Take steps to prepare for up-and-down business cycle
Expert offers best practice tips
The current economy should be enough to convince clinical research (CR) sites that they need better strategies to handle the rollercoaster ride of the research business cycle if they want to survive and thrive for the long term.
"The bottom line is learning how to prepare for the crunch," says Kathy Jones Beals, chief operating officer and vice president of business development for NeuroTrials Research in Atlanta, GA. NeuroTrials has 17 years of experience in clinical research, and Beals was a scheduled speaker about CR site financial management nationally at the 2010 MAGI Clinical Research Conference - East, held May 23-26, in Boston, MA.
"We're seeing the business cycle crunch to a greater extent now than in previous years, but it's always there," Beals says. "We're at the mercy of the pharmaceutical and device companies' cycle."
However, there are some smart strategies CR sites can take to better manage their finances in the lean times and avoid overspending during the busy times. Beals offers these suggestions:
Try smart staff strategies: "At our site we have our core staff that is there all the time, and we have PRN staffing in the wings when a busier time arrives due to the research cycle," Beals says. "These are people we've brought in and trained in our procedures and philosophy."
A clinical trial site has to prepare for the busy times by hiring as-needed staff before they're truly needed.
"We've utilized these PRN employees sporadically over a period of time so when we get very busy we can bring in someone who is familiar with the organization," Beals says. "We make sure they stay trained and ready."
Sites can find professionals interested in this occasional work by seeking out mothers of school-aged children. These women sometimes do not want fulltime or even part-time work. But they are open to the occasional project for bringing in extra income, she suggests.
Also, retired research professionals and research interns are other sources for building a temporary workforce.
"Usually people come to us through a referral organization," Beals notes.
For example, a local college might call to say there's a bright student in their research program who is looking for an internship.
"We might have that person come in and intern with us so we can evaluate him or her and find out whether they could serve as PRN or a part-time staff member down the road," Beals says. "Many internships are at no or low cost to a company."
The key to training these temporary workers is to have an experienced and dedicated core staff that takes on the mentoring and training roles, she adds.
Use only a little more than the space you need: It's important to have adequate and comfortable space for meeting research participants. But it's not necessary to rent or purchase much more site than a site needs.
When Beals looked at NeuroTrials' current facility several years ago, she decided to lease what the CR site needed to fit current staffing and exam room needs plus only 15% for expansion.
"It's exciting to develop these huge, state-of-the-art sites, but when business slacks off, you're supporting that space while waiting for healthier times," she says.
However, sites still can prepare for the cyclical busy times by making certain there is additional space available for temporary expansion or use.
For instance, NeuroTrials has an agreement with medical clinic tenant in the multistory building the two organizations share: when NeuroTrials needs some additional space, they can rent space from their neighbor during off-hours, Beals says.
"We put in place a contingency plan for bearing a greater study load, but to not bear permanent costs," she explains. "You need to be creative with your needs."
Another strategy is to open the CR office on weekends when a fast-enrolling trial makes the office very busy in the short term.
Avoid the latest, most expensive models: "With our phone systems and software programs, and other technology, we wanted state-of-the-art, but we didn't need to be cutting edge," Beals says. "You should go for what truly meets your needs, but don't be swayed by the bells and whistles that aren't necessary for your operation."
Occasionally, the organization will buy second-hand equipment. But the chief cost-cutting strategy is to buy new equipment that is discounted because a newer, more expensive model has just hit the market, she says.
"You can get a much better deal on last-year's model," she adds. "So if everything else remains the same with the technology and quality, don't be shy about buying last year's model."
Cross-train staff: "We heavily cross-train all of our staff, and the reason is because when we're really busy, we may need to have staff who can wear different hats," Beals says.
CR sites pay handsome salaries and benefits for experienced clinical trial coordinators, so it makes sense to train these professionals to do phlebotomy, package and ship supplies, and do other CR tasks as needed.
"It helps their job security, it helps the company with its cash burn rate," Beals says.
CR sites that have fulltime coordinators and fulltime phlebotomists will have an expensive staffing load to carry during lean times, she adds.
"If you have people cross-trained, then you can be a leaner group and get high quality procedures done," Beals says.
Negotiate optimal lease commitments: CR sites often can negotiate much better leasing options than they're first offered by a vendor.
For instance, a copy machine company might say the machine has to be rented for three years, but the same monthly payment could be negotiated for a 24-month period instead, Beals says.
"The shorter your leasing commitment, the less financial commitment you have overall," she explains. "So being thoughtful on the front end when negotiating terms for leases can save you a whole lot of money on the back end."
In the case of renting space, CR sites should research their local market well before deciding whether to buy or rent. If the market is high-priced, leasing might be the less costly option.
If it's a down real estate market, then now might be the time to buy the property.
In a high-priced real estate market that appears to be heading up, then it's also a good idea to negotiate a long-term lease with a better rate because of the terms.
"We got a longer term rate because we know we'll be in business for the next five years," Beals says.
Keep a cash flow cushion: CR sites should anticipate having cash flow issues. All research sites do, depending on the cycle, Beals says.
"There are bountiful times and some very lean times," she explains. "So we try to keep a three-to-six month operating cushion, with three being the minimum."
In addition, consider opening a banking line of credit.
"They might not use it, but it's there in case it takes the site more than six months to become profitable again," Beals says.
The key with all of these suggested strategies is for CR sites to have the plans in place before they need to use them, Beals adds.