Clinical trial agreements are notorious for their complex and often confusing payment terms. Those terms make it difficult for research institutions to accurately track how much is owed to them by sponsors/CROs and if they have been paid correctly for a study. Effectively managing your receivables can change the way your institution does business, and it has many benefits. These benefits include: improving cash flow, collecting all owed revenue, and generating financial insights to make informed business decisions.
CenterWatch, a company that provides a variety of clinical research products and services, periodically conducts a survey of research sites and institutions to better understand the clinical trial landscape. In 2004, they conducted a survey to identify their chief operating concerns. At that time, “Slow Payments/Reimbursements” was identified as the leading concern. In 2010, they conducted a similar survey, and “Slow Payments/Reimbursements” remained the number one concern. Clearly, this problem is not going away, and many institutions feel this is their primary barrier to improving business outcomes.
There are many misconceptions about payments and reimbursements. The top 2 are that the sponsors/CROs automatically pay on time and accurately for work performed, and the second is that when invoices are submitted, they’re paid immediately. The misconception that sponsors/CROs pay on time and pay accurately for the work performed is very common; however, only 72% of sites are paid on-time, and only 70% of patient payments are paid correctly (PFS Clinical Internal Analysis). Additionally, approximately 33% of invoices need to be resubmitted to the sponsors/CROs before payment is received (PFS Clinical Internal Analysis).
Institutions may have blind spots related to their clinical trial receivables process. Many times, constrained resources without clear responsibilities inadvertently create financial liabilities for the research organization. These resources may lack the proper clinical knowledge to accurately recognize revenue for the trial. Additionally, CTMS systems, if not implemented correctly, can create data inconsistencies that cause financial errors. Organizations need to develop a thorough process and provide proper training for research receivables to be managed appropriately.
With this information in mind, how do institutions organize for success? One option is to establish a “research only” lock box for the receipt of study receivables. By having a dedicated lock box, institutions can minimize the co-mingling of funds with other business operations. Having a dedicated lock box also provides an efficient vehicle for the dissemination of payment details. This lock box can help you institute a disciplined process for reconciling receivables. Some examples of this include a customized CTMS financial module, Excel spreadsheets, or outsourcing to a receivables management vendor. In each of these options, maintaining patient information and visit details is crucial to the success of the research institution.
-Push for monthly payment terms during contract negotiations
-Understand the payment terms for your studies; clarify in writing as needed
-Maintain a reconciliation log to tie out all payments
-Have a "research only" lock box
-Request payment details from the sponsor
-Assume your CTMS system will automatically and accurately track your receivables
-Entrust the entire receivables management process to a study coordinator
-Assume that the sponsor/CRO will pay you correctly
-Presume that if you send in invoices you will be paid
-Wait too long after your close-out visit to complete the final reconciliation
If you have any questions regarding managing your clinical trial receivables or any other questions, email PFS Clinical at email@example.com.