated geographies called “service areas.” Hence the term “Service Area Competition or SAC;” we’ve written about?the SAC grant process.

There are about 1,400 FQHCs right now, and every year a few dozen nonprofit health care providers receive a new FQHC designation, usually by receiving a New Access Point (NAP) grant. These days, FQHCs derive most of their revenue from Medicaid and other third-party payer reimbursements. Still, The Kaiser Family Foundation—a great source for health-related data—reports that?Section 330 grants account for 18% of FQHC revenue. At first glance this might not seem like a lot, but imagine that your income was suddenly reduced by 18%—there goes Netflix, vacations, your rainy-day fund; you’ll be buying yoga wear at Target, not Lululemon. The same is true for FQHCs, which, like most Medicaid providers, operate on thin margins.** Thus, disaster would follow loss of Section 330 funding.

The second,?Ryan White HIV/AIDS Program Part C HIV Early Intervention Services Program?(RWHAP Part C EIS), provides three-year grants for outpatient primary health care and support services for low income, uninsured, and underinsured people living with HIV/AIDS (PLWH) in specified service areas. A range of nonprofit types receive RWHAP Part C EIS grants, including many FQHCs.

Not surprisingly, PLWH have very complex heath care and supportive services needs in addition to primary health care, as many also face challenges like injection drug use (IDU), other substance abuse, severe mental illness, homelessness, and so on. This makes providing case-managed integrated care to PLWH complicated and expensive. While grantees use multiple funding streams (e.g., Medicaid, other RW grants, etc.) to serve this hard-to-serve population, RWHAP Part C EIS grants are often the glue that holds the?Rube Goldberg?PLWH care system together. They’re the backbone grant. Without those grants, many fewer people would receive comprehensive HIV services—and they’d be more likely to transmit HIV to others.

We write many SAC and RWHAP Part C EIS proposals and know that many current grantees alternate between being indifferent and hysterical when the new funding cycle is announced. CEOs of FQHCs and similar large grantees often come to take backbone grants like these for granted (pun intended) because they’ve had the funding for years and think they’re entitled to the grant. This is a mistake.

Both programs, as well as many other similar backbone grant programs, force current grant grantees to complete with new applicants. While it’s not easy for a new applicant to “take away” a backbone grant, it can be done. We know, as we’ve helped clients do just this. We’ve also helped clients defend against new entrants to the market.

The CEO indifference towards the grant turns to hysteria when the CEO realizes the deadline is approaching and also realize they can’t receive a new backbone grant unless a technically correct and compelling proposal is submitted on time. HRSA uses peer reviewers and, from the reviewer’s point of view, applications from existing and new applicants are the same—it’s as if HRSA has never heard of the applicant, even if they’ve received the same grant for years. Victory is never final. Proposals need to meet some minimum quality threshold to be fundable. If they don’t meet that threshold, they may be rejected even if there are no other plausible providers in a given area.

The moral of this tale is twofold. If you’re a current grantee for a backbone program, don’t take your grant for granted. If you’re a new applicant, who wants to provide the service, by all means, go after the current grantee’s grant—they might stay in indifference mode and either turn in a lousy proposal or miss the deadline. It happens.

* Many grants and contracts don’t actually provide sufficient funding to do all the activities and accomplish all the goals funders require. Everyone knows this but no one talks about it. Except us.

** According to?this analysis by FiveThirtyEight, state funding for colleges is down to the 8 – 20% range—which explains most of the cost of public-college tuition hikes over the last decade. For some reason, most state residents are demanding that colleges be better funded.