Summary
England has a vibrant research and innovation ecosystem, which includes a well-developed research infrastructure and research expertise within our health and care workforce.
The NHS benefits greatly from delivering research directly, not only in terms of breakthroughs enabling earlier diagnosis, more effective treatments and improved system design, all of which improve patient care and health outcomes, but also increased workforce satisfaction and retention [1] and patient and carer experience [2]. Mortality is lower in research active hospitals [3]. The NHS also benefits financially from delivering research.
As integrated care systems (ICSs) develop and evolve, there is an opportunity for them to further embed research within health and care. NHS England has already published guidance to maximise the value of research across ICS footprints, and this finance guidance helps ensure robust research finance management practices are embedded.
Good financial management is a key part of effective delivery of research in the NHS, and it is important to recognise that some aspects of this are niche to research and require specialist knowledge, compared to overall NHS financial management.
This guidance sets out good practice and other information to support NHS organisations in England maintain or develop their research finance management policies and processes.
It covers each of the 4 broad aspects of research finance management:
- Costing of research studies. This aspect of financial management is niche to research and requires specialist knowledge.
- Finance activity during research activity. Some of this will be niche to research, for example per patient invoicing, but other activities such as monitoring, accounting and reporting are core NHS finance functions.
- Distribution and use of the income generated by research. Some aspects of this are common to mainstream financial activity but others are niche to research.
- Reporting of research finance activity. Research has requirements additional to those of normal NHS finance reporting, although research activity should also be included in integrated care board and provider reporting and accounts.
1. Introduction
NHS England uses the UK policy framework for health and social care research definition of research:
“… the attempt to derive generalisable or transferable new knowledge to answer or refine relevant questions with scientifically sound methods. This excludes audits of practice and service evaluation…”
Research may involve single or multiple sites, and be national or international. From a finance perspective the key thing to note is that research can be funded by either commercial or non-commercial bodies and the funding source will have an impact on financial management.
The UK is a world leader for research and innovation in healthcare, with around 25% of the world’s top 100 prescription medicines being discovered and developed in the UK [4].
The NHS also benefits financially from delivering research, particularly commercial clinical trials. Between 2016/17 and 2018/19 the NHS received on average £9,000 per patient recruited to a commercial clinical trial and saved over £5,800 in drug costs for each of these patients. This equates to income of £355 million and cost savings of £28.6 million in 2018/19.
The 2022 ABPI Life Sciences Superpower report found that delivering the Life Sciences Vision could raise £165 million of additional revenue and save £32 million of costs for the NHS every year. The latest National Institute for Health and Care Research (NIHR) annual report 2022/23 highlights that for every £1 invested by NIHR to support research, a return of £19 to the wider wealth of the nation is generated. Every £1 million spent by charities on medical research in the UK contributes £1.83 million to the economy.
In 2023 NHS England published guidance on embedding research in the NHS, which supports integrated care boards (ICBs) to meet their legal duties around research, including high level information on research finance. This further guidance provides more detail on financial management activity linked to research in the NHS, including defining the role of the research finance function and the practicalities of research funding, costing and delivery. It emphasises the importance of robust research financial management in supporting all NHS organisations to deliver research that maximises the value and benefits of research to their populations and themselves.
This guidance sets out the clear expectations that:
- organisations need a good understanding of research finance if they are to maximise the benefits of research for their populations
- the finance workforce is recognised as a key part of the research workforce; they bring a specialised skillset to supporting and delivering research
- organisations should have a transparent research income distribution process to support and build research capacity and capability
- commercial and non-commercial research should both be considered for an organisation to have a balanced research portfolio
It is for:
- all NHS organisations undertaking research
- those with senior responsibility in providers or ICBs, including at board level, for finance and/or operationalising research
- finance directors and managers, including those with research finance in their portfolio
- research and innovation directors, leaders and managers
- research active clinicians and staff
- practice managers engaged in research
- heads of services engaged in research
This guidance may also be useful to individuals involved in funding or delivering research or education, and partner organisations involved in NHS research such as local authorities, social care services, the voluntary, community, faith and social enterprise sector and other providers of healthcare services including financial auditors.
Please refer to NHS England’s separate guidance relating to data-enabled research secure data environments and the value sharing framework.
2. Research finance management principles
Robust research finance management practices are a vital part of the research life cycle for all research active organisations, but the resource required for the function will depend on the level of research activity. Some research-intensive organisations will have dedicated research and development (R&D) finance teams, while others will embed this function in wider NHS finance departments. The UK policy framework for health and social care sets out the roles and responsibilities of individuals and organisations involved in research.
Research can be funded by either commercial or non-commercial bodies, and the financial management of research differs significantly between the two funding sources. This section covers the overarching principles common to both commercial and non-commercial research, section 3 those specific to commercial contract research and section 4 those specific to non-commercial research.
2.1 Research finance function
The research finance function manages the research finances, and is a responsibility that can be held by a department, team or individual, or a combination of these. The function could be situated within an R&D department (may also be called a research and innovation [R&I] department) or mainstream finance team in an NHS organisation, or both. NHS R&D departments and their functions may be outsourced or shared between organisations. Primary care R&D functions may be hosted by an integrated care board (ICB).
The size of the NHS organisation may determine the required capacity and capability of the research finance function. Large, highly research-active organisations often have dedicated teams and systems, whereas in smaller organisations the function may be a component of an individual or shared role.
In principle, the scope of the finance management, control and services function within an NHS organisation is broad and covers:
- forecasting of finances to support business planning and strategy development
- cash flow (treasury) management
- staff (research delivery teams, key support services, business teams, finance accountants, research programmes, human resources, information technology, senior management team [SMT], directors/trustees)
- financial management, accounting and reporting; taxation if applicable
- understanding financial activities and operational information to inform forecasting and identify potential risks
- support services
- capital finance management
- SMT reporting; support of audit and other statutory obligations
The research finance function undertakes specific tasks in relation to managing research-related finances, which include:
- ensuring all research activity costs are captured and income received
- distributing the funding for a study to all sites undertaking specific research activities within it
- understanding the cost attribution of the various funding streams relating to research
- working with the research team to develop costings prior to agreeing to take part in a study
- ensuring research funding is reported in NHS organisation financial accounts in line with relevant accounting standards, which may be subject to financial audits from external auditors, regulators, sponsors and funders
- meeting the reporting requirements of funding bodies, which will vary from monthly, quarterly, annually or end of study only requirements
- providing the external verification required by the funding body relating to the expenditure of a particular research award
- providing information to funding bodies to demonstrate that the funding award has been used in line with their expectations. This is of importance not only to individual organisations but also the NHS as a whole
- maintaining a system of delegated responsibility so that there is internal control of budgets and the signing of research contracts, for example funding agreements
- management of commercial cost recovery, contracts and distribution of funding to support commercial research
The NHS organisation finance and R&D department teams should work together to deliver defined functions and meet on a regular basis. The exact mechanisms and split of responsibilities may vary, but an example of how this may work is detailed in table 1 below.
Table 1: Example of effective operational working between NHS organisation finance and research and development department teams (adapted and expanded from the UK research finance guidance)
Task | Who undertakes this activity | |
---|---|---|
A | Generate financial reports to the board responsible for research and development (R&D) |
|
B | Complete financial returns to National Institute for Health and Care Research (NIHR) and other funding bodies |
|
C | Manage external research income, for example research awards and research capability funding (RCF) |
|
D | Manage carry forward |
|
E | Manage invoicing, payments and bad/aged debt | NHS organisation finance to:
|
F | Identification of financial benefits of research |
|
G | Sign-off for internal processes, for example standard operating procedures |
|
H | Ad hoc advice on costing |
|
I | Manage ledger/monthly close |
|
J | Maintain accurate invoice log |
|
K | Review and input to research contracts, for example collaboration, site agreements |
|
2.2 Management of research income and expenditure
To ensure that the NHS organisation can comply with its standing financial instructions, standing orders, reservation and delegation of powers, and by implication accounting standards including IFRS 15, the R&D department should base decisions on an accurate understanding of research income and expenditure. This is to ensure that income received by the NHS organisation can be directed in an efficient and transparent manner. Expenditure is managed in a controlled way to support the requirements of funders and to comply with the organisation’s policy on research. It must also satisfy audit requirements.
Transparent income distribution process
Research within NHS organisations is usually dependent on external income. There are various funding sources including the National Institute for Health and Care Research (NIHR; funded by the Department of Health and Social Care [DHSC]), charities, commercial companies and sources such as research award and infrastructure income. Research finance functions need to understand the differences between the sources and how this affects management. Accurate systems are required for managing and tracking income and expenditure across different income streams whether this be through multiple cost centres or other means where separate cost centres are not available.
NHS organisations should have robust and transparent income distribution policies and processes. Their research finance functions should have a system that ensures transparency around the funding of individual studies to enable the reconciliation of activities undertaken with income received. Any identified disparities should be raised with funders through the study sponsor in a timely manner. The finance department should have systems to issue invoices in a timely manner and identify where invoices are not paid within agreed timeframes, and appropriate methods to recover outstanding amounts from funders.
Research income for direct costs should be used to offset the associated direct expenditure: for example, where income is received to deliver an MRI scan, it should be directed to the department in the organisation that incurred the expenditure to undertake the MRI. Where the direct costs are staff time, this income should be directed to where the staff costs are incurred.
Organisations should have a model that works best for them to distribute income related to indirect or overhead costs. Some may choose to allocate support posts to cost centres where indirect funding is then held; others may distribute indirect funding to department cost centres to recognise the support provided to research studies by those departments and contribute to funding posts within a wider team.
Regarding estates and facilities, organisations may have dedicated areas where research is undertaken, but more likely is that it is undertaken across the organisation’s estate and therefore needs to be taken into account in income distribution. Where available, it would be appropriate to use patient-level information and costing system data in this process.
Case study: Complexities of research and development finance in an NHS organisation
NHS Cambridgeshire and Peterborough ICB hosts an NIHR-funded 5-year study with an academic partner. The research is additionally supported by a £100,000 contribution from a charity, paid in full at the start of the study – a normal practice for a charitable contribution to a research project. However, the corresponding payment schedule effectively drew down on this sum (in combination with payments from DHSC) over the first 3 years. Therefore, the ICB Research and Development Office is obliged to accrue some of the held charitable funding into two financial years beyond that in which the income was received – a necessity at odds with normal ICB financial processes for full in-year spend of income.
Some hosted research awards may involve a range of academic and NHS partners, creating even more complex payment schedules. On occasion, partners may invoice 6–12 months behind schedule, or even later, and this too can necessitate accrual of award funds beyond the year end.
International financial reporting standard 15 revenue recognition
The NHS often undertakes research in partnership with other organisations: for example, through a collaboration with other provider sites in the same study. When this involves the transfer of monies – for example, from an NHS organisation to third parties – this is either described in written agreements or established practice. Being able to manage annual income, expenditure and projected income within year is important because this allows researchers and R&D departments to use any income and invest any projected surplus within the financial year to ensure compliance with international financial reporting standard (IFRS) 15.
IFRS 15 provides a single, principles-based 5 step model to be applied to all contracts with customers.
- Identify the contract(s) with a customer.
- Identify the performance obligations in the contract.
- Determine the transaction price.
- Allocate the transaction price to the performance obligations in the contract.
- Recognise revenue when (or as) the entity satisfies a performance obligation.
It is important to note that IFRS 15 should not be used as a mechanism to recognise income on a cost accounting basis. The income can be recognised as and when the performance obligations – for example, agreed research activities – have been completed. At that point, the NHS organisation will select an appropriate measure of progress to determine how much revenue should be recognised as part of IFRS 15.
Building research capacity
As with all services there is a need to evolve and develop research capacity and capability as both technology and needs change. This will require planning and adequate resource allocation. Some of this resource may come from external sources such as NIHR infrastructure funding or research income, and organisations may also use their own income to develop research capacity. A business case may need to be developed to support objective, evidence-based decisions that are properly scoped, planned and costed from the outset and meet the organisation’s governance requirements, NHS England has developed detailed guidance on developing and approving business case and the Health Innovation Network also provides information on developing NHS business cases.
While income for direct costs should be used to offset the associated direct expenditure, organisations need to consider how indirect costs should be used to build research capacity. The organisation should reinvest any indirect research income received above that required to deliver the research in increasing research capacity and efficiency. Investments across the organisation, including those outside the R&D department, can achieve this aim: for example, investment in an additional CT scanner may by extension improve research capacity. Further information on reinvestment is provided in section 3.4.
The NIHR Clinical Research Network (CRN) (the NIHR Research Delivery Network [RDN] from October 2024) provides infrastructure support for the initiation and delivery of high quality research which benefits patients and the NHS, including relevant research in public health and social care.
The NIHR RDN will provide funding to study sites that can be used to support the costs of research delivery across the entire study delivery pathway; financial oversight is needed to ensure this funding is used to support R&D activities in line with DHSC guidance on the attribution of research costs; and dedicated support to ensure study sites are recovering all appropriate costs to sustainably fund and grow research delivery staff and facilities.
NIHR CRN/RDN funding will enable the NHS organisation to:
- increase opportunities for participants to take part in research
- ensure studies are carried out efficiently
- improve the environment for commercial contract research
Case study: Driving practice growth and staff engagement through investing in research
The Darlington Primary Care Network has implemented a strategic workforce approach that fosters research engagement among nurses, midwives and allied health professionals (NMAHPs). As part of this initiative, NMAHPs were invited to participate in research projects through a competitive process, supported by pump priming funding from the local CRN (LCRN) (£21,000).
One selected practice nurse, initially supported through a fixed-term position, received assistance from the LCRN to conduct multiple commercial trials in the primary care setting. The income generated from these trials (£40-50,000 per annum) was reinvested in the practice, with the nurse’s position made permanent. This then continued to generate additional funding, which is being reinvested in the practice to benefit patients.
These commercial research opportunities not only increased clinical knowledge but also yielded significant financial gains for the practice, enabling staff advancement and growth. This created a sustainable cycle, one that reinforced the business case while fostering an environment that encouraged staff participation in ongoing research initiatives.
2.3 Forecasting research financial activity
In the NHS, forecasts are routinely made to the end of the current financial year (and milestones within the year) and the medium to long term (2–5 years) as part of the annual planning cycle.
A full picture of all research-related costs, income and expected expenditure will be needed to provide an accurate forecast. Unlike standard NHS budgets, which are set at the start of a financial year, research budgets will fluctuate based on the income received from research awards and commercial contract research through the year. It is important to identify income that may be received in one financial year but spent in a subsequent year, as this can affect bottom line figures, particularly where all costs fall within a single cost centre.
Research-related forecasts are generally set late in the previous financial year. While some costs will not be known – for example, level of recruitment to studies – assumptions can be made based on the previous year’s performance, with forecasts then adjusted as more information becomes known.
To better inform forecasting, how the participant activity and costs are attributed across the different teams supporting a study – for example, radiology, pathology, pharmacy – needs to be understood, and this requires a system that will capture both participant-level information and activity costs for any given study. Capturing participant-level information at a study level enables each team to understand how much income could potentially be received for their activity, and to provide monthly, quarterly and annual forecasts based on real-time participant activity.
Case study: Leeds research finance model to support timely invoicing and recruitment-based forecasting
The Leeds Teaching Hospitals NHS Trust Research and Innovation Business team has developed a research finance model that supports research delivery teams in managing research finance activity at an individual participant recruitment and study level. The ‘finance trackers’ provide an overview of study information, recruitment performance, and breakdown of research activity and invoicing by individual participant, key support services and other organisations. This information is then summarised by participant visits and invoicing to date. It provides transparency around activity and finances for collaborative working across organisations and for all income-generating studies.
The summary information can be pulled from each study into a delivery team portfolio to provide a full overview of recruitment performance, income to date and expected income based on actual recruitment. This forecasting information provides both assurance and highlights potential risks to the central research and innovation management team, and supports the functions of the research accountants.
The data generated also helps teams gauge both current and future research capacity requirements.
2.4 Visibility of research finance
Health and social care research is governed by a range of laws, policies and international, national and professional standards. The Health Research Authority (HRA) is responsible for ensuring research-related regulation is co-ordinated and standardised across the UK, to make it easier to do research that people can trust.
All NHS and adult social care organisations are obliged to have regard to HRA’s guidance on the management and conduct of research, including financial management. The visibility and transparency of research finance must also satisfy internal governance and external audit requirements to demonstrate robust financial management and probity through NHS organisation qualified accounts. These requirements are:
- internal reporting of research finances – developing good governance structures and reporting mechanisms will support a transparent assurance process. This may be through dedicated finance committees or R&D governance groups. Any reporting structure should have clear lines of escalation and accountability
- external audit for research finances – the organisation is liable for the auditing of research finances, which must be carried out by independent auditors. Organisations that host research awards and/or are in receipt of NIHR CRN funding need also to be aware of the research funders requirements, as audits may be requested at any time during or after the award and/or funding.
As internal and external audits may require substantial preparation and information gathering, having named or key individuals and robust filing will aid the audit process. Management of information storage will, where applicable, also need to adhere to the organisation’s records retention and disposal schedule.
2.5 Financial aspects of public and patient involvement and engagement
The NHS Standard Contract obliges providers of NHS-funded services to assist the recruitment of suitable people (whether patients or staff) into approved research studies, which aligns to the Health and Care Act 2022 requiring ICBs to facilitate or otherwise promote research. All health and care settings should be recruiting people into research.
Working with people and communities is a requirement of ICBs, and statutory guidance supports them and their partner providers to meet this legal duty. The Public Sector Equality Duty also applies and requires equality of opportunities between persons who share a relevant protected characteristic and persons who do not.
Managing payments for public and patient involvement and engagement contributors
NIHR provides payment guidance for public involvement of research for organisations, to support the development of clear and timely payment policies; and guidance for researchers, to support the costing and planning of payment and recognition approaches for public contributors.
It is good practice for organisations to have a policy for managing payments to public contributors, particularly where these amount to more than the reimbursement of expenses. This will help ensure clear mechanisms are in place for tracking and managing activity and payments, and there is transparency over eligibility and rates of pay for public contributors.
Aspects to consider when drafting a public and patient involvement and engagement payment policy include:
- mechanisms to pay expenses upfront or in cash to enable involvement of particular individuals or groups
- tax and national insurance (NI) implications for public contributors (covered in detail in the NIHR guidance). There may be tax and/or NI implications for individuals where payments over and above reimbursement of expenses are made, and public contributors will need to be aware of this. Payment in vouchers is considered the same as cash payments in this respect
- payment through groups or third parties, for example voluntary, community, faith and social enterprise sector (VCFSE) organisations
Consideration of voluntary, community, faith and social enterprise sector organisations
NHS financial processes should not prevent VCFSE research partners from receiving payment for their agreed research activities, or delay such payment.
2.6 Seeking research finance support
Individuals who are not familiar with local research processes but who are seeking research finance support for their study may like to consider the following:
- identify whether your organisation has an R&D department or R&D function that supports a research finance function. The UK R&D contacts directory provides a list of organisational R&D contacts
- if your organisation’s R&D department does not support a research finance function, check if the finance department does
- you and/or your team should engage with your organisation R&D department and/or finance teams as early as possible to obtain advice on delivery support and research-related finance as detailed in section 2.1
- for commercial contract research studies, further information, advice and costing support can also be accessed through the NIHR Study Support Service
- for non-commercial research studies, the NIHR Research Support Service gives researchers, especially those in receipt of NIHR funding (pre-application through to post-application), access to support, advice and expertise in the development and delivery of their research project
3. Commercial contract research
The category of ‘commercial contract research’ is explained in the AcoRD guidance. This is research funded solely by industry, where NHS organisations are contracted to carry out the research. The funding arrangements for such research are straightforward and ensure that the NHS recovers from industry all costs over and above the standard NHS treatment cost (see section 4.2).
It is important to note that research studies that attract industry funding are not automatically considered to be ‘commercial contract research’. Individual research projects are centrally categorised as commercial or non-commercial through National Institute for Health and Care Research Clinical Research Network portfolio eligibility and Health Research Authority and Health and Care Research Wales approval processes.
Commercial contract research brings benefits beyond the research itself, and as stressed in the government’s vision for clinical research and response to Lord O’Shaughnessy’s review into commercial clinical trials, there is a need to create an environment in the NHS that makes it easy and efficient for the NHS to undertake commercial research.
3.1 Finance considerations
The cost of all commercial contract research activity should be fully covered by the commercial funder; the NHS does not subsidise the delivery of commercial contract research. Income from the delivery of commercial contract studies covers the costs of undertaking the activities required and funds the building of the capacity and capability for further research in the NHS.
Commercial contract research generally falls under IFRS 15. An NHS organisation has a contract to carry out obligations, the research, for a customer for an agreed price. The income should therefore be recognised as or when the NHS organisation fulfils the performance obligations, not when an invoice is issued. Funding for commercial contract research can be deferred to future financial years if the requirements of IFRS 15 are met.
Commercial income is generally received in arrears to pay for activity already completed.
Commercial contract research is costed at a granular level (for example, per patient, activity or hour). Without accurate tracking, activity and associated income may be lost. It is important for organisations to manage and track activity undertaken on commercial studies to ensure invoices and payments accurately reflect activity completed. A delay in triggering payment milestones set out in the study finance schedule can delay the issue of the invoice or non-payment which can result in ‘bad debt’
3.2 National directive on commercial contract research studies
The NHS Standard Contract mandates adherence to the national directive on commercial contract research studies, which states that providers must:
- use only the unmodified model agreements for sponsor-to-site contracting for commercial contract research; HRA and HCRW approval of studies will be dependent on the use of these templates
- use the standard costing methodology to set prices for commercial contract research undertaken by NHS organisations; this is in the National Institute for Health and Care Research (NIHR) interactive costing tool (NIHR iCT)
- use the national contract value review (NCVR) process in line with national rollout
3.3 National contract value review
The national contract value review (NCVR) is a standardised, national approach to costing for commercial contract research, and in October 2023, it became mandatory for all late phase commercial trials (phase IIb and above) in acute, specialist and mental health trusts.
It creates transparency and streamlines administrative processes by providing the site-level costs as a financial appendix for direct insertion into localised contracts. Local negotiation of contract value is not permitted and all NHS trusts must use the fixed financial appendix in the clinical trial agreement.
First year data demonstrates that the NCVR process significantly reduces the time it takes to set-up commercial studies in the NHS (saving over 100 days per study), and the resource required to cost commercial clinical trials, including the staff resources as the activity and cost negotiation is done once rather than at each study site (the average is 10 sites per study). The intention now is to roll out NCVR to all NHS organisations, and early phase studies and studies involving advanced therapeutic medicinal products.
General practices can participate in NCVR through a voluntary scheme that enables practice staff to set up studies quicker and generate additional income for the practice. General practices that do not to sign-up to NCVR are advised to identify an authorised member of staff with expertise on cost negotiation to review and agree costs and payments on their behalf.
NCVR ensures that the NHS costs (direct and indirect) are covered. The type of income and receiving department should be identified in the study review and set-up stage. Where permitted by financial systems, the relevant departments should be identified on invoices to facilitate the flow of funds to the appropriate budget. For example, where a per participant visit has been completed the following items may be identified:
- consent taken by a research nurse: research staff time should be directed to the cost centre where the expenditure for the member of staff is incurred
- full blood count undertaken by the laboratory department: income should be directed to the organisation laboratory department
- physical examination undertaken by a doctor-in-training in clinic: staff time should be directed to the directorate cost centre where the expenditure for the doctor is incurred.
NCVR uses the NIHR iCT to:
- determine resource requirements for study delivery at a national level
- calculate site-specific prices to ensure commercial trials are costed correctly and the NHS fully recovers the costs
- include a site-specific multiplier that takes into account local market forces factor (MFF) and overheads.
A capacity building rate is added to both direct staff time and investigation costs within the NCVR, to maintain, strengthen and grow sustainable research infrastructure, as well as build capacity, retain skills and strengthen eligibility to deliver future research.
The MFF tariff included in the cost of the study provides an adjustment value to accommodate the unavoidable cost differences of providing healthcare across the country and is NHS organisation specific. Note that the MFF also adjusts for specific considerations when commercial studies are undertaken in general practice: for example, out-of-hours working and clinical room costs.
3.4 Income from commercial contract studies
NHS organisations must have a transparent income distribution process. NIHR provides a guide to income distribution. The most important aspect of any distribution model is that it ensures transparency and accountability.
The capacity building element in commercial contract research costings is intended to support a sustainable research infrastructure in the NHS. While an NHS organisation has the flexibility in how this income is used, NHS England strongly encourages organisations to use it to support research capability and capacity, and to ensure there is board-level visibility of research income and how it is used.
Organisations may choose to reinvest a proportion of the capacity building element into their services. Reinvestment into clinical developments and support functions may offer departments a strong incentive to support research. It may also be used to incentivise chief investigators (CIs) and other researchers to further support and engage with research.
Case study: Percentage allocation model to incentivise research
The Newcastle upon Tyne Hospitals NHS Foundation Trust has developed an example percentage allocation model for income from indirect costs that incentivises research.
NHS organisation A (without private finance initiative [PFI]):
- 40% of indirect income is allocated to the organisation contribution to recognise support functions and estate
- 30% is allocated to the organisation-wide business case development fund
- 10% is retained by research management for strategic investment
- 10% is allocated to the chief investigator for specialty investment
- 10% is allocated to the chief investigator department to invest in facilitation of research
NHS organisation B (with PFI):
- 30% of indirect income is allocated to the organisation contribution to recognise support functions
- 20% is allocated to the organisation PFI budget
- 10% is allocated to the organisation-wide business case development fund
- 20% is retained by research management for strategic investment
- 10% is allocated to the chief investigator for specialty investment
- 10% is allocated to the chief investigator department to invest in facilitation of research
In both instances, the research and development department and/or finance team should report annually to the finance committee on the income received and how it was distributed.
Case study: Expanding the commercial portfolio and generating income in a general practice setting
The Breckland Alliance Primary Care Network comprises 3 general practices serving a total practice patient list of about 45,000. Before this alliance was formed, the 3 practices conducted research separately.
In 2019, the alliance only had one new commercial study and one ongoing from 2018. There was one part-time research nurse, who worked from home. That year, the Breckland Alliance Board/partners made several strategic/operational changes:
- research is a primary objective of the alliance, and the role of all staff members
- if applicable, the research team can call on any other member of the alliance staff to help with research
- research information is displayed in all 3 general practices, both as a poster board and on the TV display screen
- each general practice’s website hosts research information
With the above changes, along with the help of the alliance operation manager and the income generated from commercial research, Breckland Alliance has increased its commercial portfolio considerably and now has a dedicated research unit. The alliance was the second highest recruiting site for a particular UK study in 2022, and in 2023, recruited 56 patients across 4 commercial studies. As of January 2024, the alliance has 5 commercial studies due to start, 1 new commercial study that has just started and 4 ongoing.
4. Non-commercial research
Non-commercial research in the NHS is vital to ensuring new technologies are clinically beneficial and cost-effective in the NHS. It led to the first proven treatments for Covid-19, for example the use of dexamethasone, estimated to have saved over a million lives worldwide. Across all clinical specialties research gives patients and clinical teams access to new technologies and treatments. The evidence generated by non-commercial research leads to improvements in patient care and can result in resource releasing changes, for example the FAST-Forward trial demonstrated that breast cancer patients were able to receive safe and effective radiotherapy treatment in a significantly reduced number of visits to hospital.
Generally, non-commercial research award funding has a contractual arrangement between the funder and a lead organisation or contractor. The lead organisation is responsible for putting in place collaboration agreements with other research collaborators, which include other study sites. This should mean that all organisations collaborating on a particular research project have a written description of how they receive financial support.
Some funders may stipulate which organisations can receive funding: for example, the National Institute for Health and Care Research, for some of its funding streams, will only issue funding to NHS organisations.
Good financial management practice should be demonstrated for the entire research lifecycle, from competitive funding application to pre-award, award (research activity), post award, publications and project closure. An award’s financial reporting regime is usually included in the relevant contractual arrangements. The NIHR provides a good practice research funding guide for organisations in receipt of its research funding. Other funders may require different financial and project reporting arrangements.
Organisations in receipt of NIHR funding may be selected to participate in an annual funding review to examine whether their governance, financial and risk management systems are effective and appropriate. Selected organisations are required to complete a funding review assurance questionnaire which is assessed by the Department of Health and Social Care.
4.1 Research funding sources
Much of the research undertaken in NHS and other health and care settings is aligned to national priorities and funded though national calls and awards provided by funders such as NIHR and UK Research and Innovation (UKRI); includes the Medical Research Council (MRC) and Economic and Social Research Council (ESRC). Research charities are also key funders of health research in the NHS. In 2022, 150 members of the Association of Medical Research Charities funded £1.99 billion of medical research, including the salaries of 19,000 researchers; 55% of its members fund research posts in the NHS, including clinicians, nurses and clinical trials support staff.
Commercial companies also collaborate with NHS organisations or non-NHS research funders to support non-commercial research. If a study is primarily for the public’s benefit, rather than the direct commercial benefit of the company concerned, it may be considered non-commercial.
Some studies (for example, student projects or those that have minimal impact on an organisation) may have no funding attached, and it is for individual organisations to determine whether they wish to participate or not on this basis. Many such studies bring other benefits; for example, providing evidence to support decision-making processes.
There is no standard application form or process across the numerous funding bodies. Teams supporting researchers need to be able to interpret specific guidance on funding applications, so that they can not only understand but also plan and schedule the various financial reporting requirements of the numerous funding bodies once funding is awarded. These often span NHS organisation financial years.
For NIHR awards, researchers will be informed that their application has been “recommended for funding”. This does not guarantee funding; a study will only progress to contracting once satisfactory responses have been received to funder queries and the application, including any updates to the project costings (for example, research, support and excess treatment costs [ETCs]), has been amended to reflect any agreed changes. Any subsequent changes to project costings should be agreed between the researcher and R&D department and/or finance team involved in the funding application.
4.2 Costing non-commercial research activity
Research funders are not responsible for all costs associated with health research, and commissioning organisations retain a duty to pay for the care of their patients, even in the context of a research study. Therefore, organisations will need well-established systems and processes to accurately attribute and cost research, enabling development of robust proposals that cover the cost implications of the research and minimise financial risks to the delivery of studies.
The lead organisation (the site where the chief investigator is located) will need to work with its collaborators to get accurate and appropriate costings for the entirety of the research project. It is good practice to have a process to determine costings (including cost identification, attribution and pricing of a research proposal), cost management process, costing templates and pricing policy.
It is likely that the site-level costs will need to be reviewed and amended following protocol development to reflect the actual delivery model for the trial. Any project extensions will need funder approval and may need re-costing, and potentially reapplication for funding including support costs and ETCs.
The person leading the research project costing will need to understand the key differences between collaborators’ costing approaches: for example, funders may only provide 80% full economic costing (fEC) to universities but the NHS organisations may be eligible for 100% fEC, or in certain circumstances unable to apply for indirect costs in NIHR awards. Researchers and finance professionals should refer to funder’s guidance when applying for a research award.
Research studies comprise a number of component activities, which the AcoRD policy framework attributes to one of three broad cost categories.
- Research costs: the costs of the R&D itself, which would end when the research ends. They relate to activities undertaken to answer the research questions. For research involving funding from Association of Medical Research Charities (AMRC) members, these are split into Research part A and B.
- NHS treatment costs: the patient care costs, which would continue to be incurred if the patient care service in question continues to be provided after the R&D study end. These include ‘excess treatment costs (ETCs)’ (see section 4.3).
- NHS support costs: the additional patient care costs associated with the research, which would end once the R&D study in question ends, even if the patient care involved continues to be provided. These activities are primarily concerned with the safety of the participant within the context of the study.
As part of the cost attribution process, the primary purpose of each activity needs to be assessed, regardless of who will be delivering that activity. For example, blood samples taken for safety reasons during a study are deemed to be NHS support costs as their primary purpose is patient safety, even if the results are used to influence patient care.
An activity that is not related to participant care is likely to be a research cost, and one that is related to participant care is likely to be a treatment/support cost. The difference between the two costs is whether the participant care activity would continue if the intervention were successful and became a standard care option. NHS organisations also need to review what is considered standard care for those eligible for the study.
Within NHS treatment costs, activities categorised as standard care indicates they are part of the standard care pathway. The funding for these activities should be recovered via the organisation’s normal commissioning routes.
For studies in the NIHR CRN portfolio, access to support costs and ETCs is the same no matter the setting of the research activity. Research costs should be claimed from the sponsor with arrangements for invoicing agreed during study set-up.
Schedule of events cost attribution tool
Some funders, for example NIHR, require the online version of the Schedule of events cost attribution tool (SoECAT) to be completed for all new funding submissions. Its primary purpose is to ensure that site-level costs are attributed according to AcoRD principles in the funding application, and that site-level research costs are met with that funding. By being part of the research funding submission, the SoECAT introduces greater consistency and streamlining across the funding, planning and site set-up stages of a project. Organisations should ensure that the costs detailed in the SoECAT align with the site costs detailed in their research applications.
The NIHR has established a network of AcoRD specialists. Their role is to provide specialist advice, signpost researchers to resources, support resolution of attribution queries, authorise the SoECAT and facilitate the triage process.
The same hourly rates are usually applied for support costs and ETCs (the most appropriate rate can be selected). However, the SoECAT does enable bespoke amounts of remuneration to be added. These can be added manually for studies that are run completely outside the NHS, where the tariffs built into the SoECAT do not apply.
While the SoECAT gives an overview of the activities in a study and their AcoRD cost categorisation, this does not always translate to actual funding. For example, support costs may be detailed in the SoECAT but in practice a Clinical Research Network (CRN)-funded nurse may deliver the support and then these costs may not be payable.
4.3 Excess treatment costs
Patients in a research study may receive healthcare that differs from what is standard in the NHS: for example, activity requires more clinician time or is delivered in a different location. The associated NHS treatment costs may exceed or undercut those of the standard treatment. If greater, the difference is referred to as the NHS excess treatment costs (ETCs). Please refer to NHS England’s separate guidance on ETCs.
4.4 Contracting and financial schedule
The exact financial management and reporting requirements of individual funding awards will depend on the funder, but some are common to all.
The finance schedule will usually form part of the main contract for the award between the lead organisation and the study sponsor. This needs to broadly reflect the anticipated spend on the project to minimise any large in-year variance in spend versus income, which is of particular importance for NIHR-funded projects.
Onward payments to collaborators will usually be detailed in a collaboration agreement between the parties. Payments to NHS sites and/or participant identification centres will be via the appropriate UK template agreement (for example, model non-commercial agreement and non-commercial organisation information document. No UK template agreements exist for non-NHS sites, but the NHS templates are considered a good starting point for negotiation.
The financial agreements will need to consider any payments to individuals. Payments should be made in a timely manner and the payee will be responsible for managing any tax or NI implications. Payment in vouchers is usually considered the same as a direct monetary payment.
Where payment to individuals is likely, it is good practice to use the IR35 calculator to determine whether off-payroll working (IR35) rules apply. See section 2.5 for information on payments to public and patient involvement and engagement representatives.
4.5 Research capability funding
NHS organisations hosting NIHR research awards may also be eligible for NIHR income-related research capability funding (RCF) if they have received sufficient, eligible NIHR income in the previous calendar year or recruited sufficient participants to research studies conducted through the NIHR CRN. RCF is usually awarded to an organisation either on the basis of NIHR income (income-related RCF) or recruitment (recruitment-related RCF), but not both. NIHR provides detailed information on what RCF can be used for.
For research recruitment activity in primary care, RCF is payable to the integrated care board (ICB). ICBs are expected to use this in line with the RCF guidance, which usually means supporting research capacity and capability in primary care. ICBs may also choose to use some of their RCF strategically in line with their research strategy to build and grow research capacity and capability more broadly across their ICSs.
Example: Use of research capability funding in supporting research and development capacity
One important potential ICB use of research capability funding (RCF) is to support a stable research and development (R&D) function (whether an individual or team) that is protected from other fluctuations in ICB income, enabling longer term development and retention of staff with specialist R&D knowledge and skills, and the development of relationships, partnerships and activity across an ICS to build wider research capacity. This in turn enables expert deployment of RCF in support of research across the ICS, increased research activity and bigger effective returns on investment for the delivery of statutory responsibilities in regard to research.
Organisations in receipt of large RCF funding allocations should have an RCF policy. Such a policy might cover a local RCF allocation process including award criteria, an escalation process and project award versus actual spend. In writing an RCF policy, NHS organisations should refer to the NIHR’s frequently asked questions on RCF which cover:
- the need to allocate RCF money in support of primary care research recruitment capacity and capability
- the need to retain a skilled R&D workforce, for example not on a year-to-year basis only
- use of RCF strategically to build and grow research in line with local research strategy
- the need to cover unfunded indirect costs of research
Case study: Use of research capability funding in integrated care board to support primary care research capacity
NHS Nottingham and Nottinghamshire Integrated Care Board (ICB) Research Strategy Group, chaired by a GP lead, strategically allocates and monitors the ICB’s NIHR research capability funding in accordance with NIHR guidance.
The RCF currently funds 2 primary care research champions (a GP and a practice manager) appointed following a competitive process. Both are from research active general practices.
Their role is to engage with primary care, primary care networks and wider stakeholders, including in partnership with the NIHR CRN East Midlands, to promote, advise, support and provide mentorship to integrate research into everyday primary care practice. They have a particular focus on supporting research where patient need is greatest. They have opened new NIHR research opportunities to patients and the workforce, and demonstrated the importance of having trusted research leaders who enthusiastically champion research, act as role models, mentor and provide practical support for their primary care colleagues.
One outcome of their work has been 15 more general practices joining the NIHR CRN East Midlands Research Sites Initiative (RSI) scheme in 2023/24 (56 of 130 practices across the ICS are now members), with a third of the new practices being in some of the most disadvantaged communities in the ICS. Also, 9 additional practices joined Clinical Practice Research Datalink in 2023.
The RSI scheme is one CRN option for investment in primary care. It is run by the LCRN to help build a primary care research infrastructure to support practices to deliver CRN portfolio research. Practices are invited to apply for the scheme on an annual basis and payments are linked to level of research activity. This funding is additional to the study specific patient-related costs a practice receives as reimbursement for service support activities.
Case study: Use of income-related research capability funding in an integrated care board setting
NHS Norfolk and Waveney Integrated Care Board (ICB) receives income-related research capability funding (RCF) on the basis of NIHR award income received. This income is used to support capacity and capability building through: funding the research development team, who work with academic colleagues to develop and cost NIHR award funding applications; and funding project development awards and early career fellowships with academic partners that meet the system priorities of the ICS. This entails buying out time of a research associate to write the NIHR award application and supporting community engagement to strengthen applications. In return for funding, award submission is required to be through the ICB, to generate further RCF to be reinvested in future research awards development, and preparation of evidence briefing for sharing with commissioners.
5. References
1. Rees MR, Bracewell M (2019). Academic factors in medical recruitment: evidence to support improvements in medical recruitment and retention by improving the academic content in medical posts. Postgrad Med J 95(1124): 323-327.
2. Newington L, Wells M, Adonis A, Bolten L, Bolton Saghdaoui L, Coffey M, et al (2021). A qualitative systematic review and thematic synthesis exploring the impacts of clinical academic activity by healthcare professionals outside medicine. BMC Health Serv Res 21: Article 400.
3. Ozdemir BA, Karthikesalingham A, Singha S, Poloniecki JD, Hinchliffe RJ, Thompson MM, et al (2015). Research activity and the association with mortality. PLoS ONE 10(2).
4. Varnai P, Rentel M, Dave A, De Scalzi M, Timmerman W, Rosemberg-Mantes C, Simmonds P, Technopolis Group (2017). The impact of collaboration: The value of UK medical research to EU science and health.
Glossary
The definitions are from the National Institute for Health and Care Research and the Health Research Authority.
Chief investigator (CI): The person who takes overall responsibility for the design, conduct and reporting of a study.
Collaborator: As part of a collaborative research, it involves research teams co-ordinating between researchers, organisations and/or communities. This co-operation can bring distinct expertise to a project.
Direct costs: These are costs specific to the research, will be charged as the amount actually spent and can be supported by an audit record. They should comprise salary, travel, subsistence and conference dissemination costs.
Full economic costing (fEC): Universities and other higher education institutions use the transparent approach to costing (TRAC) methodology to calculate full economic costs. If a grant is awarded, research councils provide funding at 80% of the fEC. The organisation must agree to find the balance of fEC for the project from other resources.
Funder(s): This is the organisation or group of organisations providing funding for the research project. The funder is normally the sponsor in the case of commercial research.
Indirect costs: Indirect costs or overheads include physical costs, such as estate costs, and costs of the support functions required to deliver a research study, such as finance, administration, human resources, information systems and corporate management.
Involvement: Where people are actively involved in research projects and in research organisations.
National Institute for Health and Care Research (NIHR) Clinical Research Network (CRN) portfolio studies: These are research studies that benefit from a range of support from the NIHR CRN. NIHR describes the eligibility requirements for support.
Participant: An individual who is studied in a trial, often but not necessarily a patient.
Participation: The act of taking part in a research study: for example, people being recruited to take part in a clinical trial or another kind of research study, joining in a focus group or completing a questionnaire.
Research site(s): The organisations with day-to-day responsibility for the locations where a research project is carried out. In health and social care research, they are often providers of health or social care and/or the employer of members of the research team.
Research team: The group of people conducting the research project. It may include care professionals, academics, patients and service users, members of the public, research professionals, students and/or scientists.
Sponsor(s): The organisation or partnership that takes on overall responsibility for proportionate, effective arrangements being in place to set up, run and report a research project. Two or more organisations may agree to act as co-sponsors or joint sponsors. The UK policy framework for health and social care provides further details of sponsor’s responsibilities.
Publication reference: PRN00984