Research institutions leaving money on table
Research institutions leaving money on table
Here's how to capture every cent
An alarm went off when the research center at Yale University in New Haven, CT, was approached by a vendor who offered to capture their uncollected research payments for a fee equaling 70% of what they collected.
Yale research officials wondered exactly what kind of money was being lost through a less-than-ideal budgeting process.
So they examined current studies, invoices, and payments and were surprised at their findings.
"We found in one year that we were $1.5 million short," says Tesheia Johnson, MBA, associate director for clinical research at the Yale School of Medicine and chief operations officer for the Yale Center for Clinical Investigation.
The uncollected money came from a variety of problems including sponsors or clinical research organizations (CROs) forgetting to pay at milestones to adverse events costs that were never invoiced, she says.
"We weren't monitoring our payments and were innocently depending on the sponsor," Johnson says. "In other cases we were negligent in sending in invoices."
Eventually, the institution collected what it was owed.
"Once we showed sponsors we had not been paid there was some reconciling back and forth," Johnson says. "But for the most part we were right on target with the $1.5 million."
Yale's problem is similar to what many research organizations face, particularly those that are academic research centers where profit is less of a concern in research, she notes.
"As an academic center we develop and manage clinical trials, accounting for expenditures, making sure we're covering costs to do research or coming as close as possible," Johnson says. "We accept that research is a deficit enterprise, and we don't always look to break even."
The focus always is on maintaining quality research and improving processes that are less efficient or effective.
However, the current economy has given all research institutions more incentive to negotiate clinical trial (CT) budgets that more accurately reflect their costs and to work at capturing every payment.
Johnson offers these suggestions for how to improve your budgeting and budgeting negotiating process:
1. Hire a financial manager to track invoices and CT procedures.
"We hired an additional financial management administrator," Johnson says. "The administrator communicates with research staff, study coordinators, data managers, and others working on the study."
Then the administrator prepares invoices and is responsible for entering collection and reconciliation for those dollars, as well as for managing financial reports for the program to show how the money is used, she explains.
"This has been beneficial across the process," Johnson says.
"For some studies we were recruiting like gangbusters and thought we'd negotiated a fair rate for research," she adds. "Then we found the coordinator costs were a lot more than had been anticipated, and sometimes the procedural costs were more than we anticipated."
When the administrator produced these reports, the CR office could use the information to negotiate a better rate.
"We went back to the sponsor and said, 'We've been doing your study at a $1,000 per patient loss,' and then we negotiated to raise our per-patient budget," Johnson says. "In a lot of cases, sponsors looked at our data and renegotiated our budget and then retroactively covered the costs of those patients."
If a sponsor refused to renegotiate, then it was a lesson learned, she adds.
"We take those lessons to the budgeting process and payment process," Johnson says.
2. Ask for more financially realistic milestones.
Sponsors often provide payment milestones that are evenly distributed over the expected course of the patient's participation in a clinical trial. However, in many cases, the CT site spends the highest percentage of staff and resources at the front end of the study.
When this happens, the CT site begins the study in a deficit and cannot catch up until the end of the study.
This can mean that a site will lose thousands of dollars per participant in some studies, such as oncology studies, Johnson says.
For instance, an oncology study might provide a budget of $10,000 per patient, but the money is spread out evenly between 15 cycles of chemotherapy, Johnson says.
But in many cases the patient will complete two to four cycles of chemotherapy, and then their disease progresses, she adds.
Once their disease state changes, they might drop out of the study or the patient might die, and the research institution won't receive the remaining payments, despite the fact that the costs to that point exceed what had been paid, she explains.
"We don't have funds lying around to cover these costs, so the budget should be negotiated so that the payment is higher up front," Johnson says. "If we spend 50% of the dollars allocated per patient in the first two months of the patient's participation in the study, then we want to make sure a 50% payment is allocated in those first two months."
Otherwise, the research institution has deficit spending, and the sponsor is hanging on to money the CT site has already spent, she adds.
"You want to look at exactly how you're going to manage those expenses internally, and you want the cash terms to match that," Johnson says.
3. Find the person with authority to make budgeting changes at the sponsoring company.
"Some sponsors and CROs are great to work with, and others are much less willing to negotiate," Johnson says. "I've found that if you show them a detailed breakdown of your expenditures, showing that it costs this amount for us to do this study and this is why we request this budget, then they'll agree with you, and you won't have a lot of issues."
But when CT sites call a sponsor, it's important to find the person who has the authority to renegotiate budgets, she notes.
"Sometimes you reach a person on the phone who has a price ceiling and has no ability to go above that," Johnson says. "So you need to ask to speak with someone else who has more authority."
Johnson recommends that research institutions ask to speak with the sponsor's scientific liaison. This would be the person who is the principal investigator's counterpart at the sponsoring company.
"It could be at some sites a principal investigator who is responsible for a particular disease line for a company," Johnson says.
The person with authority often is the person who approached the research institution's investigator in the first place.
"Someone at the pharmaceutical company knows your faculty member, and they ran into each other at a conference, and the pharma person said, 'We have this study coming up, and we want you to participate,'" Johnson says. "So it's the personal connection that brought the study to you, but then the company turns it over to a CRO, who does not have the relationship."
When a research institution hits a brick wall in negotiating, it's time to rely back on that original personal relationship, Johnson adds.
"Then you say, 'Our costs are $5,000 per patient, and your CRO says the ceiling is $3,000 per patient, and we really can't work at a loss on this study,'" she suggests.
If the sponsor understands how labor costs in Connecticut are higher than in South Carolina, for instance, and if the sponsor really wants the CT site to participate, then the sponsor likely will pay the higher amount, Johnson adds.
Sponsors sometimes will say during negotiations that they can find someone cheaper, but that hasn't been an impediment to reaching a fair agreement, Johnson says.
"I can't say we've had a sponsor walk away because of cost," she adds.
An alarm went off when the research center at Yale University in New Haven, CT, was approached by a vendor who offered to capture their uncollected research payments for a fee equaling 70% of what they collected.Subscribe Now for Access
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