Be Careful what you Sign: Milestone Payments & Research Billing

Ryan Meade

Managing Director

Aegis Compliance & Ethics Center, LLP

Be Careful what you Sign: Milestone Payments & Research Billing

In the clinical research community, a common misunderstanding that the “budget” is separate from the clinical trial agreement persists. In fact, what is typically referred to as the “sponsor’s budget” (or some version of that term) typically attaches as an exhibit to the clinical trial agreement and sets out compensation terms.  In these instances, the “budget” presents itself as a binding legal document with terms that could have unforeseen consequences if an institution’s clinical research billing initiative is not diligent with its language. This post focuses on research billing risks associated with milestone payments.

Budget Format Comparison

Budgets can take many forms but the two most common formats are: (1) lump-sum milestone payments at certain timepoints or (2) a grid that closely tracks the protocol’s schedule of events.  Both carry unique risks.  Budgets often set out a specific dollar amount for payments at a certain time but with no specifications as to what the money covers. At this point, it is important to analyze how the budget exhibit connects with the main body of the clinical trial agreement.  A person will read the main body of the agreement and the budget exhibit as one continuous legal document.  If different sections of that one legal document each contain financial discussions, then they must be strung together and placed side-by-side in order to determine the legal significance – and importantly, to figure out whether the continuous document prohibits billing for conventional care services.  If the main body of the agreement states something similar to “Costs for all protocol-related services are covered by the amounts set out in Exhibit B,” then the research site will not be able to bill insurance for any protocol-required services.  Silence in the budget exhibit on what the money covers is explained by the language in the main body of the agreement: all protocol-related services.

Language Matters

Of course, if the study team has no intention of billing insurance for protocol services, then this language is not problematic. But the implications of this language may not be what the principal investigator or study team wanted.  If the study team believes the milestone payments are limited to the services that are performed for research purposes only, then the language in the main body of the agreement needs to be changed.

There might be a temptation to keep the language in the main body of the agreement and instead add a clarification in the budget exhibit.  This should not be done until the language in the main body of the agreement is neutralized.  If clarifying language is inserted in the budget exhibit such as “these payments cover only data collection activities and are not intended to pay for conventional care services,” then that sets up a contradiction in terms between line in the main body of the agreement and the budget exhibit.

A good approach is to put neutral financial language in the main body of the clinical trial agreement and place clarifications in the budget exhibit.  A substitute for the language set out above in the main body of the agreement could be: “All compensation terms associated with this research study are set out in Exhibit B.”  This creates a “neutral” environment that isolates all financial terms to the budget exhibit.  Making sure the main body of the agreement does not get into details on what the money is for while referencing the budget exhibit allows all compensation terms to be in one place: the budget exhibit.  This avoids complicated interpretations trying to reconcile the main body of the agreement with the budget exhibit and any other miscellaneous financial references in the agreement.

With the financial discussion in the main body of the agreement “neutralized,” the budget exhibit is free to clarify the reasons for the payments in any way it wants.  It is important that the budget exhibit be as clear as possible with what the sponsor’s payments cover.  In many ways, a budget crafted to match the protocol’s schedule of events is a better and easier way to manage clinical research billing compliance, but if the institution needs to accept a sponsor’s milestone format, then be sure that anyone reading the exhibit (especially a third-party such as a government agency) knows exactly what is being paid for and what is not.

If the milestone payments are not intended to cover conventional care services or other medically necessary items and services, then the budget exhibit could include a statement such as “These payments do not cover any medically necessary services required by the protocol but are intended to cover services that are for research purposes only.”  This would free up the protocol services that are medically necessary to be billed to insurance if the services meet all the various coverage rules required by public and private health plans.

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