oversight

Services for Patients Involved in National Institutes of Health-Supported Research: How Should They Be Classified and Who Should Pay for Them

Published by the Government Accountability Office on 1977-12-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

REPORT TO THE CONGRESS

BY THE COMPTROLLER GENERAL
OF THE UNITED STATES
                                                                llllllllllllllllllllllllllllllllllll
                                                                       LM104599




Services For Patients Involved
In National Institutes Of
Health-Supported Research:
How Should They Be Classified
And Who Should Pay For Them?
The National Institutes of Health incurs costs
for care of patients participating  in research
that should be paid by patients or insurers.
The Institutes often does not know whether
grantees are charging it reasonable rates for
patient care services because of inadequate
monitoring    of financial management   aspects
of grants involving such services.

The Institutes   should          undertake     corrective
actions, such as

      --establishing a policy     on patient    care ser-
        vices it will pay for,

      --establishing criteria for evaluating use
        of centers where research is performed
        on patients, and

      --enforcing more vigorously the require-
        ment that grantees promptly    submit
        reports of operations.

The Congress should state whether patients
should pay for nonresearch services received
at the Institutes’ Clinical Center.

HRD-78-21                                            DECEMBER      22, 1977’
                    COMPTROLLER     GENERAL      OF         THE   UNITED   STATES
                                  WASHINGTON.        D.C.     20548




B-164031(2)




To the President of the              Senate and the
Speaker of the Rouse of              Representatives
       This report      describes       changes                     that could be made to
more fairly     distribute        charges    for                    patient    care services
between the National          Institutes      of                    Health    and the health
insurance     companies     or patients.                          Significant      increases
in patient     care costs       incurred     by                   the Institutes        in
recent    years attracted         our attention.
      We made OUK review pursuant   to the Budget and
Accounting   Act, 1921 (31 U.S.C.  53), and the Accounting
and Auditing   Act of 1950 (31 U.S.C.   67).
       We are sending   copies   of this   report    to the Acting
Director,    Office  of Management and Budget,         and the
Secretary    of Health,  Education,     and Welfare.



                                                                      &4
                                                                      ller   General
                                                of          the       United   States




                                                                       -
COMPTROLLER GENERAL'S                         SERVICES FOR PATIENTS INVOLVED
REPORT TO THE CONGRESS                        IN NATIONAL INSTITUTES OF
                                              HEALTH-SUPPORTED RESEARCH:
                                              HOW SHOULD THEY BE CLASSIFIED
                                              AND WHO SHOULD PAY FOR THEM?

             DIGEST
             ---a--
             Clinical   research    supported      by the National
             Institutes    of Health    provides     knowledge    and
             experience    for developing       fundamental    dis-
             coveries   into improved      treatment     and care
             for humanity.
             The Institutes           annually     supports      research
             involving        thousands       of patients      throughout
             the Nation.            Estimated     patient     care costs
              it incurred         in 1975 totaled         about $76 mil-
             lion,      including       $32 million       at the Institutes'
             Clinical        Center and about $44 million               for
             patient       care provided        through     grants
             and contracts           awarded by seven of the
              Institutes'        organizations.           (See p. 3.)
             Many research         patients       require    hospitaliza-
             tion and other services                for their      medical
             condition;      their      participation         in research
             is incidental         to their       hospital      stay.
             Other patients          do not necessarily            require
             hospitalization          except      to participate         in
             a research      study.
              There are no Institutes-wide                 guidelines        on
              what patient        care services        can be paid with
              research      grant      and contract      funds.       Only
              two of the eight           organizations        paying     for
              patient     care services          have written        guide-
              lines    indicating        when services        can be
              charged     to the Institutes.             These guide-
              lines    provide       that grantees       separate
              services      for patient         care between research
              and nonresearch           portions     based on medical
              judgments,       charge the Institutes              for the
              research      portion,       and charge insurers           or
              patients      for the nonresearch            portion.
               (See pp. 5 to 8.)


Tear Sheet.  Upon removal.   the report
cover date should be noted   hereon.
                                                                                  HRD-78-21
Organizations          with      guidelines       providing
that    charges      to the Institutes              for     patient
care    services       be based         on medical        judgments
do not require           that     grantees      comply       with
them.       Grantees       often      disregard       the guide-
lines     and base charges              on administrative
determinations.              The 87 grantees            of one
organization         having       guidelines        reported
28,452      patient     discharges           in fiscal       year
1975.

GAO’s review           included       five       of these        grantees.
Of the 1,721           discharges          they      reported,        GAO
estimated        from a random             statistical            sample
that,     in about         30 percent         of the cases,
either      the Institutes,             or patients             and
insurers,        were      inappropriately               charged      for
routine       hospital        care    because          patients       were
not classified             in accordance             with     the
guide1 ines.

Estimated         net overcharges       to these         five
grants      totaled      $126,800,    based on rates              used
for    charging       the Government,        while       net under-
charges       to patients       or insurers        totaled
$121,800,         based on ordinary         hospital         rates.
(See pp. 10 to 12.)

Grantees     are required         to submit    rate    propo-
sals    each year      for    Department     of Health,
Education,       and Welfare        regional   comptrollers
to use in negotiating             Government     rates     for
patient     care    services.

Of 86 grants           GAO reviewed,          70 were charging
for   patient        care     services      at unapproved
Government         rates,      regular      hospital        rates,
or rates       that      were more than a year                out of
date.       (See pp. 14 to 16.)                In many instances,
grantees      do not promptly              submit     necessary
information          upon which        to negotiate           a rate,
but in other           instances,        regional       comptrollers
fail    to act promptly              on rate      proposals.          (See
p. 15.)

The Institutes      does not take       sufficient
action    to insure     that  grantees      submit       infor-
mation    required    for grant     administrators             to
make sound financial         management       decisions,


                                     ii
               Many grantees          reviewed     were late in sub-
               mitting      required       reports   of operations.
               Those submitted            often contained     erroneous
               information        or were based on improper            rates
               for patient        care.        (See p. 17.)     Further,
               Institutes       officials        do not have guide-
               lines     to help them determine           when clinical
               research       centers      are being efficiently
               used.       (See pp. 18 to 20.)
               Current    legislation         neither      clearly      permits
               nor clearly       prohibits       charging       patients      for
               services     at the Institutes'             Clinical      Center.
               (See p. 27.)          Patients      receive      care at the
               Center without         charge even though many of
               the services        they receive        are routine         and
               not research        related.        (See pp. 23 and 24.)
               This situation         creates      an inconsistency
               wherein    patients        at the Center receive             all
               services     free,     while    patients       at clinical
               research     centers       funded by the Institutes
               have to pay for nonresearch                 services.
               RECOMMENDATIONS
               The Secretary     of Health,     Education,       and
               Welfare   should take actions       to establish         an
               equitable    basis for determining          which
               patient   care services      the Institutes         should
               pay for and to improve various            financial
               management aspects      of grants      involving
               patient   care services.        Such actions        should
               include:
               --Establishing         a uniform     Institutes-wide
                  policy     on patient      care costs,       with imple-
                  menting     guidelines      on allocation         of
                  charges     for patient       care between the
                  Institutes      and the patient          or other
                  parties.
               --Providing     for adequate       enforcement   of
                  the new guidelines         and, until    they are
                  implemented,     requiring      that grantees
                  comply with existing         guidelines.
               --More vigorously     enforcing             the require-
                  ment that grantees     submit            satisfactory
                  rate proposals   and reports               of operations.

Iear   Sheet                                  iii
--Requiring     that patient  care rates        be
   negotiated    within a certain  time
--Establishing     criteria    for evaluating
   use of clinical      research centers.
   (See pp. 29 and 30.)
The Congress should clarify       section
301(e) of the Public Health Service Act
to specifically    state whether study
patients   at Public Health Service institu-
tions, hospitals,     and stations,     including
the Clinical    Center, can be charged for
any services they receive.         (See pp. 30
and 31.)
The Department of Health, Education,    and
Welfare agreed with most of GAO's recom-
mendations, although in some instances,
the agreement was qualified.    The Depart-
ment's comments did not always fully
respond to the recommendations.
The Department disagreed with GAO's recom-
mendation that the Congress clarify           legis-
lation on whether partients       admitted to
the Clinical    Center can be charged for
services they receive.        It be1 ieved the
present language in section 301(e) indicates
that these patients     should not be charged,
that establishing     a workable    fee-for-services
system at the Center would be virtually
impossible,    and that to do so might hamper
research.
Based on the results     of this review, GAO
continues   to believe that the Congress
should clarify    its intent as to whether
patients  at the Clinical    Center or any
public Health Service facility     can be
charged for services they receive.




                          iv
                         Contents

                                                                     Page
DIGEST                                                                 i
CHAPTER

   1      INTRODUCTION
              Projects    involving      patient     care   costs
              Program financial         data
              Prior    GAO report
          GRANTEES ARE INCONSISTENT IN CLASSIFYING
            RESEARCH PATIENT CARE SERVICES
            CHARGED TO NIH GRANTS
              Lack of uniform   criteria     for deter-
                mining patient    care costs
              Charges for patient      care often   not
                based on medical     judgments

          FINANCIAL MANAGEMENT OF GRANTS INVOLVING
             PATIENT CARE COSTS                                       14
               Grantees     use unsubstantiated         rates
                  in charging       for patient     care costs        14
               Late,    incomplete,      or inaccurate       re-
                  ports                                               17
               Need for criteria         for monitoring        use
                  of clinical       research    centers               18
          SHOULD PATIENTS RECEIVE NONRESEARCH SERV-
            ICES FREE AT THE NIH CLINICAL CENTER?                     21
              Extent      of nonresearch      services      pro-
                 vided at the Clinical            Center              23
              Potential       impact on research         programs
                 of charging       patients     for nonresearch
                 services                                             24
              Conditions       under which insurers          would
                 pay for services          by the Clinical
                 Center                                               26
               Legality     of charging      patients      at the
                 Clinical      Center                                 27
   5      CONCLUSIONS, RECOMMENDATIONS, AND HEW
            COMMENTS AND OUR OBSERVATIONS                             28
              Conclusions                                             28
              Recommendations   to the Secretary
                of HEW                                                29
              Recommendation  to the Congress                         30
              HEW comments and our observations                       31
CHAPTER                                                                           Page
       6   SCOPE OF REVIEW                                                         36
APPENDIX
       I   Letter    dated October               14, 1977,        from   the
              Inspector    General,              HEW                               37
  II       Principal      HEW officials                responsible       for
              administering       activities               discussed       in
              this report                                                          48
                                   ABBREVIATIONS
DRR        Division      of    Research          Resources
GAO        General      Accounting            Office
GCRC       General      Clinical        Research         Centex
HEW        Department         of    Health,        Education,       and Welfare
NC1        National      Cancer        Institute
NHLBI      National      Heart,        Lung,       and Blood       Institute
NIH        National      Institutes            of Health
ROE        report     of expenditures
                                          CHAPTER 1
                                        INTRODUCTION
        The clinical      research     of the National.Institutes           of
Health    (NIH) provides       knowledge      and experience      for developing
fundamental      discoveries       into improved     treatment      and care
for humanity.        NIH has been increasingly            emphasizing     clinical
research;     as a result,       its clinical     research      costs have
been growing       at over twice the rate of its total               research
budget.      A part of clinical          research   costs goes for patient
care.
        Patient     care costs can be incurred                   for services          pro-
vided to inpatients           or outpatients.             They include            routine
and ancillary         costs.      Routine      costs are for items customarily
included      in the hospital         room rate,         such as dietary              and
nursing      services     and minor medical            supplies.           Ancillary
costs are for such items as laboratory                         tests,      use of oper-
ating    rooms, and anesthesia.                Depending         on several         factors,
including       a patient's      medical       condition         and the policies            of
a particular        NIH organization,            NIH may pay either               (1)
all costs for patients             participating           in research         or (2)
costs for only those patient                 care services            directly        con-
nected with research            studies,       leaving       the cost for non-
research-related          care to be paid for by patients                      or insurers.
         We examined how patient     care costs incurred    by NIH are
determined      and how much financial     and management control
NIH exercises       over patient  care costs incurred    by research
centers     under NIH grants.     Our review was directed       pri-
marily     at NIH management of patient       care costs rather      than
clinical     research   programs  in general.
PROJECTS INVOLVING PATIENT CARE COSTS
      Patient care costs come from two areas:        (1) research
at the NIH Clinical   Center and (2) grantees     and contractors
funded by any of the NIH research      institutes  and the Division
of Research Resources     (DRR), which serves the resource
needs of all the institutes.
        The largest       amount of NIH grant awards for research
patient    care is for operating             discrete     clinical        research
centers,      areas of hospitals          with a specific          number of beds
set aside for research            patients.        A discrete       center       typically
has from 6 to 30 beds and its own nursing,                       dietetic,         and
supporting       technical     staff     to provide     precise       controls        and
observations,        in addition       to its own laboratory,               diet    kitchen,


                                                1
patients' lounge,    nurses'       station,           and conference          room.      Many
also have outpatient     facilities.
         NIH also awards grants             for operating        clinical       research
centers,      known as scatter           bed centers,       where research           may
be conducted         on patients       anywhere in the hospital.                  In
addition,       it allows      patient      care costs as part of some grant
awards for regular            research      projects,     such as when NIH-funded
clinical      research     centers       are not available           to investigators
that are studying          patients       and doing other          types of research.
In either       instance,       grant awards may restrict               patient      care
costs to research           involving       either    inpatients        or outpatients
or it may allow research               involving      both types of patients.
An institution         may receive        several     grant    awards,       including
funding     for both a discrete             center    and a scatter          bed center.
         Most NIH-supported          clinical        research         centers     are oper-
ated through        grants      awarded by DRR.             They      are   known    as General
Clinical     Research Centers            (GCRCs).          Studies       under    the   GCRC
program can deal with a wide range of human diseases.                                    Grants
to GCRCs typically            fund administrative               costs of operating
the GCRCs as well as routine                  costs,       ancillaries#          and other
services      involved      in clinical         research.           The grants       do not
directly     provide      funds for researchers'                  salaries       or other
costs associated          with actual         research.           Support      for specific
projects     can be obtained           through       non-Federal          or Federal
sources,      including       research      grants       from one or more of
the NIH institutes,             each of which does research                    on specific
categories       of diseases.          NIH officials            estimate       that more
than 1,500 of the 3,900 researchers                        using GCRCs in fiscal
year 1975 were supported               by $280 million              in grants       and
contracts       awarded by individual              institutes          for research
projects.
        The National      Cancer        Institute    (NCI) and two other         insti-
tutes    also award grants            for support     of clinical      research
centers     where facilities            for research     on specific      diseases
are needed or where there                 is no GCRC available       to researchers.
Unlike     grants  to GCRCS,          these grants      often   help pay clinical
researchers'      salaries.
         NIH supports      over 1,300 hospital          beds for research          on
human subjects.          The GCRC program alone funds about 785
beds.       Another   519 beds are located          at the NIH Clinical
Center,      a Public    Health     Service    research     hospital     located
on the NIH reservation            in Bethesda,      Maryland.        Additional
beds are supported          through     contracts     and grants      awarded
to institutions        throughout       the Nation      by the individual
institutes.         In fiscal     year 1975, the average daily               inpatient


                                               2
census in the GCRCs and the NIH Clinical        Center was 918
patients,   while outpatient      visits to GCRCs and the Clinical
Center totaled    127,739 visits.
PROGRAM FINANCIAL            DATA
      During calendar    year 1975, patient       care costs    incurred
at the Clinical    Center and grant     awards for patient        care
by DRR and six research      institutes   totaled     an estimated
$76 million.    i/
       Most of the patient       care costs      identified       by NIH were
incurred     at the Clinical     Center and through          grants     awarded
for support     of discrete     centers.      Estimated      patient     care
costs at the Center totaled           $32 million      during     1975.     The
table    below shows the amount of grant awards,                the number
and types of grants        awarded,    and the NIH organizations
making the awards.
                       NIH Grant    Awards for Patient        Care Costs
                                       During  1975
                                          Grants to                  Grants to
                                     discrete    centers         other   facilities
NIH organization                   Number        Amount         Number           Amount
DFtR                                 85      $32,608,646           2       $     171,387
NC1                                    6          1,910,958      84            6,135,009
National   Heart,  Lung,
  and Blood Institute
   (NHLBI)                                                       50            1,882,579
All     others
      (4 institutes)                 - 3            473,047      56              629,835
          Total
                                     C94     $34,992,651        -192       $8,818,810



lJNIH records          do not separately         show patient    care costs
   incurred       through    contracts.        Such costs could be substantial
   in total,        but they may make up only a small portion                 of indi-
   vidual      contracts.       There were 2,060 research           contracts
   funded for $389 million              in fiscal     year 1975, and NIH
   officials        could not readily         determine     the number of con-
   tracts      involving     patient      care costs OK the portion          of
   total     funds awarded under contracts               for these costs.

                                              3
PRIOR GAO REPORT
      In a December 26, 1968, report to the Congress,
"Need for Further Action To Determine Allowable Costs and
Recover Overpayments Under General Clinical     Research Center
Grants" (B-164031(2)),   we pointed out that five of the six
grantee institutions   reviewed had received cost reimburse-
ments in excess of allowable    costs, we recommended that
(1) the Department of Health, Education,     and Welfare (HEW)
Audit Agency audit other grantees as requested by NIH and
(2) based on such audits, NIH act to recover any amount
improperly  charged to the grants.
       NIH agreed to request the audits and as of June 1972,
reported a total of $1,978,872 in recoveries         from grantees.
NIH also expected further      recoveries  following    settlement
with grantees.     In October 1976 an NIH official       told us
the audits had been completed and recoveries         had been
made in full.     However, files    showing recoveries    after June
1972 were not available     either at NIH or the HEWAudit
Agency f and we were therefore      unable to determine the total
amount recovered.




                                  4
                                     CHAPTER 2
               GRANTEES ARE INCONSISTENT             IN CLASSIFYING
        RESEARCH PATIENT CARE SERVICES CHARGED TO NIH GRANTS
        NIH does not have an overall            policy     indicating       when it
will    pay the costs of patient            care services.          Only two of
the seven NIH organizations              that award research          grants
providing     for patient       care services      have issued guidelines
on the subject.        Although      these guidelines         differ     in some
respects,     they both provide          (1) that medical         judgments    be
used in determining          which services      should be charged           to the
grants     and (2) that payment should usually                be made only
for those services         related     to research     studies       under the
grants.
        Most of the grantees            we visited    based their       charges
for patient       care services         on various    financial      consider-
ations,     such as the amount of unexpended                grant    funds   or
whether     patients     had health       insurance     coverage.       This
occurred     because either          there were no guidelines           or the
NIH organizations           that had guidelines         did not require
that they be followed.               Consequently,       in 46 of 150 cases
we sampled,       grantees      charged NIH for the cost of patient
care services        not related        to research     or charged      the patients'
health    insurance      firms     for research-related         services,

LACK OF UNIFORM CRITERIA            FOR
DETERMINING CARE COSTS
        There are no NIH-wide          guidelines   that specifically
discuss      patient     care services     payable  from     research     grant
and contract         funds.   Only DRR and NC1 have established               guide-
lines     for separating      research     from nonresearch       patient     care
services.         The two sets of instructions         differ,      however,
 in how such costs are to be determined               and do not apply to
contracts       that may be awarded by the two organizations.
DRR auidelines
        From the inception        of the GCRC program in 1960               until
the program policy          was modified       in 1968, GCRCs were          operated
exclusively     for research        patient      admissions    and the      grant
paid all costs of the hospitalization.                    The program       policy
modification      allowed     grantees      the option      of admitting
patients     to GCRCs primarily          for care provided       that      such
patients     be financially       responsible       for the cost of         their
care.


                                            5
       To give grantees     guidance    in complying      with the program
policy   modification,     DRR prepared     a service     patient   policy
for GCRCs in 1970.        Over 90 percent     of the GCRCs had imple-
mented this policy      in some form as of July 1977, according
to DRR officials.       The policy    divides    patients      into the fol-
lowing   categories.
        --Research     patients:        Persons selected         by a GCRC
           primarily     to participate         in a research       project.     They
           are either      healthy    individuals         to be used as a
           control    group or, although           they may have to be hos-
           pitalized     for research        purposesp      they have a medical
           problem not requiring           hospitalization        for treatment.
           The grant should be charged               for all costs relating
           to care of research          patients.
        --Research       service     patients:         Persons who require
           hospitalization         for diagnosis           and treatment        for their
           illnesses       and whose participation             in research         is only
           incidental       to their      hospitalization.            These patients
           are fiscally        responsible        for their      routine      costs and
           for the costs of non-research-related                      ancillary      ser-
           vices.
        --Patients     not participating       in research:             Persons
           admissible     under certain    circumstances              to maximize
           use of hospital      beds.    These patients              are fiscally
           responsible     for all of their      costs.
         GCRCs may categorize           a research     service       patient     as a
research      patient     when necessary         to enlist      his cooperation        in
a research       project.        According     to a DRR official,            this pro-
vision      was included       to insure     that researchers           would not
have to deny hospital             admission      to patients        of research      impor-
tance because they are unable or unwilling                        to pay for hos-
pitalization.          He added that the decision               to categorize        a
research      service     patient     as a research        patient      should be
made upon the patient's              admission     and only after          carefully
considering        the patient's        value to the project.
         Until    February      1976 the service       patient      policy     prohibited
professional         fees from being charged to either                  research      or
research       service     patients     by individuals       providing        medical
care to patients,           because such individuals             often     receive
salary      support     from other grants         to do the research.              This
prohibition        was to minimize         the potential       for patients         to
be charged for services              also paid for through            the grants.
Concern that this policy               could deprive      a patient        of the
best consultative           services     or discourage       GCRC admission


                                              6
of potentially       informative      research  cases         resulted  in DRR
modifying      the policy     to allow professional             fees to be charged
research     service    patients.
Comparison of service patient    policy
for GCRCs and the NC1 guidelines
       The NCI guidelines,            implemented       in 1968, state        that all
services       are to be divided         between research           and treatment;
the grant will           pay for the research         portion       of services,
but the patient           should not be relieved           of all financial
responsibilities           merely because of that research.                  The guide-
lines    do not, however,         specifically        prohibit        the grantee
from charging          the grant for nonresearch             costs not paid by
the patient         or the patient's        insurer.       The service       patient
policy     for GCRCs explicitly           disallows       such charges because
the hospital         should be fiscally          responsible        for all billings
and collections           when patients       require     hospitalization         for
treatment,        just    as it would be if the patient                 were admitted
to a regular         hospital    bed.
       The NC1 guidelines        provide      that the principal         investi-
gator,     or the attending      staff     physician      he designates,       must
decide     for each day of care whether             the patient     is in a
research      or normal care status.            If both research       and normal
care elements       are involved       in a day, the investigator            must
decide which of the two predominates.                   If it is research
care,    the grant     should be charged for that day's routine
costs;     if it is normal care,         the routine       costs should be paid
by the patient       or his insurer.
       The NC1 guidelines       also provide       that a judgment        be
made about whether         the cost of ancillary         services    are to be
charged to the grant or to the patient                or insurer.        When the
research    requires     tests  or services      in addition      to those
that would be otherwise         required,     the guidelines        allow the
grant to pay for the additional            items.      But the grant will
not ordinarily       pay for services      that do not result           in ex-
penses greater       than those the patient          would have incurred
even though no study existed.
        The service       patient      policy      for GCRCs uses different,           and
we believe       clearer,      language       for determining      whether      the
grant will       pay for the cost of routine                and ancillary       services.
But,    unlike     the NC1 guidelines,             the service    patient     policy
for GCRCs provides           that the grant will           pay for all costs
when patients         are hospitalized           primarily     for research.         We
believe      a separate      decision       should be made as to whether
a patient      requires      hospitalization           for a medical      condition


                                             7
and whether     ancillary     services  provided     are required    as part
of the research        study or for treatment.        The grant   should pay
for ancillary      services    required   as part of the research       study
and for routine        costs when the patient       does not require
hospitalization        for his medical   condition.
      According    to an NC1 official,        NC1 guidelines         do not allow
fees for professional       services    to be charged to the grant
because salary     support    for professional        and other personnel
is provided     under other grants.        The guidelines         also indicate
that professional      fees cannot be charged            to patients      unless
they are for services       to a patient      requiring      hospitalization
and are not related       to the research       project.
        NIH organizations          other     than DRR and NC1 do not have
written      guidelines      for either        grantees       or contractors      to
use in identifying           patient      care services         chargeable      to NIH.
During     1975, five organizations               not having       such guidelines
incurred      about $3 million          in patient         care costs through
grants,      most of which were incurred                 by the National        Heart,
Lung r   and    Blood   Institute.         NHLBI     officials      indicated     that,
although      no guidelines        exist,      NHLBI     grantees     are   asked   to
obtain     insurance      reimbursements          where possible.
CHARGES FOR PATIENT CARE OFTEN
NOT BASED ON MEDICAL JUDGMENTS
        DRR and NC1 guidelines          provide      that medical          judgments
be used to separate         services      for care chargeable              to the grant
from those for which the hospital                 is responsible           for col-
lecting    from patients       or insurers.          However, most DRR grantees
did not follow       these guidelines;          instead,      they assessed
charges    based solely      on financial         considerations,            such as
whether    grant   funds were available             or whether      the patient
had insurance.         The NCI-funded        grantee     we visited          was ignoring
the NC1 guidelines         by submitting        the patient's         bill      to in-
surers    without    regard    to whether       services      related        to research
or treatment      and charging       to the NIH grant           the portion        of
the bill     not paid by insurers.             The NHLBI grantee             we reviewed
was following      a similar      practice.
Grantees     operating      GCRCs
        In fiscal      year 1975, DRR made grant        awards totaling        $33
million      to fund costs for the research          portion     of patient
care services.          During the same period,        grantees     received
from persons        categorized    as research    service     patients,      and
their     insurers,     reimbursements    estimated     by DRR to total
$3.2 million.          We visited    five GCRCs that received           awards



                                            8
totaling    $3.7 million    from          NIH and reimbursements     totaling
$1.1 million     from patients            and insurers   for patient    care
services.
       Officials       at only one of the GCRCs based charges on
medical     decisions       as provided        for in the policy.            At the
other    four centers,          officials      often   classified       patients      as
research      patients      and charged the grant for all services
when adequate         hospitalization          insurance     was not readily
available.         Where such insurance            was readily       available,
they often       classified         patients     as research      service     patients
and charged        insurers       for all patient        care services        pro-
vided,     regardless       of whether       the services        were required        for
their    medical      condition        or for the research         study.
        At one GCRC and a unit of another,                     administrative
personnel       were classifying         patients      based solely            on finan-
cial    resources,        such as the extent          of their         hospital      insur-
ance.      In addition,        the GCRC billing           clerk      routinely       placed
patients       in the research        category      if the patient             was from
outside      the State or if insurance              information           might otherwise
be difficult         to obtain.       Conversely        if,     in the billing          clerk's
judgment,       patients      had enough insurance,               they were routinely
placed     in the research         service     category.            Costs were recovered
from Medicaid          for two patients,         who were healthy              volunteers
whose records          were clearly      marked "well          patient."          The billing
clerk     explained       that "Medicaid       will     pay for anything."
        Officials       at another       GCRC did not stress           implementing
the service        patient      policy     until      it became apparent        that
grant    funds could not support                 patient    care service       costs
for the rest of the grant year.                       When they began to stress
policy     implementation,           they also placed a $100 weekly limit
per patient        on services         chargeable        to the grant.       This caused
some researchers           to seek other ways of financing                  research-
related      services,       such as classifying            research    patients      as
research       service     patients       and billing       insurers     for all
patient      care services         provided.
        One GCRC had two distinct             units.       One unit classified
patients       as research       or research     service      patients.       The other
unit    classified      patients      as research       patients      largely    because,
according        to the program director,            the policy       for GCRCs
precludes        payment from grant        funds of the portion             of a re-
search service         patient's      bill   not paid by the insurance
company.         Thus, the hospital        must either        require      payment from
the patient        or absorb the unpaid portion               as a bad debt.         The
director     indicated     some patients        are                 admitted        to that     hos-
pital,   rather      than  another,    primarily                      to be      studied    at the
GCRC and that         it was unreasonable         to                charge       such patients.

         Officials         at another          GCRC appeared            to be trying              hard
to follow          the policy         for    GCRCs.        To aid investigators                     in
classifying           patients,         they    had established               written         policies
and procedures             requiring         that     (1) upon a patient’s                    admission,
orders       be prepared          prescribing           research        tests       to be       charged
to the grant           and (2) a patient’s                 classification             be      listed
for     each day of his admission.                        We believe          that    this        grantee
had the best            system      for    classifying          patients          of any        grantees
visited.

Extent       of   patient        misclassification

        DRR officials               do not make reviews                 to determine            if
grantees         are properly            classifying          patients.            A DRR official
said     that     personnel           were not available                to review        all       as-
pects      of grantee           operations.            He stated          that     grantees
receive        assistance           in interpreting            and applying             policies
on patient           classification             when they         request        it or when
instances          of patient          misclassification                become evident               during
work with          grantees         or reviews         of grantees’            reports.            He
is considering               ways to improve             grantee        compliance          with       the
policy       for     GCRCs.         One option         that    he is considering                   is for
his office           to review         classifications              of selected          patients.

        Because    of inconsistencies               in the methods        grantees
use to determine        patient        care      costs      chargeable    to DRR
grants,     we reviewed      patients’           records        at the GCRCs visited
to estimate      the extent       of noncompliance                with the policy    for
GCRCs when making        patient         classif      ications.

         A total      of 1,721        patients        were discharged                during     fiscal
year     1975 from        the five        centers       visited.           From lists         of
patients      discharged,           we took        a random        statistical            sample
of 150 patient            records,        and    copies       of   related         research
studies,       for    our medical           advisor       to use.          He determined
whether      patients        had been properly                classif       ied--either
as research         service        patients        who require           hospitalization
for    their     medical       condition         or as research               patients      who were
hospitalized          primarily         for    the study.             We asked         NIH to desig-
nate     a physician         to corroborate             these      classifications,
but NIH officials              agreed       to accept         our classifications                 with-
out corroboration.

        After       initially         reviewing            the cases, our medical     advisor
discussed         them with          physicians            at the GCRCs where   necessary




                                                      10
and obtained   additional       information                    on some cases.                   He then
made his final   classifications.
     These final             classifications            differed              from classifications
by GCRC officials              for 46 of the           150 cases              reviewed,     as shown
below.


                                Classlfled       by GAO       Classified     by    GAO
             Total              as research       service      as research       but        Total
         discharges                but by grantee           ’    by grantee      as    classif      ication
GCRC           1975    Sample        as research               research     service       differences

 A                98    15                  1                             8                          9

 B            454       30                  0                             4                          4

 C            383       31               10                               1                       11

 D            663       56               13                               5                       18

 E            123       22              2                                 0                      4
          1,721        150              28                              18                       46
                       -                =                               =                        zz




        For cases that were classified                   as research       by the grantee
but as research           service     by us, we found no evidence                 that
grantees      used the special           provision       in the service         patient
policy     that allows         categorization         of research       service      patients
as research        patients       to enlist      their     cooperation.         Rather,
it appeared        that such differences              occurred     primarily        because
grantees      did not make classifications                   in accordance        with the
policy.       Of the 28 cases in this               category,      14 were in units
that routinely          classified       patients       as research      patients,        10
were in a GCRC that did not stress                      policy    implementation
until    late    in fiscal        year 1975, and the other              4 were in units
that made classifications                solely     on administrative           judgments.
         The net financial       result    of classification             differences
for the cases reviewed           is that DRR would have been charged
$12r600 less using our classifications                   and, after          adjustments
for differences        explained      in chapter       3, ordinary         rates    and
rates     charged the Government,          patients,        or insurers         would
have been charged $12,700 more.                 Projecting        the sample
results      to the total     1,721 patients         discharged        from the five
GCRCs in fiscal        year 1975, we estimate             that 488 patients            were
classified       improperly.       These improper        classifications            are
estimated      to have resulted         in a net overcharge            to the GCRC
grants     of $126,800,      based on rates        used for charging             the
Government,       and a net undercharge          to the patients             or their



                                                  11
insurers    of $121,800,     based       on ordinary hospital           rates.
Patient   discharges     reported        by all GCRCs totaled           28,452
in fiscal    year 1975.
        After   our review,     officials      of DRR's GCRC Branch drafted
a proposal      that would require        institutions          operating       GCRCs
to have local        review groups audit         classifications           of study
patients      admitted     to GCRCs. DRR representatives                 visiting
GCRCs would be required           to review      and report       on the ade-
quacy of these groups’          auditing     practices.
Centers     funded    by NC1 and NHLBI grants
       A cancer research      center   we visited      received a grant
award of $1.2 million       from NC1 and reimbursements         of more
than $705,000      from insurers     in fiscal     year 1974.   The NHLBI
grantee   we visited    received     a grant award of about $600,000
and reimbursements      of about $472,000        from insurers.
        Officials       at the cancer research        center    were not gener-
ally    attempting        to comply with NC1 guidelines          for identifying
patient      care services      allowable     to be paid under the grant.
Instead      they were billing        insurance   firms     for their   patients'
entire     hospitalization        and then charging       the grants    for the
portion      of the bills      not paid for by the insurers.
        Officials      at the center        funded by NHLBI charged for
patient      services     in a similar        manner.       As a result,       both
grants     have been charged for routine                 patient     care required
for patients’         medical    conditions.          Also,    insurance    firms   are
likely     to be paying       for research,         as well as nonresearch,
costs,     because the insurers           we contacted         said they are
generally        unable to determine          whether     procedures,     such as
urine    samples and blood tests,              relate     to research     or treat-
ment.
         The NC1 guidelines      state  that the nonindigent       patients
should not be relieved         of their    obligation    to pay for hospita-
lization     expenses they would have incurred           if there were no
research     study.    However,     the NC1 grantee     we visited    made
not charging       the patient    the rule rather     than the exception.
        The NHLBI grantee       also never charged patients                studied
at their    center.      An official    of a major insurer             in the
area where the NC1 and NHLBI centers            are located            said his
firm was not aware that Federal           grant   funds were           being used
to relieve     patients    of all financial     responsibility,                He
indicated    that,     had the firm known, it would have                 refused
to pay for services        provided   at both the NC1 and              NHLBI



                                         12
centers       because     (1) the firm        was being      billed for    research
along     with    nonresearch      services        and (2) many insurance          con-
tracts     exclude      payment    for    services      indirectly    paid    by the
Government        or for     which   patients       have not been charged
directly.

        Both NC1 and NHLBI grant                 officials          said       they were not
aware     that      the grantees       were not separating                   research        from
treatment         services        as a basis     for determining                 charges       for
patient       care     services.       An NHLBI grant             official          believed       the
grantee       was determining           such charges           based on DRR’s service
patient       policy       for GCRCs.        An NC1 grant           official          said     many
NCI-funded          grantees       were probably         billing        grants        for    the
balance       of patient          care  services       not paid         by insurers,
but he believed              grantees    were separating              research          services
before      billing        insurers.

          The NC1 official              felt     that      grants     management        officials
were responsible                for   informing          the grantee       of the NC1 posi-
tion      on patient          care   costs       chargeable         to the grant          and that
the grantee            was responsible             for     complying.        The official
agreed        that     neither      patients         nor insurers         should      be charged
for      services        provided       as part        of the research           study.         The
official          noted,      however,       that      NC1 has not stressed               to grantees
the importance              of separating            research-        from non-research-
related         services       because       grantees         have reported         the proce-
dure      to be difficult.

         The NCI-funded            grantee        we visited        was separating
research        services        from    treatment-related               services       when
such separation              was to its         financial        benefit.         For example,
because       researchers’           salaries        are included           in the grant
awards,       NC1 has instructed                the grantee         not to charge           pro-
fessional         fees     to the grant           and NC1 guidelines              indicate
that     patients        or insurers          can be charged            professional
fees     only     for    non-research-related                 procedures.           Therefore,
the grantee           had specified           which      procedures        were research
procedures          and was billing             insurers       professional          fees     for
services        relating        to other       procedures.




                                                  13
                                          CHAPTER 3
                        FINANCIAL       MANAGEMENT OF GRANTS
                          INVOLVING PATIENT CARE COSTS
        HEW officials        are inadequately          monitoring        various
financial     management aspects             of grants      involving       patient
care services.           In some instances,           regulations        do not
require    certain      actions      to be taken,        while    in other       in-
stances,    program officials            do not enforce         the regulations.
As a result,         (1) grantees       are not submitting            timely,      ade-
quate rate proposals             for patient      care costsl         (2) final
approved     rates are not being negotiated                   annually,       and (3)
grantee    reports      of expenditures          (ROES) and annual            reports
of total     activity       are often      late,    inaccurate,         and thereby
not providing         a reliable       basis for sound management decisions.
GRANTEES USE UNSUBSTANTIATED RATES
IN CHARGING FOR PATIENT CARE COSTS
        Grantees'        claims     for reimbursement             of patient        care costs
incurred        under an HEW research             grant must be supported                  by
the timely        submission        of a rate proposal              for each fiscal
year during         which such costs are claimed.                       Hospitals      awarded
grants      involving        over $25,000 in research                patient      care costs
must, according            to the HEW Grants Administration                      Manual,
submit      rate proposals          based on recent            data to the HEW comp-
troller       in their       region     no later      than 3 months after              the
effective        date of the first            grant year and within               6 months
after     the close of each succeeding                    fiscal     year.       The HEW
regional        comptrollers        use these proposals               to set rates         that
hospitals        can charge the grants              for patient          care services.
Also,     timely      negotiation         of rates      can be important            in com-
paring      costs per patient             day incurred         by the various          clinical
research        centers      and in computing           future     grant      awards.        Actual
rates allowable--negotiated                   rates-- are not normally                set for
some time after            the close of the grant year.                     Therefore,        HEW
regional        comptrollers        establish       provisional          rates    for grant-
ees ' temporary          use, and adjustments               to previously         submitted
charges are made after                allowable       rates are negotiated.
Charges to grants    not           based
on currentlv  neuotiated              rates
         Rates for patient    care services     are often     outdated.       NIH
officials      have not emphasized    the need for timely         submission
of rate proposals       by grantees.     Further,    HEW regional        comp-
trollers      do not place a high priority        on negotiating       rates,


                                               14
nor     are they required     to negotiate     rates periodically       or by
any     specific   date.   As of August 1976, 68 of 84 GCRCs l/
were      charging  for patient    care services     at rates which-were
more      than a year out of date:        36 were 1 to 2 years,        18 were
2 to      3 years,  11 were 3 to 5 years,        and 3 were 5 to 6 years
out     of date.    For the NCI-funded      research   center     we visited,
rates       had not been negotiated     since fiscal    year 1972.
       No rates have ever been negotiated                      for the NHLBI grantee
we reviewed.          This grantee         was charging        the grant     for patient
care services         based on the hospital's               normal billing        rate.
NHLBI grant awards involving                   patient     care contain      a standard
statement       that "institutional             hospital      patient   rates may be
used unless        rate otherwise          negotiated       * * *."     This policy
is contrary        to the intent          of the HEW Grants Administration
Manual,     which provides           that provisional          or negotiated        rates
be used.        It is also unnecessary               because the manual already
provides      instructions         to hospitals         that do not have negotiated
research      patient      care rates.          Grantee officials         said that
NHLBI, by approving            the grant        award, has authorized           them to
charge at normal billing                rates.       This resulted      in higher
charges     to the grant         than would have been made using a nego-
tiated    rate.
         The four regional   comptrollers      we contacted       said one
problem     is that grantees    often    do not respond promptly         to
requests      for backup data on rate proposals        previously       sub-
mitted.       Other grantees   submit rate proposals        late.      The
comptrollers       also said that they sometimes delay rate nego-
tiations      because of heavy workloads.
       Because of delays      by regional     comptrollers     in negotiating
rates,   DRR personnel     do the negotiations         for some GCRCs and
recommend rates      to regional    comptrollers       for approval.     How-
ever,   a DRR official     said DRR does not have enough personnel
to negotiate    rates for all GCRCs.
       The HEW Grants Administration             Manual states     that failure
by a grantee       to submit timely      rate proposals      may result       in
research     patient   care costs being disallowed.              It indicates
that the awarding       organization,        such as DRR in the case of
grants    for operating      GCRCs,   is   responsible    for insuring        that
grantees     submit rate proposals.           Grant administration        offi-
cials    we contacted     said that the most severe action             taken

---

l/Since      1975, three of the GCRCs shown in the                   table    on page.3
    have    been phased out of the program.



                                            15
against       grantees      who fail       to submit rate proposals            is to
limit     payment to the amount of the grant                      award based on pre-
vious years'         costs.       Since health          care costs are rising,
this could result            in the grantee           not being fully       reimbursed
for current         costs.       One official         told us that,      because grant-
ees do not fear NIH action,                   grants     management personnel         can
do little        to obtain       compliance       except     threaten     to withhold
future      funds.      Another      official       thought     that the NIH Division
of Contracts          and Grants,        not the awarding          agency,    was respon-
sible     for insuring         that grantees          submit rate proposals.
An official         at the Division,           however,      said that its duties
on insuring         rate negotiations            extended      only to providing       a
list    of grantees         due for rate negotiations               to HEW's Office
of the Comptroller.
         Expenses for some grantees               are finalized--claims          for
expenses settled         and files      closed --based         on provisional        rates
set by HEW regional          comptrollers          or approved       orally    by DRR
officials.         A DRR official       explained       that this       is done when
provisional        rates do not appear unrealistic                  and, based on
these rates,         the grantee   has charged          the maximum allowable
under the grant.           For one grantee           DRR had finalized         expenses
for each of 3 grant years from 1970 to 1972, although                             the
claims       for grant years ended in 1970 and 1971 were not in
accordance        with the negotiated           rate,   and claims        for 1972
were based on provisional             rates.         The HEW Audit Agency
reported        on this grantee’s       activities        in 1973 and again in
1976.        Because of a lack of negotiated                rates,    they were
unable to comment on the reasonableness                       of more than $900,000
in patient        care costs claimed         for the 5 grant          years from 1970
to 1974.         We noted that DRR had finalized                 expenses     for at
least      six grantees     as of August 1976 even though negotiated
rates were lacking.
         A DRR official         said that some grantees          have been signi-
ficantly     underpaid        for patient      care services      because their
awards were based on outdated                provisional      rates     that were
too low.       By the time rates are negotiated                 and the amount
of underpayment          is finalized,       several     years have often
elapsed,     all DRR grant          funds for that year have been obli-
ga ted,    and therefore         DRR cannot compensate         the grantee
for charges        in excess of the grant award.               By the same token,
the official         said some grantees         receive    grant awards in excess
of their     charges       for services      and are allowed        to retain      the
excesses     until      a rate is negotiated          and grant expenses          are
finalized      for that year.           According     to him, these excesses
could be used to compensate               underfunded      grantees       if they
were identified          in time,      but because of delays          in rate nego-
tiations,     excesses        must sometimes       be returned      to the U.S.
Treasury.


                                            16
LATE.    INCOMPLETE. OR INACCURATE REPORTS
         NIH requires       that grantees           report      annually     on both
financial      and scientific             aspects     of grant      operations.         Reports
summarizing       financial        data are known as reports                 of expendi-
tures.      More detailed          financial       data on specific           aspects      of
grantee     operations        is contained          in annual reports.              Both
ROES and annual reports                are used by NIH grant officials                   to
determine      the amount to reimburse                  grantees.        These reports
could also be important                 for handling        other grant management
activities,        such as estimating             future      funding     needs for
individual       grants     and groups of grants                and for desk auditing
grantees'      financial        activities.           However,      the reports        were
generally      of little        use because most were either                   late,
incomplete,       or inaccurate.
        Annual reports        and ROES must be submitted          to NIH within
3 months after         the close of the grant       period.       Of the 84
GCRCs, 7 were 3 months past due and another                   6 were 7 months
past due in submitting            ROES at August 1976.         Of those past
due, six also had not submitted             completed      annual reports.
Another      20 grantees      had submitted    ROES but had not submitted
completed      annual reports.        As previously      indicated,      many
reports      submitted      were inaccurate    because of outdated          nego-
tiated     rates.      In addition,     the reports    often     contained
erroneous       information      or were improperly      completed.        Some
grantees      wrote that they were delaying           submission       of reports
until    rates     are negotiated.
        Failure      by grantees     to submit complete         and timely
reports      results    in more work for NIH officials.                According
to a DRR official,           they have to follow          up, often    repeatedly,
with telephone         calls    and letters    to grantees        requesting      that
reports      be submitted       or requesting     clarification        because
information        submitted     was erroneous      or incomplete.          Also,
desk audits        and other monitoring        activities       are delayed       and
made more difficult,
        NIH guidelines         dated     November      1971 state        that:
        "A recurring    problem   in the administration        of many
        NIH   grant programs    is the delinquency      on the part
        of some grantees      in submitting   reports    required   as a
        condition    of the grant    award."
The same document           directs    NIH organizations        to assure that
such reports    are        submitted.      Although    guidelines    allow NIH
organizations     to       deny future     funding    to grantees     failing
to report,    a DRR        official    said NIH does not take punitive



                                              17
action    against   grantees      failing    to report   'or reporting
improperly.       The official        said that,   because grantees       do
not fear such action,          they do not stress       proper   preparation
and timely      submission     of reports.
NEED FOR CRITERIA FOR MONITORING
USE OF CLINICAL RESEARCH CENTERS
        No specific     criteria       exist    for NIH officials            to use in
evaluating     use of clinical           research     centers,       but several
NIH and grantee       officials        have said that patient              occupancy
rates,     the number of researchers              using the centers,            and
the existence       of training        programs      are important         factors      to
be considered.        Two GCRCs we visited              appeared      to be underused
based on these three factors,                and patient        occupancy       reports
showed that other GCRCs had low occupancy                       rates    in fiscal
year 1975.       Guidelines       indicating       factors      to consider        when
monitoring     grantees'       use of centers,          including      when grants
should be considered           for formal       evaluation,        would make it
easier     for NIH grant officials            to identify         underused      GCRCs,
         For many clinical         research    centers,     NIH funds operations
of an area of the hospital               set aside for research          patients.
For these centers,           as occupancy      rates decrease,        costs per
patient       tend to increase        and vice versa.        Information        pre-
pared for hearings           by the Subcommittee         on the Department           of
Labor and HEW, House Committee               on Appropriations,          showed
justifications         for GCRCs with occupancy           rates below 50
percent.         In a staff     paper,    a DRR official       wrote that
'I* * * occupancy         rates    of less than 50% result          in excessive
wasted staff        time, while       occupancy     rates of over 80% lead
to undesirable         delays    in admission."         HEW has stated        that
about 70 to 75 percent             occupancy     is considered      optimal,
         During fiscal       year 1975, 11 of the 84 DRR-funded                GCRCs
reported      that less than 50 percent              of their   beds were used
by inpatients        categorized       as either      research   ox research
service.        DRR officials        explained     that research     tests     on
some outpatients          require     use of beds.        Also,  the officials
explained       that some beds are used for ordinary                hospital
admissions,        and the hospital         reimburses     the grant    for the
cost.      The following        table    shows fiscal      year 1975 patient
activity      reported      by DRR at the 11 GCRCs.




                                           18
                                    Inpatient      days                      Number of
     Bed-days              Research-          Non-research                   outpatient
GCRC available              related             related            Total        visits
  A       3,290               1,277                 370            1,647          1,115

   B      2,704               1,232                 562            1,794             318

   C      4,080               1,943                    0           1,943                   0
   D      5,475               2,658                 729            3,387           1,476

   E      3,650               1,781                 235            2,016              115

   F      5,110               2,236                 709            2,945                   0
   G       3,285              1,128                    0           1,128              342

   H       2,190              1,028                 428            1,456                   0

   I      1,825                   818                     0            818                 0

   J       3,285              1,436                 154            1,590              159

   K       2,190                  882               166            1,048              289

       Total   use of beds for two of the five           GCRCs visited
averaged     under 45 percent   during     fiscal    year 1975.       Neither
GCRC was used for ordinary       hospital       admissions,     but one
was used to study outpatients.           In the applications          used as
a basis    for recommending   the grants        for approval,      the grantees
said they planned     to use 75 percent         of their    beds,
         NIB and grantee        officials          have indicated        that factors
other     than occupancy        rates       to consider       when evaluating          use of
a clinical        research     center       include      the number of researchers
using the centers           and the existence              of training      programs.
The Chairman of the Subcommittee                      on the Department         of Labor
and HEW told the Director                 of DRR during         1976 hearings:           " We
don't     like    the idea that these centers                 are made captives            by
one or two investigators."                    A GCRC peer review           committee
member has stated           that funding           a research      center    that sup-
ports     only a few researchers                is a poor investment.             A grantee
official       stated    that centers          used by fewer         than four major
researchers         are not practical             or cost effective.           A paper
prepared       by DRR officials           states      that one important          goal




                                             19
of the GCRC program,     inseparable        from the research    itself,
is to educate  physiciansr      scientists,      and paramedical      person-
nel in the complex techniques         and disciplines     of clinical
research.
       One GCRC we visited             functioned         primarily       for two re-
searchers      who, in fiscal          year 1975, accounted               for over 70
percent     of the total        inpatient       days, over 75 percent                 of
the total      outpatient      visits,        and an estimated            75 percent          of
work done in the GCRC laboratory.                      The fiscal         year 1974
annual report         from this GCRC indicated                that these two
researchers        used about 75 percent              of the total          inpatient
days and 90 percent           of the total          outpatient        visits.         According
to the program director,               it   is  difficult         to  teach      clinical
research     techniques       with only two active                researchers         avail-
able and, therefore,            the GCRC has no formal                training        pro-
gram aside from rotation               of medical         personnel.          During a
review    of the GCRC in October               1972, a peer review               group cited
the small number of researchers                  using the GCRC as a weakness
but cited      the fact that several              new groups of potentially
good researchers          were developing           as a strength.             It recom-
mended approving          the application           because its strengths                 far
outweighed       its weaknesses.
      Another    GCRC functioned          primarily       for three researchers
who* in fiscal      year 1975, accounted            for about 80 percent          of
the total    inpatient      days.      It had no formal         training    program
and was ignoring       the service        patient     policy    for GCRCs when
making final     patient     classifications.            After    our visit    to
this GCRC, DRR officials            reduced the grant award for patient
care from $240,269        in grant year 1975 to $98,335 in 1976.




                                               20
                                       CHAPTER 4
            SHOULD PATIENTS RECEIVE NONRESEARCH SERVICES
                      FREE AT THE NIH CLINICAL             CENTER?
        Patients      are accepted       without      charge at the NIH Clinical
Center for study,           diagnosis,        and treatment.         Hospitalization
of some patients          is required        only for their        participation         in
research      studies.        Many other patients,           however,       must be
hospitalized        for their      illness,      and their      participation         in
research      is incidental        to their      treatment.        These patients
or their      insurers      would have been subject              to charges       for
services      rendered      had they been admitted             to an ordinary
hospital      or an NIH-funded          clinical      research     center.
        The feasibility       of collecting          reimbursement    for non-
research    services     provided     at the        Clinical   Center has been
studied    before.      A 1974 NIH study            was made to:
       --Evaluate     the      impact of third-party            reimbursement     on
          each institute's          intramural   clinical          research   program.
       --Discuss   third-party           reimbursement          with insurance
          firms  and Medicare           and Medicaid        officials.
       --Sample     the Clinical         Center patient         population     to
          determine    the extent         of insurance         coverage    and
          nonresearch     services        provided.
       --Analyze       alternative        collection   mechanisms  and
          their     relationship        to the existing    NIH accounting
          structure.
      The results      of the feasibility         study were provided
to the Secretary       of HEW in two memorandums.              In the first,
the Director     of NIH said       that three major concerns            were
repeatedly     mentioned     regarding      the impact of third-party
reimbursement.        These concerns        were that     (1) patient      recruit-
ment would be impaired,          (2) the quality        of clinical      investi-
gations    might be affected,          and (3) problems       associated      with
recruiting     and retaining       investigators      would increase         because
they would have to perform             more administrative        tasks.      The
Director     of NIH concluded        the memorandum as follows:
        "We realize   that  it is impossible      to prove,  before
       the fact,   that these strongly      held beliefs    and predic-
       tions  would result     from the institution      of a third-
       party  reimbursement      policy.  It is our sense that the


                                             21
       risks     have been carefully          and thoughtfully      assessed,
       and we are convinced           that if these beliefs         are proven
       to be true,       the deleterious         consequences    for our
       programs       of clinical     investigation        will be
       irreversible."           (Underscoring       supplied.)
         The second memorandum was submitted             to the Secretary
of HEW by the Assistant         Secretary      for Health.       It dealt      with
the three      remaining  objectives       of the study.       First,    it
included     the results    of discussions        with insurance      carriers,
which showed that services           currently     provided    in Federal
institutions       were nonreimbursable        and that reimbursement
would not be allowed        unless    all patients       were legally       obli-
gated to pay for services          received.       The discussants       felt
that these problems       could be resolved,          but only through
legislative       action.
        A second objective         discussed     was the result        of a sam-
pling    of Clinical      Center patients        as to whether       they had
health     insurance    coverage      and whether       they received      non-
research-related        services.         Based on a 50-percent          sampling
taken by attending          physicians       and social     workers    of the 304
patients      in the Center on January           30, 1974, it was reported
that    (1) about one-third          would not have come to the Center
if they or their        insurance       carriers    were charged       for routine
services      and (2) 29 percent          of the patient      population
received      services    that NIH officials         believed      to be reim-
bursable      by insurance      carriers.
        Finally      the memorandum included              estimates      by Clinical
Center officials            of how much it might cost to operate                    a sys-
tem that could identify              nonresearch        costs.       Using university
medical      center     and independent        clinical        research    institution
models,      the officials        estimated      that the cost of a fee-for-
service      system would range from $250,000                    to $500,000      annually
with a staff         of 15 to 50.        One estimate          included    in a memo-
randum from the Assistant               Secretary       to the Secretary          and
dated several          months before      the memorandums reporting                 the
study results          projected     a $200,000       cost to collect         $9 mil-
lion.      Isolating        nonresearch     costs was considered             a major
problem.
         The Assistant     Secretary     for Health    concluded     his memo-
randum by referring         back to the percentage          of patients
who reportedly        said they would not have come to the Clini-
cal Center if they or their            insurance    carriers     were billed
for routine      services.      He stated     that,   in his judgment,
third-party      reimbursel>ent      would jeopardize       the intramural
research     programs,     and he recommended that no charges              be
initiated.
                                             22
         We believe         that    this      recommendation            is inconsistent
with     the data       obtained        during       the study,         the information
gathered      during        our review,          and the requirements               to charge
patients       in NIH-funded            clinical        research        centers.        It appears
that     the Federal          Government         could      save a lot         of money with
little      or no adverse           impact       on research          programs      if NIH were
to charge        for    nonresearch           services        related      to patients’       ill-
nesses.        Insurers         we contacted           said     they    would    pay for     such
services       under      the conditions             described        on pages 26 and 27.

         The legality            of collecting             reimbursement            for    nonresearch
services        has also         been addressed.                NIH officials            have twice
asked     the HEW Office               of General          Counsel      whether         patients        can
legally        be charged          for     the cost        of treatment          provided          by
the Clinical            Center.          The Office          of General         Counsel         gave
opinions         in 1952 and 1973,                concluding         that     the     Public       Health
Service        Act and related               statutes        provide      no sound legal
basis      for     charging        for     the care of study              patients.             We agree
that     current        legislation            does not clearly             provide         for    HEW
to charge          for    any services            provided        to patients           studied       at
the Clinical            Center       or any other            Public      Health       Service        hos-
pi tal , and we believe                  that     clarifying         legislation            is needed
to specify           whether       charges        can be imposed            for     nonresearch
services.

EXTENT OF NONRESEARCH SERVICES
PROVIDED AT THE CLINICAL CENTER

      Patients     at the Clinical       Center   receive      a wide variety
of nonresearch       services,   estimated      by NIH officials          to
cost  $9 million      annually.      Some services,       such as physical
and dental     examinations,     are routinely       provided,      while    others
are provided      as needed.

          The Clinical             Center      feasibility            study     indicated           that      80
(or more than             half)        of the 152 patients                 sampled        required
hospitalization               for      their     condition          during      part      of their
admission          and that          at least       55 required            hospitalization                during
their       entire       admission.            In 11 randomly              selected          cases      re-
quiring         hospitalization              at the time            of the study,             our medical
advisor         reviewed         the patients’             medical       records.            He found         that
all     procedures           performed         on seven patients                during         the admis-
sion      included         in the study           were nonresearch                in nature.              For
the other          four      patients,         unconventional              methods        were used
to try        to improve           their     medical         condition         and to study             the
effects         of these         methods.         A Clinical            Center      official          said
that      research         at the Center            often       involves        observing           and
collecting           data     on the effects               of accepted          medical          procedures



                                                       23
in an effort        to improve them or as a basis to compare                     results
of untested       procedures   performed on other patients.
        We recognize      that there         is often      a need to accept
patients     requiring      nonresearch         services,       and we are not sug-
gesting    that the Clinical           Center change its method of
selecting      and caring      for patients.            However,      because the
Center has a policy          of not charging            for any services          pro-
vided to its patients,            it absorbs         the cost of nonresearch
services     provided     these patients.              This is contrary         to the
DRR service      patient     policy     for GCRCs and the NC1 guidelines
for cancer research          centers       discussed       earlier,     which require
that patients        needing     hospitalization,           or their      insurance
carriers,      pay for costs of hospitalization                     and nonresearch
service.
POTENTIAL IMPACT ON RESEARCH PROGRAMS
OF CHARGING PATIENTS FOR NONRESEARCH SERVICES
        During     the 1974 feasibility          study,    various     NIH officials
expressed      a strong     belief      that programs      of clinical         investi-
gation    would be hindered           as a result      of third-party          reimburse-
ment, primarily         because of the fear that even partial                     col-
lection     of third-party         reimbursement       would greatly         impair
patient     recruitment.         They explained        that patients         having
exhausted,      or fearing       future     exhaustion     of, their       insurance
coverage     would likely        seek treatment        at local     institutions
rather    than assuming transportation                and other costs related
to an NIH admission.
        As part of the study,         a questionnaire    was prepared    for
all the patients        included.       Two of the questions    dealt   with
whether     the patients      would still     have come to the Clinical
Center    if they or their        insurance    companies  were billed    for
routine     services.
         Of 80 patients     who required         hospitalization        for their
condition,     74 were available          to respond to the two questions.
Fifty-five     patients     indicated       that they would still            come to
the Center even on a fee-for-nonresearch-services                         basis.
The following       table   shows the number of patients                indicating
whether     or not they had health            insurance       and the number of
those stating       whether    or not they would have come to the
Center had they or their            insurers      been billed       for routine
services.




                                           24
                            Would     still             Would not     No response
                             have     come              have come      or unsure
                                      Per -                   Per-S           Per-       Total
                             No.      cent              c     cent     No.    cent      patients

Patients     with
   insurance                  51          80                3     5     10      16           64

Patients    with-
   out insurance             - 4          40                2    30     - 3     30           -10
        Total                -55          74                6     8     13      18           74
                                                            =           =                    =
         All     six patients           stating       that    they    would     not have come to
the Clinical            Center      on a fee-for-services                basis     gave financial
problems         as the reason            for   their      responses.         A Center        official
stated       that     the absence           of the six patients              could     have some-
what hampered             research.           Bowever,       he believed        that     such
patients         would      agree     to participate            in research         if the Center
could      selectively          write       off   charges       for   routine       care    and non-
research         services       when such patients                are of major         research
significance.

        When patients          in the study         explained         the effect         on their
coming     to the Center          if they     were billed           for    routine       services,
the responses          were overwhelmingly              complimentary            regarding
the Center’s         services.         Of the 13 patients               commenting         about
services      provided,        only    one made a comment               that     might     be con-
sidered      negative.         He believed        that     more expert           consultations
were needed         but said      that    he would        still     come to the Center
even on a fee-for-services                 basis.         Following         are question-
naire    responses        from    some other        patients.

        --“It’s       the   best     in    the         world.”

        --“For      further     surgery   would    come here if                had to pay
            because      cannot    get the kind of all      round               care as
            at NIH even when paying            for   it.”

        --“Would       come here    if           it      meant mortgaging      the house.*         * *
            Chose    NIH over    other                recommended    centers     * * *.”

        We recognize        that     hospital     care    is expensive,       and we
are not suggesting            that    patients       be placed    in financial
jeopardy      by attempts         to collect      from    them.     However,     we
believe     that   patients         who can pay for         their   routine    care  and
nonresearch      services         should      do so.




                                                       25
       In response         to our inquiry   about the potential       impact
of charging        patients    for nonresearch    services,      a GCRC pro-
gram official         said there was no evidence        to suggest    that such
charges hamper the GCRCs' ability              to obtain    patients    for
their    projects.
CONDITIONS UNDER WHICH INSURERS WOULD
PAY FOR SERVICES BY THE CLINICAL CENTER
        According      to the feasibility         study,     all major carriers
maintained       that services      provided      by Federal        institutions
were nonreimbursable,          and commercial         carriers        and Blue
Cross/Blue       Shield   expressed      this position         through       standard
exclusion      clauses    in their     contracts.        We met with officials
of several      major insurance        companies      to learn        under what
conditions       they would pay for non-research-related                       services
provided     at the Clinical        Center.
         Officials      of California,          Massachusetts,       and Washington,
D.C.,     insurance      companies       we   contacted--Blue        Cross/Blue
Shield      and Prudential       --said      their     standard   exclusion      clause
would not preclude            their     paying     for services      provided      at the
Clinical        Center.      They explained          that the standard        clauses
excluding         payment to Federal           and State institutions           are used
because patients           in those institutions              are generally      entitled
to free care.           One official        cited      examples of Federal         hos-
pitals      reimbursed       by his insurance           company for services
provided        to policyholders.           He knew of no reason why any
insurer       would not pay for hospitalization                  costs of a patient
admitted        to the Center merely because it is a Federal                       hos-
pital.
        Insurance      company officials          noted,    however,     that
insured      and uninsured      patients        must be treated       equally      with
regard     to charges.       Otherwise        they would not consider            them-
selves     liable    to pay for services           provided    to their       policy-
holders.         However, this     should not affect          hospitals'        proce-
dures for admitting          patients       and providing      services       to them.
For examplep the insurance              officials       would not expect a
hospital       to refuse   admission        to patients      unable to pay for
needed services         not covered      by insurance.
        The feasibility        study indicated      that the Clinical        Center
could charge patients            or insurers    for nonresearch       services
only if it implemented            a billing   system acceptable         to health
insurers.      The Center has no such system.              The NIH study
included    an analysis        of collection     mechanisms     used by uni-
versity    medical      research     centers  and independent       clinical
research    institutions.          It concluded     that,  although       the final

                                            26
system design cannot be determined                before  third-party
negotiations,        the Clinical      Center could probably          use aspects
of each of the techniques             discussed    in the study in creating
an acceptable        billing   system.       As stated   on page 22, NIH
estimates     that such a system would require              from 15 to 50
positions     and an annual operating           budget of $250,000        to
$500,000.       Collections       could amount to as much as $9 million
annually.
LEGALITY OF CHARGING PATIENTS
AT THE CLINICAL CENTER
         The Clinical   Center operates    under authority   of section
301(e)     of the Public    Health Service   Act, which states:
         "For the purposes       of study,      [the Secretary       is
         authorized     to] admit.and     treat     at institutions,       hos-
         pitals,    and stations     of the Service       persons      not
         otherwise    eligible    for such treatment;           * * *.'I
The HEW Office           of General Counsel pointed                 out in its opinions
that this        section     makes no provision             for charging        study
patients       at Public       Health     Service      hospitals.         In contrast,
sections        322(b) and 324(b) allow for treatment                       of certain
classes       of patients,        such as seamen from foreign                 flag
vessels,       but    expressly      provide     for    charging       them.     Moreover,
HEW Counsel said (1) patients                   admitted       for study have tradi-
tionally       not been charged for treatment                    and (2) the study
patient       category      is the only one in which the patient                      is
selected        by the Public        Health     Service       and which has as its
primary       purpose      not the therapeutic            treatment       of the indivi-
dual but the furtherance                of a general          service     function.
Therefore,        HEW Counsel concluded              that the Congress did not
intend      that research         patients      be charged         since it did not
specifically          state    this.
        We found that section            322(d) of the Public             Health     Ser-
vice Act providing           for temporary         treatment      of patients        in
emergencies      includes       language     similar      to section        301(e)
providing     for treatment         of study patients.              Neither     section
makes a provision          for charging        the patients,         but HEW has
charged patients          admitted     under section         322(d) while        treating
all patients       admitted       under section         301(e) without         charge.
In addition,       although       sources    cited      by the HEW Office          of
General    Counsel do not make a specific                   provision       for charging
study patients,         they do not prohibit             such charges.          However,
we cannot specifically             conclude      that the Public          Health
Service    Act allows        for charging        study patients.



                                             27
                                      CHAPTER 5
                    CONCLUSIONS, RECOMMENDATIONS, AND
                    HEW COMMENTS AND OUR OBSERVATIONS
CONCLUSIONS
        NIH-funded       clinical       research      programs     are an important
means of applying            medical      advances      in fundamental      biomedical
research      to humanity.           A part of the cost of clinical              research
goes for patient           care.       Some services        provided    to patients     at
NIH-supported        clinical        research       centers    are required     as
part of research          projects,        but many are necessary           for the
patient's       medical      condition.         In   many   instances,    NIH   has
paid for all services,               even those required           for the patients'
medical     condition.          In other      instances,       insurers   or patients
have been charged for services                    required     as part of research
projects.
        There are no NIH-wide         guidelines    for determining    which
patient     care services       can be charged to NIH contracts        and
grants.      The NIH organizations          that do have guidelines      for
separating      research     from nonresearch      services  do not enforce
them and are unaware of the extent               to which grantees    are
being reimbursed         for costs for which patients        or insurers
would ordinarily         be responsible.
        NIH needs to give more attention                  to various       financial
management aspects           of grants    involving         patient    care services.
Rates that grantees           use to charge for patient              care services
are often      out of date.        Reports    of expenditure           and annual
reports     submitted      to NIH are often         late,      incomplete,       or
inaccurate,       and little     or no management action               results.
Further,     NIH officials       do not have any guidelines                  to help
them determine        when clinical       research        centers    are being effi-
ciently     used.
        At the NIH Clinical          Center,   study patients       or insurers
are not charged even though services                provided    many patients,
including     their    hospitalization,        are required     because of
their    medical     condition.        NIH has concluded     that valuable
research     patients      may not come to the Clinical           Center   if they
are charged and that insurers               may not pay for services         pro-
vided at the Center because it is a Federal                  institution      and
it lacks a billing           system.
       Information     from     patient      questionnaires        indicated that
most   patients    needing      hospitalization          would   come to the Center


                                           28
even if they were charged                    for nonresearch              services.            We
believe       the few patients             stating       that      they     would      not come
if they       had to pay would             do so if the Center                 were to write
off    charges      they      could     not afford         to pay.          Insurance          officials
we contacted          said      they    would      not refuse          payment      to a hos-
pital     just    because         it is a Federal            institution          and would            not
expect      a hospital          to refuse        admission         to patients            unable       to
pay for       needed      services.          Although        no system         exists        for deter-
mining      charges       for     nonresearch         services         provided         at the Cen-
ter , an NIH analysis                showed      that    an acceptable             billing         system
could     be designed           based on systems             used by other              organiza-
tions     doing     clinical         research.

          Current       legislation           neither    clearly       permits       nor clearly
prohibits          charging        patients        at the Clinical           Center     for   non-
research         services.           Historically,         NIH has not charged              for    any
services         at its       Clinical        Center.      This     creates      an inconsistency
inasmuch         as patients           at a. research        center      funded      by an NIH
grant      or contract           can be required           to pay for         nonresearch
type      services,        while       patients       at NIH’s      Clinical        Center    are
not required            to pay.

        We believe      that     this   inconsistency       need not exist            and
that     it can be eliminated           with    little,   if any,      detrimental
effect      to research       conducted      at the NIH Clinical          Center        if
the legislation         were amended         to include     language       specifically
allowing      patients      at the Center          to be charged     for    nonresearch
services.

RECOMMENDATIONS              TO THE SECRETARY              OF HEW

         To improve    the overall                system   under         which    patient   care
service     rates   are determined                  and charges          for   such services
are made I we recommend         that              the Secretary            of HEW require      the
Director      of NIH to:

         --Establish       a uniform        NIH-wide      policy            on patient   care
            costs    with   implementing          guidelines               on allocation
            of charges      for   patient       care     between            NIH and the
            patient      or other     parties.

         --Require     all    contractors        and grantees,          as part    of
            the guidelines,          to submit      information        on how they
            computed     patient       care   costs     charged      to NIH,    such as
            is now required          by the Division          of Research       Resources
            in annual      reports       from General       Clinical      Research
            Centers.

         --Require  that     contract               and    grant      officials         enforce
            the new guidelines.


                                                  29
      We further       recommend      that the Secretary           strengthen
procedures    for     negotiating       rates and obtaining           reports    by:
       --Determining       whether      the regional    comptrollers   are
          adequately      negotiating      patient   care   rates or whether
          NIH should      develop     the capability      to negotiate   its
          own rates.
       --Requiring       that patient       care    rates    be negotiated       within
          a certain      time.
       --Requiring        the Director      of NIH to more vigorously
          enforce      the requirement        for grantees     to submit
          satisfactory        rate proposals,       reports    of expenditures,
          and annual reports:          strengthen      the penalities        for
          noncompliance:         and impose the penality           permitted
          in the regulations         when grantees        fail   to cooperate.
       Until  the new guidelines  are implemented,                   we recommend
that   the Director  of NIH be instructed   to:
       --Require   NIH organizations     with guidelines       for charging
          patient  care services     to their    grants  to require    that
          grantees  comply with these guidelines         so that impro-
          per payments for nonresearch        services   provided   by
          grantees  will  be minimized.
       --Require     NHLBI to discontinue        placing    in grant  awards
          the provision       allowing   grantees     to use ordinary    hos-
          pital   rates    for computing     charges     to the grant  for
          patient    care.
       Finally,      we recommend that the Secretary                require      the
Director      of NIH to establish          criteria      for evaluating        use
of clinical       research      centers.       The criteria      should     include,
but not be limited          to,   consideration        of   occupancy     rates,
the number of researchers              using the centers,         and training
programs     provided      by the centers.
RECOMMENDATION TO THE CONGRESS
        The Congress should decide whether                it is appropriate       for
patients    participating        in federally       supported     medical    re-
search projects         to receive    all services        free at the NIH Clini-
cal Center,      while patients       participating         in research     at an
NIH-funded     clinical      research    center     can be required       to pay
for the non-research-related             services      received.




                                           30
       We recomend that the Congress clarify             section       301(e)
of the Public     Health Service      Act to specifically          state
whether    study patients    at Public    Health   Service       institutions,
hospitals,     and stations1   including    the Clinical         Center,       can
be charged for any services         they receive.
HEW COMMENTS AND OUR OBSERVATIONS

      HEW agreed with most of our recommendations         although,
in some cases,   the agreement    was qualified.     The comments
were not always fully    responsive   to our recommendations.
HEW disagreed   with our recommendation       to the Congress.
The following   sections   deal with areas in which HEW did
not agree with our recommendations      or qualified    its agree-
ment.
Establish     uniform     NIH-wide      policy
        HEW agreed that there should be a uniform                   NIH-wide
policy    on patient     care costs,       but cited       the complexity        of
separating      research    from nonresearch          costs.     Specifically
mentioned      was the difficulty         of categorizing        laboratory
examinations       for research       or patient      care purposes.          HEW
also pointed       out that some of the misclassifications                    reported
on page 11 were due to one clinical                 center    classifying
patients     as research      patients      rather    than research       service
patients     in order to obtain         their     cooperation      in a research
project.
        We believe        that a policy        on patient     care costs should
include      a provision       that all services           be categorized       as
either     research       or nonresearch.          The researcher         must know
why he is ordering            an examination,          and a simple method,         such
as using different            colored     slips    to record     examination       orders,
could be used to separate               research-related         from non-research-
related      examinations.          Also,     a policy     on patient      care costs
should     include      a provision       that researchers         briefly     document
circumstances         in which an individual             who would normally         be
classified       as a research         service     patient    is classified        as
a research       patient.
Require     enforcement       of   new guidelines
        HEW agreed that the new guidelines             should be enforced
but said that NIH believes         retrospective         classification      of
patient    care costs is difficult.            Therefore,       it concluded
that NIH must rely on grantee           institutions        to accurately
apply these guidelines.



                                            31
         Although     grantee      institutions        have a key role in insuring
compliance        with the new guidelines,              we believe     that NIH cannot
fully      rely on them to enforce              the guidelines.        As discussed
on page 12, DRR plans to improve compliance                        with its guide-
lines      by requiring        that local       groups appointed       by grantee
institutions         selectively         review classifications          of study
patients       admitted      to GCRCs. We believe             that a similar
requirement        in connection          with the planned        NIH-wide   guide-
lines      could facilitate          their     enforcement.
Determine  whether  regional      comptrollers
or NIH should negotiate      patient    care         rates
        HEW did not believe      that NIH should do its own rate
negotiating.       It felt   that negotiation     of both patient     care
and indirect     cost rates     should be centralized     in one office
to prevent     hospitals   from having to negotiate       with different
HEW offices     which might take different        views of proper     cost
allocation.
        We agree that coordination            within   HEW is desirable        when
negotiating       patient    care and indirect        cost rates.       However,
HEW did not specify          whether    a determination        would be made of
the adequacy of regional            comptrollers'      efforts     to negotiate
patient     care rates.        Since NIH officials         have been doing
some rate negotiations,            some formalized       procedures     might be
initiated      that would allow NIH officials              to coordinate     with
the regional       comptrollers       in negotiating       rates.
Enforce    reporting    requirements       and
strengthen     noncompliance     penalties
       HEW explained         that the main problem          in obtaining      reports
of expenditures        and annual reports            is the delay in establishing
negotiated     patient      care rates.        Grantees     are reportedly       reluc-
tant to prepare        their     reports     based on provisional        rates,
which,     when later     finalized,       are negotiated       at higher     amounts.
HEW did say that,         if regional        comptrollers      notified    NIH of
delinquent     rate proposals,           cooperation      would be provided.
       We do not believe   that HEW's comments clearly      express
whether    any new steps will   be taken to enforce   reporting
requirements.      Also, no mention   is made about strengthening
or imposing    penalties  for not complying   with reporting     require-
ments.




                                          32
Require      NHLBI to discontinue     grant    award                   provision
allowing      grantees   to use ordinary     hospital
rates    for    computzg   patient   care   charges

       HEW said    that   NHLBI does not allow         grantee      institutions
to use ordinary       hospital     rates   in place    of HEW-negotiated
rates.    In the future,       the grantee       will  be advised         that,                   in
the absence      of an HEW negotiation         agreement,      rates      used                  to
charge   patient     care costs      to a specific     grant     are subject
to later     HEW adjustment      to actual     costs.

        Our point         is not that           NHLBI allows         grantee        institutions
to use ordinary             hospital        rates     in place       of HEW-negotiated
rates.       Rather,        as discussed          on page 15, the grantee                     we
reviewed       had never          attempted       to obtain         negotiated          rates.
The grantee         indicated          that     a standard        statement         in NHLBI
grant     awards      for     patient       care    allowed       normal      billing         rates
to be used unless              a rate       had been negotiated               by HEW.           This
statement        is not included              in grant       awards     by other          NIH organi-
zations      we reviewed.              We pointed        out    that     the statement              is
both    unnecessary           and contrary          to the intent           of the HEW Grants
Administration            Manual.          We therefore        believe        that      it should
be eliminiated.

Establish    criteria            for     evaluating
use of clinical             research        centers

        HEW concurred           in our recommendation                  to establish         cri-
teria    for    evaluating          use of clinical            research        centers.          How-
ever,    HEW believes           that    it continously              evaluates        and assesses
use of clinical            research       centers      through         the NIH peer         review
process      and program          staff     review.        HEW mentioned             that   the
GCRC program         does not have written                 criteria          on inpatient
occupancy       rates      but that       GCRC evaluators              are given        general
written      guidelines         to evaluate         use.       HEW stated          that    GCRCs
are evaluated          every      2 to 5 years         by scientific             review     groups
in accordance          with    DRR guidelines.               Also,       staff     reviews       of
GCRC scientific            and expenditure           reports         are made annually.

         Our recommendation          is to establish           criteria        for  evalu-
ating      use of all   clinical          centers,     not just         GCRCs.     The guide-
lines      used to evaluate        GCRCs could         be used as a basis             for
establishing      NIH-wide       criteria          to evaluate       the use of
all    clinical   research       centers.

Clarify       legislation            regarding
charging        patients       for      services

       HEW did not agree     that   section                   301(e)      of the Public
Health   Service  Act should      be clarified                    to     specifically   state

                                                   33
whether   study patients          at Public      Health     Service    facilities,
including     the NIH Clinical           Center,   can be charged         for any
services    they receive.           To support     its position,         HEW cited
a 1973 legal       opinion     of its General        Counsel,      which reaffirmed
a 1952 opinion.          The opinions        state   that study patients
admitted    to the Center should not be charged because this
would make ability           to pay a factor       in selecting        patients
and that this was inconsistent                with congressional          intent   and
could shift      treatment      criteria      to those for which the patient
would be expected          to pay.       HEW also argues that the Congress
expects   patients       to pay for emergency treatment                under section
322(d) of the act for which no appropriation                        is made but
does not expect patients              to pay at the Clinical           Center,
which receives        a congressional         appropriation.
           HEW also supports       its   contention    that patients       at the
Clinical       Center should       not   be charged    by stating    that:
           --Every     patient     is admitted    to the Center under a
              research      protocol   and, therefore,     all services   they
              receive     are necessary      to the research   objective.
           --Determining      nonresearch         services at the Center is
              almost    impossible      because certain      services  required
              for a routine       hospital      stay are necessary    at the
              Center for research          protocols.
           --The 1973 patient     survey,   which showed that over 74
              percent  of the patients    interviewed      would come to
              the Center even on a fee-for-nonresearch-services
              basis,  was hasty and limited       and reflected   misleading
              patient  attitudes.
           --In      1973 discussions   with insurance     carriers,        they
               indicated     that it was unlikely     that a viable         con-
               tract    would be negotiated     with them or other          carriers
               because of the Center's       program.
        We believe     that congressional          intent      regarding     patients
being charged       for nonresearch      services         at the Clinical         Center
is not clear       and that    specific    clarification           of section      301(e)
of the Public       Health   Service    Act would eliminate              the long-
standing    controversy      over this matter.             Although      we recognize
that the Congress appropriates'money                  for Center operations,
we are not convinced         that it is aware of (1) the extent                    of
nonresearch      services    provided,     (2) the January            1974 NIH
patient    survey which indicated          patients        would come to the
Center even on a fee-for-services                basis      (see pp. 24 to 26),
and (3) statements         by officials      of major insurance             companies

                                           34
we contacted        suggesting    conditions      under     which   they   would
pay for    services      provided    by the Center         (see pp. 26 and 27).
We believe      the Congress      should     once again       look  at this
issue   using     the most current        data   available       and then clarify
section    301(e)      as it deems appropriate.




                                        35
                                      CHAPTER 6
                                  SCOPE OF REVIEW
        This review was made during               1975 and 1976 at NIH
headquarters         and the Clinical         Center   in Bethesda,        Maryland;
Childrents       Hospital      National      Medical   Center,      Washington,
D.C.;     University      of California        Medical     Center,    San Francisco,
California;        Stanford      University     Hospital,      Stanford,      Califor-
nia;    and Peter Bent Brigham Hospital,                  Boston,    Massachusetts.
We reviewed        5 of 85 grants         for discrete      General     Clinical
Research Centers          funded by the Division            of Research Resources,
1 of 6 discrete         clinical      research     center     grants    funded by
the National         Cancer Institute,         and 1 of 50 grants          involving
patient     care costs funded by the National                  Heart,     Lung, and
Blood Institute.
        We randomly      selected      150 patient      medical      and fiscal
records     from 1,721 patients          discharged      during      fiscal   year
1975 from the GCRCs visited.                With the help of a medical
advisor     and after      discussions      with grantee       officials      where
appropriate,        we also classified         patients     as research       or
research      service    in accordance       with criteria         in the service
patient     policy    for GCRCs. We then compared our classifica-
tions    with those of GCRC officials.
         An NIH analysis         of charging     patients     studied     at the
Clinical       Center,     including     an evaluation      of questionnaire
responses       by 152 (or half)         of the patients       hospitalized         at
January      30, 1974, was reviewed.             We summarized        questionnaire
responses       indicating       whether   patients      had insurance       and
whether      they would come to the Clinical               Center     if they were
billed     for routine        services.
         We reviewed      legisation,     HEW Audit Agency reports,
studies,      legislative       hearings,   grantee  and NIH records,
and NIH and grantee            guidelines   relating  to patient   care costs
allowable       under NIH grants.         We also spoke with four HEW
regional      comptrollers        and NIH, grantee,   and health   insurance
officials.




                                           36
APPENDIX     I                                                                                             APPENDIX   I



                       DEPARTMENT       OF   HEALTH,             EDUCATION.         AND    WELFARE
                                         OFFICEOF          THE     SECRETARY

                                             WASHINGTON.           DC    20201




                                                                                      October        14,     1977


      Mr. Gregory        J. Ahart
      Director,        Human Resources
         Division
      United      States    General
         Accounting        Office
      Washington,        D.C.     20548

      Dear       Mr.     Ahart:

      The Secretary     asked that         I respond     to your request        for
      our comments on your draft              report    entitled,     "Services
      for Care of Patients          Participating        in Research      Supported
      by the National      Institutes         of Health       - How Should They
      Be Determined     and Who Should Pay Them."                 The enclosed
      comments represent         the tentative        position     of the Depart-
      ment and are subject          to reevaluation           when the final
      version   of this    report      is received.

      We appreciate               the    opportunity                    to       comment      on this       draft
      report  before              its    publication.

                                                                   Sincerely              yours,




                                                                   Thomas D. Morris
                                                                   Inspector General

      Enclosure




                                                           37
APPENDIX          I                                                                                      APPENDIX           I



COI'WENTSOF THE DEPARTMENTOF HEALTH, EDLJCATIOX, AND WELFAREON THE
COMPTROLLERGENERAL'S DRAFT REPORTTO THE CONGRESSOF THE UNITED STATES
ENTITLED "SERVICES FOR CARE OF PATIENTS PARTICIPATING IN RESEARCH
SUPPORTED 6Y THE NATIONAL INSTITUTES                         OF HEALTH--HOW SHOULD THEY BE
DETERMINED AND !lHO SHOULD PAY THEM"


GAO Recommendation

The Secretary      of       HEW should     require    the Director    of NIH to establish     a
uniform   NIH-wide          policy   on patient      care costs with implementing      guide-
lines   on allocation            of services     for patient    care between those chargeable
to NIH and those            for which the patient         or other   parties are responsible.

HEW Comments

We agree that NIH policy          should    be consistent      and we plan to establish                                 a
uniform   NIH-wide     policy    on patient     care costs.       However,   separation       of
research   costs    from nonresearch        costs   is a complex     problem    involving
different    considerations       in different      settings.      Any such policy        would
have to allow      consideration      for the specific        programmatic    requirements
of the multiple       awarding    components.

The service         patient     poiicy      of the General            Clinical        Research       Centers
Program       (GCRCP) was implemented                in 1970 as an optional,                  not mandatory,
policy      to permi" L research           centers       to charge patients              and third        party
carriers       for patient        car e rendered           during     the conduct         of research.
There was significant               resistance         to even this          optional       policy      by the
medical       scientific       community        because of strongly                held opinions          that
patients'        voltintary     participation            in research         projects       was of such value
that     they should        be relieved         of all      financial        responsibility           during    the
period      that research        was being conducted.                   Due to resistance             by many to
the idea of charging              research        patients       and the existence             of many regions
where third         party    insurance        coverage        was marginal,           NIH decided         to make
the policy        optional      and gradually            implement        it in order not to impede
the prcgress           of medical      research.           The implementation             has been gradual,
on a center         by center       basis,     with      advice     or assistance           from GCRCP staff
and with       some accommodation             for the individual               financial       systems       peculiar
to each host institution.                   Over 90 percent             of the General           Clinical
Research       Centers      (GCRC'S) have now implemented                      the service         patient
policy      in some form.

The three categories              of   patients       who may be admitted              to    the   GCRC are
defined  as follows:

     1)    Category          A--Research    Patients--Those         patients                admitted to the
GCRC primarily     to        participate    in a research        protocol.                  The GCRC grant
pays all   costs   of        Category    A patient     admissions.




                                                            38
APPENDIX       I                                                                         APPENDIX       I




       2) Category B--Research Service Patients--Those            patients    admitted
to the GCRC primarily        for the purposes of diagnosis or treatment according
to established     therapeutic     regimens, and who are participating        in a GCRC
research protocol      that may or may not be related       to their illness.
Category B patients       are fiscally    responsible  for the routina service
costs of their hospitalization          and for the costs of non-research         related
ancillary   services.      The delineation     between research costs and service
costs is a professional         decision made by the individual      investigator       and
is subject to review by the GCRC advisory committee at each institution.

       3) Cateqory C--Non-research        Patients--Those      patients   admitted to
the GCRC solely for the purposes of diagnosis or treatment accordinq to
established     therapeutic     regimens and who are not participating         in a-
research protocol.         Category C patients    are fiscally     responsible    for
their   hospitalization      costs and may be admitted to the GCRC only when
there are unfunded or underutilized          beds in the Center.

We feel that classification               of individual     patients     in many research
projects      by any one physician            is an extraordinarily        difficult     task due
to the variety        of specialized         medical research involved and knowledge of
local circumstances           which is needed.          The separation      of research activ-
ities    from regular treatment             is a complex problem.          Frequently,      research
and routine       treatment      are occurring       simultaneously      in the same patient
and differences         in classification          in even the same types of patient may
be appropriate        at different        centers.      The classification          of research
patients      must take into account various factors                 including       the require-
ments of the research            project,       the stage of the disease process, and the
resources available           for treatment.         Because of the foregoing           complexities,
we do not believe that it is practical                   for us to attempt to retrospec-
tively     classify     individual      patients.

The GAO visited   5 centers and sampled 150 patient         records.     The report
states that 28 patients     were classified    as research service by the GAO
but as research by the grantee.        In two of the centers,       accounting     for
14 of the 28 cases, the service patient        policy had not yet been imple-
mented.    These cannot be called misclassifications         since the service
patient   policy was not in effect.       In a third  center, accounting       for
most of the remaining 14 cases called misclassifications,             the GCRCPwas
informed that investigators     frequently    have classified     patients    as
research patients   rather than research service patients           in order to
enlist  their cooperation    in the project.

The GAO classified      as research patients 18 patients     for which the grantee
was recovering     insurance funds.   While such misclassifications       result in
a substantial    savings for the Government, we do not condone such practices
and plan to implement stronger guidelines      for utilization      review to
curtail  these practices.




                                                   39
APPENDIX      I                                                                  APPENDIX     I



Fina?ly,    the report states that in four cases classifications                were made
solely on the basis of administrative             judgment.      We agree that klassifica-
tion of patients      by administrative       personnel is inappropriate        even
though the fiscal      resources of the patient         may be a legitimate      considera-
tion in classification.          One center indicated        that these judgments are
made at a professional        level and has written        to clarify     the possible
misunderstanding.        Two other center Directors          contacted have indicated
that judgments are made at a professional              level and instructions       given
to administrative       personnel on classification          by the responsible     inves-
tigators.      We feel classification       by administrative        personnel is appro-
priate    only with appropriate       professional     medical supervision.

 It would be very difficult   to categorize     laboratory    examinations  on GCRC
patients   for research or patient    care and could result in enormous
expenditures   of time and resources.      :t is possible to make this classifica-
 tion for research service patients     where certain      unusual tests are
clearly   being performed only for research purposes, and program guide-
lines already allow for this.      However, to separate research and patient
care tests on research patients     requires    a professional    judgment which
is very tedious and time consuming.

GAO Recommendation

The Secretary     of HEW should require  the Director   of NIH to require all
contractors    and grantees , as part of the guidelines,    to submit information
on how they computed patient      care costs charged to NIH, such as is now
required    by the Division  of Research Resources in annual reports     from
General Clinical     Research Centers.

HEW Comments

The NIH concurs     with   this   recommendation.

GAO Recommendation

The Secretary  of HEWshould         require the Director  of NIH to require          that
contract  and grant officials        enforce the new guidelines.

HEW Comments

We agree that the new guidelines        should be enforced.     However, NIH feels
that it is difficult       to classify  patient care costs retrospectively.
The GAO stated,      on page 20, that insurers   "stated that they are generally
unable to determine whether procedures , such as urine samples and blood
tests,   relate    to research or treatment."    We feel that the responsibility
for classification       is best assigned to the principal    investigator   and
that PITH must rely on grantee institutions       to accurately    apply these
guidelines.




                                              40
APPENDIX I                                                                               APPENDIX I


GAO Recommendation

The Secretary,  HEW, should strengthen       procedures for negotiating   rates
and obtaining  reports by determining       whether the regional comptrollers
are doing a satisfactory    job in negotiating      patient care rates or whether
NIH should develop sufficient     capability     to do its own rate negotiating,

HEW Comments

The HEW believes that NIH should not develop its own capability                            to
negotiate     patient      care rates.      Current Department policy mandates the
use of Medicare cost reports for the development of cost data needed for
both indirect        costs and patient        care costs incurred         by hospitals       performing
on Departmental          agreements.     This procedure was adopted for several
reasons.       It included a desire on the part of the Department to not
impose upon hospitals           an additional       administrative      layer of reporting
forms.     The use of one set of reporting                forms for hospitals         also elim-
inated the possibility            of costs being distributed          in differing        propor-
tions to a given program merely.as                 a consequence of cost allocation
techniques       required     by a reporting       format.     Furthermore,      the centraliz-
ation of negotiation           functions     for both patient       care and indirec-t         costs
into one office          precluded hospitals         from having to negotiate          with different
Departmental        offices--    an additional       bureaucratic    hinderance.         Without
centralization         of this function,        a hospital     must cope with the potential
problem of individual            HEW offices     taking different        interpretive       views of
proper cost allocation.

GAO Recommendation

The Secretary,   HEW, should          require     that   patient    care rates      be negotiated
within a certain   time.

HEW Comments

We agree that timely rates are essential  to the effective      financial
administration  of grants. Accordingly,  we will investigate       the reasons
for the dated rates cited by GAO and take corrective     actions.

 GAO Recommendation

 The Director,  IIIH, should more vigorously enforce the requirement for
 grantees to submit satisfactory      rate proposals,    reports of expenditures,
 and annual reports,   strengthen   the penalties     for noncompliance,  and
 impose the penalty permitted     in the regulations     when grantees fail   to
 cooperate.

 HEW Comments

 We agree that these          reports should       be obtained from grantees.    However,
 the primary difficulty           in obtaining      reports of expenditures   and annual




                                                    41
APPENDIX 1                                                                         APPENDIX I

reports    has been the delayed establishment            of negotiated      rates which are
acceptable     to IIIH, the grantee, and the regional            offices.      Although the
Grants Administration         Manual Chapter 6-50-300 emphasizes the advantages
of predetermined       rates, more frequently         the Regional Comptrollers
negotiations      provide for provisional         rates for forward funding purposes.
These provisional       rates are usually based on historical              costs without
consideration      to inflationary       factors.     AS a result,     grantees are reluc-
tant to use such rates on timely filed               Reports of Expenditures        since the
awarding agency is inclined           to use unexpended funds against the next
year's    budget.     Subsequently when rates are finalized              as much as two or
 three years later,       and generally       at higher amounts, there are no funds
available     for adjustment.       If notified      by the Regional Comptrollers         of
 grantees that are delinquent           in submitting     required rate proposals,       we
will    cooperate with them as fully           as possible.

GAO Recommendation

Until   such time as the new guidelines     are implemented, the Director      of
WIH should be instructed      to require YIH organizations,     presently   having
guidelines   for charging patient     care services   to their grants,    to require
that grantees comply with these guidelines         so that improper payments for
nonresearch    services  provided by grantees will be minimized.

HE\! Comments

We concur.   We will attempt, with our currently  available                 resources,    to
improve grantee compliance with these guidelines.

GAO Recommendation

The Director,  NTti, should require NHLBI to discontinue                placing    in grant
awards the provision   allowing  grantees to use ordinary               hospital     rates
for computing charges to the grant for patient    care.
HEW Comments

The l;HLBI does not allow grantee institutions     to utilize ordinary
hospital    rates in place of rates negotiated   by HE\J. In the future,
however, we will advise the grantee that, in the absence of an HEW
negotiation     agreement, rates used to charge research patient   care costs
to a specific     qrant are subject to subsequent adjustment   to actual costs
by the.HEW.       -

GAO Recommendations

The Secretary,     HEW, should require      the Director     of NIH to establish
criteria    for evaluating  utilization       of clinical    research centers.      The
criteria    should include but not be lim ited to consideration             of occup;lr~~y
rates,   the number of researchers      using the centers,        and training    programs
provided by the centers.       Once criteri     a have been established,       a minimum
frequency     for carrying out such evaluations          should be established.



                                                42
    AP’PENDIX     I                                                                      APPENDIX       I



    HEW Comments

    We concur.   However, we feel that we are continuously   evaluating and
    assessing the utilization   of clinical research centers by means of the
    NIX peer review process and constant program staff review.

    "Utilization"       of a GCRC is a term used in two different              contexts.       In a
    narrow sense it means the occupancy rate for inpatients.                      Although the
    GCRCP does not have specific              written   criteria   for the inpatient      occupancy
    rate, site visitors          have been given general written          guidelines     for
    evaluating      the utilization        of GCRC's. We do not feel that it is Seasible,
    to establish       strict    criteria     which do not allow for unusual circumstances
    at a particular         center.      About 70-75X occupancy is considered optimal.
    Low occupancy rates waste staff                time and too-high rates create problems
    with scheduling         the orderly      completion of scientific      protocols.        However,
    a center's      inpatient       space and personnel resources are usually also
    "utilized"      for the study of outpatients             and sometimes for nonresearch
    patients.       The GCRCP has a program which provides for certain                  "mixed
    centers"      which allow service patients            to be mixed with research patients.

    A typical    mixed center would include five research beds on a ten-bed
    center with nursing and dietary       costs shared between research and service
\   patients    admitted to the center in order to prevent diversion               of research
    resources to service.      This is particularly          useful in a small center
    where personnel costs are proportionately             high on a per bed basis.         We
    feel that it is an effective      means of cost saving and allows flexibility
    in matching center bed size to scientific             need and productivity.       When
    nonresearch patients     and outpatients      are included in the occupancy
    calculation     for the GCRC's for 1975, only 3 out of 83 centers fall below
    the 50% occupancy level,      not 11 as stated in the report,           and corrective
    action has been taken at each of these.              In addition,    a center with an
    apparently    low occupancy rate may, in fact, have its beds occupied
    during daytime hours by studies being conducted on outpatients.                   Further,
    it is not meaningful     to apply strict      criteria      or attempt to implement
    uniform measures for outpatient       utilization        since outpatient    studies may
    vary from only a brief visit      for examination         and testing   to many hours
    of timed infusions     and specimen collections,            It is most effective     to
    rely on program staff and peer scientific             judgment to determine the
    extent of resource occupancy.

     The report also seems to use the term utilization                      in a broader sense, to
     include scientific           accomplishments,     training    value, and value to the
     institutional          research atmosphere.       Evalutions      of this type of utiliza-
     tion are made at many different              points in the life cycle of a GCRC, and
     explicit      criteria      have been developed for them. Centers are evaluated
     by scientific          peer review groups and staff every two to five years in
     accordance with DRR guidelines,               These guidelines          have been re-examined
     recently      and are currently        undergoing revision,          These peer reviews are
     a thorough examination           of the scientific        productivity,      occupancy, training
     programs, need for the center,             administration       of the center,      medical



                                                     43
                                                     .

APPENDIX I                                                                        APPENDIX I


care coverage, staffing        patterns,   fiscal  classification  of patients,
appropriateness     of hospital      rates and future direction   of the research
             In addition,    annual ranking is carried out by the GCRC Advisory
~~~$~!;e     and the National Advisory Research Resources Council on all
centers in their      terminal    and preterminal    years.

Staff reviews of GCRC scientific        and expenditure       reports are also
conducted annually.        Funding  is reduced    at  centers   whose activity        is at
a lower level than anticipated.         Criteria     used in evaluating       the centers
include occupancy rates, outpatients          use, scientific      productivity,        use
of the center for training,        and amount of non-DRR NIH support for
research projects      conducted on the center.        Problems are identified
during this review orocess, staff visits           are made to the center, or
center staff     is invited   here to assist     in the negotiation      of hospital
rates,   to discuss problems itemized in the review, to correct                  reporting
probf ems, etc.     Finally,    to the extent possible early peer review evalua-
tions are scheduled by scientific         and grants management staffwith                   '
consultants    to review the entire program of a center where annual
reports    and other evidence suggest it is performing            below the expecta-
tions of the previous review.

The DRR is aware that some centers may occasionally              be utilized    by only
a small number of investigators        and that, in general,       at least four
investigative    groups using a center are desirable.            However, this does
not necessarily    preclude support to centers with fewer investigators,
particularly    where the narrow use appears temporary and the remaining
investigators    are highly productive.       In the center described on pages
34 and 35, a site visit      was conducted in 1973 and the reviewing commit-
tees stated that the strengths        of this application      far outweighed the
weaknesses.     The Advisory Council recognized that the major usage and
productivity    of the unit had involved only a small number of investiga-
tive groups, but saw evidence that several new groups of potentially
good investigators     were developing.      They unanimously recommended
approval of the center-at       a high scientific    priority.      During the past
three years, fot;r major groups were using the center.               In addition,   a
new group has recently      joined the center and is now using approximately
20% of the facility.

The second center described on page 35 lost several major investigative
groups during the past few years.          Due to this loss, administrative
action was taken to reduce the center from six to three beds, which we
feel is consistent       with the level of scientific     activity    by the remaining
investigators.        A site visit  review was conducted this year and the
reviewers      recommended continued support for one year at the current
reduced level to allow time for a recruitment          effort     to bring additional
investigators       to the center.

The DRR feels that such cases are exceptional and must be judged individ-
ually both as to the-appropriate level of support and the potential  for
broader utilization.



                                               44
APPENDIX       I                                                                   APPENDIX         I


GAO RECOMMENDATION
                 TO THE CONGRESS

The Congress should decide whether            it is appropriate   for patients   who
participate     in Federally    supported     medical research projects     to receive
all services      free when they are at       the PIIH Clinical  Center, while patients
who participate       in research at an      NIH funded clinical    research center,
must pay for the services received            which are nonresearch in nature.

We recommend that the Congress clarify     section 301(e) of the Public
Health Service Act to specifically    state whether study patients       at
Public Health Service institutions,    hospitals,  and stations     including
the NIH Clinical  Center, can be charged for any services       they receive.

HEW Comments

We do not agree that section 301(e) of the Public Health Service Act
should be amended. We believe that the present language indicates  that
patients at the HIH Clinical Center should not be charged for any
services  they receive.

The report indicates         that many patients       at extramural    clinical     centers
require    hospitalization       and other services for their medical condition
and their participation          in research is incidental        to their     hospital
stay.    By applying the extramural            experience to the NIH, the GAO concluded
that many Clinical         Center patients      must be hospitalized       by their     illness
and that their participation            in research is incidental        to the treatment
they receive.        This conclusion      is inaccurate.       While most hospitals
exist to provide direct          benefits    to patients,    the Clinical      Center's      only
reason for existence         is to increase biomedical         knowledge through clinical
investigations.         Every Clinical      Center patient     is admitted exclusively
for the purpose of research under a research protocol.                    Accordingly,        all
services     they receive are necessary to the research objective.                    All
research patients        receive good general medical care as an adjunct to the
research.

Occasionally        a patient    is admitted for     diagnosis   to determine     whether
the patient        qualifies    under a research     protocol.

The determination    of nonresearch services in the Clinical     Center is
almost impossible.     For example, although a low salt diet is a therapeu-
tic regimen in many hospitals,      it is the background for investigational
studies at the Clinical    Center.    Although certain   patient  services      such
as physical examinations     and laboratory   test would be required     for a
routine  hospital  stay, at the Clinical     Center they are necessary to
maintain  the patients   so that research protocols     can be carried     out.

In 1973, under time pressure,           we performed a hasty and very limited
survey and noted that patient           attitudes    towards payment versus non-
payment might be misleading.            Of 80 patients     who required   hospitaliza-
tion,  74 responded.  Fifty-five            said they would still     come to the




                                                45
APPENDIX I                                                                                                  APPENDIX I

Clinical       Center      even on a fee for nonresearch                     services         basis     and only
six said they would not come.                       Thirteen       were uncertain.                The GAO report
indicates        that    this     favorably       indicates        patient      acceptance           of charges
for patient         services.         We disagree.           The patients          were not asked whether
they would permit             their     limited       hospitalization           insurance          to be used for
research       study.       This is an important                consideration            since the average
stay at the Clinical                Center     is 22-23 days compared to 7-8 days in a
community        hospital,         and the number of laboratory                   tests       and other        regular
services       are extended          disproportionately              for research            patients.         Plany
Clinical       Center      patients        suffer     from chronic          diseases         and we believe
many of them would not come to the Clinical                               Center      if they had to use
their     limited      hospitalization            insurance.           The survey          indicated       that
nearly      one quarter         of the patients            surveyed      might      fail       to participate          in
Clinical       Center      studies       if charqed.          Due to the uniqueness                  of these
studies,        and the relatively              smail    numbers of patients                 involved,       this
could     jeopardize         NIli's    ability      to attract         suitable       research         subjects      for
certain       protocols.

We found,       during    discussions          in 1973 with Blue Cross and Blue Shield                              and
Maryland       Medicaid,     that these companies                di d not pay for patients                    involved
in research        and that they required               that all        patients      be charged            in a
like     manner.       The companies         considered        it extremely          unlikely         that a
viable      contract     could     be negotiated          with     them or other          third       parties
because of the nature              of the Clinical           Center's        program and patient
population.          The report        states     that    GAO recently           contacted        officials         of
California,        Massachusetts,           and Washington,           D.C.,      Blue Cross,          Blue
Shield,      and Prudential           and were informed            that    their     standard         exclusion
clause      would not preclud e their               paying     for services          provided         at the
Clinical       Center.      However,        they were not asked if they would pay for any
segment of th e cost of a research                     protocol.         All Clinical           Center        patients
are entered        under research           protocols.         It is unlikely           also,       that      insurance
carriers       would allow      i'iIti to extract         the maximum available                 from them and
waive     the balance       due from the research                subject.         On the other           hand, to
hold the patient          responsible          for the unpaid           balance,      particularly              when
his stay may well           be extended          for research         purposes,       would also be a
financial        burden to the patient              and would tend to limit                 our patients            to
the affluent         or well-insured.

In October     1973, the HEW General            CGWI;~~ ,..a~&       that there     is no legal
base for imposing          a charge for the care of Clinical              Center    patients.
The legal     opinion      reaffirmed      that   study patients      admitted    to the Clinical
Center    under Section         301(e) of the Public       Hc<:lth Service       Act should      not
be charged     for two reasons:            "(1)   it would be inconsistent          with    the
criteria    of selection          of patients    as intended      by Congress     since     it would
inject    a factor     of ability       to pay as to patients         who clearly      are intended
to be selected        solely      in terms of the needs of the investigation,                  and
(2) it would tend to shift              the criteria    controlling       treatment      to those
alone for which the pa-tient              would be expected       to pay."      These arguments
are still     valid.




                                                              46
APPENDIX I                                                                    APPENDIX I




The report states that HEW has charged patients            admitted under Section
322(d) of the Public Health Service Act while treating             withotit   charge
all patients   admitted under Section 301(e).           The FiIH Clinical    Center
receives a Congressional       appropriation    for its continuation.        There is
no Congressional    appropriation     for the temporary treatment         of patients
in emergencies.     This would indicate      that the Congress expects patients
to pay for emergency treatment         under Section 322(d) but not to pay for
research treatment     at the FJIH Clinical     Center.




                                             47
APPENDIX II                                                     APPENDIX II

                       PRINCIPAL   HEW OFFICIALS
              RESPONSIBLE FOR ADMINISTERING        ACTIVITIES
                      DISCUSSED IN THIS REPORT

                                              Tenure      of office
                                              From                    -To
SECRETARY OF HEALTH, EDUCATION,
  AND WELFARE:
     Joseph A. Califano, Jr.                Jan.      1977       Present
     David Mathews                          Aug.      1975       Jan. 1977
ASSISTANT SECRETARY FOR HEALTH:
      Julius   Richmond                     July      1977       Present
      James F. Dickson   III (acting)       Jan.      1977       July 1977
      Theodore    Cooper                    May       1975       Jan. 1977
DIRECTOR, NATIONAL INSTITUTES          OF
  HEALTH:
     Donald S. Fredrickson                  July      1975       Present
DIRECTOR, NATIONAL CANCER
   INSTITUTE:
      Arthur   C. Upton                     July      1977       Present
      Guy R. Newell,    Jr. (acting)        Nov.      19?6       July 1977
       Frank J. Rauscher,   Jr.             May       1972       NOV. 1976

DIRECTOR, NATIONAL HEART, LUNG,
  AND BLOOD INSTITUTE:
     Robert I. Levy                         Sept.     1975       Present
DIRECTOR, DIVISION OF RESEARCH
  RESOURCES:
     Thomas G. Bowery                       NOV.       1969      Present

DIRECTOR, NATIONAL INSTITUTES
  OF HEALTH CLINICAL CENTER:
     Mortimer    B. Lipsett                 July      1976       Present
     Griff    T. Ross (acting)              Apr.      1976       July 1976
     Roger L. Black (acting)                Sept.     1975       Apr. 1976




(10375)

                                   48
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