Indirect Cost Waivers on Federal Patient Pass-Through Costs

As the Medical School strives to advance groundbreaking clinical and translational research, we recognize the challenge this type of research brings. We have heard concerns from faculty that patient pass-through costs burdened with the full on-campus research indirect cost rate have created a financial challenge on federally funded, multi-site clinical trials. These are situations where funds are provided to U-M with the purpose of sending out per patient reimbursements to various other sites (through a contracted service or Hybrid Purchase Order mechanism).

Having researched the issue, we found that often federal sponsors allowed for full indirect cost recovery on per patient pass through costs consistent with our negotiated rate agreement, but had instituted a cap on the total funds available, making it nearly impossible to meet the work requirements of the announcement and still recover full indirects on the pass through costs.

We do recognize that there remains investment of university resources used to issue checks, establish contracts, and process official agreements, as well as unit overhead costs related to the post-award support of the project. Finally, our negotiated rates on campus are an average rate across all activities, so any change to lower recovery on this activity does depress the cumulative recovery across all projects.

After review, the Medical School is willing to use a waiver allowing indirects to be recovered only on the first $25,000 to each site, for this subset of activity. This waiver will only be allowed when agreed to by the administrative home department of the project.

Only federally funded, multi-site projects with identified and approved pass through costs are eligible. Qualified activity will be identified as capitated (or per patient) payments to sites enrolling patients. The mechanism used by the Office of Contract Administration (OCA) to establish the agreements will likely be that of a Hybrid Purchase Order.

This policy will not apply to industry sponsored, multi-site projects. If you have questions regarding the applicability of this policy to non-federally sponsored projects please contact [email protected]. If you are seeking a variation of this waiver, please contact [email protected].

No prior-approval or agreement to the waiver is necessary if the conditions below are met. A project will be approved by the Medical School for use if:

• The activity is per patient reimbursement costs to participating sites;
• It is proposed in an application for federally sponsored funding; and
• The administrative home department is in agreement with the use of a waived rate (indicated by approval of the PAF – no formal waiver request must be signed).

When preparing an SF424 budget for submission to federal sponsors, the total amount being allocated to the sites for per-patient activity should be shown on the “Subawards/Consortium/Contractual Costs” line. Formal subcontract paperwork is not completed; however, it may be appropriate to include in the proposal a letter of agreement from each site.

Additionally, on the Proposal Approval Form (PAF) in eRPM, the waiver requested must be marked “Yes” with a description of the circumstances in the text field: “This proposal includes patient care pass-through costs. The indirect costs on these expenses are included for only the first $25,000 for each of the X sites.”

If you would like an ongoing project reviewed for a change in financial handling, please send your request to [email protected]. However, please note, any project that was proposed and awarded under the full indirect cost recovery method will not be approved in order to offset other budget cuts. This is not intended to be a retroactive policy. As there are many nuances to clinical research, if you need help determining whether or not your activity is qualified please contact Heather Offhaus, (734-763-4272).