Negotiate better payment terms for your CT site

Six steps to better terms

Clinical trial payment agreements are improving for sites, but there are strategies that can make these even better, an expert says.

Over the past several decades, clinical trial sites have witnessed changes in how sponsors pay them with the time spent waiting for a check almost quadrupling this past decade.

Two decades ago, sponsors typically paid clinical trial sites every 45 days with loose monthly payment terms, says Terry Stubbs, MA, CCRC, president and chief executive officer of ActivMed Practices & Research in Haverhill, MA.

Sponsors then switched to quarterly payments, which greatly lengthened the time between when the money was spent on a clinical trial to the sponsor sending the site a check.

"It went from being paid every 45 days to being paid in 120 to 165 days," Stubbs says. "Most people assume that you'd get paid every 90 days when its on a quarterly basis, but in reality it's from 120 to 165 days to receive payment, and this was the practice for a long time."

The good news is that within the past year, the pendulum has again swung. Payment times are shortening with many sponsors returning to monthly payment terms, she adds.

The reason for the change is obvious to those in the CT industry who have witnessed a rapid turnover of research sites.

Five years ago about half of CT sites went out of business, according to a survey by Ken Getz, because they couldn't stay afloat with terms that left them cash poor, Stubbs says.

"Now the industry is listening and hearing us and doing payments on a monthly basis, so we're paid from day 45 to day 60," she adds. "This is so much easier because we don't have to cover our staff salary for six months while waiting to get paid."

Sponsors also are more amenable to other changes in CT agreements, so now is the time to strike a good deal, Stubbs says.

"From 2003 to 2006, you saw all kinds of things in clinical trial agreements that would not be good for keeping your cash flow positive," Stubbs says. "Now the industry understands the pressures it created at sites."

It was harder to negotiate five years ago because so many physicians flooded the CR market, and many did not truly understand how difficult it would be to live within the budgets being offered by sponsors.

For example, an inexperienced physician researcher might accept a payment of $1,800 per patient for a hypertension trial that requires 13 visits, blood work, and EKGs, Stubbs says.

It'd be difficult to pay staff salaries and cover your malpractice insurance and other expenses with that budget, she says.

"If the same doctors were to look at an insurance reimbursement at that rate with all of those procedures, then they'd say they wouldn't contract with that insurer," she adds.

Now the market pressures have changed, and research sites have more power to negotiate better payment terms. Here are some of Stubbs' suggestions for getting better terms:

1. Analyze your site's expenses thoroughly.

Sites need to look at their normal expenses, monthly expenses, and their cash reserve to determine how long they can carry costs without compensation, Stubbs says.

If the site determines it cannot carry expenses longer than 60 days without compensation, then the site should negotiate a monthly payment term and make certain the sponsor doesn't stretch this out beyond 60 days.

"Once sponsors understand that it's not greediness, but the reality of trying to stay in business so a site can continue to do research trials, then that's where the sponsor's bending comes into practice," Stubbs says.

2. Negotiate with positive statements.

Pull information from industry trends and use these to help with your negotiation, Stubbs suggests.

"Discuss something you've seen or experienced in a positive way," she adds. "Negotiate with the positive, not the negative, and don't intimidate."

The more the site's negotiator explains the site's expenses and budget in a positive way, avoiding adversarial stances, the better the negotiations will go, Stubbs says.

3. Know the contract's fine print and details.

Here are some questions to identify in the proposed contract:

  • How long it will be between payments?
  • What's being paid in the payment?
  • Should extra expenses for advertising or items like dry ice be added into the contract or invoiced and paid within 30 days?

Advertising reimbursement is a particularly sticky point because radio stations and newspapers will insist on being paid immediately, Stubbs says.

"It's important if you do advertising and ancillary services that you get paid on a 30-day basis and not have it put into the quarterly or monthly payments, she adds.

"This lesson came early in my career," Stubbs says. "I had two trials running, and I called the radio station to run another $4,000 in ads, but the radio station said I'd have to pay cash first before I could do the next round of advertising."

This payment could cause cash flow problems, particularly if sponsors are slow to reimburse for these expenses.

4. Improve terms of hold back payments.

"Originally the hold-back payments came in during that time when there wasn't good business reality among sites, so sponsors or clinical research organizations would hold 20% of the entire budget until the end of the study," Stubbs explains. "That could mean by the end of the entire clinical trial when every site is finished or at the end of your site's recruitment period and all of your data are collected and answered."

This can have a big impact on a site's cash flow.

"If you are involved in a three-year trial and you have 30 patients in that trial, then whatever money is held until the end of the 3 to 3.5 years is a huge amount," she adds.

Sites should negotiate for more reasonable hold-back terms, such as a 10% hold back, Stubbs suggests.

"That's a little easier to deal with," she says. "They just want to make sure everyone cooperates and gets their data in, so 10% is returned when all data are in."

5. Ask for a regulatory fee.

The industry used to give sites a 10% start-up fee. But this posed problems since many sites receiving the fee never enrolled subjects, Stubbs says.

Now sponsors will pay regulatory fees, typically of $1,500 to $2,000 upfront, but they won't give these to sites at start-up unless they know the site has a positive track record in enrolling, she adds.

"If you've done well then you can get start-up money with the understanding that if you don't provide services you'll pay it back to the sponsor," she says.

This fee is for training staff, using electronic data capture, getting regulatory documents submitted to the IRB for approval, making amendments to informed consent forms, and covering other regulatory issues.

6. Look for other items to improve in negotiations.

If your site develops an enrollment plan that details what you're going to do with advertising, then you're more likely to get a better advertising budget from the sponsor, Stubbs says.

Sites also can negotiate more sensible payment terms by knowing what the cost of living is for their region of the country.

Sponsors and sites take into consideration that CR sites in Boston, MA, and California will have higher expenses than sites in Texas, for instance, Stubbs says.

"The sponsor will base this on the area and part of the country in which you're located and based on what the cost of living is in your area," she says. "If you are located in California, then you should ask for more money in the contract."

One way to do this is to determine your employees' monthly cost for working in research plus your monthly overhead costs, and show the sponsor that the proposed budget is considerably less than what the work will cost you, she adds.

While it's unlikely sites will win everything they want in budget negotiation, they should keep in mind that now is a good time to ask for better terms.

"I see a lot more positive energy from sponsors and CROs as far as working things out with sites," Stubbs says.