The Business Side of Clinical Trials

By Maxine Bookbinder 

December 30, 2013 | Clinical research is, of course, where cures are found and discoveries are made, and forms a key part of many medical institutions’ regular activities. Yet 46% of hospital executives don’t know if their research programs are profitable, breaking even, or even losing money.

Rhonda Paz, PhD., Senior Vice-President of Operations at GuideStar Clinical Trials Management, says that, while community hospital executives should certainly encourage clinical trials for their research and medical potential, they should manage them as they would any other revenue-generating business venture.

“Sometimes hospital leaders may only view research as a clinical endeavor,” says Paz, who has spent more than 25 years in clinical research operations at centers like the Louisiana Cancer Research Consortium and MUSC Hollings Cancer Center. “The reason they need to look at it as a business, as well, is to ensure they are reaping the financial rewards which will sustain the program.”

According to Paz, who is a Certified Research Contract Professional, trial revenues can fall short of covering costs when executives don’t do a break-even analysis, set realistic enrollment goals, or identify administrative costs that are not directly associated with the protocol, such as specimen shipping or office supplies.

A successful – and profitable – clinical research operation requires experienced staff that understands the operational and financial nuances of a research effort. Just as important are physician champions, who serve as principal investigators on trials. Basic steps hospitals can take include balancing industry-funded versus low-funded cooperative group studies, skillfully managing contract and budget negotiations, and verifying there is an appropriate patient population to fulfill study requirements.

Rhonda Paz
Rhonda Paz, of GuideStar Clinical Trials Management

Even altruistic endeavors, such as researching medical discoveries, need funding to succeed. Careful and strategic planning before a trial begins can prevent expensive disasters. The first step, says Paz, is to hire a research finance specialist, in addition to other staff familiar with contract and clinical language. Staff must understand the key areas of a clinical trial agreement or contract; negotiate budgets and payments; insist on start-up payments; include penalties for late payments; and ensure that contracts protect the hospital against indemnification, liability, and insurance issues.

Common financial mistakes can be avoided by creating a billing compliance process, providing two distinct billing pathways, separating standard of care from specific research-related services, and reviewing patient bills before releasing them. Before a trial begins, it is imperative, for billing purposes, to delineate routine treatment versus services required by the trial protocol. Services that are considered standard of care are billed to the third party payer; services rendered because of the trial protocol that are not considered standard of care are billed to the trial sponsor. Otherwise, doctors might inadvertently double-bill insurance companies.

Of course, doctors must document everything to avoid unintentional revenue loss. “Remember the adage,” says Paz, “‘If it isn’t documented, it didn’t happen.’”

Once a clinical trial is in progress, finances must remain a focus. Sometimes, says Paz, medical professionals either neglect to collect payments or feel awkward asking for late payments. If there is no designated research finance specialist to enforce negotiated terms, send invoices, and make late-collection calls, an otherwise successful trial can run a loss and may become unviable.

Industry-funded clinical trials provide revenue to physicians, too. Physician payment is based on fair market value, percentage of budget, and time and effort beyond clinical activities. An ISP survey noted that, despite new payment laws under the Sunshine Act that require all payments for trials to be reported publicly by the Centers for Medicare and Medicaid, 86% of doctors still want to participate in clinical trials.

Usually, says Paz, about 10% of a clinical budget reimburses the doctor for research-related services. Twenty percent is reserved for ancillary services, such as tests, procedures, and other research-related activities. The remaining 70% pays for clinical support services, such as paperwork, data collection and processing, and other research-related provisions not covered by third-party payers.

As trials progress, executives should vigilantly examine program profit and loss, individual patient trial profit, clinical trial program cost recovery, trial revenue, potential new business, staff capacity, and patient enrollment.

“The bottom line,” says Paz, “is that a clinical trials program is a viable business decision and, if run properly, results in a multitude of benefits. And it should absolutely generate enough revenue to cover the expense of the infrastructure to support it.”


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