October 30, 2014
From BNA Health Law Reporter

by John Aquino

Over the past few years, clinical research has shifted from universities to community hospitals and physician clinics, bringing with it special liability and compliance risks, speakers at a recent webinar said.

The webinar, “Challenging Compliance Issues in Conducting Clinical Research,” was sponsored by Polsinelli PC Oct. 23 and featured attorneys from the firm as speakers.

Kristen Rosati, a shareholder at the firm's Phoenix office and also immediate past president of the American Health Lawyers Association, said, “Part of the reason for the shift of where clinical research takes place is because sponsors find community hospitals and physician clinics easier to deal with than universities. They appear to like working with community hospitals, especially because they have access to a greater spectrum of patients than are usually available to universities,”

For their part, physicians connected to community hospitals and clinics are interested in clinical research because it is one way to get cutting edge treatments to their patients, Rosati said, and clinical research also can produce additional revenue streams for both physicians and hospitals.

“But there are also liability and compliance risks involved,” Rosati said. “After all, the purpose of conducting this research is usually to determine whether or not a product is safe, which means that it can be unsafe.”

Rosati said that the recent phenomenon of physician-owned companies may cause special concerns because physicians tend to rely on their professional liability insurance which require a rider to cover clinical trials.

Research or Not?

Ana I. Christian, an associate at Polsinelli's Los Angeles office, said that it is surprisingly difficult to determine when a hospital is engaged in research. If it is, then the activity is regulated by laws and regulations such as the Department of Health and Human Services human subject research regulations.

The situation often begins when a physician with privileges at a hospital wants to use its facilities and personnel for research. Christian said that a community hospital is engaged in human subject research if it is

• conducting invasive or noninvasive procedures involving the administration of the investigational drug, device or procedure;

• requiring or allowing any of its personnel to obtain informed consent, such as when the principal investigator (PI), who is the one responsible for obtaining informed consent, delegates the responsibility to hospital nurses;

• obtaining identifiable information from patients by conducting research interviews or administering questionnaires, such as those developed by a device manufacturer to assess the long-term effects of a device; and

• collecting specimens from patients or analyzing identifiable specimen, even when hospital personnel doesn't directly interact with patients—for example, when a hospital lab analyzes blood drawn at a physician's office.

On the other hand, Christian said, a hospital isn't engaged in human research when

• its personnel perform services for investigators that are typically employed by the hospital on a commercial basis and not for research, such as a blood-draw;

•  the services don't merit professional recognition or publication privileges; and

• hospital personnel don't administer anything being tested under the protocol.

A recent phenomenon is the physician-owned research company, which can pose serious compliance issues for hospitals if the relationship isn't structured correctly, Polsinelli's Kristen Rosati said.

“A colonoscopy undertaken by a doctor who isn't a PI is usually considered routine care and not research,” Christian said. “But the use of an experimental camera during the procedure would likely make it research.”

Christian said that if a hospital determines it is engaged in research it should ensure that the hospital is a third-party to the clinical trial agreement or has a separate side agreement with the sponsor.

“You want to make sure you have a direct line with them to get them to ensure your indemnification and subject insurance reimbursement. You also want to ensure that the hospital is included in the Institutional Review Board review and the informed consent provided to patients.”

If a hospital determines that it isn't engaged in research, it should make sure that its typical services agreement is in place with the investigator or study site, Christian said.

Hospital-Physician Relationship

Special consideration is needed in handling physician relationships, Rosati said. “We've found that many community hospitals have developed their programs organically in response to the particular physicians it works with and that they sometimes don't have adequate compliance programs in place.”

The Stark Law, 42 U.S.C. § 1395nn, is implicated when there is a financial relationship between the study site and the PI and the PI refers federal program business to the site, Rosati said. “That's a big deal when it kicks in because it's a strict liability statute, no specific intent is needed,” Rosati said. “The anti-kickback statute, 42 U.S.C. 1320a-7b, applies to all potential relationships where a federal program could be billed. That's not a strict liability statute, however.”

The budget contained in the clinical trial agreement or side agreement must list what the hospital and nonemployed investigator are doing and what is being paid for, Rosati said. All payments must be consistent with fair market value (FMV), and the site should have a reliable internal confirmation of FMV.

Physician-Owned Research Company Issues

A recent phenomenon, Rosati said, is the physician-owned research company, which can pose serious compliance issues for hospitals if the relationship isn't structured correctly.

“The physician who owns his own research company may end up contracting with research sponsors without making the hospital a party to the clinical trial agreement, which means the hospital has no protection through indemnification or subject injury reimbursement. Physician companies often do not carry sufficient insurance. The physician relies on his or her liability insurance, which requires a rider for clinical trial coverage. So you can't look to the doctor if something bad happens,” Rosati said.

In order to have Stark and anti-kickback compliance, there needs to be a separate agreement between the physician's company and each hospital or its affiliate that provides services, space or staff for research with the services receiving fair market value,” Rosati said.

Billing compliance also can be a problem with physician-owned companies if the hospital or its affiliate doesn't know that services being provided are part of a clinical trial. “There are complicated billing/compliance issues for Medicare, Medicaid and private insurers. Medicare and Medicaid require you to code those services.”

Conflicts of Interest, Sunshine Act

The issue of payments between industry and physicians that created conflicts of interest has generated lawsuits, regulations such as the Sunshine Act and extensive media coverage, Rosati said.

If a physician has a financial interest with physicians, there is a potential that the physician's actions could be influenced by financial gains. A hospital needs a policy in place for oversight of potential PI's conflicts of interest, Rosati said.

She cited lawsuits that alleged conflicts of interest that brought harm to patients, such as Getsinger v. University of Pennsylvania, Pa. C.P., No. 001885, settled 11/2/00).

The Physician Payments Sunshine Act requires manufacturers of drugs, medical devices, biologics and group purchasing organizations to report payments and items of value over $10 that are given to physicians and teaching hospitals, as well as ownership and investment interests by physicians and their family members.

“Manufacturers also must report payments to physicians made through third parties on behalf of a covered recipient, such as a nonteaching hospitals that receive clinical trial payments on behalf of physicians,” Rosati said. “There is an exception for research—the disclosure of research payments may be postponed for four years from the date of payment or the Food and Drug Administration approval of the product, whichever is earlier.”

The Center for Medicare and Medicaid Services administers the Open Payment Program, which publicly displays the Sunshine Act annual disclosures. “Physicians and teaching hospitals have the right to review their reports and challenge those that are false, inaccurate or misleading. But this is a right that is not provided to nonteaching hospitals receiving funds on behalf of physicians, which is the majority of community hospitals. So you need to make sure you seek advanced disclosure from physicians,” Rosati said.

Rosati noted that in September, the CMS released most of the data on the Open Payments website, but there were many errors and de-identified payments. The CMS extended data correction to Oct. 31.

COI Policy Recommendations

Rosati said that other relevant federal regulations are the requirements in the Public Health Service regulations (42 CFR Part 50, Subpart F) that investigators for all PHS-funded research, which includes National Institutes of Health grants, must disclose financial or ownership interests over $5,000, and FDA regulations, 21 CFR 54.1, under which sponsor must disclose to the FDA in its marketing application the financial interests of an investigator and his or her family or certify that none exist.

Rosati said, “We recommend that a COI policy should require disclosure of all financial interests, not just those over $5,000, so you have consistency for all regulations, and otherwise ensure that the hospital is collecting all reportable information from physicians. It must require that a hospital ensure that the financial disclosure form is completed before research begins and the hospital seek sponsor representation that it is not aware of a COI. If a COI is identified, careful management is required.”

To contact the reporter on this story: John T. Aquino in Washington at

To contact the editor responsible for this story: Lee Barnes at

Reproduced with permission from BNA's Health Law Reporter, 23 HLR 1399 (Oct. 30, 2014). Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033)