Providers and research sponsors must consider two recent Medicare-related administrative issuances indicating CMS and OIG interpretations regarding provisions of clinical trial arrangements and Medicare payment for routine cost services in clinical trials.


Since the Centers for Medicare and Medicaid Services (CMS) decided in July 2007, after more than a year of reconsideration, not to implement significant revisions to its clinical trial policy, providers conducting clinical trials and sponsors of clinical research have been left to structure their arrangements and billing practices based on analysis interpreting the current National Coverage Determination for Routine Costs in Clinical Trials and other relevant Medicare policy provisions. For more information, see McDermott On the Subject “CMS Final Decision on Reconsideration of the Clinical Trials NCD: Maintains Status Quo” available at

Providers and research sponsors now must consider two recent Medicare-related administrative issuances indicating CMS and U.S. Department of Health and Human Services Office of Inspector General (OIG) interpretations regarding provisions of clinical trial arrangements and Medicare payment for routine cost services in clinical trials.

  • First, a “clarification” issued through the Medicare Learning Network (MLN)—but not by regulation, manual interpretation or National Coverage Determination—generally requiring providers to choose between Medicare coverage or research sponsor payment for patient out-of-pocket costs, including co-payments, deductibles and non-covered costs for services furnished in clinical trials
  • Second, an Advisory Opinion from the OIG raising fraud and abuse concerns regarding such arrangements in most situations that do not satisfy the narrow special characteristics of the government-sponsored arrangement approved in the Advisory Opinion

When read together, these issuances will in most cases require a choice between research sponsor payment for the out-of-pocket costs for subjects and Medicare coverage for routine cost services in a qualifying clinical trial, with a limited exception for certain financial hardship cases. These interpretations may require changes in many existing arrangements between sponsors and providers and appear likely to result in greater costs being born by research sponsors. Technical arguments could be raised regarding the legal effect of the MLN Matters issuance, which is by its terms “not intended to grant rights or impose obligations.” Forewarned is forearmed, however, and providers and sponsors should consider these interpretations in structuring future clinical trial agreements and when evaluating compliance under current arrangements.

These two developments are summarized below.

Medicare Learning Network Matters, Number SE0822, “Clarification of Medicare Payment for Routine Costs in a Clinical Trial

On September 29, 2008, CMS issued Medicare Learning Network Matters Number SE0822, titled “Clarification of Medicare Payment for Routine Costs in a Clinical Trial” (MLN Matters: SE0822), to provide “additional clarity” regarding payment by Medicare for routine cost services associated with clinical trials by “reminding providers” that Section 40 of Chapter 16 of the Medicare Benefit Policy Manual is applicable to clinical trials. Although Section 40 does not address clinical trials explicitly, it discusses situations in which services are excluded from Medicare payment because the patient has no legal obligation to pay for them, including cases in which items and services are furnished “gratuitously” without regard to the beneficiary’s ability to pay and without expectation of payment from any source.

CMS has stated in the past that Medicare Secondary Payer (MSP) rules are applicable to payment for injuries to patients in clinical trials. Some commenters have assumed that the MSP rules also apply to limit Medicare reimbursement where a sponsor agrees to pay non-covered routine costs of clinical trials. MLN Matters: SE0822, however, focuses on the “no obligation to pay” exclusion and does not address application of the MSP rules when analyzing a sponsor’s agreement to pay for services not reimbursed by other payors.

In MLN Matters: SE0822, CMS discusses its interpretation regarding payment by Medicare for routine cost services furnished in a “qualified” clinical trial in the following potential clinical trials arrangements:

  • The research sponsor agrees to pay routine care costs if no reimbursement is available from insurance (including Medicare), “without regard to the beneficiary’s ability to pay and without expectation of payment from any other source.” MLN Matters: SE0822 explains that in such cases, the patient has no legal obligation to pay. Therefore, Medicare payment cannot be made and the beneficiary cannot be charged.
  • The research sponsor pays for routine cost services provided to indigent non-Medicare patients. CMS Medicare payment can be made routine cost services furnished to Medicare beneficiaries provided that: 1) payment is made only for patients determined to be unable to pay; 2) all other patients in the clinical trial with the financial means to pay for routine cost services are billed, even if denied payment by insurance; and 3) Medicare beneficiaries are billed for co-payments and deductibles, but the provider waives payments for those beneficiaries who have a valid financial hardship determined pursuant to a hospital indigency policy applicable to (a) low-income patients; (b) uninsured patients; and/or (c) patients who have partial medical coverage, but payment of full charges would render the patient indigent.
  • The research sponsor agrees to cover Medicare beneficiary co-payments during a clinical trial. According to MLN Matters: SE0822, CMS does not prohibit this practice outright but states that fraud/abuse compliance issues would arise, particularly when linked to the generation of federal health care program business. Notably, in this regard MLN Matters: SE0822 makes no distinction between sponsor payments for indigent beneficiaries and beneficiaries who can afford their out-of-pocket financial responsibilities.

Unfortunately, MLN Matters: SE0822 fails to explain how its interpretation of Section 40 of Chapter 16 of the Benefit Policy Manual is not inconsistent with a long-standing provision in Section 40.2 of Chapter 16 of the Benefit Policy Manual:

“Individuals with conditions which are the subject of a research project may receive treatment financed by a private research foundation. . . . In most cases, the patient is not expected to pay for treatment out-of-pocket, but if the patient has insurance, the parties expect that the insurer will pay for the services. In this situation, a legal obligation is considered to exist in the case of a Medicare patient even though other patients may not have insurance and are not charged.”

Accordingly, since this provision appears inconsistent in at least some situations from the rationale discussed in MLN Matters: SE8022, providers evaluating existing arrangements should consider both Sections 40 and 40.2 of Chapter 16 of the Benefit Policy Manual before reaching conclusions regarding their compliance positions, defenses and the need for any corrective action.

OIG Advisory Opinion 08-11

On September 24, 2008, the OIG issued Advisory Opinion 08-11, which concludes that the anti-kickback statute and the patient inducement prohibitionin 42 U.S.C. § 1320a -7b(b) would not be implicated by grants of cost-sharing waivers for items and services furnished in a particular government-sponsored clinical study “that CMS considers essential to informed decision-making about Medicare coverage [in the area of the study].” The OIG’s favorable opinion in that case is premised upon three characteristics of the arrangement that it concluded adequately protect the arrangement from risk of fraud and abuse, but which would not be present in industry-sponsored or even most government sponsored studies. In particular, (1) the Long-term Oxygen Treatment Trial (LOTT) is sponsored by the National Heart, Lung, and Blood Institute and CMS itself, and is subject to rigorous monitoring and conflict of interest procedures; (2) the LOTT is neither a commercial study nor a product-oriented or product-specific study, and (3) the waivers in question were found to be a reasonable means of enhancing the likelihood of success of the LOTT, for which “patient compliance is essential to producing valid study results, and Medicare beneficiaries may be disinclined to participate fully for the duration of the study if they are required to pay to participate.”

The third factor, like the additional findings that the waivers would ensure “that economically disadvantaged Medicare patients are not precluded from the study” and that there would not be a differential of financial burden between subjects in study and control groups, probably would be applicable to many clinical trials regardless of sponsorship. The first two factors, however, are related to the specific governmental sponsorship and monitoring arrangements and CMS’s interest in the findings from the LOTT. The OIG specifically distinguishes the LOTT, in which it approved waivers, from other clinical trials “initiated, organized, funded, managed, or otherwise sponsored by pharmaceutical companies or other private interests with no, or only limited, government involvement.” Although the favorable finding of Advisory Opinion 08-11 would not appear available in connection with even most other government-sponsored clinical trials, the OIG specifically opined that “commercial or private studies pose significantly different risks under the fraud and abuse authorities.” In effect, the warning under Advisory Opinion 08-11 is that absent a favorable OIG Advisory Opinion, waivers of Medicare cost-sharing amounts for enrollees built into clinical trials, as opposed to granted under existing provider financial hardship policies, would likely pose a significant risk of violating the fraud and abuse laws and attracting OIG enforcement action.


Health care providers that participate in clinical trials, and pharmaceutical and device manufacturers sponsoring research, must consider the implications of the interpretations or clarifications in MLN Matters: SE0822 and the rationale of OIG Advisory Opinion 80-11 when negotiating clinical trial contracts, conducting coverage analyses, preparing budgets for clinical trials and drafting patient consents, or when evaluation compliance under existing arrangements.