Federal grant changes could reshape research funding and oversight at AMCs

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Federal research funding is facing a period of heightened uncertainty as grant terminations, delayed awards, and workforce changes at the Department of Health and Human Services (HHS) and the National Institutes of Health (NIH) affect the timing and continuity of support. Nearly 6,000 grants have been disrupted, including 1,236 terminations, with current financial losses exceeding $460 million.

Recent legislative and policy activity suggest uncertainty around federal grantmaking is likely to continue. Current proposals and executive orders, if finalized, would further impact the federal grant process.

The Office of Management and Budget (OMB) issued a government-wide proposed rule that would change federal grant administration. The proposal, submitted in late May, would change how federally funded research is reviewed, awarded, and managed across federal agencies. It would give agencies greater discretion in award decisions, make peer review advisory rather than binding, and expand agencies’ ability to terminate awards when priorities or program goals change. As written, the rule states that grants should “demonstrably advance the President’s policy priorities” and allows agencies to terminate grants if the work “no longer effectuates program goals, federal agency priorities, or the national interest.” The administration is accepting public comments through July 13.
NIH has opened a formal comment process on capping the number of research project grants held by a single investigator. The request for information (RFI), submitted in early June, asks whether NIH should limit the number of research project grants on which an investigator may serve as principal investigator (PI) or multi-PI. In FY2025, 10.7% of grantees held three or more grants, 3.6% held four or more, and 1.2% had five or more. The proposal outlines potential thresholds, ranging from two to four grants. The notice states this would free up anywhere from $3.5 billion (under a two-award cap) to $1.3 billion (under a four-award cap) and allow the agency to fund an additional 2,000 to 5,000 grants. The administration is accepting public comments through August 3.
The administration has reclassified thousands of federal positions into a new category as political appointees. The executive order signed in early June deems the roles of nearly 8,000 federal employees as confidential, policy-determining, policymaking, or policy-advocating. Among these reclassified positions are the NIH’s head of extramural research, the top official overseeing the agency’s nearly $40 billion grant portfolio; the head of the Division of Program Coordination, Planning, and Strategic Initiatives, who oversees initiatives across the agency; the NIH’s principal deputy director; and the director of intramural research, who oversees the agency’s in-house research arm. The reclassification to political appointee could cause instability in how federal institutions administer and monitor grants.
FY2027 appropriations negotiations include research policy conditions. The House appropriations bill rejected the administration’s proposed 12% FY2027 NIH funding cut and preserved funding for the National Institute for Minority Health and Health Disparities, the National Center for Complementary and Integrative Health, and the Fogarty International Center. However, the bill also includes provisions that would prohibit NIH funding for “gain of function research,” limit overhead costs to 30%, and restrict FY2027 spending on NIH multiyear grants to the amount spent on those awards in 2025. The Senate has not yet released its version, so the final outcome remains uncertain.

Together, the changes would reshape how federal grants are reviewed, awarded, managed, and potentially terminated, raising new risks for health systems and research institutions with NIH-funded portfolios.

Why It Matters

Disruptions to federal grant funding can create financial instability and planning risks. Grant funding supports direct research activity and the infrastructure that makes the academic mission possible. If award timing, grant caps, termination rules, or other policy changes reduce predictability, executives may need to decide what to subsidize, scale back, or restructure.

Funding disruptions threaten the research workforce pipeline. Training and career development grants are a key pathway for graduate students, junior investigators, and future faculty. When the support slows or becomes less predictable, institutions may reduce graduate positions, delay hiring, or lose faculty to opportunities abroad.

An early 2025 report from the Association of American Medical Colleges found that 38% of the early administration grant terminations were research training and career development awards, with more than $512 million in lost training and career development funding. For academic medical centers (AMCs), the longer-term risk is a gap in the next generation of physician-scientists and academic faculty.

The grant-cap proposal is not only an administrative change; it also reflects a broader debate over whether NIH funding should be concentrated among highly productive investigators and research-intensive institutions or distributed more widely to support younger researchers and smaller institutions.

For AMCs and medical schools with large NIH portfolios, the question is whether they can sustain programs with concentrated funding among high-performing investigators, major centers, and large multi-PI projects if the NIH favors broader distribution. While changes to award caps would affect a small portion of researchers, it could increase the administrative oversight necessary to track and regulate PI grant limits at a time when institutions are navigating fewer program officers and greater uncertainty across the grant process.

Prolonged review cycles, additional approval layers, and shifting award criteria can degrade research strategy execution and weaken faculty confidence in the grant process. For faculty who have built careers around federally funded research, it can be demoralizing if highly rated proposals go unfunded because of changing distribution priorities or other non-scientific considerations.

Top AMCs compete on research reputation, faculty productivity, publications, patents, trials, and national rankings. Administrative or funding disruptions can hamper an institution’s ability to stay competitive.

Health systems will need to prepare for continued change as federal research funding, oversight, and grant requirements evolve:

Executives will need stronger oversight of the research portfolio—including which grants are exposed to termination, which trials involve vulnerable patient populations, which projects depend on foreign subawards or politically sensitive topics, and which areas may require institutional bridge funding.
Leaders will need to plan for multiple scenarios—including congressional restoration, continued delays, selective restrictions, and new grant conditions.

For institutions built around discovery, translation, and access to advanced treatments, resilience will depend not only on securing federal awards but also on preserving the research capabilities those awards make possible. Organizations that can protect research continuity while adapting their academic strategy for the less predictable federal funding environment will be best positioned to navigate this broader shift in the relationship between federal research policy and academic medicine.