Overview
Navigating and complying with the numerous federal regulations around clinical trials billing is perhaps one of the most complex operational and regulatory challenges faced by academic medical centers and health care systems. Accurately billing for clinical trial services requires a tremendous amount of effort to coordinate operations and provide oversight to appropriately mitigate compliance risks. A lack of adequate controls can increase the risk for false claims and insurance fraud allegations, both of which can result in stiff penalties.

Federal clinical trials billing regulations mandate that payers should not be billed for services that are not considered to be directly related to patient care or are being paid by someone else (such as participation in a clinical trial). In an effort to increase participation in clinical trials, former President Bill Clinton issued an executive memorandum directing the Secretary of Health and Human Services to:

“Explicitly authorize [Medicare] payment for routine patient care costs … and costs due to medical complications associated with participation in clinical trials”(1)

The Health Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services (CMS), issued the Clinical Trial Policy National Coverage Determination (NCD) in response to the memorandum. Effective July 9, 2007, Medicare covers the routine costs of qualifying clinical trials, as well as reasonable and necessary items and services used to diagnose and treat complications arising from participation in all clinical trials.1 Previously, Medicare did not cover patient care costs associated with enrollment in a clinical trial. The NCD for Routine Costs in Clinical Trials (310.1) is now the standard by which commercial payers base clinical research coverage decisions.(2)

What are routine costs?
Routine clinical trial costs include all items and services that would normally occur as part of the patient’s care outside of a clinical trial (2). Costs associated with the prevention, diagnosis and/or treatment of complications arising from participation in clinical trials are also covered (2).  Standard Medicare billing rules apply to items deemed routine costs under the NCD (2). If Medicare covers the costs of  items and services outside of the clinical trial, then they are covered during the clinical trial (2).

What is a qualifying trial?
A clinical trial must meet the following requirements under the NCD to receive Medicare coverage for routine costs: (2)

1. The subject or purpose of the trial must be the evaluation of an item or service that falls within a Medicare benefit category (e.g., physician’s service, durable medical equipment, diagnostic test) and is not statutorily excluded from coverage (e.g., cosmetic surgery, hearing aids).
2. The trial must not be designed exclusively to test toxicity or disease pathophysiology. It must have a therapeutic intent.
3. Trials of therapeutic interventions must enroll patients with diagnosed disease rather than healthy volunteers. Trials of diagnostic interventions may enroll healthy patients in order to have a proper control group.

Exhibiting these three criteria, however, does not automatically qualify a clinical trial for Medicare coverage of routine costs. There are seven desirable characteristics that clinical trials must possess. Some clinical trials are automatically qualified as they are presumed to meet the following characteristics: (2)

1. The principal purpose of the trial is to test whether the intervention potentially improves the participants’ health outcomes;
2. The trial is well-supported by available scientific and medical information or it is intended to clarify or establish the health outcomes of interventions already in common clinical use;
3. The trial does not unjustifiably duplicate existing studies;
4. The trial design is appropriate to answer the research question being answered in the trial;
5. The trial is sponsored by a credible organization or individual capable of executing the proposed trial successfully;
6. The trial is in compliance with Federal regulations relating to the protection of human subjects; and
7. All aspects of the trial are conducted according to the appropriate standards of scientific integrity.

Certain clinical trials automatically qualify for Medicare coverage of routine costs because they are deemed by the Agency for Healthcare Research and Quality (AHRQ) to likely possess the seven characteristics. These trials include federally funded trials, trials conducted under an investigational new drug application (IND) and drug trials that are exempt from having an IND under 21 CFR 312.2 (b) (1). (2)

Under the NCD, many clinical trials’ study services can be considered routine costs, but the definition of routine costs requires careful examination of the study protocol and the sponsor’s contract to determine which items and services are payable by the sponsor (1). These items and services are not covered by Medicare. The financial disclosure language in the informed consent form also must be examined carefully. Items and services disclosed to the research participant as being free or paid for by the sponsor or third-party payer are not billable to Medicare (2).

Lessons learned
There have been numerous federal investigations and settlements involving improper clinical trials billing (Table 2). Perhaps one of the most notable investigations involved Rush University Medical Center (Rush). In 2003, Rush reviewed its clinical research operations and uncovered a number of errors in which Medicare was improperly billed for research services as routine costs (1). 

Rush voluntarily disclosed these billing errors to the U.S. Attorney’s Office. In effort to correct overpayments received from improper clinical trials billing, Rush entered into a settlement agreement with the U.S. Department of Justice, and a corrective action plan was mandated by the Office of Inspector General (OIG). The plan requires Rush to annually certify its compliance program, conduct extensive auditing and monitoring of its clinical trials billing program and report improper billing and overpayments (3).

The Rush settlement was among the first cases to focus entirely on the Clinical Trials NCD (1). Following its example, every clinical trial must be reviewed under the Clinical Trials NCD before enrolling research participants to determine which services are considered “routine costs."(5). Medicare coverage analysis (MCA) is the process of reviewing and mapping costs according to the study protocol as either routine costs or as costs billable to the study sponsors and/or a third-party payer.

The Rush case was pivotal in affirming the need for guidance regarding clinical trials billing compliance. Since the settlement, many institutions have focused extensively on improving their clinical trials billing operations.

Why comply?
Clinical trials billing compliance seems like a simple concept: Do not bill Medicare for services being paid by a sponsor and/or third-party payer, and do not bill Medicare for services that do not meet the requirements under the Clinical Trials NCD.

However, navigating the process of billing clinical trials has proven quite complex – settlement cases offer ample evidence – and often frustrating. Many stakeholders question whether the Medicare rules accomplish their goals, and in fact, the CMS has proposed a number of changes in an attempt to clarify gray areas surrounding the rules (5).

Significant risks exist for clinical trials billing non-compliance. These risks include:

• Audits
• Corporate integrity agreements
• Corporate compliance agreements
• Fines
• Negative publicity
• False claims
• Damage to the institution’s and/or principal investigator’s reputation

How to maintain clinical trials billing compliance in your organization
There is no single correct way to develop process compliance controls to meet federal clinical trials billing regulations, but standardization of the entire billing process is key. A comprehensive clinical trial billing compliance program can help organizations establish standards to meet regulatory requirements and provide sustainable organizational consistency.

Failure to comply with federal clinical trial billing regulations can lead to research suspension, fines and the imposition of Corporate Integrity Agreements (CIAs). Establishing standards is the key to mitigating risks around billing non-compliance.  For more information about Ernst & Young’s research and experience on this topic, please visit www.ey.com/healthcareadvisory.

The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP.

The authors of the piece are part of the Performance Improvement Advisory- Health Care, Ernst & Young LLP                       
Ernst & Young’s Clinical Research Team within the Health Care Advisory Practice is focused on assisting payers and providers in understanding the business behind clinical research. Our team assists organizations in developing processes to enhance efficiency, compliance and operational effectiveness.

(1)  Ryan D. Meade. Legal issues in billing Medicare for medical research services, the RAP Sheet. Washington DC: American Health Lawyers Association; 2006.
(2)   Ryan D. Meade. IRB members should know more about the reimbursement rules for clinical trial services, medical research law and policy. BNA 2006; 18:65.
(3)  Cynthia E. Boyd & Ryan D. Meade. July 2007. Clinical trial billing compliance at academic medical centers. Academic Medicine, 82(7): 646-653.
(4)  Department of Justice. May 26, 2005. Parent organization of Mayo Clinic pays U.S. $6.5 million to settle grant fraud investigation. Available online at http://www.justice.gov/opa/pr/2005/May/05_civ_292.htm.
(7)   Yale News. December 23, 2008. Yale and federal government reach settlement agreement on research grant accounting. Available online at http://news.yale.edu/2008/12/23/yale-and-federal-government-reach-settlement-agreement-research-grant-accounting.
(8)   The False Claims Act Legal Center. FY 2004 FCA fraud settlements. Available online at http://www.taf.org/total2004.htm.
(9)   Department of Justice. February 26, 2003. Northwestern University will pay $5.5 million to resolve false claims act and common law allegations. Available online at http://www.justice.gov/opa/pr/2003/February/03_civ_076.htm.
(10)  Rush University Medical Center. December 9, 2005. Rush settlement with government may help clarify billing requirements for Medicare patients in research studies. Available online at http://www.rush.edu/webapps/MEDREL/servlet/NewsRelease?id=716.
(11)  Julia Krebs-Markrich et. Al.  September 2, 2005. United States: Research misconduct: New enforcement actions and developments. Available online at http://www.mondaq.com/unitedstates/article.asp?articleid=34644.
(12)  Johns Hopkins University Medical Center to Pay $2.6 Million in Whistleblower Settlement. March 3, 2004. Compliance Monitor. Available online at http://www.hcpro.com/CCP-37976-862/Johns-Hopkins-University-Medical-Center-to-pay-26-million-in-whistleblower-settlement.html.