• CMS Issues Section 111 Alert in NGHP Context Regarding Clinical Trials
  • June 24, 2010 | Authors: Ramy Fayed; Holley T. Lutz; Janice H. Ziegler
  • Law Firms: SNR Denton - Washington Office ; SNR Denton - Chicago Office
  • On June 10, 2010, the Centers for Medicare & Medicaid Services (CMS) posted long promised guidance (in the form of an "Alert") regarding the Medicare Secondary Payer (MSP) reporting obligations that apply in the clinical trial context under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section 111).  In the Alert, dated May 26, 2010, CMS states that it considers payments by sponsors of clinical trials (Sponsors) for injuries or complications arising out of clinical trials (so-called research related injuries or RRIs) to be "self-insurance," which must be reported pursuant to the Section 111 requirements.  This is the first time that CMS has stated in formal guidance that the MSP laws apply to RRI.

    In the Alert, CMS explains that for purposes of Section 111 reporting, the date the injury first arose should be used as the "Date of Incident" and that the payments should be reported as "Ongoing Responsibility for Medicals" (also known as ORM).  This means as a practical matter that the CMS systems will be updated to reflect that the clinical trial sponsor is the primary payer for medical treatment for the Medicare beneficiary relating to the RRI, and that Medicare will take this into account when adjudicating claims.


    Section 111 imposes reporting obligations under the MSP laws on certain entities, including liability insurance (including self-insurance), no fault insurance, and workers' compensation plans (commonly referred to by CMS as Non-Group Health Plans or NGHPs).  Entities that fail to comply with the Section 111 requirements may be subject to civil monetary penalties of $1,000 a day for each instance of non-reporting.

    CMS' Position on Research Sponsor Liability and the Potential Implications of the Alert

    Among other things, the MSP statute provides that Medicare payment is precluded to the extent that payment has been made or can reasonably be expected to be made under a liability insurance policy or plan.  Thus, CMS will not make payment for an item or service to the extent that another entity has Ongoing Responsibility for Medicals.

    In April 2004, through informal advice to Holley Thames Lutz, CMS stated that Medicare would not make payment for RRIs in situations where a Sponsor had indicated in an informed consent document that it would pay for injuries not covered by another payor.  CMS adopted this approach even though the Medicare Clinical Trial Policy clearly provides coverage for items and services received by a Medicare beneficiary in connection with the diagnosis and treatment of RRIs.  CMS presumed that if a Sponsor agreed to pay for RRI, then the MSP statute would be implicated and Medicare reimbursement for the RRI would be precluded.  Clinical trial sponsors and participants have been requesting clarification of their obligations under the MSP laws for years.  The brief (two sentence) Alert reiterates CMS' position that the MSP laws apply in the clinical trial context, but sheds no light on the basis for the agency's conclusion and the practical issues raised.  As discussed in our prior article on the topic, there are significant legal and policy arguments that argue against the CMS approach. 

    The basic question is and always has been whether a Sponsor's voluntary agreement to pay for a Medicare beneficiary's research related injuries that are not otherwise covered constitutes a liability insurance plan or policy under the MSP laws, even absent any allegation or finding of liability on the part of the Sponsor or resolution of a claim (since sponsors can not legally ask for releases from trial participants).  CMS' Alert, which states that payments made by a clinical trial sponsor for complications arising from the clinical trial are a form of self-insurance -- subject to the Section 111 reporting requirements -- reiterates the agency's position that the answer is "yes," without providing any explanation or legal justification.

    Without further guidance from CMS on these issues, trial participants, institutions, and Medicare may be left at financial risk under existing arrangements.  In order to comply with CMS policy, institutions may now have to decide whether (1) to raise their cost profile for a study by requesting that Sponsors cover all costs, which may raise site enrollment and Sponsor-site negotiations issues, or (2) to not look to Sponsors for RRI, thereby looking solely to Medicare for payment, except for copayment and deductible amounts which remain the beneficiary's responsibility.  Sponsors will need to examine existing arrangements and payments to ensure that situations are appropriately identified and reported in order to avoid potential civil monetary penalties under Section 111.