REVISED OCTOBER 2018. This document applies to all NIH grants and cooperative agreements for budget periods beginning on or after October 1, 2018

research patient care costs, allowable costs, F&A

19.4 Allowable Costs

The type of patient and services received are the determining factors for allowing research patient care costs as charges to NIH grants. If the patient is receiving service or care that neither differs from usual patient care nor results in expenses greater than those that would have been incurred if the study had not existed, then the patient is considered to be hospitalized for usual care purposes and the grant will generally not support the costs. When the research extends the period of hospitalization beyond that ordinarily required for usual care, or imposes procedures, tests or services beyond usual care, whether in an inpatient or outpatient setting, the grant may pay the additional costs. The recipient must decide whether, in fact, the hospitalization period, the tests, or the services have been extended beyond or added to what would ordinarily have been expected, and to what extent. Patient care costs for individuals who are receiving accepted treatment according to standard regimens would not ordinarily be acceptable charges to an NIH grant. Similarly, in certain kinds of clinical trials where accepted treatments are compared against new therapies, research patient care costs generally may be charged to a grant only insofar as they are measurements or services above and beyond those that constitute usual patient care and are specified by the study protocol. Acceptable exceptions are listed below.

NIH funds may be used to pay all costs (whether usual care costs or research care costs) for the entire period of hospitalization or research tests or services for individuals who would not have been hospitalized or received such tests or services except for their participation in the research study. Any such exceptions should be documented in the recipient's records. These individuals may include the following:

  • Volunteers to whom no health advantages may be expected to accrue as a result of the hospitalization. Examples would be normal controls for metabolic or other studies; people with genetic or certain abnormalities of interest to the investigator; healthy individuals participating in a clinical trial, for example a vaccine trial; and sick people brought to the hospital solely for studies when they otherwise would not require hospitalization.
  • Volunteers who are sick and of research importance to the protocol but economically unable or without funds available to them through a responsible third party to pay hospitalization expenses. This includes patients for whom some third-party payer, such as a city, county, or State government, might pay hospitalization expenses in some other hospital but has no responsibility to pay in the hospital in which the approved clinical research is being conducted.
  • Volunteers of research importance who are unwilling to spend their own money or use their hospital plan coverage at that particular time. (Fear of more urgent need in the future for both personal funds and health insurance might be one reason for the patient's reluctance to participate in the study.) The investigator has a special responsibility in making the decision to include patients in this group with full charges to the grant, since NIH expects the patient and/or third party to pay the total costs of usual care. However, in exceptional circumstances, the investigator may decide to pay the total expenses for hospitalization, research services, or tests from the grant if this is required to secure timely cooperation of a valuable study patient not otherwise available.

19.4.1 Computing Research Patient Care Costs

Research patient care costs, whether expressed as a rate or an amount, shall be computed in an amount consistent with the principles and procedures used by the Medicare program for determining the portion of Medicare reimbursement based on reasonable costs. Separate cost centers must be established for each discrete bed unit for purposes of allocating or distributing allowable routine costs to the discrete unit.

When provisional rates are used as the basis for award of research patient care costs, the amount awarded shall constitute the maximum amount that the NIH awarding ICThe NIH organizational component responsible for a particular grant program or set of activities. The terms "NIH IC," or "awarding IC" are used throughout this document to designate a point of contact for advice and interpretation of grant requirements and to establish the focal point for requesting necessary prior approvals or changes in the terms and conditions of award. is obligated to reimburse the recipient for such costs. Provisional rates must be adjusted if a lower final rate is negotiated.

19.4.2 Facilities and Administrative Costs

F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. should not be paid on any cost component representing the cost of research patient care activities. Research patient care rates (routine and ancillary) include F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. related to "hospital-type" employees (nurses, medical technicians, and similar personnel) supported as a direct costCosts that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. under a grant. Therefore, to preclude over-recoveries of costs similar to these F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived., salaries and wages of all "hospital-type" employees working on the grant must be excluded from the salary and wage (S&W) base used to claim F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.. Related fringe benefits also should be excluded if such costs are part of the S&W base. If a "total-direct-costs" base is used to compute and claim F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived., the above-mentioned "hospital-type" salaries also must be excluded from the base as well as any other base costs chargeable to the grant through the application of a research patient care rate.

If the grant or a consortium agreementA formalized agreement whereby a research project is carried out by the recipient and one or more other organizations that are separate legal entities. Under the agreement, the recipient must perform a substantive role in the conduct of the planned research and not merely serve as a conduit of funds to another party or parties. These agreements typically involve a specific level of effort from the consortium organization's PD/PI and a categorical breakdown of costs, such as personnel, supplies, and other allowable expenses, including F&A costs. The relationship between the recipient and the collaborating organizations is considered a subaward relationship. (See Consortium Agreements chapter in IIB)./contract under a grant provides funding exclusively for research patient care activities, no F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. normally will be allowed as a separate cost element since all allocable F&A costsNecessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of F&A (indirect) costs. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. will be accounted for in the routine or ancillary activity costs contained in research patient care rates.

Although foreign organizations are not prohibited from requesting research patient care costs, all F&A expenses must be excluded from the charges to the grant.

19.4.3 Special Procedures for Certain Hospitals

19.4.3.1 Recipients

If a recipient does not meet the threshold for negotiation of a research patient care rate agreement with DCA in a given budget period, as specified under Policy in this chapter, but has a currently negotiated research patient care rate, that rate will be used in awarding and reimbursing research patient care costs, regardless of the amount that the recipient expects to incur. In all other cases, the recipient will be reimbursed at a rate not to exceed the lesser of actual research patient care costs or the rate included in its Medicare cost report.

19.4.3.2 Consortium Participants/Contractors under Grants

If a hospital incurring research patient care costs is not the recipient, the recipient will be responsible for establishing the rate or amount that will be reimbursed for such costs unless the hospital also is a direct recipient of other HHS awards and in that capacity has established a research patient care rate with DCA.

If a participating hospital expects to incur more than $100,000 in research patient care costs as specified under Policy in this chapter, the recipient must negotiate a rate for that hospital unless the relationship between the recipient and the hospital is considered "less-than-arms-length." In this case, the recipient should contact the GMO to determine whether DCA should negotiate the rate.

If a participating hospital expects to incur $100,000 or less in research patient care costs (as provided under Policy in this chapter), the recipient will use the lesser of actual costs or the rate in the hospital's Medicare cost report as the basis for determining reimbursement. For purposes of this paragraph, the recipient will apply the thresholds to each hospital individually.

19.4.4 Financial Responsibilities

If the costs of patient care are funded by the grant, and whether those costs are classified as usual patient care or research patient care, the amount recovered from third parties must be credited to the grant. However, patient charges must be adjusted for both routine services and ancillaries prior to applying the third-party recoveries. The recipient is obligated to pursue recovery to the fullest extent possible and should be able to document those efforts. An example of such an adjustment follows:

If the standard fee schedule charge for a CT scan is $500, the negotiated research patient care agreement rate is 75 percent, and third-party insurance pays $300, the maximum amount that may be charged to the NIH grant is $75, based on the following calculation.

Standard Fee Schedule X (multiplied by) Negotiated Rate = Cost-(minus) Insurance = Maximum Charge to NIH Grant

$500 x .75 = $375 - $300 = $75

In those instances when the recipient determines that the balance of the patient's bill may be charged to the grant (see Allowable Costs in this chapter), the total bill must be adjusted to cost before applying any third-party recoveries. The remaining balance of allowable costs may then be charged to the grant.

In certain circumstances, funds may be awarded that support tests specifically developed for research purposes that are subsequently billed to third parties. In such cases, funds recovered from third parties must be credited to the grant account.