The hospital community is finding itself increasingly involved in clinical trials. Although the value of being part of the cutting edge in innovative medicine cannot be overstated, subject injuries represent a huge potential liability. Prophylactic contract language is key to addressing these risks, but hospitals can take certain steps even if the language in their agreements is not ideal.

The number of clinical trials in the United States is skyrocketing. While less than 6,000 clinical trials were registered on ClinicalTrials.gov in 2005, in 2013, that number increased to almost 160,000 and continues to grow. With these volumes, even smaller community hospitals are finding themselves in the fray. And, as is part and parcel of working in a world of experimental medicine, subject injuries are bound to happen. And although it is bad enough that some patients entrusted to a hospital’s care suffer trial-related injuries, what can a hospital do to protect itself from financial harm? Set forth below are a number of questions that often arise when trying to determine a hospital’s rights with regard to a clinical trial sponsor when these injuries do occur.

Should I submit a claim for subject injuries to the payer or to the clinical trial sponsor?

This question is only partially answered by what is in the clinical trial agreement. Historically, it was the practice for clinical trial sponsors to state that they would pick up any costs related to subject injuries that the payer would not. Then, several years ago, the Centers for Medicare & Medicaid Services (CMS) stated that a sponsor could not make itself secondarily liable. If a manufacturer offers to pick up any injury-related costs that an insurer (governmental or not) will not reimburse,  CMS views that sponsor as primarily liable to Medicare. In other words, even if an agreement specifies that a site must submit a claim to the payer, including Medicare, and receive a denial before the sponsor’s liability is triggered, such action may be inadvisable. The Medicare program could view such action as submitting a claim while knowing that it is not properly payable.

So, what can a hospital do to protect itself against such an untenable position? First, it can seek to better define its rights when negotiating a contract. There are three potentially acceptable provisions: (a) the sponsor pays primarily for everyone, (b) the sponsor pays primarily for Medicare and secondarily for everyone else, or (c) the sponsor does not pay for subject injuries. Second, if a poorly worded agreement has already been executed, a hospital can discuss with the sponsor how the arrangement needs to be modified to avoid both sides being implicated in submitting an unpayable claim. Third, if no resolution is possible, a hospital can submit a claim as well as a disclosure letter to the contractor that explains its obligations under the contract to receive a denial. When the contractor receives the resulting claim denial, the sponsor’s obligations kick into gear.

Note that nothing in Medicare’s rules dictates claims submission requirements for private payers. But it may be worth checking the payer manuals and policies before submitting claims.

How much should the sponsor pay me?

The exact contract language may be instructive. If a contract says that a hospital will be held harmless for its “costs,” “expenses,” or even “reasonable costs,” then, arguably, it should receive its full charges reduced to costs using the most recent cost-to-charge ratio. However, some contracts specify that a hospital will be paid the Medicare rate for subject injuries. Determining the payment methodology in advance in the clinical trial agreement may be helpful.

What items and services does the “hold harmless” pertain to?

Determining the full scope of what qualifies as subject injury can sometimes be challenging because patients often also have an underlying disease. Determining a range of ICD-9 (or ICD-10) codes that likely evidence the scope of the injury caused by the study drug, device, or procedure can help add clarity. Once a sponsor agrees to that same set of codes, it becomes easier to distinguish subject injury from other illness or injury.

What if an investigator didn’t squarely follow the protocol?

Sometimes this question is answered by the agreement text. A well-drafted clinical trial agreement should specify that an investigator is allowed to veer from the protocol without vitiating the indemnification if it is in the patient’s interest. Agreements may specify that such deviations are only acceptable if cleared in advance with the Institutional Review Board. If an agreement, however, is silent as to whether there are circumstances under which an investigator can use his or her independent medical judgment, then it becomes necessary to look at materiality. That is, would the injury have occurred even without the deviation in question?

Conclusions

Clear contractual language is critical from the beginning to prevent disputes. However, even with carefully considered language, many questions may remain that do not have easy answers. This applies particularly to medical questions, such as, what exactly were the contributory factors to the injury, and how important was each factor? A good dispute resolution clause in an agreement may prove invaluable when such questions arise.