Compliance functions and processes gain respect and recognition when something goes wrong, prompting us to question “how and why” it happened. These questions were asked after the Challenger space shuttle disaster in 1986. Several factors contributed to the disaster. NASA managers were eager to launch the Challenger due to competition with the European space agency and previous attempts to launch the shuttle had been delayed by weather and mechanical issues. The launch pad had to be cleared for the next mission, which involved a probe to examine Haley’s comet. That probe mission had to launch on time so the US could collect the data before the Russian probe launch. Additionally, the Challenger launch was planned to coincide with President Reagan’s State of the Union address, which included education and the mention of the first teacher in space. The Challenger, however, was launched outside of the qualification for safety (record low temperatures were below the O-ring safety specifications) and contrary to warnings from engineers about gusty winds. The seemingly insignificant O-ring became the key element in the catastrophic failure of the Challenger rocket launch.
Now let’s consider a clinical trial launch. Sponsors, Contract Research Organizations (CROs) and sites face scheduling and economic pressures. Investigators are eager to participate in research projects that allow them to use new and novel strategies to treat their patients. Billions of dollars are spent on clinical trials, but there is no return on investment until a product is commercially launched. Sponsors have critical timelines and prefer to avoid detailed discussions about cost, budgets and billing. In the midst of all this, clinical cost analysis and research billing can be compared to the O-ring of the clinical trial solid rocket booster that supports a new technology launch. This seemingly insignificant factor can greatly impact success or failure of the program, although with less tragic consequences. Paying attention to this small detail mitigates risk and optimizes the Sponsor’s return on their clinical trial investment.
What Is Clinical Cost Analysis?
All clinical trials involve budget negotiations between Sponsors and sites. These negotiations are documented by the clinical research site in a clinical trial agreement (CTA). The CTA negotiations require a consensus agreement on legal terms and conditions, business obligations, and payment for managing the study. The ideal outcome is a win-win situation where the Sponsor obtains clean, reliable data within their timelines, while the site covers its costs and makes a profit. Commonly, Sponsors who outsource clinical trial management to a CRO also request support for site contract and budget negotiations. While these Sponsors may have an overall budget for their clinical trial, they typically defer site cost assessment to the CRO’s expertise.
Clinical trial implementation requires a detailed review of clinical research items, services, procedures and billing rules to develop a site study budget. This includes justifying the allocation of clinical cost based on federal and commercial payor policies and industry guidelines. It is important to differentiate between routine care services and those solely for research purposes. Sponsor costs of these research services should be quantified along with site personnel labor and pass through clinical trial costs to provide a site budget summary. This approach minimizes Sponsor risks associated with clinical items and services, facilitates accurate site billing and optimizes Sponsor pricing for site participation in the study.
Key financial risks in clinical research include:
- Fraud and abuse risks associated with billing patients or their insurance carriers for research costs that are not covered or already paid by another entity
- Funding projects in excess of fair market value (FMV) for services provided, which may violate the anti-kickback statute (AKS)
- Undertaking projects that result in financial losses, especially for not-for-profit sites that could be seen as subsidizing for-profit enterprises like medical device manufacturers
The civil false claims act imposes liability against a person or an entity who knowingly, by either reckless disregard or deliberate ignorance, uses or presents a false or fraudulent claim for payment/approval, or who causes a third party to present a false or fraudulent claim. Consequences of these actions include Civil Monetary Penalties of at least $5,000 and up to $10,000 per false claim submitted, triple the damages sustained by government and potential exclusion from participation in federal healthcare programs.
The criminal false claims act imposes liability on individuals such as CEOs, CFOs or COOs who knowingly and willfully makes or causes to be made a false claim with an intent to commit fraud. The criminal penalty is 5 years in prison and/or a $25,000 fine, as well as mandatory exclusion from participation in federal healthcare programs if convicted.
Examples of research false claims include:
- Billing for items and services that were never provided, solely to accommodate the protocol, or exceed the medical necessity frequencies
- “Upcoding” by using a higher level of evaluation & management (E&M) code for a visit that involves research activity
- “Double dipping” by billing for items and services already paid by another entity, such as the Sponsor
- Accepting payment for services that exceed FMV
- Billing for services that are not reasonable and medically necessary
NAMSA’s coverage analysis identifies clinical services and routine care that are considered reasonable and medically necessary based on Medicare rules, private payor policies and clinical practice guidelines. Patient care services may form a small portion of the overall study budget if the services are considered routine and billable for reimbursement. The Social Security Act defines a billable service as one which falls within a Medicare benefit category, is not otherwise excluded from coverage and is reasonable and medically necessary. The Category B device regulations in 1995 and the National Coverage Decision (NCD) for Routine Costs in Clinical Trials (310.1) in 2000 further clarify the application of this statute to site budgets and clinical trial billing. As the largest single payor for medical services in the U.S., Medicare regulations provide the most detailed clinical trial billing guidance. Medicare coverage rules are based on prior authority, laws and statutes with potential application to any government payor (Medicaid, PHS grants, federal flow-through dollars to States or Universities). Many commercial payors adopt Medicare coverage decisions.
Routine care is often determined by the Investigator, however it may not always be a billable patient care service for a subject in a clinical trial. “Standard of Care” practice is not billable if it is:
- Provided solely for data collection purposes
- Provided free to the “beneficiary” as indicated by the Sponsor and/or the ICF
- Not used to manage the subject’s care
- Not reasonable and medically necessary
NAMSA conducts medical necessity evaluations for all clinical services required by the study protocol in a coverage analysis to determine if:
- The study qualifies for coverage of routine care in a clinical trial
- There is a Medicare NCD or a local contractor policy for coverage and/or non-coverage of a specific item or service
- The Investigator Brochure (IB)/Instructions for Use (IFU) or Professional Practice Guidelines support an item or service as reasonable and medically necessary:
- To administer the test article
- To monitor the effects of the test article
- To diagnose or treat complications related to the test article
- If the item/service is otherwise available to Medicare beneficiaries outside of a clinical trial
The AKS makes it a felony to knowingly and willfully solicit or receive, directly or indirectly, anything of value in exchange for referring an individual to an entity or purchasing, leasing or ordering items/services paid for by federal health programs. The Statute imposes criminal penalties of 5 years in prison and/or a $25,000 fine; and a civil provision imposes fines of $50,000 per act, plus 3 times the amount of remuneration and exclusion from federal healthcare programs.
Examples of research compensation arrangements that may trigger the AKS:
- Recruitment bonuses
- Finders fees
- Excess FMV compensation
- Retention of residual balances from advance payments
- Milestone payments that don’t make sense (either front loaded or back loaded)
- Support agreements
- Payments for services the Investigator is already obligated to perform by standards of practice
- Questionable research transactions with inadequate scientific design and methodology or scientific validity (“sham” transactions used as a pretense for product promotion)
A contract for the exchange of research services and site payment should include consideration for personal services “safe harbors” to ensure a lawful agreement. NAMSA’s due diligence provides:
- An estimate of aggregate compensation for sites, set in advance, consistent with fair market value and not determined solely by volume or value of subjects enrolled
- Research services that do not involve counseling or promotion of a business or activity in violation of the law
- Research services that do not exceed what is reasonably necessary to accomplish the business purpose
NAMSA’s documentation serves as Sponsor evidence of an established standardized pricing with a budget justification of reasonable and medically necessary items and services, and labor within a range of FMV with no connection to patient referrals. NAMSA provides an estimated site budget based on the concept of “fair” pricing compared to “similar” services and hourly market rates for personnel labor.
Key steps to efficient and successful clinical site budgeting are:
- Use a budget template
- Accurately capture all costs
- IRB fees
- One time fees
- Per subject costs
- Variable costs
- Establish standardized pricing
- Have a study budget negotiation strategy and an escalation plan
- Determine and justify all costs to be covered by the Sponsor
- Understand the legal implications of site reimbursement
Standardized pricing offers Sponsors a more reliable clinical assessment of clinical trial costs and creates efficiencies for site budget negotiations. Sites may need to perform coverage analysis as part of a billing compliance strategy and bill this work to the Sponsor as a pass-through cost. By providing NAMSA documentation to the sites, Sponsors can avoid paying for this service multiple times. Likewise, NAMSA’s clinical teams use this deliverable to effectively manage budget negotiations on behalf of Sponsors.
This NAMSA service offering provides documentation for:
- Legitimate deliverables associated with Sponsor site payments
- Full transparency in the event of an audit
- Consistent cost calculations and justification to facilitate effective site budget negotiations
How Can NAMSA Help?
NAMSA now offers a detailed review of clinical research items, services, procedures and billing rules to develop a site study budget. Our process and methodology provides justification for clinical cost allocation based on federal and commercial payor policies and industry guidelines. We differentiate between clinical services deemed routine care and those solely for research purposes. NAMSA then quantifies Sponsor costs of these services, along with site personnel labor and pass-through clinical trial costs to provide a site budget summary. This documentation mitigates Sponsor risks associated with clinical items/services and site billing, and optimizes Sponsor pricing for site participation in the study.
Wendy Schroeder, RN, BSN, CCRC/PM, CRCP
Wendy Schroeder has been involved with research and clinical trials for more than 20 years, and has a deep understanding of in vitro diagnostics (IVDs) and companion diagnostics (CDx). She has served as a key company stakeholder in the implementation of an in-house contract research organization (CRO) infrastructure for a commercial laboratory moving bench IVD science into clinical validation studies and launching a biorepository of blood samples with annotated clinical data. Wendy has provided research operations oversight for commercial laboratories (Caris Life Sciences, Ashion Analytics) and IVD manufacturers (VisionGate, Inc.) as well as at hospital and clinical sites. Wendy holds a Bachelor of Science in nursing degree from Arizona State University (Tempe, AZ). She is a certified Research Coordinator and Project Manager (ACRP) and a certified Research Contracts Professional (MAGI). She has been an invited speaker and author of peer-reviewed journal publications on molecular diagnostics (MDx), clinical trial billing and IVD/Laboratory Developed Test (LDT) regulatory matters.