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The Business of Clinical Trials Is Booming. Private Equity Has Taken Notice.

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After finding success investing in the more obviously lucrative corners of American medicine — like surgery centers and dermatology practices — private equity firms have moved aggressively into the industry’s more hidden niches: They are pouring billions into the business of clinical drug trials.

To bring a new drug to market, the FDA requires pharmaceutical firms to perform extensive studies to demonstrate safety and efficacy, which are often expensive and time-consuming to conduct to the agency’s specifications. Getting a drug to market a few months sooner and for less expense than usual can translate into millions in profit for the manufacturer.

That is why a private equity-backed startup like Headlands Research saw an opportunity in creating a network of clinical sites and wringing greater efficiency out of businesses, to perform this critical scientific work faster. And why Moderna, Pfizer, Biogen, and other drug industry bigwigs have been willing to hire it — even though it’s a relatively new player in the field, formed in 2018 by investment giant KKR.

In July 2020, Headlands announced it won coveted contracts to run clinical trials of covid-19 vaccines, which would include shots for AstraZeneca, Johnson & Johnson, Moderna, and Pfizer.

In marketing its services, Headlands described its mission to “profoundly impact” clinical trials — including boosting participation among racial and ethnic minorities who have long been underrepresented in such research.

“We are excited,” CEO Mark Blumling said in a statement, to bring “COVID-19 studies to the ethnically diverse populations represented at our sites.” Blumling, a drug industry veteran with venture capital and private equity experience, told KHN that KKR backed him to start the company, which has grown by buying established trial sites and opening new ones.

Finding and enrolling patients is often the limiting and most costly part of trials, said Dr. Marcella Alsan, a public policy professor at Harvard Kennedy School and an expert on diverse representation in clinical trials, which have a median cost of $19 million for new drugs, according to Johns Hopkins University researchers .

Before covid hit, Headlands acquired research centers in McAllen, Texas; Houston; metro Atlanta; and Lake Charles, Louisiana, saying those locations would help it boost recruitment of diverse patients — an urgent priority during the pandemic in studying vaccines to ward off a disease disproportionately killing Black, Hispanic, and Native Americans.

Headlands’ sites also ran, among other things, clinical studies on treatments to combat Type 2 diabetes, postpartum depression, asthma, liver disease, migraines, and endometriosis, according to a review of website archives and the federal website ClinicalTrials.gov. But within two years, some of Headlands’ alluring promises would fall flat.

In September, Headlands shuttered locations in Houston — one of the nation’s largest metro areas and home to major medical centers and research universities — and Lake Charles, a move Blumling attributed to problems finding “experienced, highly qualified staff” to carry out the complex and highly specialized work of clinical research. The McAllen site is not taking on new research as Headlands shifts operations to another South Texas location it launched with Pfizer.

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What impact did those sites have? Blumling declined to provide specifics on whether enrollment targets for covid vaccine trials, including by race and ethnicity, were met for those locations, citing confidentiality. He noted that for any given trial, data is aggregated across all sites and the drug company sponsoring it is the only entity that has seen the data for each site once the trial is completed.

A fragmented clinical trials industry has made it a prime target for private equity, which often consolidates markets by merging companies. But Headlands’ trajectory shows the potential risks of trying to combine independent sites and squeeze efficiency out of studies that will affect the health of millions.

Yashaswini Singh , a health economist at Johns Hopkins who has studied private equity acquisitions of physician practices, said consolidation has potential downsides. Singh and her colleagues published research in September analyzing acquisitions in dermatology, gastroenterology, and ophthalmology that found physician practices — a business with parallels to clinical trial companies — charged higher prices after acquisition.

“We’ve seen reduced market competition in a variety of settings to be associated with increases in prices, reduction in access and choice for patients, and so on,” Singh said. “So it’s a delicate balance.”

Dr. Aaron Kesselheim , a professor of medicine at Harvard Medical School, called private equity involvement in trials “concerning.”

“We need to make sure that patients” know enough to provide “adequate, informed consent,” he said, and ensure “protections about the privacy of the data.”

“We don’t want those kinds of things to be lost in the shuffle in the goals of making money,” he said.

Blumling said trial sites Headlands acquired are not charging higher prices than before. He said privacy “is one of our highest concerns. Headlands holds itself to the highest standard.”

Good or bad, clinical trials have become a big, profitable business in the private equity sphere, data shows.

Eleven of the 25 private equity firms identified by industry tracker PitchBook as the top investors in health care have bought stakes in clinical research companies, a KHN analysis found. Those companies have been involved in studies ranging from covid vaccines to treatments for ovarian cancer, Parkinson’s disease, and Alzheimer’s.

Contracted firms also analyze patient data and prepare materials to secure approval from regulatory agencies, in hopes of getting more drugs to market faster. And a big draw for investors: Clinical research companies make money whether or not a drug succeeds, making it less risky than investing in a drug company.

The number of clinical trials has exploded to more than 434,000 registered studies this year as of late November, more than triple the number a decade ago.

Still, most trial sites are physician practices that don’t consistently perform studies, according to a presentation by Boston-based investment firm Provident Healthcare Partners.

“Independent sites are being purchased by private equity, and they’re moving into larger site groups of 30, 40, and then their game plan is to roll that up into a business and then sell it again,” said Linda Moore Schipani, CEO of Clinical Research Associates, a Nashville-based company that worked on covid vaccine trials for AstraZeneca, Novavax, and Pfizer. “That’s kind of the endgame.”

Headlands is a prime example. It announced in November 2019 that it would acquire six centers in the U.S. and Canada, including three sites in Texas and Louisiana owned by Centex Studies that would help improve participation among Hispanics and African Americans.

It has made other acquisitions since then and opened new sites in areas with “extremely limited trial options,” something Blumling says distinguishes his company.

“I’m not an evangelist for private equity,” Blumling said. “The ability of KKR to be willing to invest in something that is a three- to five-year return versus a one- to two-year return is something that you won’t see out there.”

A research center in Brownsville, Texas — a stone’s throw from the U.S.-Mexico border and where 95% of the population is Hispanic or Latino — is one of several where it is partnering with Pfizer to boost patient diversity.

To recruit patients, Headlands “is really going beyond what a lot of sites do, which is social media,” Blumling said in an interview. “It’s going within churches, community fairs, really getting out into as much as possible the broader community.”

Headlands closed the Houston and Lake Charles sites because of staffing issues, Blumling said, and finished or moved their studies elsewhere. Blumling said the decision to close those locations “did not have anything to do with the speed of trials.”

Similarly, he said, Headlands is moving the McAllen site’s operations to Brownsville “because it had a larger population of trained personnel.”

“We want to continue to grow sites and do great work,” Blumling said. “If we can’t find the people in order to do that at the quality that we demand, which is at the highest level, then it doesn’t make sense to keep those sites.”

‘The Writing to Me Was on the Wall’

In 2006, Devora Torrence co-founded Centex Studies, which she described as “my little mom and pop business” in a 2021 podcast about female entrepreneurs in science. She said a flurry of interest from private equity came at the end of 2018. The appeal was evident: Drug companies were relying on bigger clinical trial networks.

“The thing is speed, getting it to market. With a bigger network, you get that speed,” Torrence said on the podcast. “The writing to me was on the wall that either I get some outside investment and scale up myself, or kind of listen to these guys and see if maybe now would be the right time to exit.”

Joining Headlands had its benefits during the pandemic because she could “lean on” its other sites with experience running vaccine trials. “Had we not gotten those … we may not still be here,” Torrence said.

Torrence, whose LinkedIn profile said she left the company in 2021, didn’t respond to messages from KHN.

Lyndon Fullen, a health care consultant and former Centex employee, said private equity provides funding that allows companies to add study sites.

“I completely support it,” he said. “If it’s about reaching that large patient population, it’s of course better to have larger groups with that funding.”

Opportunity in Long Covid

Contract research organization Parexel saw opportunity in the covid pandemic — millions of people were developing long covid after infection and there were few, if any, meaningful treatment options.

The company, which employs more than 19,000 people, was acquired in 2021 by EQT Private Equity and Goldman Sachs’ private equity arm for $8.5 billion , billions more than the $4.5 billion that private equity firm Pamplona Capital Management paid when it took Parexel private in 2017.

A growing body of research shows the debilitating effects of long covid, including a recent study of tens of thousands of patients in Scotland where nearly half had not fully recovered months later. But treatments addressing its root causes could be years away. “It’s a huge number of people,” said Dr. Nathalie Sohier, who leads Parexel’s infectious diseases and vaccines franchise. “There’s a lot of need.”

Long covid represents the promise and peril of the work to develop new drugs: Millions of patients create a potentially lucrative market for drug companies, and yet researchers and industry experts say they are reluctant to jump in. In part, that’s because “it’s not a well-defined disease, and that really makes it highly risky for companies to invest in research,” said Cecil Nick, a vice president for Parexel.

“How are we going to be able to tell the FDA that our drug works? We can’t count the number of people who died; we can’t count the number of people in the hospital,” said Dr. Steven Deeks , a University of California-San Francisco professor who is running an observational study on long covid patients.

As of August, among more than 4,400 covid studies, only 304 focused on long covid. A third of those were related to drug development, Sohier said.

Sohier said “there are few” companies in its long covid program. That hasn’t stopped Parexel from pitching itself as the ideal partner to shepherd new products, including by doing regulatory work and using remote technology to retain patients in trials. Parexel has worked on nearly 300 covid-related studies in more than 50 countries, spokesperson Danaka Williams said.

Michael Fenne, research and campaign coordinator with the Private Equity Stakeholder Project, which studies private equity investments, said Parexel and other contract research organizations are beefing up their data capacity. The aim? To have better information on patients.

“It kind of ties into access and control of patients,” Fenne said. “Technology makes accessing patients, and then also having more reliable information on them, easier.”

KHN senior correspondent Fred Schulte and Megan Kalata contributed to this report.

Related Topics

• Cost and Quality
• Health Care Costs
• Health Industry
• Pharmaceuticals
• Clinical Trials
• Investigation
• Patients for Profit
• Prescription Drugs

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By Rachana Pradhan December 2, 2022

After finding success investing in the more obviously lucrative corners of American medicine — like surgery centers and dermatology practices — private equity firms have moved aggressively into the industry’s more hidden niches: They are pouring billions into the business of clinical drug trials.

To bring a new drug to market, the FDA requires pharmaceutical firms to perform extensive studies to demonstrate safety and efficacy, which are often expensive and time-consuming to conduct to the agency’s specifications. Getting a drug to market a few months sooner and for less expense than usual can translate into millions in profit for the manufacturer.

That is why a private equity-backed startup like Headlands Research saw an opportunity in creating a network of clinical sites and wringing greater efficiency out of businesses, to perform this critical scientific work faster. And why Moderna, Pfizer, Biogen, and other drug industry bigwigs have been willing to hire it — even though it’s a relatively new player in the field, formed in 2018 by investment giant KKR.

In marketing its services, Headlands described its mission to “profoundly impact” clinical trials — including boosting participation among racial and ethnic minorities who have long been underrepresented in such research.

“We are excited,” CEO Mark Blumling said in a statement, to bring “COVID-19 studies to the ethnically diverse populations represented at our sites.” Blumling, a drug industry veteran with venture capital and private equity experience, told KHN that KKR backed him to start the company, which has grown by buying established trial sites and opening new ones.

Headlands’ sites also ran, among other things, clinical studies on treatments to combat Type 2 diabetes, postpartum depression, asthma, liver disease, migraines, and endometriosis, according to a review of website archives and the federal website ClinicalTrials.gov. But within two years, some of Headlands’ alluring promises would fall flat.

In September, Headlands shuttered locations in Houston — one of the nation’s largest metro areas and home to major medical centers and research universities — and Lake Charles, a move Blumling attributed to problems finding “experienced, highly qualified staff” to carry out the complex and highly specialized work of clinical research. The McAllen site is not taking on new research as Headlands shifts operations to another South Texas location it launched with Pfizer.

A fragmented clinical trials industry has made it a prime target for private equity, which often consolidates markets by merging companies. But Headlands’ trajectory shows the potential risks of trying to combine independent sites and squeeze efficiency out of studies that will affect the health of millions.

“We’ve seen reduced market competition in a variety of settings to be associated with increases in prices, reduction in access and choice for patients, and so on,” Singh said. “So it’s a delicate balance.”

Dr. Aaron Kesselheim , a professor of medicine at Harvard Medical School, called private equity involvement in trials “concerning.”

“We need to make sure that patients” know enough to provide “adequate, informed consent,” he said, and ensure “protections about the privacy of the data.”

“We don’t want those kinds of things to be lost in the shuffle in the goals of making money,” he said.

Blumling said trial sites Headlands acquired are not charging higher prices than before. He said privacy “is one of our highest concerns. Headlands holds itself to the highest standard.”

Eleven of the 25 private equity firms identified by industry tracker PitchBook as the top investors in health care have bought stakes in clinical research companies, a KHN analysis found. Those companies have been involved in studies ranging from covid vaccines to treatments for ovarian cancer, Parkinson’s disease, and Alzheimer’s.

Still, most trial sites are physician practices that don’t consistently perform studies, according to a presentation by Boston-based investment firm Provident Healthcare Partners.

“Independent sites are being purchased by private equity, and they’re moving into larger site groups of 30, 40, and then their game plan is to roll that up into a business and then sell it again,” said Linda Moore Schipani, CEO of Clinical Research Associates, a Nashville-based company that worked on covid vaccine trials for AstraZeneca, Novavax, and Pfizer. “That’s kind of the endgame.”

It has made other acquisitions since then and opened new sites in areas with “extremely limited trial options,” something Blumling says distinguishes his company.

“I’m not an evangelist for private equity,” Blumling said. “The ability of KKR to be willing to invest in something that is a three- to five-year return versus a one- to two-year return is something that you won’t see out there.”

A research center in Brownsville, Texas — a stone’s throw from the U.S.-Mexico border and where 95% of the population is Hispanic or Latino — is one of several where it is partnering with Pfizer to boost patient diversity.

To recruit patients, Headlands “is really going beyond what a lot of sites do, which is social media,” Blumling said in an interview. “It’s going within churches, community fairs, really getting out into as much as possible the broader community.”

Headlands closed the Houston and Lake Charles sites because of staffing issues, Blumling said, and finished or moved their studies elsewhere. Blumling said the decision to close those locations “did not have anything to do with the speed of trials.”

Similarly, he said, Headlands is moving the McAllen site’s operations to Brownsville “because it had a larger population of trained personnel.”

“We want to continue to grow sites and do great work,” Blumling said. “If we can’t find the people in order to do that at the quality that we demand, which is at the highest level, then it doesn’t make sense to keep those sites.”

‘The Writing to Me Was on the Wall’

In 2006, Devora Torrence co-founded Centex Studies, which she described as “my little mom and pop business” in a 2021 podcast about female entrepreneurs in science. She said a flurry of interest from private equity came at the end of 2018. The appeal was evident: Drug companies were relying on bigger clinical trial networks.

“The thing is speed, getting it to market. With a bigger network, you get that speed,” Torrence said on the podcast. “The writing to me was on the wall that either I get some outside investment and scale up myself, or kind of listen to these guys and see if maybe now would be the right time to exit.”

Joining Headlands had its benefits during the pandemic because she could “lean on” its other sites with experience running vaccine trials. “Had we not gotten those … we may not still be here,” Torrence said.

Torrence, whose LinkedIn profile said she left the company in 2021, didn’t respond to messages from KHN.

“I completely support it,” he said. “If it’s about reaching that large patient population, it’s of course better to have larger groups with that funding.”

The company, which employs more than 19,000 people, was acquired in 2021 by EQT Private Equity and Goldman Sachs’ private equity arm for $8.5 billion , billions more than the $4.5 billion that private equity firm Pamplona Capital Management paid when it took Parexel private in 2017.

A growing body of research shows the debilitating effects of long covid, including a recent study of tens of thousands of patients in Scotland where nearly half had not fully recovered months later. But treatments addressing its root causes could be years away. “It’s a huge number of people,” said Dr. Nathalie Sohier, who leads Parexel’s infectious diseases and vaccines franchise. “There’s a lot of need.”

Long covid represents the promise and peril of the work to develop new drugs: Millions of patients create a potentially lucrative market for drug companies, and yet researchers and industry experts say they are reluctant to jump in. In part, that’s because “it’s not a well-defined disease, and that really makes it highly risky for companies to invest in research,” said Cecil Nick, a vice president for Parexel.

“How are we going to be able to tell the FDA that our drug works? We can’t count the number of people who died; we can’t count the number of people in the hospital,” said Dr. Steven Deeks , a University of California-San Francisco professor who is running an observational study on long covid patients.

Sohier said “there are few” companies in its long covid program. That hasn’t stopped Parexel from pitching itself as the ideal partner to shepherd new products, including by doing regulatory work and using remote technology to retain patients in trials. Parexel has worked on nearly 300 covid-related studies in more than 50 countries, spokesperson Danaka Williams said.

“It kind of ties into access and control of patients,” Fenne said. “Technology makes accessing patients, and then also having more reliable information on them, easier.”

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CRO M&A: How pharma drives it and why private equity is interested in it

INC Research’s June acquisition of Trident Clinical Research didn’t generate the same headlines among clinical research organizations as the company’s $232 million Kendle purchase. But it’s just as illustrative of what’s driving M&A trends among top clinical research organizations. Australia-based Trident has experience and expertise running clinical trials in Australia and Asia. With Trident in […]

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INC Research’s June acquisition of Trident Clinical Research didn’t generate the same headlines among clinical research organizations as the company’s $232 million Kendle purchase . But it’s just as illustrative of what’s driving M&A trends among top clinical research organizations.

Australia-based Trident has experience and expertise running clinical trials in Australia and Asia. With Trident in INC’s fold, the Raleigh, North Carolina CRO builds on its global abilities by adding another region where it can run clinical trials. And that’s only part of the story. CEO Jim Ogle recently told Outsourcing Pharma that the company is also looking ahead to where drug development is going and what its customers want to do beyond those trials.

“The most important thing is that our customers are looking at developing drugs in areas where they ultimately hope to sell them,” Ogle said. “There are emerging populations, in Asia in particular, where there are large number of potential users of the drugs that are being developed.”

With the Rise of AI, What IP Disputes in Healthcare Are Likely to Emerge?

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Consolidation among clinical research organizations has been ongoing for many years. The pace has picked up in 2011 and pharmas are driving it. Big pharma has been looking for ways to slash costs, feeding the outsourcing movement that has led to the CRO industry’s growth.  But pharmas still want to be global players selling their drugs in even more markets. Corey Ackerman , senior partner at Cornerstone Search Group , a New Jersey executive search and recruitment firm for the pharma industry, said that pharmas are turning to CROs to give them geographic reach as well as expertise.

Meanwhile, clinical research organizations are trying to acquire the pieces and services that they think pharmas want them to offer. For example, a specialized CRO able to find patients for hard-to-recruit-for trials could be an attractive target, said Asher Rubin , partner and co-leader of the life sciences practice at law firm Hogan Lovells . By finding the pieces a CRO does not have, a CRO make itself more attractive to clients and more competitive against rivals. The quickest way to achieve these goals is through M&A. “It’s easier to buy it than to build it,” Rubin said.

Private equity has become particularly active in the CRO space, which they see as a better investment than pharma, said John Herndon, a lecturer in accounting and finance at California State University, East Bay and a veteran of several life science firms. A pharma company can spend $800 million over a decade developing a compound only to see it fail in clinical trials and end up with nothing. As a service business, contract research makes money from day one.

“A CRO, you’re going to get paid whether the drug gets approved or not,” Herndon said.

A Personalized Approach to Medication Nonadherence

At the Abarca Forward conference earlier this year, George Van Antwerp, managing director at Deloitte, discussed how social determinants of health and a personalized member experience can improve medication adherence and health outcomes.

Some private equity firms have acquired the smaller, specialized CROs seen as the attractive acquisition targets of larger CROs. Others are investing in larger CROs. Backed by private equity dollars, CROs are making strategic acquisitions of their own.

InVentiv Health was acquired last year by private equity firm Thomas H. Lee Partners. Last winter, inVentiv acquired CRO i3 Research as well as Campbell Alliance, a Raleigh consulting firm. INC, whose backers include private equity firm Avista Capital Partners, bolstered its consulting capabilities with the January acquisition of consulting firm AVOS Life Sciences . These acquisitions are also driven by pharmaceutical companies, Ackerman said. Pharmas wants to get more resources from fewer vendors. To attract pharmas and keep them from looking at other firms, Ackerman says CROs are trying to become “one-stop shops.”

CRO consolidation is expected to continue and several large companies are reportedly in play. PPD ( NYSE:PPD ) is a rumored acquisition target with private equity seen as an acquirer. PRA International , owned by private equity firm Genstar, is being shopped. Either company would give an acquirer immediate global scale. Scale matters, Herndon said, because it makes CROs attractive to the big pharma companies who can offer the biggest contracts.

That, top clinical research organizations and private equity firms hope, is where the money will be made.

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Suggested callout sentence:  While the contract research industry has become increasingly attractive to private equity investors seeking growth opportunities and stable cash flow, investors and acquirers should not lose sight of the importance of conducting effective due diligence with regard to potential or planned transactions.

With an increasing focus on managing costs and shortening time to market, many pharmaceutical companies now outsource their clinical trials to contract research organizations (CROs).  CROs are hired by drug developers and medical-device makers to provide research services such as overseeing preclinical and clinical testing.  The CRO industry has experienced double-digit annual growth in recent years and is increasingly relied on to perform clinical trials in countries with more diverse populations and less stringent regulations, including China and India, and nations throughout Central America.  Such dramatic growth and consistent cash flows have recently drawn private equity investors to this niche industry.

The growth of CROs has arisen, in many ways, out of necessity.  Globally, the number of clinical trials is on pace to reach nearly 150,000 each year.  The sheer volume of trials makes it prohibitive for pharmaceutical and medical-device companies to perform these trials exclusively in house.  Furthermore, stagnant research and development budgets have led pharmaceutical companies to cut costs wherever possible. 

In response to these realities, many CROs developed niche practices to focus on specific types or stages of drug development.  This specialization enables clinical trials to be performed at a lower cost and over a shorter duration because CROs can leverage their preexisting client base and accumulated knowledge to deliver superior value and quality. 

While the growth of CROs has been significant, it has not come without growing pains.  Many firms have shifted to a full-service model that enables them to play a part in each step of the drug-approval process.  This shift has been accompanied by increasing consolidation of larger-market participants—in the most recent (2010) data, the six largest publicly held CROs made up 41 percent of the market.  Furthermore, this market concentration is forecast to increase due in part to big pharmaceutical companies wanting a single provider for all their CRO needs. 

However, the trend does not signal the death knell for niche players, since they still offer value for smaller start-up companies.  In addition, the overall market structure will likely experience upheaval in the coming years as larger CROs gain more market share.

Recent Deals

Quintiles has played an important part in the development of the 50 most-successful drugs on the market.  It is the largest CRO, with annual revenues in excess of $3.7 billion.  The company has shifted from privately to publicly held on two occasions and, in May 2013, was brought to market again in a $947.9 million initial public offering (IPO) that far exceeded market expectations. 

Quintiles illustrates the growing influence of private equity firms in the CRO marketplace.  The reason CROs have become a popular point of entry into the life sciences industry is that they generally boast consistent cash flows and are not subject to the boom or bust realities that accompany pharmaceutical drug producers seeking FDA approval.  This enables private equity funds to structure leveraged buyouts with significant debt loads and benefit from future appreciation of the underlying asset as well as dividend recapitalizations.

TPG Capital and Bain Capital LLC, two private equity funds that led a $3.8 billion buyout of Quintiles in 2008 from One Equity, have implemented the strategy.  From 2009 to 2012, they received almost half of the proceeds of the roughly $1.5 billion in dividends that were paid.  Each of the funds profited handsomely from the recent IPO of Quintiles, reducing each of their individual stakes to 18.6 percent, but taking over half of the $269.4 million in proceeds allocated to the private equity investors.  The IPO proceeds will be used to extinguish existing credit facilities and to take advantage of strategic growth opportunities in the form of specialized businesses that offer the potential to deepen their scientific, therapeutic and technical expertise.

Another market leader, PPD, was acquired in mid-2011 for $3.9 billion in cash in a leveraged buyout led by private equity giants The Carlyle Group and Hellman & Friedman.  The buyout represented a nearly 30 percent premium over the stock price at the time of announcement and involved one of the five-largest CROs globally.  The acquisition resulted in the previously publicly held company being taken private and in the appointment of a new CEO. 

While the acquirers have been understandably tight-lipped regarding their future intentions for the firm, the company seems an ideal candidate for an IPO or sale down the road if capital markets are receptive.  Tight lending standards at the time of the buyout resulted in a decreased selling price due to a lack of other viable bidders, a fact that may allow Carlyle and Hellman to turn over the asset at a favorable price in a short investment period.

Medpace, Inc.

Consolidation and strategic relationships are key drivers of growth in the small to mid-size segments of the CRO marketplace.  In November 2012, Medpace, Inc., a privately held CRO based in Cincinnati, Ohio, and with offices across the globe, acquired MediTech Strategic Consultants B.V., a European CRO that focuses on medical device clinical trials.  The deal expanded the influence and scale of Medpace in the growing European CRO marketplace without subjecting the company to the difficulties of establishing new offices in the target markets. 

The MediTech deal is the most recent in a string of acquisitions of smaller CROs that present strategic fits and synergies for Medpace.  Some of their other recent acquisitions include a late-2009 deal involving a Swiss CRO that focused on oncology drugs, and an early 2010 deal involving a Germany-based CRO that focused on regulatory consulting and drug safety.  The transactions are an attempt to achieve a level of scale and breadth of service that would allow Medpace to secure CRO contracts with larger pharmaceutical companies that provide more consistent and less piecemeal business than niche pharmaceutical companies.         

PRA International

A $1.3 billion deal involving the acquisition of PRA International by Kohlberg Kravis Roberts & Co. LP (KKR) is set to close in the third quarter of 2013.  The deal illustrates the potentially lucrative investment opportunities presented by CROs.  PRA was purchased by middle-market private equity firm Genstar Capital, LLC, in 2007 for $797 million in a take-private transaction.  After appointing a new CEO and management team, PRA was able to significantly increase revenues and outperform the industry over the past six years. 

The investment strategy implemented by Genstar is becoming increasingly common amongst private equity funds.  Many seek investments that have an approximately five-year holding period and expected annualized returns in the 30 percent range.  However, these deals are not always well received in the marketplace.  For example, Genstar attempted to sell PRA in 2011, but was unable to find a suitable bidder.  In response to more receptive equity markets, Genstar filed an IPO for PRA a more attractive 2013 target for potential bidders such as KKR.

Key Considerations

The top five key due diligence and deal structuring points to consider in the acquisition of a CRO are as follows:

1. How Secure is the Cash Flow? 

Different CROs have varying levels of security in their contracts.  Most enter into long-term agreements and statements of work with clients, an arrangement that provides some clarity into the CRO’s cash flows in coming years.  On the other hand, CROs that have direct contract relationships with sponsors are less replaceable and are often included in FDA dossiers and approved clinical trial plans.  Those that act as subcontractors or have indirect relationships are less secure. 

Customer concentration can be a key concern.  Some niche CROs rely heavily on a small number of customers to drive a large percentage of cash flow.  To help identify potential risks of over-concentration, funds should closely examine the CRO’s client relationships and contractual obligations to gain a clear picture of their strength and reliability. 

2. FDA Oversight of CROs 

Although CROs are not bound to perform research within the regulations of a device or pharmaceutical company, the FDA may still oversee their activities.  Pharmaceutical and device companies transfer certain FDA-mandated clinical trial obligations to a CRO pursuant to a written agreement.  According to the FDA Compliance Program Guidance Manual, “When operating under written agreements, the CROs are subject to the same regulatory actions as sponsors for any failure to perform any of the obligations assumed.” 

In November 2009, the FDA sent its first warning letter to a CRO citing infractions observed by the FDA during two clinical trials that were sponsored by Johnson & Johnson.  Prior to this, it had been their practice to only send such letters to the sponsors of clinical trials and not to the CROs who may have actually committed the violation.  This evidences a trend of greater scrutiny of CROs’ compliance efforts. 

At least one private-equity funded CRO has experienced serious quality issues that led to FDA scrutiny and loss of business resulting in bankruptcy.  Cetero Research was built and funded by KRG Capital Partners through a roll-up involving a number of separate CROs.  Between 2009 and 2011, Cetero had significant issues with the FDA related to recordkeeping compliance at one of its main laboratory facilities in Texas.  Subsequently,  the FDA took the unprecedented step  of publicly declaring all research conducted during a nearly five-year period at the Cetero laboratory as “unreliable.”

The Cetero Research experience shows that CROs expose private equity investors to very material quality and compliance risks that cannot be ignored. 

3.  International Opportunities and Risks 

Many CROs increasingly have foreign operations or partner with CROs operating outside of the United States to conduct clinical work overseas.  For example, INC Research, Covance and ICON perform research throughout Asia, Central America and South America.  While the ability to identify patient populations in diverse areas does create a unique offering, it also exposes the investment to the risks of international regulation and international taxation.  CROs with international operations should be reviewed for tax compliance and for compliance with international bioresearch laws and regulations. 

4.  Sales and Marketing Personnel 

CRO business is built through relationships with sponsors of clinical trials.  This requires a robust sales and marketing team that can build long-term relationships with large and small pharmaceutical and device companies alike.  In order to ensure proper protection of intellectual property and corporate relationships, employment agreements, non-competes and confidentiality agreements should be closely scrutinized.  The deal should be structured so that the buyer can assume and enforce existing agreements in the event of a dispute with a former employee. 

5. Collections Risk 

Certain CROs will do business with early stage biotech and medtech companies.  This business model exposes the organization to much greater collections risk when compared with CROs that do business with global pharmaceutical conglomerates such as Pfizer or GSK.  Attention should be paid to accounts receivables management and to the structure of payment for services under the CRO’s contracts.  Some CROs may propose aggressive payment terms to woo business from early stage, cash-strapped development companies.  This approach, however, may have a negative impact on cash flow and expose the company to credit risk. 

The CRO market provides an interesting opportunity for private equity investors of all sizes.  However, it is important to use caution in due diligence to ensure continuity of cash flows and compliance with regulatory requirements.  Given continued consolidation in the industry and predicted growth, it is likely that the boom in CRO investments by private equity funds will continue for the foreseeable future. 

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Private Equity Dives Into Booming Business of Clinical Trials

This article was originally published by Fortune and Kaiser Health News.

After finding success investing in the more obviously lucrative corners of American medicine — like surgery centers and dermatology practices — private equity firms have moved aggressively into the industry’s more hidden niches: They are pouring billions into the business of clinical drug trials.

To bring a new drug to market, the FDA requires pharmaceutical firms to perform extensive studies to demonstrate safety and efficacy, which are often expensive and time-consuming to conduct to the agency’s specifications. Getting a drug to market a few months sooner and for less expense than usual can translate into millions in profit for the manufacturer.

That is why a private equity-backed startup like Headlands Research saw an opportunity in creating a network of clinical sites and wringing greater efficiency out of businesses, to perform this critical scientific work faster. And why Moderna, Pfizer, Biogen, and other drug industry bigwigs have been willing to hire it — even though it’s a relatively new player in the field, formed in 2018 by investment giant KKR.

In July 2020, Headlands announced it won coveted contracts to run clinical trials of covid-19 vaccines, which would include shots for AstraZeneca, Johnson & Johnson, Moderna, and Pfizer.

In marketing its services, Headlands described its mission to “profoundly impact” clinical trials — including boosting participation among racial and ethnic minorities who have long been underrepresented in such research.

“We are excited,” CEO Mark Blumling said in a statement, to bring “COVID-19 studies to the ethnically diverse populations represented at our sites.” Blumling, a drug industry veteran with venture capital and private equity experience, told KHN that KKR backed him to start the company, which has grown by buying established trial sites and opening new ones.

Finding and enrolling patients is often the limiting and most costly part of trials, said Dr. Marcella Alsan, a public policy professor at Harvard Kennedy School and an expert on diverse representation in clinical trials, which have a median cost of $19 million for new drugs, according to Johns Hopkins University researchers .

Before covid hit, Headlands acquired research centers in McAllen, Texas; Houston; metro Atlanta; and Lake Charles, Louisiana, saying those locations would help it boost recruitment of diverse patients — an urgent priority during the pandemic in studying vaccines to ward off a disease disproportionately killing Black, Hispanic, and Native Americans.

Headlands’ sites also ran, among other things, clinical studies on treatments to combat Type 2 diabetes, postpartum depression, asthma, liver disease, migraines, and endometriosis, according to a review of website archives and the federal website ClinicalTrials.gov. But within two years, some of Headlands’ alluring promises would fall flat.

In September, Headlands shuttered locations in Houston — one of the nation’s largest metro areas and home to major medical centers and research universities — and Lake Charles, a move Blumling attributed to problems finding “experienced, highly qualified staff” to carry out the complex and highly specialized work of clinical research. The McAllen site is not taking on new research as Headlands shifts operations to another South Texas location it launched with Pfizer.

What impact did those sites have? Blumling declined to provide specifics on whether enrollment targets for covid vaccine trials, including by race and ethnicity, were met for those locations, citing confidentiality. He noted that for any given trial, data is aggregated across all sites and the drug company sponsoring it is the only entity that has seen the data for each site once the trial is completed.

A fragmented clinical trials industry has made it a prime target for private equity, which often consolidates markets by merging companies. But Headlands’ trajectory shows the potential risks of trying to combine independent sites and squeeze efficiency out of studies that will affect the health of millions.

Yashaswini Singh , a health economist at Johns Hopkins who has studied private equity acquisitions of physician practices, said consolidation has potential downsides. Singh and her colleagues published research in September analyzing acquisitions in dermatology, gastroenterology, and ophthalmology that found physician practices — a business with parallels to clinical trial companies — charged higher prices after acquisition.

“We’ve seen reduced market competition in a variety of settings to be associated with increases in prices, reduction in access and choice for patients, and so on,” Singh said. “So it’s a delicate balance.”

Dr. Aaron Kesselheim , a professor of medicine at Harvard Medical School, called private equity involvement in trials “concerning.”

“We need to make sure that patients” know enough to provide “adequate, informed consent,” he said, and ensure “protections about the privacy of the data.”

“We don’t want those kinds of things to be lost in the shuffle in the goals of making money,” he said.

Blumling said trial sites Headlands acquired are not charging higher prices than before. He said privacy “is one of our highest concerns. Headlands holds itself to the highest standard.”

Good or bad, clinical trials have become a big, profitable business in the private equity sphere, data shows.

Eleven of the 25 private equity firms identified by industry tracker PitchBook as the top investors in health care have bought stakes in clinical research companies, a KHN analysis found. Those companies have been involved in studies ranging from covid vaccines to treatments for ovarian cancer, Parkinson’s disease, and Alzheimer’s.

Contracted firms also analyze patient data and prepare materials to secure approval from regulatory agencies, in hopes of getting more drugs to market faster. And a big draw for investors: Clinical research companies make money whether or not a drug succeeds, making it less risky than investing in a drug company.

The number of clinical trials has exploded to more than 434,000 registered studies this year as of late November, more than triple the number a decade ago.

Still, most trial sites are physician practices that don’t consistently perform studies, according to a presentation by Boston-based investment firm Provident Healthcare Partners.

“Independent sites are being purchased by private equity, and they’re moving into larger site groups of 30, 40, and then their game plan is to roll that up into a business and then sell it again,” said Linda Moore Schipani, CEO of Clinical Research Associates, a Nashville-based company that worked on covid vaccine trials for AstraZeneca, Novavax, and Pfizer. “That’s kind of the endgame.”

Headlands is a prime example. It announced in November 2019 that it would acquire six centers in the U.S. and Canada, including three sites in Texas and Louisiana owned by Centex Studies that would help improve participation among Hispanics and African Americans.

It has made other acquisitions since then and opened new sites in areas with “extremely limited trial options,” something Blumling says distinguishes his company.

“I’m not an evangelist for private equity,” Blumling said. “The ability of KKR to be willing to invest in something that is a three- to five-year return versus a one- to two-year return is something that you won’t see out there.”

A research center in Brownsville, Texas — a stone’s throw from the U.S.-Mexico border and where 95% of the population is Hispanic or Latino — is one of several where it is partnering with Pfizer to boost patient diversity.

To recruit patients, Headlands “is really going beyond what a lot of sites do, which is social media,” Blumling said in an interview. “It’s going within churches, community fairs, really getting out into as much as possible the broader community.”

Headlands closed the Houston and Lake Charles sites because of staffing issues, Blumling said, and finished or moved their studies elsewhere. Blumling said the decision to close those locations “did not have anything to do with the speed of trials.”

Similarly, he said, Headlands is moving the McAllen site’s operations to Brownsville “because it had a larger population of trained personnel.”

“We want to continue to grow sites and do great work,” Blumling said. “If we can’t find the people in order to do that at the quality that we demand, which is at the highest level, then it doesn’t make sense to keep those sites.”

‘The Writing to Me Was on the Wall’

In 2006, Devora Torrence co-founded Centex Studies, which she described as “my little mom and pop business” in a 2021 podcast about female entrepreneurs in science. She said a flurry of interest from private equity came at the end of 2018. The appeal was evident: Drug companies were relying on bigger clinical trial networks.

“The thing is speed, getting it to market. With a bigger network, you get that speed,” Torrence said on the podcast. “The writing to me was on the wall that either I get some outside investment and scale up myself, or kind of listen to these guys and see if maybe now would be the right time to exit.”

Joining Headlands had its benefits during the pandemic because she could “lean on” its other sites with experience running vaccine trials. “Had we not gotten those … we may not still be here,” Torrence said.

Torrence, whose LinkedIn profile said she left the company in 2021, didn’t respond to messages from KHN.

Lyndon Fullen, a health care consultant and former Centex employee, said private equity provides funding that allows companies to add study sites.

“I completely support it,” he said. “If it’s about reaching that large patient population, it’s of course better to have larger groups with that funding.”

Opportunity in Long Covid

Contract research organization Parexel saw opportunity in the covid pandemic — millions of people were developing long covid after infection and there were few, if any, meaningful treatment options.

The company, which employs more than 19,000 people, was acquired in 2021 by EQT Private Equity and Goldman Sachs’ private equity arm for $8.5 billion , billions more than the $4.5 billion that private equity firm Pamplona Capital Management paid when it took Parexel private in 2017.

A growing body of research shows the debilitating effects of long covid, including a recent study of tens of thousands of patients in Scotland where nearly half had not fully recovered months later. But treatments addressing its root causes could be years away. “It’s a huge number of people,” said Dr. Nathalie Sohier, who leads Parexel’s infectious diseases and vaccines franchise. “There’s a lot of need.”

Long covid represents the promise and peril of the work to develop new drugs: Millions of patients create a potentially lucrative market for drug companies, and yet researchers and industry experts say they are reluctant to jump in. In part, that’s because “it’s not a well-defined disease, and that really makes it highly risky for companies to invest in research,” said Cecil Nick, a vice president for Parexel.

“How are we going to be able to tell the FDA that our drug works? We can’t count the number of people who died; we can’t count the number of people in the hospital,” said Dr. Steven Deeks , a University of California-San Francisco professor who is running an observational study on long covid patients.

As of August, among more than 4,400 covid studies, only 304 focused on long covid. A third of those were related to drug development, Sohier said.

Sohier said “there are few” companies in its long covid program. That hasn’t stopped Parexel from pitching itself as the ideal partner to shepherd new products, including by doing regulatory work and using remote technology to retain patients in trials. Parexel has worked on nearly 300 covid-related studies in more than 50 countries, spokesperson Danaka Williams said.

Michael Fenne, research and campaign coordinator with the Private Equity Stakeholder Project, which studies private equity investments, said Parexel and other contract research organizations are beefing up their data capacity. The aim? To have better information on patients.

“It kind of ties into access and control of patients,” Fenne said. “Technology makes accessing patients, and then also having more reliable information on them, easier.”

KHN senior correspondent Fred Schulte and Megan Kalata contributed to this report.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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CenExel Clinical Research Acquires ForCare Clinical Research

Aug 4, 2021 | Blog , CenExel , CenExel FCR , Press Releases

Salt Lake City, August 4, 2021 /GlobeNewswire/ — CenExel Clinical Research, Inc., (“CenExel”) announces the acquisition of ForCare Clinical Research (“CenExel FCR”), a Tampa-based clinical research organization with Principal Investigators who have more than 40 years of combined research experience. CenExel FCR conducts Phase I through Phase IV studies in both chronic and acute conditions, primarily in Dermatology.

By acquiring this state-of-the-art facility, CenExel dramatically strengthens its ability to support clinical research in Dermatology and Immunology, as well as several other therapeutic areas. CenExel FCR is led by Principal Investigators who are board certified and conduct studies in Dermatology, Immunology and Inflammatory disease, Neurology, and Internal Medicine.

CenExel FCR will take advantage of the site network’s fully integrated, collaborative processes in centralized budgeting, business development, contracting, SOPs, quality management, among others. CenExel FCR will also work closely with CenExel’s other nine Centers to continue development of Dermatology clinical trials through cross-training and integration.

The CenExel Centers of Excellence network now encompasses ten of the most experienced clinical research facilities in the country, with special emphases in Neurology, Pain, Psychiatry, Vaccines, Dermatology/Immunology, Ethnic-bridging, Sleep studies and Clinical Pharmacology. Each of the CenExel research units have outstanding records of assisting pharmaceutical sponsors with protocol development, study design, and conducting Phase I-IV trials to develop new therapeutics for improved patient care.

“The many strengths at CenExel FCR align perfectly with CenExel’s mission to be the leader in therapeutically focused clinical research. With this addition, CenExel now has the leading platform to conduct clinical trials in Dermatology, CNS, Vaccine, and Clinical Pharmacology,” said Tom Wardle, CenExel CEO. “This addition elevates our entire network. I look forward to working alongside the amazing team at CenExel FCR as we continue to grow together.”

“CenExel FCR will keep exceeding enrollment expectations, preserving subject retention, reducing trial timelines, and delivering reproducible, quality data,” said Misty Sturges, Chief Operating Officer at CenExel FCR. “We’re excited to see even faster study start-up and efficiencies by employing CenExel’s site network resources in our single- and multi-site studies.”

CenExel Clinical Research, Inc. was formed in 2018, and since its formation, CenExel has energetically pursued organic growth as well as the acquisitions of state-of-the-art research centers around the U.S. The mission of CenExel is to work with trial Sponsors and Contract Research Organizations to reduce costs and development times for innovative therapies which may advance patient care.

Provident Healthcare Partners acted as exclusive sell-side financial advisor to CenExel FCR in the transaction.

Media Contact: [email protected]

About CenExel Clinical Research CenExel Clinical Research (www.Cenexel.com) provides unparalleled medical and scientific support in the design and execution of clinical trials. Our therapeutic area focus and attention to detail assures quality, reliable results and has helped CenExel to consistently achieve and exceed patient recruitment goals. CenExel Centers of Excellence have conducted thousands of studies, the variety and complexity of which have resulted in a vast depth of experience and insight for the Principal Investigators and research staff in each facility. The CenExel Centers of Excellence deliver the engagement, expertise, and results to ensure that their clients achieve their clinical research goals.

About Provident Healthcare Partners Provident is a leading healthcare investment banking firm specializing in merger and acquisition advisory, strategic planning, and capital formation for healthcare companies. The firm has a comprehensive knowledge of market sectors and specialties, including a significant track record of success within home health and hospice services. Provident also has unsurpassed experience and insight into the M&A process, which includes working with a number of buyers such as private equity firms and strategic consolidators. For additional information, visit www.providenthp.com or follow on LinkedIn .

​ Update on COVID-19

To: our sponsors, cros, patients, and employees.

At CenExel Clinical Research, our top priorities are the safety and health of our patients and employees. For our Centers of Excellence to provide the highest quality of clinical research, we established and maintain a COVID-19 Task Force with representatives from every Center. The Task Force is charged with continuous monitoring of the pandemic and providing guidance and communication.

Our clinical operations continue, and we have implemented the following additional safety measures:

• Enhanced screening of everyone entering any of our facilities before they are admitted into our offices or clinical areas
• Reinforced internal communication regarding the COVID-19 situation, CDC and SHRM recommendations, digital team meetings, and the importance of using sick leave for anyone who has signs, symptoms, or recent exposure to someone with suspected or diagnosed COVID-19
• Additional cleaning and disinfecting materials provided through our clinic and office areas
• Cross-training and preparations for contingency plans if key staff need to stay home

We will continue to monitor the current situation, coordinate with the proper authorities, and update our policies and procedures as needed to ensure the safety of our patients and employees.

Private equity in health care: three takeaways going forward

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Barbara Bennett is partner at Frost Brown Todd LLP. Based in Nashville, Tennessee, she is a member of the firm's data, digital assets and technology practice group as well as the private equity and venture practice group. She can be reached at [email protected].

T. Ray Guy is partner at the firm. Based in Dallas, Texas, he is a member of the firm's business and commercial litigation practice group. He is a veteran trial lawyer who represents business clients in high-stakes commercial litigation and arbitration, and is experienced in cases involving banking and finance, private equity, energy, fraud, class actions, and more. He can be reached at [email protected].

Austin Simpson is an associate within the business litigation practice group at the firm. Based in Dallas, Texas, he is focused on a hands-on approach to cases. He can be reached at [email protected].

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When austin was 3 years old, his parents realized something was wrong..

DMD weakens the muscles until the patient can't walk and greatly shortens their lifespan. There's no cure.

After multiple falls, concussions, and a broken arm, they discovered he had Duchenne muscular dystrophy, a condition diagnosed in 20,000 children globally each year.

Now she was the one in need of care — joining the 3.8 million women in the US and many other around the world impacted by breast cancer.

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Today, he's a college student, co-founder of the nonprofit one rare, and a member of our patient advisory council — helping us better meet the needs of rare disease patients., lives can change when you design rare disease trials with care and precision..

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Private Equity Investments Draw Mixed Reactions in Radiology

Partnership discussions should include questions about effects on patient care, radiologist workload and long-term viability of the practice.

This is the final story in a series of RSNA News articles addressing issues facing private radiology practices. Read the first and second story  of the series. 

Private equity investment in radiology practices is nothing new. But the impact such investments have on the practice and on the radiologists is very much open to debate.

“Investor-backed entities can be a good idea if done correctly and for the right reasons,” said Gavin P. Slethaug, MD, associate chief medical officer for growth at the equity-backed Radiology Partners.

According to Dr. Slethaug, outside investment, when done right, can open the door to new clinical programs, new technologies like AI and enable more subspecialty imaging care. It can also increase financial stability and operational excellence within a practice while lowering administrative costs.

“In my experience at Radiology Partners, such investments have benefited radiologists, referring physicians, hospitals and, most importantly, patients,” he said.

Frank Lexa, MD, professor and vice chair of the Department of Radiology at the University of Pittsburgh School of Medicine, is of the view that private equity tends to be a poor investment match for successful radiology groups, although he believes it does present an opportunity to improve hospital infrastructure.

“If done correctly, such investment could enable the purchase of new equipment and technologies,” he said.

On this point, Christoph Lee, MD, professor of radiology, health systems and population health at the University of Washington, tends to agree.

“Being under a larger private equity umbrella can help scale technological advances if there is a unifying, enterprise- wide PACS and information systems used across practices,” Dr. Lee said. “Such a setup could help alleviate the overhead costs that smaller practices face while allowing for the types of population-based imaging technology evaluation that can move the field forward.”

“Simply put, a group of 3,600 radiologists is able to make investments that a 200-radiologist practice can’t, or that a 10-radiologist practice—the median size for radiology groups in the U.S.—can only dream of,” Dr. Slethaug added.

The Challenges of Profit-Driven Private Equity in Radiology

However, as Dr. Lee pointed out, such tech-driven investments will only happen if the private equity firm has a very strong business case for doing so. Unfortunately, this often, isn’t the case.

“One downside of private equity is the required short-term horizon for profits,” Dr. Lee said.

Dr. Lexa added that private equity’s focus on achieving large profit margins in a short amount of time can translate into higher quantities of reads without guarantees of maintaining quality.

“This essentially turns radiologists into commoditized workers rather than owner-stakeholders, inevitably leading to higher productivity requirements and burnout among radiologists and further burdening an already depleted workforce,” he explained.

Dr. Slethaug disagrees, highlighting the many ways radiologists stand to benefit from private equity investments.

“Radiologists not only benefit from new clinical programs, AI and IT solutions, and professional development opportunities, but also from the peace of mind in knowing that appropriate decisions and investments are being made to ensure that the practice continues to thrive,” he said.

Drs. Lee and Lexa aren’t so sure, noting that after a practice is purchased, young radiologists tend to see an increase in workload, a decrease in salary and a curtailing of their long-term prospects within the group.

“The lack of transparency in buyout negotiations can further deteriorate the professional experience of younger radiologists just starting their careers and negatively impact their long-term commitment to the profession,” Dr. Lee said.

“If you look at the private equity model that’s currently being used, it’s quite good for the radiologists who are selling their practices,” Dr. Lexa added. “But it’s hard for me to see the upside if you’re a young radiologist.”

“I enjoy these discussions about practice models and strongly believe there is room in the health care ecosystem for all models, including traditional private practice, investor-backed private practice, employed and academic.”

GAVIN P. SLETHAUG, MD

How Private Equity Affects Patient Care in Radiology

When private equity prioritizes the bottom line, it could also have a negative impact on patient care.

“If outside investors make decisions solely in the interest of profit, then this would obviously not be in the best interest of the patient,” Dr. Lexa said.

But Dr. Slethaug believes this is the exception, not the rule. “Meeting the expectations of radiologists and health systems drives radiologist recruitment and retention and drives growth within our health care systems— and growth is critical to any investor- backed entity,” Dr. Slethaug said. “At the end of the day, smart outside investors will be aligned with the best interests of patient care.”

To hold private equity accountable, Dr. Lexa recommends that radiology societies and the profession in general demand that equity firms be able to demonstrate how making a profit contributes not only to efficiency gains, but to a greater public good.

“They should be held accountable for accelerating technological innovation and adoption and be able to show how their investments help maintain—even improve—the quality of patient care,” he said.

Not for Every Practice

Clearly, private equity investment isn’t for every practice, and just because it works for one doesn’t mean it will work for the other.

“Each group is unique and will have different reasons for engaging in partnership discussions,” Dr. Slethaug said.

To help determine whether an investment is a good fit, Dr. Slethaug suggests each radiologist considers two questions prior to voting to proceed with a partnership: One, will the group be better off post-partnership, and two, will the individual radiologist be better off post- partnership?

“I’ve said it before and I’ll say it again, I enjoy these discussions about practice models and strongly believe there is room in the health care ecosystem for all models, including traditional private practice, investor-backed private practice, employed and academic,” Dr. Slethaug concluded.

Read previous RSNA News stories on issues related to private practice radiology:

• Avoid a “Culture Clash” During Academic and Community-Based Practice Integration
• From Chaos to Cohesion: The Art of Integrating Radiology Group Cultures in a Merger-Driven Market
• Generalist or Subspecialist? No Wrong Answer for Trainees Thinking About the Future

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Strategy and Innovation

The Business of Clinical Trials Is Booming Private Equity Has Taken Notice

Rachana Pradhan

January 12, 2023

After finding success investing in the more obviously lucrative corners of American medicine — like surgery centers and dermatology practices — private equity firms have moved aggressively into the industry’s more hidden niches: They are pouring billions into the business of clinical drug trials.

To bring a new drug to market, the FDA requires pharmaceutical firms to perform extensive studies to demonstrate safety and efficacy, which are often expensive and time-consuming to conduct to the agency’s specifications. Getting a drug to market a few months sooner and for less expense than usual can translate into millions in profit for the manufacturer.

That is why a private equity-backed startup like Headlands Research saw an opportunity in creating a network of clinical sites and wringing greater efficiency out of businesses, to perform this critical scientific work faster. And why Moderna, Pfizer, Biogen, and other drug industry bigwigs have been willing to hire it — even though it’s a relatively new player in the field, formed in 2018 by investment giant KKR.

In July 2020, Headlands announced it won coveted contracts to run clinical trials of covid-19 vaccines, which would include shots for AstraZeneca, Johnson & Johnson, Moderna, and Pfizer.

In marketing its services, Headlands described its mission to “profoundly impact” clinical trials — including boosting participation among racial and ethnic minorities who have long been underrepresented in such research.

“We are excited,” CEO Mark Blumling said in a statement, to bring “COVID-19 studies to the ethnically diverse populations represented at our sites.” Blumling, a drug industry veteran with venture capital and private equity experience, told KHN that KKR backed him to start the company, which has grown by buying established trial sites and opening new ones.

Finding and enrolling patients is often the limiting and most costly part of trials, said Dr. Marcella Alsan, a public policy professor at Harvard Kennedy School and an expert on diverse representation in clinical trials, which have a median cost of $19 million for new drugs, according to Johns Hopkins University researchers.

Before covid hit, Headlands acquired research centers in McAllen, Texas; Houston; metro Atlanta; and Lake Charles, Louisiana, saying those locations would help it boost recruitment of diverse patients — an urgent priority during the pandemic in studying vaccines to ward off a disease disproportionately killing Black, Hispanic, and Native Americans.

Headlands’ sites also ran, among other things, clinical studies on treatments to combat Type 2 diabetes, postpartum depression, asthma, liver disease, migraines, and endometriosis, according to a review of website archives and the federal website ClinicalTrials.gov. But within two years, some of Headlands’ alluring promises would fall flat.

In September, Headlands shuttered locations in Houston — one of the nation’s largest metro areas and home to major medical centers and research universities — and Lake Charles, a move Blumling attributed to problems finding “experienced, highly qualified staff” to carry out the complex and highly specialized work of clinical research. The McAllen site is not taking on new research as Headlands shifts operations to another South Texas location it launched with Pfizer.

What impact did those sites have? Blumling declined to provide specifics on whether enrollment targets for covid vaccine trials, including by race and ethnicity, were met for those locations, citing confidentiality. He noted that for any given trial, data is aggregated across all sites and the drug company sponsoring it is the only entity that has seen the data for each site once the trial is completed.

A fragmented clinical trials industry has made it a prime target for private equity, which often consolidates markets by merging companies. But Headlands’ trajectory shows the potential risks of trying to combine independent sites and squeeze efficiency out of studies that will affect the health of millions.

Yashaswini Singh, a health economist at Johns Hopkins who has studied private equity acquisitions of physician practices, said consolidation has potential downsides. Singh and her colleagues published research in September analyzing acquisitions in dermatology, gastroenterology, and ophthalmology that found physician practices — a business with parallels to clinical trial companies — charged higher prices after acquisition.

“We’ve seen reduced market competition in a variety of settings to be associated with increases in prices, reduction in access and choice for patients, and so on,” Singh said. “So it’s a delicate balance.”

Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School, called private equity involvement in trials “concerning.”

“We need to make sure that patients” know enough to provide “adequate, informed consent,” he said, and ensure “protections about the privacy of the data.”

“We don’t want those kinds of things to be lost in the shuffle in the goals of making money,” he said.

Blumling said trial sites Headlands acquired are not charging higher prices than before. He said privacy “is one of our highest concerns. Headlands holds itself to the highest standard.”

Good or bad, clinical trials have become a big, profitable business in the private equity sphere, data shows.

Eleven of the 25 private equity firms identified by industry tracker PitchBook as the top investors in health care have bought stakes in clinical research companies, a KHN analysis found. Those companies have been involved in studies ranging from covid vaccines to treatments for ovarian cancer, Parkinson’s disease, and Alzheimer’s.

Contracted firms also analyze patient data and prepare materials to secure approval from regulatory agencies, in hopes of getting more drugs to market faster. And a big draw for investors: Clinical research companies make money whether or not a drug succeeds, making it less risky than investing in a drug company.

The number of clinical trials has exploded to more than 434,000 registered studies this year as of late November, more than triple the number a decade ago.

Still, most trial sites are physician practices that don’t consistently perform studies, according to a presentation by Boston-based investment firm Provident Healthcare Partners.

“Independent sites are being purchased by private equity, and they’re moving into larger site groups of 30, 40, and then their game plan is to roll that up into a business and then sell it again,” said Linda Moore Schipani, CEO of Clinical Research Associates, a Nashville-based company that worked on covid vaccine trials for AstraZeneca, Novavax, and Pfizer. “That’s kind of the endgame.”

Headlands is a prime example. It announced in November 2019 that it would acquire six centers in the U.S. and Canada, including three sites in Texas and Louisiana owned by Centex Studies that would help improve participation among Hispanics and African Americans.

It has made other acquisitions since then and opened new sites in areas with “extremely limited trial options,” something Blumling says distinguishes his company.

“I’m not an evangelist for private equity,” Blumling said. “The ability of KKR to be willing to invest in something that is a three- to five-year return versus a one- to two-year return is something that you won’t see out there.”

A research center in Brownsville, Texas — a stone’s throw from the U.S.-Mexico border and where 95% of the population is Hispanic or Latino — is one of several where it is partnering with Pfizer to boost patient diversity.

To recruit patients, Headlands “is really going beyond what a lot of sites do, which is social media,” Blumling said in an interview. “It’s going within churches, community fairs, really getting out into as much as possible the broader community.”

Headlands closed the Houston and Lake Charles sites because of staffing issues, Blumling said, and finished or moved their studies elsewhere. Blumling said the decision to close those locations “did not have anything to do with the speed of trials.”

Similarly, he said, Headlands is moving the McAllen site’s operations to Brownsville “because it had a larger population of trained personnel.”

“We want to continue to grow sites and do great work,” Blumling said. “If we can’t find the people in order to do that at the quality that we demand, which is at the highest level, then it doesn’t make sense to keep those sites.”

‘The Writing to Me Was on the Wall’

In 2006, Devora Torrence co-founded Centex Studies, which she described as “my little mom and pop business” in a 2021 podcast about female entrepreneurs in science. She said a flurry of interest from private equity came at the end of 2018. The appeal was evident: Drug companies were relying on bigger clinical trial networks.

“The thing is speed, getting it to market. With a bigger network, you get that speed,” Torrence said on the podcast. “The writing to me was on the wall that either I get some outside investment and scale up myself, or kind of listen to these guys and see if maybe now would be the right time to exit.”

Joining Headlands had its benefits during the pandemic because she could “lean on” its other sites with experience running vaccine trials. “Had we not gotten those … we may not still be here,” Torrence said.

Torrence, whose LinkedIn profile said she left the company in 2021, didn’t respond to messages from KHN.

Lyndon Fullen, a health care consultant and former Centex employee, said private equity provides funding that allows companies to add study sites.

“I completely support it,” he said. “If it’s about reaching that large patient population, it’s of course better to have larger groups with that funding.”

Opportunity in Long Covid

Contract research organization Parexel saw opportunity in the covid pandemic — millions of people were developing long covid after infection and there were few, if any, meaningful treatment options.

The company, which employs more than 19,000 people, was acquired in 2021 by EQT Private Equity and Goldman Sachs’ private equity arm for $8.5 billion, billions more than the $4.5 billion that private equity firm Pamplona Capital Management paid when it took Parexel private in 2017.

A growing body of research shows the debilitating effects of long covid, including a recent study of tens of thousands of patients in Scotland where nearly half had not fully recovered months later. But treatments addressing its root causes could be years away. “It’s a huge number of people,” said Dr. Nathalie Sohier, who leads Parexel’s infectious diseases and vaccines franchise. “There’s a lot of need.”

Long covid represents the promise and peril of the work to develop new drugs: Millions of patients create a potentially lucrative market for drug companies, and yet researchers and industry experts say they are reluctant to jump in. In part, that’s because “it’s not a well-defined disease, and that really makes it highly risky for companies to invest in research,” said Cecil Nick, a vice president for Parexel.

“How are we going to be able to tell the FDA that our drug works? We can’t count the number of people who died; we can’t count the number of people in the hospital,” said Dr. Steven Deeks, a University of California-San Francisco professor who is running an observational study on long covid patients.

As of August, among more than 4,400 covid studies, only 304 focused on long covid. A third of those were related to drug development, Sohier said.

Sohier said “there are few” companies in its long covid program. That hasn’t stopped Parexel from pitching itself as the ideal partner to shepherd new products, including by doing regulatory work and using remote technology to retain patients in trials. Parexel has worked on nearly 300 covid-related studies in more than 50 countries, spokesperson Danaka Williams said.

Michael Fenne, research and campaign coordinator with the Private Equity Stakeholder Project, which studies private equity investments, said Parexel and other contract research organizations are beefing up their data capacity. The aim? To have better information on patients.

“It kind of ties into access and control of patients,” Fenne said. “Technology makes accessing patients, and then also having more reliable information on them, easier.”

KHN senior correspondent Fred Schulte and Megan Kalata contributed to this report.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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Research Opportunity Announcement: Integrating Clinical Research into Primary Care Settings through Network Research Hubs – A Pilot (OT2)

Research Opportunity Announcement Overview

Purpose and Scope

Phased Approach

Definitions

Eligibility

Application Responsiveness

Application Requirements

Objective Review

Special Award Terms

Research Opportunity Announcement Overview #announcementoverview

ROA Number: OTA-24-016

• ROA Posting: May 6, 2024
• Technical Webinar 1: 12pm EDT on May 14, 2024
• Technical Webinar 2: 12pm EDT on May 22, 2024
• Submission Deadline: Complete applications must be submitted under OTA-24-016 via NIH eRA Commons ASSIST no later than 5:00pm EDT on June 14, 2024. Late applications submitted to this ROA will not be accepted.

Brief Overview of the Research Opportunity: The purpose of this limited competition research opportunity announcement (ROA) is to invite applications by organizations currently affiliated with and participating in specific existing clinical research networks --to serve as “Network Research Hubs” and establish the infrastructure to conduct clinical research in primary care settings. This opportunity is limited to organizations that focus on serving rural communities and are part of or funded by: NIH Institutional Development Award Clinical and Translational Research (IDeA-CTR) awards, the NIH Clinical and Translational Science Award (CTSA) Program, and/or the Patient-Centered Outcomes Research Institute’s (PCORI) Patient-Centered Clinical Research Network (PCORnet).

Award Mechanism: This funding opportunity will use the Other Transactions Authority (OTA) governed by 42 U.S. Code § 282 (n)(1)(b) to issue Other Transaction (OT) awards. OT awards are not grants, cooperative agreements, or contracts and use an OTA, provided by law. Policies and terms for individual OTs may vary between awards. Each award is therefore issued with a specific agreement which is negotiated with the recipient, and which may be expanded, modified, partnered, not supported, or later discontinued based on program needs, changing research landscape, performance and or availability of funds.

Anticipated Awards and Budget: NIH anticipates 2-5 awards will be issued through this ROA in FY24. NIH intends to allocate a total of approximately $5M in FY24 and approximately $20M in FY25 to fund Network Research Hubs during the two-year pilot phase, contingent on programmatic objectives, performance and availability of funds. After the two-year pilot phase, individual awards may be terminated, extended, or curtailed based on programmatic objectives, performance, and availability of funds.

Contact Information: [email protected]    

Background #background

In recent years, the U.S. has experienced trending declines in health that are disproportionately occurring in medically underserved and disadvantaged populations. Many of these sectors are also often underrepresented in clinical research. When study demographics don’t match the demographics of those impacted by the illness or condition under investigation, the results may have limited generalizability, leading to evidence gaps and further compounding health disparities. A major barrier to participating in clinical research is lack of access to or availability of clinical studies. In addition, the majority of Americans have never talked to their doctor about participating in research. There is a critical need to extend research participation opportunities to communities often underrepresented in clinical research, and to integrate those opportunities into settings where people seek care.

Therefore, the National Institutes of Health (NIH) is planning to establish a coordinated infrastructure that integrates innovative research into routine clinical care in primary care settings. Through this effort, NIH will:

• Pilot and implement infrastructure to support primary care-based clinical research in mission areas across all NIH Institutes and Centers (ICs) spanning prevention and treatment and with a focus on health equity and whole person health;
• Establish a foundation for sustained engagement with communities underrepresented in clinical research (e.g., individuals who live in rural environments, racial and ethnic minority groups, older adults, persons experiencing challenging social determinants of health and related experiences);
• Implement innovative study designs that address common health issues, including disease prevention; and  
• Utilize a full range of clinical research designs as appropriate, including dissemination and implementation research, to inform clinical practice 

NIH envisions this infrastructure will facilitate and accelerate research advances for adoption and implementation into everyday clinical care, improving health outcomes, and advancing health equity for all Americans.

The infrastructure NIH will pilot and implement is anticipated to include the following components:

• Providing oversight of the studies/protocols and site and study selection 
• Providing statistical and data management support  
• Developing innovative clinical study designs and implementation strategies to minimize burden on participants and providers in primary care settings  
• Operations Center – conducting site feasibility assessments, site agreements/contracting, and coordination of study operations (protocol development; compliance with Food and Drug Administration (FDA) and Office of Human Research Protections (OHRP) regulatory and participant protection requirements; communications; training; auditing; quality assurance; and data monitoring)  
• Independent Review and Monitoring Boards - including Data and Safety Monitoring Board (DSMB), Observational Study Monitoring Board (OSMB), and the Central Institutional Review Board (IRB)  
• Network Research Hubs – leveraging existing research networks and partnerships with Clinical Sites to conduct clinical research in primary care settings   
• Community Engagement – providing support, advice, and resources, in part through partnerships with existing entities, to facilitate sustained participant and community engagement, community-driven research, and integration of studies in primary and community care settings 
• Industry Partnerships – engaging for-profit partners for collaborative knowledge sharing and potential participation in/use of the infrastructure

Purpose and Scope #purposeandscope

The purpose of this research opportunity announcement (ROA) is to invite applications by existing clinical research networks – as well organizations currently affiliated with and participating in specific existing clinical research networks – to serve as “Network Research Hubs” as part of a larger infrastructure (comprising the components described above) supporting research in primary care settings. These Network Research Hubs must be actively part of (i.e., active funding/award) one or more of the following: NIH Institutional Development Award Clinical and Translational Research (IDeA-CTR) awards, the NIH Clinical and Translational Science Award (CTSA) Program, and/or the Patient-Centered Outcomes Research Institute’s (PCORI) Patient-Centered Clinical Research Network (PCORnet). The Network Research Hubs will serve to expand accrual efforts of select existing NIH-funded studies and develop and conduct new studies with a focus on engaging underrepresented populations, particularly those in rural or underserved areas, and enhancing study inclusivity. Bringing clinical research studies to individuals in their own communities, informed by those communities, and improving clinical research inclusivity will facilitate the generation of a more broadly applicable evidence base that contributes to improved patient outcomes and health equity for all Americans. 

Objectives #objectives

Network Research Hubs will be responsible for:

• Provide clinical research leadership and oversight for clinical studies at all sites supported by and/or partnering with the Network Research Hub, including Clinical Sites.  
• Participate in select existing studies/trials conducted by NIH-funded investigators. Identify and recruit primary care-providing organizations to serve as Clinical Sites for study accrual, supporting the particular needs of each site (e.g., assembling and/or mentoring local research team(s), training providers and clinical staff, assuring protocol adherence, ensuring adequacy of human subjects protections) in collaboration with the Operations Center.
• Accurately identify, screen, recruit and enroll eligible participants for clinical research studies, meeting or exceeding demographic representation and study inclusivity targets as agreed upon with the Scientific and Medical Director and/or the Scientific Committee.
• Implement strategies for culturally appropriate and inclusive study participation, including ensuring study interventions and measures are clinically meaningful and adapted for different populations, as appropriate.
• Provide complete, accurate, and timely collection and entry of high-quality data and biosamples into data management system and repositories as required by the protocol, Scientific Medical Director, and/or Scientific Committee.
• Track and report trial and performance data (e.g., recruitment, retention, adverse events) by site on a regular and frequent basis as required by the clinical studies, the Scientific and Medical Director, Scientific Committee, and/or data and safety monitoring plans.
• If successful with enhancing accrual of an existing NIH-funded study, develop new study ideas (interventional or observational) for consideration by the Scientific and Medical Director, Scientific Committee, and Operations Center that reflect the clinical needs and priorities of the applicant’s community base. These ideas for new studies will require external funding sources to cover study costs not supported by the components of the coordinated infrastructure.
• Respond to information requests for study feasibility assessments (e.g., accessible study population, enrollment estimates, resources available) during research planning and protocol development.
• Identify health disparities and care disparities and needs of the local population of clinical sites for research planning and prioritization.
• Participate in data analysis, development of results, and dissemination efforts as appropriate.
• Ensure that aggregate research results and/or final study findings are shared with study participants through effective communications.
• Work collaboratively with and through individuals and communities on a continuum of practices from outreach to shared decision making to build trust, foster meaningful bi-directional relationships, and identify and address the health needs and priorities of those individuals and communities. 
• Increase and sustain the involvement of research participants, patients, patient advocates, and community organizations as partners in research, including research planning and prioritization.
• Operationalize and sustain engagement from the onset of research activities and through various culturally appropriate approaches to create awareness, provide education, develop and perform targeted recruitment and enrollment activities, and mobilize knowledge of the benefits of the research.
• Leverage existing resources and expand community partnerships (e.g., safety-net health systems, other health systems, grassroots organizations, public health departments, community and faith-based organizations, schools or childcare settings, Tribal organizations and agencies) to increase access to clinical studies.
• Manage unintended consequences and/or breaks in community relationships.
• Evaluate engagement efforts for continuous improvement and sustainability.
• Share approaches and strategies for effective community engagement and build a community of practice.
• In coordination with the Scientific Committee and Scientific and Medical Director, apply and execute innovations across the landscape of clinical research to minimize burden of research on participants and clinical staff. Innovations may include activities such as: leveraging electronic health records for recruitment, randomization, and data collection; leveraging digital health technologies to reduce research burden and facilitate incorporation of diverse precision measurements into participant monitoring and clinical outcomes assessments; aligning clinical care and research workflows; implementing point-of-care trial, pragmatic, and decentralized approaches in study designs.
• Optimize study designs to increase research equity and accessibility in real world health care settings while maintaining scientific rigor.
• Through alignment of research and clinical workflows, facilitate clinical sites movement towards a learning healthcare system, accelerating the adoption and implementation of evidence into clinical practice.
• Accept and implement policies and procedures established and/or approved by the Scientific and Medical Director, Scientific Committee, Operations Director, and/or additional governance structures established as the infrastructure is further developed.
• Contribute to the development of policies and procedures by participating in Working Groups or Sub-Committees of the Scientific Committee and other governing bodies established as the infrastructure is further developed.
• Actively participate and cooperate with quality assurance, study oversight, and study monitoring efforts.
• Interact and collaborate with other federal and non-federal primary care and clinical research networks and entities (e.g., the NIH Community Engagement Alliance (CEAL), Federally Qualified Healthcare Centers (FQHCs), the NIH Collaboratory, IDeA-CTRs, CTSAs, PCORnet), to leverage existing resources and partnerships, as appropriate.
• Work collaboratively with all other components of the coordinated infrastructure.
• Participate in cross-site and cross-component/cross-effort meetings to foster relationship building and enhance partnerships. 
• Identify, track, and consolidate challenges and successes and share best/promising practices to integrating research in primary care settings for scalability and sustainability.

Phased Approach to Launching Studies and Building the Infrastructure #phasedapproach

NIH is planning to launch this effort as a two-year pilot. The first year of the pilot will involve selecting and funding Network Research Hubs through this ROA to support participation in select existing NIH-funded studies that are agreed upon between the applicant and NIH (in coordination with NIH-funded investigators as needed) during negotiations of a potential award. These initial studies may be interventional or observational and are expected to be reasonably suitable for primary care settings. It is expected that the select existing NIH-funded studies will have infrastructure to support operational aspects (e.g., central IRB, data management) for new sites, but resources available and needed will be negotiated prior to award.

If the Network Research Hub is successful in enhancing participant accrual into an existing study, they may potentially expand in year two with new research in coordination with the other components of the infrastructure. In order to leverage the coordinated research infrastructure described above, these new research concepts will require approval by the Scientific and Medical Director, and Operations Director and funding from external sources for all study aspects not covered by the coordinated infrastructure described above (e.g., specific interventions, additional clinical research staff). Before ramping up to an implementation phase in year three, NIH will conduct an evaluation of the program to assess which approaches and efforts are working. NIH may expand, pivot, and/or sunset awards and/or components based on the results.

Definitions #definitions

This announcement follows the definitions for Clinical Trial-Related Terms below in addition to those in the NIH glossary for clinical trial-related terms: https://grants.nih.gov/policy/clinical-trials/glossary-ct.htm.

Additional key terms are defined below:

Central Institutional Review Board (Central IRB) : A centralized approach to human subject protection through a process that streamlines IRB review of selected NIH-sponsored trials for institutions across the country by relying on national experts to ensure trials are reviewed efficiently and with the highest ethical and quality standards.

Clinical Research Network : Collaborative groups of researchers and/or clinicians and that come together in partnership with healthcare systems to identify important clinical questions and design clinical studies to answer them, with coordinated support to manage regulatory, financial, scientific, and/or operational aspects of the research.

Clinical Site : A primary care practice, community health center, hospital, or other health services institution where participants are identified, screened, recruited, and/or enrolled in research conducted by the Network Research Hub.

Federally Qualified Health Centers (FQHC) : As defined by the Health Resources and Services Administration (HRSA), public and private non-profit health care organizations that meet certain criteria under the Medicare and Medicaid Programs. FQHCs include:

• Nonprofit entities that receive a grant, or funding from a grant, under section 330 of the Public Health Service Act to provide primary health services and other related services to a population that is medically underserved;
• FQHC “Look-Alikes” – nonprofit entities certified by the Secretary of the U.S. Department of Health and Human Services as meeting the requirements for receiving a grant under section 330 of the Public Health Service Act but are not grantees; and
• Outpatient health programs or facilities operated by a Tribe or Tribal organization under the Indian Self-Determination Act or by an urban Indian organization receiving funds under Title V of the Indian Health Care Improvement Act.

Medically Underserved Area/Population (MUA/P) : As defined by HRSA, MUAs may be a whole county or a group of contiguous counties, a group of county or civil divisions or a group of urban census tracts in which residents have a shortage of personal health services; MUPs may include groups of persons who face economic, cultural or linguistic barriers to health care.

Milestones : Objective, measurable events that are indicative of project progress occurring as proposed in the application.

Network Research Hub : An institution/organization with an established organizational structure and scientific and statistical leadership for developing, implementing, and analyzing multi-institutional clinical studies/trials.

Other Transactions Authority (OTA) : A unique type of authority that allows an agency to enter into a legal agreement with a recipient organization that is not a contract, grant, or cooperative agreement (Learn more about OTAs on the NIH website) .

Partnership : An association of two or more individuals or entities with a commitment to an ongoing relationship to work toward common goals as established.

Primary Care: As defined by HRSA, the provision of integrated, accessible health services by clinicians who are accountable for addressing a large majority of personal health care needs, developing a sustained partnership with patients, and practicing in the context of family and community.

Primary Care Setting : As defined by HRSA, a setting with integrated, accessible health care services by clinicians who are accountable for addressing a large majority of personal health care needs, developing a sustained partnership with patients, and practicing in the context of family and community. These don’t meet the criteria:

• Emergency departments
• Inpatient hospital settings
• Ambulatory surgical centers
• Independent diagnostic testing facilities
• Skilled nursing facilities
• Inpatient rehabilitation facilities

Research Opportunity Announcement (ROA) : Used to solicit applications for programs using Other Transactions Authority.

Rural: For the purposes of this ROA, rural areas are defined according to the Office of Management and Budget and Federal Office of Rural Health Policy (FORHP) definitions, where primary Rural-Urban Commuting Area (RUCA) codes between 4 and 10 correspond to rural areas and primary RUCA codes 1-3 correspond to urban areas.

Rural Health Clinic: An entity certified by the Centers for Medicare & Medicaid Services. A rural health clinic provides outpatient services to a non-urban area with an insufficient number of health care practitioners.

Social Determinants of Health (SDOH) : As defined by the CDC, SDOH are the nonmedical factors that influence health outcomes. They are the conditions in which people are born, grow, work, live and age, and the wider set of forces and systems (e.g., economic policies and systems, development agendas, social norms, social policies, racism, climate change, and political systems) shaping the conditions of daily life.

Eligibility #eligibility

Eligible applicants are limited to organizations that are lead or funded partner organizations of one or more of the following clinical research networks: the NIH IDeA-CTRs, NIH CTSA, and/or PCORI PCORnet. For the purposes of this ROA, organizations with IDeA-CTR and CTSA awards or sub-awards in no-cost-extensions are eligible to apply. In addition, applicant organizations must be located in a state/jurisdiction where at least 25% of its census tracts are defined as rural using the Revised 2010 RUCA Codes.

Non-domestic (non-U.S.) Entities (Foreign Institutions) are not eligible to apply. Non-domestic (non-U.S.) components of U.S. Organizations are not eligible to apply. Foreign components, as defined in the NIH Grants Policy Statement, are not allowed.

Higher Education Institutions

• Public/State Controlled Institutions of Higher Education
• Private Institutions of Higher Education
• Hispanic-Serving Institutions (HSIs)
• Historically Black Colleges and Universities (HBCUs) 
• Tribally Controlled Colleges and Universities (TCCUs)
• Alaska Native and Native Hawaiian Serving Institutions
• Asian American Native American Pacific Islander Serving Institutions (AANAPISIs)

Nonprofits Other Than Institutions of Higher Education

• Nonprofits with 501(c)(3) IRS Status (Other than Institutions of Higher Education)
• Nonprofits without 501(c)(3) IRS Status (Other than Institutions of Higher Education)

For-Profit Organizations

• Small Businesses
• For-Profit Organizations (Other than Small Businesses)

Governments

• State Governments
• County Governments
• City or Township Governments
• Special District Governments
• American Indian/Native American Tribal Governments (Federally Recognized)
• American Indian/Native American Tribal Governments (Other than Federally Recognized)
• Independent School Districts
• Public Housing Authorities/American Indian Housing Authorities
• Native American Tribal Organizations (Other than Federally recognized tribal governments)
• Faith-based or Community-based Organizations
• Regional Organizations

Application Responsiveness #responsiveness

Applications will undergo a responsiveness screening conducted by NIH program staff. Applications that are deemed nonresponsive will be withdrawn and will no longer be in consideration for funding. Examples of projects that will be considered unresponsive to this announcement include the following:

• Applications that do not meet the “Eligibility” requirements specified above.
• Applications from organizations that are not actively participating as lead or a funded partner in one or more of the following clinical research networks: IDeA-CTRs, CTSA, and/or PCORnet in the United States,
• Applications proposing partnerships only with Clinical Sites that do not meet the definition of primary care settings.
• Applications proposing support for routine patient care unrelated to human subjects research.
• Applications proposing animal or in vitro research.

Application Requirements #applicationrequirements

All application components should be uploaded in eRA Commons in searchable PDF format with a font size of 11 or 12 point and font type of Calibri, Aptos, Arial, or Times New Roman. Margins must be 1-inch wide (top, bottom, left, and right). The components of the application should be loaded as separate attachments and should be titled as specified in each section below (title included in parentheses following each section). Guidance for OT application submission can be found on the NIH website.

Cover ( “Cover.pdf”, 2 page maximum )

• Number and title of this Research Opportunity Announcement
• Application Title 
• Principal Investigator(s) (PI) first and last name, title, organization, mailing address, email address and phone number. If multiple PIs are named, the Contact PI is clearly identified. 
• Name and address of the partnering Clinical Sites with a contact for each (full name, email address)
• Recipient Business Official/Signing Official first and last name, title, organization, mailing address, email address and phone number 
• First and last name of other key personnel, their title, institutional affiliation, and email address

Abstract ( “Abstract.pdf”, no more than 250 words )

A brief summary of the application.

Specific Aims ( “Specific Aims.pdf”, 1 page maximum )

Provide a cogent overview, at a high level, of the capabilities and proposed plans to carry out the objectives of a Network Research Hub as part of a coordinated infrastructure supporting clinical research in primary care settings. Include how the work of the Network Research Hub will increase the accessibility of clinical research and improve health equity.

Project Plan ( “Project Plan.pdf”, 16 pages maximum )

Applications must include a Project Plan that clearly and fully demonstrates the applicant’s capabilities, understanding, and experience to accomplish the objectives of the Network Research Hubs.

Technical Approach ( 6 pages maximum )

Section A: Overview and Organization

• Outline the overall organization of the Network Research Hub and partnering Clinical Sites, and briefly describe the collective strengths of the team. Include how the Network Research Hub is actively participating in and/ or affiliated with one of the following clinical research networks: NIH IDeA-CTRs, NIH CTSA, PCORI’s PCORnet. 
• Provide a diagram (and/or map) showing the geographical relationships between all entities included in the application. The rural participant catchment area is not limited to the applicant organization’s state. 
• List the underrepresented populations that could be served by the Network Research Hub. Define the community or communities the Network Research Hub will serve.
• Describe plans to collaborate with NIH-funded investigators, other Network Research Hubs, and the other components of the coordinated infrastructure. Share how the Network Research Hub plans to contribute to the development of policies and procedures and abide by them as they are established.

Subsection B. Developing and Implementing Studies and Use of Innovative Designs

• Identify areas of research that the Network Research Hub would like to pursue if successful with implementing expansion of an initial, existing NIH-funded study. Include a description of the criteria to be used and process by which studies will be identified that are priorities of and/or co-developed by their community.
• Explain how the Network Research Hub’s research interests and/or proposed research agenda will improve scientific knowledge, develop a more broadly applicable clinical evidence base, and improve clinical practice.
• Describe innovative/novel solutions to address challenges with integrating research into primary care settings and to minimize the burden of research on participants and clinical staff. Share the team’s expertise and experience with operationalizing these solutions. 
• Briefly describe processes the applicant will use to ensure compliance with regulations for research involving human subjects, and that study teams obtain and maintain sufficient proficiency level regarding the conduct of clinical research in coordination with the Operations Center.

Subsection C. Participant and Community Engagement

• Illustrate the team’s expertise in implementing related plans through recent examples and experiences.
• Clearly describe how the Network Research Hub will solicit and understand the challenges and health needs of their community.
• Highlight flexibilities in study designs, features, and engagement plans that can be adapted to meet the needs of a variety of participant groups and community partners, including those that are underrepresented in research.
• Describe how the Network Research Hub will contribute to the development of a community of practice in community engagement.

Primary Care Research Experience (6 pages maximum)

• Study title, type/design, research question(s) addressed, and target and actual total enrollment over time
• Partnerships with organizations providing care in primary care settings.
• Total enrollment by site
• Demographic breakdown of enrolled participants by race/ethnicity, sex, age, rural vs non-rural, and at least one other measure of social determinants of health (SDOH)
• How the data and/or results were shared and disseminated (including if shared with research participants)
• List additional previous relationships and/or partnerships with the proposed Clinical Sites to provide evidence supporting the likelihood of successful collaborations on future research.

Environment and Resources (3 pages maximum) 

List and describe the salient features of the facilities and other resources available for use by the proposed Network Research Hub. 

• Describe the resources available to facilitate carrying out the objectives of a Network Research Hub.
• Characterize the proposed Clinical Sites: describe the collective catchment area of the potential research participants through geographic boundaries, quantify the proportion of the catchment area as being rural vs urban in alignment with primary RUCA codes between 1-3 as defining urban areas and 4-10 as defining rural areas, and share any unique features to facilitate accrual of populations underrepresented in research.

Leadership Plan (1 pages maximum)

A brief leadership plan should be presented which identifies and describes the governance of the Research and Clinical Sites, chain of responsibility for decision making, and process for conflict resolution. The plan should describe how the leadership will contribute to the success of and collaboration within the infrastructure and the implementation of clinical studies with a focus on underrepresented populations. A succession plan with identification of a substitute/back-up lead investigator candidate should be included, if possible, to assure programmatic continuity.

Budget ( “Budget.pdf”, no page limitations )

The Budget must demonstrate estimated baseline costs of adding a select and limited number of primary care Clinical Sites to existing studies conducting clinical research in primary care settings, where the operational aspects of the study are supported by other NIH awards. Budgets are expected to be negotiated as the initial study is selected in coordination with NIH before an award is issued. Cost sharing is allowable.

Applicants shall assume a budget period of 12 months initially, and an additional 12-month option period during the 2-year pilot of this infrastructure for research in primary care settings. Funding for core support will be reimbursable, but costs per participant is expected to be funded based on study accrual milestones. Towards the end of the initial budget period, NIH will conduct an evaluation of the program to assess which approaches and efforts are working; NIH may continue, expand, pivot, and/or sunset awards and/or award components based on the results, infrastructure needs and/or congressional appropriations.

Study budgets should include funds for the community partners to be fully engaged and successfully participate in research prioritization, design and implementation.

Provide the overall expected cost for expanding research enrollment in primary care settings including but not limited to each of the following categories: 

• Personnel 
• Equipment 
• Travel 
• Subawards/subcontracts/consultants 
• Other direct costs 
• Total cost (with indirect costs included) 
• Proposed Cost Share contribution (if applicable)

Applicants must provide a budget justification for all budget items. Subrecipients/subaward budgets must include a breakdown of costs and a budget justification. Applicants should provide one budget and budget justification per institution or organization in the application.

Additional information to include in the submission

List of Key Personnel (“Key Personnel.pdf”, 1 page maximum)

Provide a list of key personnel that will significantly contribute to the objectives of the Network Research Hub. Provide their first name, last name, title, institutional affiliation, and email address.

Biosketches of Key Personnel (“Biosketch.pdf”, 3 page maximum per individual)

Provide a biosketch of each named key individual appearing in the Key Personnel List. The information in the biosketch should include the name and position title, education/training (including institution, degree, date (or expected date) of degree, and field; list of positions and employment in chronological order (including dates); list of relevant publications, proposed level of effort and a personal statement that briefly describes the individual’s role in the project and why they are well-suited for this role. Providing successful examples from past work on similar infrastructure building projects as appropriate to illustrate the relevant experience is desired. The format used for an NIH grant application is acceptable: https://grants.nih.gov/grants/forms/biosketch.htm .  

Letters of Interest/Support (1 page maximum per institution or organization)

A letter from the applicant's current affiliated clinical research network(s) (e.g., the director of the network coordinating center, administrative core, other authorized representative) should provide assurance that the proposed Network Research Hub is active and in good standing with the affiliated clinical research network. In addition, letters of interest and support should be provided from an authorized official from each of the proposed Clinical Sites and should include references to or direct evidence of prior research partnership or relationship with the Network Research Hub.

Appendix of Data Characterizing the Research and Clinical Sites’ Catchment Area (no page limit)

Data used to characterize the catchment area as rural or non-rural may be included to verify the catchment area descriptions in the Project Plan.

Objective Review #objectivereview

The intent of the objective review is to evaluate the strengths and the weaknesses of the proposed Network Research Hub and how well they would meet the objectives of a Network Research Hub. Applications will not be evaluated against each other during the review process but rather on their own individual merit.

Objective review will involve the submission of written critiques by subject matter experts documenting the strengths and weaknesses of responsive applications against the Review Criteria described below and interactive individual discussions between those experts and NIH program staff. The subject matter experts will include NIH staff and/or other federal staff.

Applications may be triaged for review based on the proposed catchment area of potential research participants, with applications with catchment areas characterized by >50% of the population being from rural areas, as defined by primary RUCA codes between 4-10 , receiving priority for review.

NIH will NOT provide feedback on applications, except as a part of follow-up on an as-needed basis as time permits. NIH will not accept an appeal of the objective review or funding decision outcomes.

Review Criteria:

Potential Contribution to the Coordinated Infrastructure for Supporting Research in Primary Care Settings

The approach of proposed Research Site has a high likelihood of meeting the objectives of a Network Research Hub. The applicant has described adequate plans for collaboration with other components of the coordinated infrastructure. The proposed activities involve engagement following a comprehensive framework, facilitating early and sustained engagement with a diverse group of individuals and communities, especially those that are underrepresented in research. Plans to engage the community they serve will successfully support a community-driven research agenda. Leadership plans, support from existing clinical research networks, and support from Clinical Site partners demonstrate a high commitment to the success of the proposed Network Research Hub.

Capabilities and Experience

The applicant has a demonstrated track record of successfully implementing research in primary care settings in the recent past. Prior experience showcases the ability to access and partner with underrepresented individuals in clinical research. Evidence of prior partnerships or relationships with proposed Clinical Sites has been provided. Key personnel have sufficient and relevant expertise to support the activities of the Network Research Hub.

Resources and Environment

The Network Research Hub is currently participating in and affiliated with one or more clinical research networks (NIH IDeA-CTRs, NIH CTSA, and/or PCORI PCORnet), that will increase site readiness to rapidly launch as a new site for existing NIH-funded studies. The catchment area of the Network Research Hub and its Clinical Sites will provide a high likelihood of facilitating engagement and study accrual of populations underrepresented in research (with a priority on individuals in rural communities).

Award Negotiation and Selection Information

Based on the identified strengths and weaknesses, NIH will determine whether an application will be selected for negotiation and/or award. NIH may select up to six viable applications to move forward in negotiations for a potential award, based on the objective review. Negotiations will involve identification of the initial study already funded by NIH to which the Network Research Hub will serve as an additional enrollment site. Coordination with the NIH-funded investigators and/or NIH program staff overseeing those studies will be required in order to understand the needs and existing support for the studies and to develop a final budget and milestone plan for the Network Research Hub. Final award selection will involve assessment of applications with successful negotiations and review and approval by NIH leadership and development of objective milestones as agreed upon by NIH and the applicant.

The level of funding for any award(s) made will depend on the negotiated studies and milestones and availability of funds.

Special Award Terms #Special Award Terms  

The complete terms and conditions of each OT award issued under this ROA are subject to negotiation and will be contained in the Agreement entered between NIH and award recipient. This Special Award Terms section is provided for informational purposes only in order to provide prospective applicants with an understanding of key expectations and terms that may differ from traditional NIH award mechanisms. All terms and conditions of award will flow down to any partners (e.g., subrecipients, collaborators) participating in the OT award.  

Lower Tier Agreements  

Award recipients will be expected to issue sub-awards to entities identified in their applications and approved by NIH under this ROA. Any changes to sub-awards must be in consultation with NIH prior to adding or removing partners.

Milestone-Based Workplan 

A milestone-based workplan will be requested and negotiated prior to award for inclusion in the OT Agreement. The workplan should include a description of operational milestones, completion criteria, and expected start and completion dates.

Enhancing Diversity, Equity, Inclusivity, and Accessibility in the Research Community

Award recipients will be encouraged to diversify their staff populations to facilitate engagement with diverse research partners and to enhance the participation of individuals from groups that are underrepresented in the biomedical, clinical, behavioral and social sciences, such as those defined in Notice of NIH’s Interest in Diversity ( https://grants.nih.gov/grants/guide/notice-files/NOT-OD-20-031.html ).

Program Governance   The Network Research Hubs will be part of a program consisting of a coordinated infrastructure involving the following governance and components:   

• establishing the vision, mission, strategic objectives, and goals of the coordinated infrastructure to be carried out by a Scientific and Medical Director (SMD) and Operations Director.
• ensuring the supported work appropriately and equitably supports and prioritizes the needs of all NIH ICs. 
• monitoring and evaluating the progress of the infrastructure, its efficiency and effectiveness, and that its outputs align with the vision and mission.
• providing oversight of the studies/protocols and site and study selection, 
• managing/coordinating the Central Institutional Review Board (IRB), 
• providing statistical and data management support, 
• collaborating with sites to develop innovations on clinical study design and implementation to minimize burden on participants and providers in primary care settings, 
• facilitating sustained engagement with key partners through a community advisory board, and
• other functions as the governance and structure of the Clinical Science Center is further developed.
• conducting site feasibility assessments
• facilitating Clinical Site agreements/contracting,
• coordination of study operations (protocol development; compliance with Food and Drug Administration (FDA) and Office of Human Research Protections (OHRP) regulatory and participant protection requirements,
• quality assurance, and 
• data monitoring.

OT Agreement Governance 

Other Transactions (OT) are a special type of legal instrument other than contracts, grants or cooperative agreements. Generally, these awarding instruments are not subject to the Federal Acquisition Regulation (FAR ), nor to grant regulations unless otherwise noted for certain provisions in the terms and conditions of award. They are, however, subject to the OT authorities that govern the initiative and/or programs as well as applicable legislative mandates. NIH and its components, including the Office of Strategic Coordination (OSC), have been authorized by Congress to use them. They provide considerable flexibility to the government to establish policies for the awards, so the policies and terms for individual OT awards may vary between awards. Each award is therefore issued with a specific Agreement, which is negotiated with the recipient and details terms and conditions for that specific award. Program and administrative policies and the terms and conditions of individual awards are intended to supplement, rather than substitute for, governing statutory and regulatory requirements. Awards or a specified subset of awards also may be subject to additional requirements, such as those included in executive orders and appropriations acts (including the other transaction legislation cited in the Agreement), as well as all terms and conditions cited in the Agreement and its attachments, conditions on activities and expenditure of funds in other statutory or regulatory requirements, including any revisions in effect as of the beginning date of the next funding segment. The terms and conditions of the resulting OT awards are intended to be compliant with governing statutes.

For the awards funded under this ROA, NIH will engage in negotiations and all agreed upon terms and conditions will be incorporated into the Agreement. Either a bilateral agreement or a Notice of Award (NoA) will be used as the official Agreement. The signature of the Signing Official in the application certifies that the organization complies, or intends to comply, with all applicable terms and conditions, policies, certifications, and assurances referenced (and, in some cases, included) in the application instructions.

Award Administration Roles and Responsibilities

Other Transactions Agreements Officer (OTAO) 

• is responsible for legally committing funds on behalf of the Federal government and that OT actions taken are in the best interest of the government
• administers, manages, and closes out awards
• oversees the management of award records
• receives and acts on requests for NIH approval; the only NIH official authorized to change the funding, duration, or other terms and conditions of award

Other Transactions Agreements Specialist (OTAS) 

• serves as the first line contact for OT correspondence with applicants/recipients for administrative and financial aspects of the award

Other Transactions Program Official (OTPO) 

• provides the day-to-day programmatic oversight of individual awards 
• seeks guidance and advice as appropriate from subject matter experts for various disease areas and/or clinical trial oversight (e.g., medical monitoring)
• documents programmatic decisions related to an OT
• upholds government regulations on the appropriate use of federal funds
• conducts timely review of reports, inspection of deliverables, and other mechanisms to monitor and evaluate performance of the OT recipients
• serves on the OT Team, which includes developing ROAs and contributing to the development of OT award terms and conditions
• maintains certifications to serve as OTPO
• coordinates with other NIH Program Officers when partnering on other NIH-funded projects

Subject Matter Experts

• assist the OTPO in scientific and technical discussions with awardees
• review reports and discuss progress towards milestones and deliverables
• provide recommendations to the OTPO based on progress reviews
• attend face-to-face awardee meetings, as necessary
• attend site visits, as necessary

The terms and conditions of each award will address this criterion as appropriate based upon the final negotiated terms and agreed upon budget.

Human Subjects Research

All applications for work that will involve engagement in Human Subjects Research (as defined in 45 CFR § 46)( https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-A/part-46 ) must provide documentation of one or more current Assurance of Compliance with federal regulations for human subject protection, including at least a Department of Health and Human Services (HHS), Office of Human Research Protection (OHRP), Federal Wide Assurance ( https://www.hhs.gov/ohrp/index.html ). All research involving Human Subjects must be reviewed and approved by an Institutional Review Board (IRB), as applicable under 45 CFR § 46 ( https://www.ecfr.gov/current/title-45/subtitleA/subchapter-A/part-46 ) and/or 21 CFR § 56 ( https://www.ecfr.gov/current/title-21/chapter-I/subchapter-A/part-56 ).

The entity’s Human Subjects Research protocol must include a detailed description of the research plan, study population, risks and benefits of study participation, recruitment and consent process, data collection, and data analysis. Award recipients must comply with all applicable laws, regulations, and policies for NIH-funded work. This includes, but is not limited to, laws, regulations, and policies regarding the conduct of Human Subjects research, such as the U.S. federal regulations protecting human subjects in research (e.g., 45 CFR § 46, 21 CFR § 50, § 56, § 312, § 812) and any other equivalent requirements of the applicable jurisdiction.

The informed consent document utilized in human subject research funded by NIH must comply with all applicable laws, regulations, and policies, including but not limited to U.S. federal regulations protecting human subjects in research (45 CFR§ 46 ( https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-A/part-46 ) and, as applicable, 21 CFR § 50 ( https://www.ecfr.gov/current/title-21/chapter-I/subchapter-A/part-50 ). The protocol package submitted to the IRB must contain evidence of completion of appropriate Human Subject Research training by all investigators and key personnel who will be involved in the design or conduct of NIH funded human subject research. Funding cannot be used toward human subject research until all approvals are granted.

Intellectual Property

Specific terms with respect to intellectual property will be negotiated at the time of award; however, any negotiation will consider other laws (as relevant) that affect the government’s issue and handling of intellectual property, such as the Bayh-Dole Act (35.U.S.C. 200-212); the Trade Secrets Act (18U.S.C. 1905) the Freedom of Information Act (5 U.S.C. 552); 10 U.S.C. 130; 28 U.S.C. 1498; 35 U.S.C. 205 and 207-209; and the Lanham Act, partially codified at 15 U.S.C.1114 and 1122.

Payment  

The OT award will use the Payment Management System (PMS) operated by the DHHS Program Support Center. Payments by PMS are made on a reimbursement basis unless otherwise specified in the terms of the Agreement.

Management Systems and Procedures 

Recipient organizations are expected to have systems, policies, and procedures in place by which they manage funds and activities. Recipients may use their existing systems to manage OT award funds and activities as long as they are consistently applied regardless of the source of funds and across their business functions. To ensure that an organization is committed to compliance, recipient organizations are expected to have in use clearly delineated roles and responsibilities for their organization’s staff, both programmatic and administrative; written policies and procedures; training; management controls and other internal controls; performance assessment; administrative simplifications; and information sharing.

Financial Management System Standards 

Recipients must have in place accounting and internal control systems that provide for appropriate monitoring of other transaction accounts to ensure that obligations and expenditures are congruent with programmatic needs and are reasonable, allocable, and allowable. A list of unallowable costs will be included in the terms and conditions of the award. In addition, the systems must be able to identify unobligated balances, accelerated expenditures, inappropriate cost transfers, and other inappropriate obligation and expenditure of funds, and recipients must notify NIH when problems are identified. A recipient’s failure to establish adequate control systems constitutes a material violation of the terms of the award.

Property Management System Standards 

Recipients may use their own property management policies and procedures for property purchased, constructed, or fabricated as a direct cost using NIH OT award funds. The terms and conditions of award will address this criterion as appropriate based upon the final negotiated and agreed upon budget. Procurement System Standards and Requirements Recipients may acquire a variety of goods or services in connection with an OT award-supported project, ranging from those that are routinely purchased goods or services to those that involve substantive programmatic work. Recipients must acquire goods and services under OT awards in compliance with the organizations established policies and procedures. The terms and conditions of each award will address this criterion as appropriate based on the final negotiated and agreed upon budget.

Organizational Conflicts of Interest (OCIs)  

Applicants are required to identify and disclose all facts relevant to potential OCIs involving subrecipients, consultants, etc. Under this section, the proposer is responsible for providing this disclosure with each Detailed Plan. The disclosure must include the PI/Collaborators’, and as applicable, proposed members’ OCI mitigation plan. The OCI mitigation plan must include a description of the actions the proposer has taken, or intends to take, to prevent the existence of conflicting roles that might bias the proposer’s judgment and to prevent the proposer from having an unfair competitive advantage. The government will evaluate OCI mitigation plans to avoid, neutralize, or mitigate potential OCI issues before award issuance and to determine whether it is in the government’s interest to grant a waiver.

The government will only evaluate OCI mitigation plans for proposals that are determined selectable. The government may require applicants to provide additional information to assist the government in evaluating the proposer’s OCI mitigation plan. If the government determines that a proposer failed to fully disclose an OCI or failed to reasonably provide additional information requested by the government to assist in evaluating the proposer’s OCI mitigation plan, the government may reject the Detailed Plan and withdraw it from consideration for award.

Monitoring 

Recipients are responsible for managing the day-to-day operations of OT award-supported activities using their established controls and policies. However, to fulfill their role in regard to the stewardship of federal funds, the program team will monitor their OT awards to identify potential problems and areas where technical assistance might be necessary. This active monitoring is accomplished through review of reports and correspondence, audit reports, site visits and other information, which may be requested of the recipient. The names and contact information of the individuals responsible for monitoring the programmatic and business management aspects of awards will be provided to the recipient at the time of award.

Monitoring of a project or activity will continue for as long as NIH retains a financial interest in the project or activity as a result of property accountability, audit, and other requirements that may continue for a period of time after the OT award is administratively closed out and NIH is no longer providing active OT award support.

Audit 

NIH OT recipients for the Program are subject to the audit requirements of OMB 2 CFR 200, Subpart F- Audit Requirements, as implemented by DHHS 45 CFR Subpart F. In general, 45 CFR 75, Subpart F-Audit Requirements requires a state government, local government, or non-profit organization (including institutions of higher education).  

For-profit organizations have two options regarding the type of audit that will satisfy the audit requirements. The recipient either may have (1) a financial-related audit (as defined in, and in accordance with, the Government Auditing Standards (commonly known as the “Yellow Book”), GPO stock 020-000-00-265-4, of a particular award in accordance with Government Auditing Standards, in those cases where the recipient receives awards under only one DHHS program, or (2) an audit that meets the requirements of 45 CFR 75, Subpart F-Audit Requirements.

This page last reviewed on May 6, 2024

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Yahoo Finance

Christus enters 'joint venture' with private equity-backed staffing firm.

May 7—The Texas organization that owns Santa Fe's Christus St. Vincent Regional Medical Center has entered into a new pact with a Georgia-based private equity-backed staffing firm, a hospital spokesman confirmed Tuesday.

Christus Health and Atlanta-based SCP Health are creating a new "clinical company" called CS Partners, which hospital spokesman Arturo Delgado described in an email Tuesday as an "in-sourced inpatient group."

Hospital leaders did not respond directly to a request for an interview about the new company on Tuesday.

In a provided statement, Delgado said the new company will be equally governed by Christus Health — the group that owns the New Mexico hospital and clinics — and SCP Health.

"This new organization benefits from SCP's infrastructure and data-rich clinical expertise in hospital-based medicine as well as the trusted, compassionate and high-quality care provided by CHRISTUS Health," the release said. "Building on the decades of experience and dedicated service of both organizations, this joint venture aspires to build a novel and industry-leading way of connecting and supporting clinicians while creating a new and powerful cross-ministry and cross-service line collaboration aimed at improving the quality and consistency of care for our patients.

Delgado did not answer questions about the specifics of how the partnership will work or which parts of the hospital's services would be affected. He wrote in an email to The New Mexican that while the hospital has had initial discussions with some physicians, he could not answer questions about a timeline for any forthcoming changes.

"Out of respect for our providers, and the importance of initial discussions, it is premature to share anything that would suggest that a plan or timeline have been determined," he wrote.

SCP Health, based in Atlanta and headed by CEO Rich D'Amaro, was founded by Dr. William "Kip" Schumacher, an emergency medicine physician who still serves as the organization's executive chairman. The company, formerly known as Schumacher Clinical Partners, offers outsourced staffing services. Various media outlets recently reported the firm taking over employment of hospitalist employees for a Catholic health system that operates 10 hospitals in the Chicago area.

The new partnership in New Mexico comes on the heels of Christus St. Vincent outsourcing employment of its Women's Care Specialists practitioners to South Carolina-based Ob Hospitalist Group, another private equity-backed company. Both developments also come after a shift in the hospital's ownership mix. Until last year, local nonprofit Anchorum St. Vincent owned half of Christus St. Vincent, which includes the hospital as well as all the other local Christus entities. In the fall, that nonprofit transferred its shares to Texas-based Christus Health.

Hospital president and CEO Lillian Montoya said in a provided statement that "were there to be any changes" as a result of the newly created CS Partners, the hospital would communicate those directly to its staff.

"As we learn more about the joint venture strategy, including any possible implementation, we remain committed to providing high quality care and a great patient experience," Montoya wrote. "Any changes would need to be complementary to our local mission, inclusive of the feedback from our providers, and position CHRISTUS St. Vincent to successfully navigate the headwinds in healthcare."

A Christus Health spokeswoman wrote in an email Tuesday afternoon that information provided by Delgado is "all that we are releasing at the moment." Efforts to reach SCP Health representatives on Tuesday were not successful.

Private equity is bankrupting American healthcare firms—literally

Healthcare bankruptcies  surged in 2023 , and it turns out many of the companies that went under had one thing in common: private equity (PE) ownership.

At least 21% of the 80 healthcare companies that filed for bankruptcy last year were PE-owned, according to a  report  from the nonprofit Private Equity Stakeholder Project (PESP).

“PE’s excessive use of debt and aggressive financial strategies put healthcare companies at risk, and in turn threaten the stability of critical healthcare resources across the country,” Eileen O’Grady, research and campaign director at PESP, wrote in the report.

In addition to the 17 PE-owned healthcare companies that filed for bankruptcy in 2023, there were at least 12 bankruptcies among healthcare companies with venture capital backing, representing another 15% of the year’s total bankruptcies, according to the PESP report.

Comparatively, there were just eight bankruptcies in 2019 among PE-owned healthcare companies, the report noted.

One of the reasons the number of bankruptcies among PE-backed healthcare companies has increased is that the PE business model relies on high debt levels, O’Grady wrote in the report. That makes companies “more vulnerable to changing market conditions, including high interest rates and rising labor costs,” she wrote.

Interest rates increased 11 times between March 2022 and July 2023 (from 0.25% to 5.5%), according to PESP.

Healthcare companies have also faced rising labor costs and staffing shortages, and many have relied on  more expensive contract labor , which compounds financial challenges, O’Grady noted.

Some PE firms have seen multiple healthcare company bankruptcies in recent years. KKR , one of the largest publicly traded PE firms, owned both staffing firm Envision Healthcare and cancer care provider GenesisCare—both of which filed for bankruptcy in 2023, according to PESP. The firm still owns three other healthcare companies with a high risk of default, O’Grady wrote.

The PE-owned bankruptcy trend is expected to continue, according to PESP.

“Another wave of PE-driven healthcare bankruptcies is expected in 2024—almost all [93%] of the most distressed US healthcare companies are owned by PE firms,” O’Grady wrote in the report.

The consequences of a healthcare company bankruptcy are more than just financial. It can cause a  lack of healthcare access  and lead to overburdened providers, according to PESP.

“The rise in bankruptcies raises questions about how the private equity business model creates risk for the healthcare system,” O’Grady wrote. “Private equity’s heavy use of debt to fund its healthcare investments is becoming a major liability for its portfolio companies as interest rates have risen and remained elevated and labor costs for many healthcare companies have skyrocketed.”

This report was initially published by Healthcare Brew .

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