NGHP User Guide Published without change to Clinical Trials Sponsors obligation to report.

Despite requests from pharmaceutical firms, the Centers for Medicare and Medicaid Services (CMS) published the latest version of their Mandatory Insurer Reporting User Guide version 3.2 dated 17 August 2011 without changes to the language or relief from the current reporting deadline of 1 January 2010.

After months of ongoing negotiations and meetings between two large pharmaceutical firms and CMS, brokered by Piatt Consulting, CMS has repeatedly put off changing their stance about the requirement to report injuries to Medicare beneficiaries arising out of clinical trials.  If CMS was going to deviate from the position it took last year that clinical trials constitute a liability plan that accepts liability for ongoing medical claims arising from a clinical trial, the new User Guide version would have been the vehicle of choice.  Change may yet come, but the odds are diminishing and clinical trial sponsors should weigh the risks of waiting too long to comply.

General Reporting Delays
In CMS Non-Group Health Plan (NGHP) Technical teleconference on 21 September 2011, CMS acknowledged that they are aware of requests to further delay reporting deadlines for liability settlements, judgments or awards.  The American Insurance Association (AIA) requested that HHS Secretary Sebelius once again delay reporting, based on lack of CMS guidance about reporting “Group Two” mass torts and insurance that does not pay for medical claims.  We expect Medicare to issue an alert providing additional guidance about reporting mass tort settlements prior to 05 December 1980 and hopefully eliminating non-medical insurance; however, we do not expect CMS to further delay reporting liability claims in general.  This does NOT impact clinical trials reporting.  CMS has clearly stated that cases involving “Ongoing Responsibility for Medicals” (ORM) assumed as of January 1, 2010 and subsequent must be reported.

Consents that imply sponsor’s obligation to pay is secondary
Some clinical trial sponsor’s consent agreements (contracts) state the sponsor will pay for medical costs if another plan will not pay: implying they are secondary to any other plan.  Consent agreements that pay secondary when the claimant is a Medicare beneficiary do not conform to Federal statutes and may open the way for civil action by CMS for double damages. Sponsors should note that Medicare may not pay primary when payment can reasonably be expected to be made under a liability plan (see 42 U.S.C. § 1395y(b)(2)(A)(ii)) and includes a contract obligation as prima facie evidence of a reimbursement obligation under 42 C.F.R. § 411.22(b)(3).   Although the case involved a Group Health Plan, a recent Sixth Court of Appeals decision in Bio-Medical Applications v Central States  (09-6121/6169) rejected decisions of earlier courts that a plan’s obligation to pay has to be demonstrated by a civil suit before action for double damages can be tried.  It found that an existing contract for the insurer to pay [the provider] is sufficient.  Also of interest in this case was the Court’s decision that healthcare providers may sue a plan for double damages under the statute.  This decision, it seems, could be readily applied to the relationship between the clinical trial site (provider) and the clinical trial sponsor (plan).  Read our full analysis

Piatt Consulting has been actively working with two Pharma 15 companies to help them report claims for medical treatment made by Medicare beneficiaries enrolled in clinical trials under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA).  Clinical trials sponsors that do not report are subject to civil action by CMS for fines up to $1,000 per day per unreported beneficiary and may face double damages under Title 42 U.S.C. 1395y(b)(8) of the Medicare Secondary Payer (MSP) statute.

The Centers for Medicare and Medicaid, CMS, held a meeting on the 28th of July 2011 with two of the largest US pharmaceutical companies to discuss issues surrounding the reporting of claims of ongoing responsibility for medical care arising out of a clinical trial under the Section 111 Mandatory Insurer Reporting as promulgated under the MMSEA, Medicare Medicaid and SCHIP Extension Act of 2007.

Although the pharmaceutical companies requested the meeting to discuss the difficulties surrounding the collection of privacy act and HIPAA information from clinical trial sites, CMS took the opportunity to investigate what steps pharmaceutical companies have taken to ensure that Medicare has not been inappropriately billed for services that should have been paid by them as the trial sponsor.  CMS took the additional and unusual step of inviting three attorneys from Health and Human Services (HHS) Office of General Council (OGC) to a Mandatory Insurer Reporting meeting to hear the answers.

There were two questions and one interpretation that particularly warrant consideration by the pharmaceutical industry.  They are paraphrased from Piatt Consulting meeting notes as below:

• What mechanisms are in place to distinguish between when Medicare can be billed and when the sponsor should be billed?
• What mechanisms are in place to pay any chronic problem that go beyond the completion of the trial?
• It doesn't matter whether or not the subject was taking a placebo or not, the point is whether or not they paid to treat.

Each of these key points is discussed in greater detail in the remainder of this article.

What mechanisms are in place to distinguish between when Medicare can be billed and when the clinical trial sponsor should be billed?

CMS briefly touched on the substance of a June 2000, Presidential Memorandum stating that Medicare would pay for routine patient care associated with clinical trials; then asked how the clinical trial sponsor distinguished between a routine and non-routine billing event.  As an example CMS offered that if x-rays where part of the trial protocol, Medicare could be billed for the x-rays as long as the number of x-rays did not exceed the beneficiary’s standard annual allotment.  If the beneficiary required more x-rays, then the clinical trial sponsor would have to pay for them.

Clinical trial sponsors generally contract with clinical trial sites to administer and monitor the efficacy of the drug or device being studied.  As part of the competitive bidding process, candidate trial sites review the trial protocol and develop proposals based on the tests, procedures, medications and the length of the study.  A proposal would also include regular visits with the research staff (usually medical doctors and/or nurses) to monitor the test subjects health and to determine the safety and effectiveness of the treatment(s) they are receiving.  The clinical trial has to gauge the costs it will incur to implement the trial protocol and submit a proposal to the trial sponsor that is competitive and yet still meets that profit goal of the site as a business entity.  It is important to note, that inherent in a trial is the potential for the adverse events, some of which may be anticipated based on earlier phases of testing while others may arise during the trial. The payment to a clinical site for medical treatment by the trial sponsor clearly establishes the clinical trial as a “plan” under Medicare Secondary Payer (MSP) statute and is at the heart of Medicare’s question.  If the clinical trial sponsor views the testing as having been completely outsourced through a fixed price contract payment, the sponsor may not have a lot of detail about how the funds are expended. 

Interestingly, it is the agreement with the trial subject to pay for medical claims arising out the trial, not the contract with the clinical trial site, that identifies the clinical sponsor as ultimately responsible to reimburse Medicare for any inappropriately billed medical claims.  It establishes them as the owner of the plan and the Responsible Reporting Entity (RRE) under Mandatory Insurer Reporting.  How the trial sponsor writes and manages the contract with their clinical trial sites becomes even more critical and the opportunity to rewrite those contracts before having to report was a part of our request to CMS for relief from the reporting deadlines.

What does this question imply for reporting and ultimately accepting ongoing responsibility for medical payments? This reminder of Medicare’s offer to pay for routine patient care associated with clinical trials and their concern that Medicare may be picking up the cost of non-routine treatment of a clinical trial was something of a surprise and may be open to interpretation of statute.

Anecdotal information suggests that clinical trial sponsors have eschewed allowing their sites to bill Medicare for tests, procedures and medications dictated by the test protocol.  This is probably the wisest and simplest approach.  If the sites are in fact allowed to bill Medicare, then it would seem that only course of action to meet the intent of MSP and reporting would be to accept ongoing responsibility for medicals at the start of the trial for each beneficiary that participates.  The report would look something like a Group Health Plan with very limited benefits as represented by diagnosis codes associated with the trial’s protocol.  Once Medicare received the report, Medicare would deny payments unless the trial site provider or referred provider billed Medicare with a special V-code reserved for clinical trials.  The added complexity is probably not worth the discount to the trial sponsor.

It should be noted that by statute [42 U.S.C. 1395y], Medicare will only pay for “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”  Except in a very limited area of research (e.g., Category A Medical Devices), Medicare does not cover a beneficiary’s participation in a clinical trial. Generally, an RRE is not required to report medical claims that Medicare does not cover.

It should also be noted that the June 2000, Presidential Memorandum, incorrectly reputed by some to be an Executive Order, is in fact a hortatory directing an agency (HHS) to change their policy of reimbursement to pay for medical claims they would have otherwise paid if the beneficiary was not enrolled in a clinical trial.  This direction seems to contradict statute and hence appears to be designed to create law.  The US Supreme Court has decided, “The President is limited to executing, not creating, the law” in No. 06-984 Jose Ernesto Medellin v State of Texas.  If CMS filed a civil suit against a pharmaceutical company for recovery of payments they made in the past, CMS could sue for all payments regardless of whether they were routine patient care as the Court would be unlikely to find the Memorandum persuasive.

There is some financial incentive to bill treatments prescribed by the trial protocol and some risk to accepting Medicare’s offer to help foot the bill.

Medicare would gain little by reporting in this fashion as trial subject must go to the trial site to participate in the tests, procedures and medications dictated by the test protocol.  Many of this site are dedicated to research and are not authorized to submit medical claims to Medicare.  Any site that could bill Medicare would be guilty of fraudulent billing if they did not bill the sponsor.  A more worthwhile goal would be to stop a beneficiary for seeking treatment for injuries (e.g., a breathing disorder) that might inadvertently be billed to Medicare by a hospital associated with a clinic or a family practitioner unfamiliar with the trial.  Clinical trial sponsors should favor this approach as it stops an unassociated entity from billing Medicare for a claim they are responsible to pay and creating a demand for reimbursement from Medicare, which is more difficult to process than reporting.  Finally, the mechanism for reporting would be difficult.  For example, finding an appropriate diagnosis code that would prevent Medicare from paying primary  for investigative procedures such as drawing blood, while still allowing other providers to bill for claims that are unrelated to the trial.

IMPORTANT: Keep in mind that although the sponsor may not have to report the medical tests and procedures prescribed by the protocol, does not mean that sponsor does not have to report all non-routine patient care, such as adverse events and serious adverse events for which they have promised to pay as part of their consent agreement.

Occasionally, people tend to underestimate the perceptiveness and artfulness of government agencies, but perhaps, since the OGC present times three, Medicare chose to debate the opportunity to bill Medicare as a segue into billing in general.

What mechanisms are in place to pay any chronic problem that go beyond the completion of the trial?

As a follow up to probing about how a clinical trial sponsor ensures they are paying for treatment during a trial; CMS asked if someone ended up with a chronic problem, how is it paid for?

Any attorney with experience with Medicare and Workers’ Compensation will recognize this as a question about how the trial sponsor has “Considered Medicare’s Interest” in future medical costs.

Unlike Workers’ Compensation law or perhaps liability tort actions, the answer to that question lies in content of the trial sponsor’s consent agreement.  If the agreement (e.g., contract) limits their financial liability to the period of the trial, then they have no further obligation to the beneficiary, and hence Medicare, for any continued coverage after the trial for treating their affliction.

It doesn't matter whether or not the subject was taking a placebo or not, the point is whether or not they paid to treat.  CMS stifled any debate that might have occurred on the subject of whether or not a beneficiary that participated in the trial was administered a placebo when they said the trigger for reporting was a payment.

Tort or Contract?
Contract.  The legal basis for enforcing Medicare Secondary Payer statutes arising from clinical trials is one of contract, not tort.  It is their consent form in which they agree to pay for any injuries arising out the trial that forms the legal basis for a civil action.  Whether or not the beneficiary is taking a placebo is not germane to the fact there is a contract to treat a beneficiary.

To further illustrate the point that the is a matter of contract, consider the following argument.

In 42 U.S.C. 1395y(b)(2)(A) “An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part,” a clinical trial sponsor has two options: a.) buy an insurance policy or b.) not buy an insurance policy.  Either way, the consent form is prima facie evidence that the sponsor has assumed the risk of injuries resulting from the clinical trial.

In 42 C.F.R § 411.21  “Plan means any arrangement, oral or written, by one or more entities, to provide health benefits or medical care or assume legal liability for injury or illness,” clearly encompasses the written consent form as an assumption of legal liability.

In 42 C.F.R  § 411.50   General provisions. “Liability insurance means insurance (including a self-insured plan) that provides payment based on legal liability for injury or illness or damage to property,” this regulation provides CMS the opportunity to use payment as prima facie evidence of an insurance plan regardless whether or not a written agreement is in place.

Unfortunately, many attorneys involved in analyzing whether or not they should recommend reporting something to Medicare believe they are only responsible for reporting when they make a payment in excess of the payment they made to the clinical trial site to conduct the trial and assume these payment will be a tort  -- compensation in lieu of treatment or a settlement for negligence in conducting the trial.  Hopefully, we have demonstrated that is these are not situations of ongoing responsibility for medical coverage, rather represent one-time monetary awards that should be reported as “Total Payment Obligation to Claimant” or TPOC.

Summary

CMS heard the concerns of two major pharmaceutical companies about their difficulties in collecting data and left with a contact within the parent organization, HHS, and CMS’s sister organization the FDA that could help streamline the reporting.  They took under consideration as to whether these difficulties warranted some relief in reporting deadlines.

CMS demonstrated a sincere interest in learning how a pharmaceutical company managed billing. CMS may have left with some sense of the scope of the savings to be gained by reporting to enforce proper billing.  The HHS OGC may have left with a sense of the size of an award they could win via their right to file an action for double damages with a Federal Court on behalf of their beneficiaries to recover conditional payments going as far back as December 05, 1980, not to mention $1,000 per day per beneficiary.

Barring contradictory guidance from Medicare in the next version of the User Guide, I will continue to recommend that trial sponsor’s report claims for treatment related to the injuries they sustained as a consequence of the trial (e.g., adverse events and serious adverse events) and refrain from billing or reporting treatments prescribed by the trial protocol.

Medicare is only aware of two companies that are actively reporting or in the process of preparing to report.  If your firm is not on that list and you are reporting, my advice is to alert CMS to the fact as soon as possible.

Disclaimer: The author is not an attorney and opinions expressed in this article should not be taken as legal advice, or the views CMS. The opinions expressed in this article and on this web site are those of author based on his experience as the Former MSP Program Director, consulting with RREs and attorneys.