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July 24, 2008

Debit cards to replace cash for research subjects

Petty cash accounts soon will disappear for researchers who compensate research participants at Pitt and UPMC.

A new debit card system designed to streamline payment, tighten fiscal controls and improve compliance with Internal Revenue Service requirements is being rolled out across the University and UPMC.

WePay cards already are in the hands of research subjects in some departments and soon will be the standard means of payment for all research volunteers.

The cards, which bear the MasterCard logo and look like a typical debit card, can be used to get cash at ATM machines or for purchases anywhere MasterCard is accepted. Participants also can cash them in at two Citizens Bank branches in Oakland.

The money is available instantly to the participant as soon as the research team member enters the payment amount. Once a research volunteer receives a WePay card, it can be reloaded with additional value, but only from Pitt or UPMC research.

An estimated 150,000-170,000 payments a year go into the hands of research volunteers at Pitt alone, said Susan Gilbert, Pitt’s assistant treasurer of finance.

The University’s existing petty cash policy didn’t foresee Pitt’s growth into a major research university in which some $8 million- $10 million a year is disbursed for research volunteer payments.

Research participants — which include large numbers of staff, students and others from the University community — have been compensated for their participation in various studies in a number of ways including cash, checks or even gift certificates, all with no central management of the funds, Gilbert said.

Noting that Pitt’s research funding of $620 million made up 39 percent of the University’s revenues last year, she said the petty cash policy “is quite antiquated given the explosion in our research base.”

Change definitely was needed, she said. “With a research portfolio this large we needed infrastructure to accommodate the number of disbursement payments,” said Gilbert, who was part of the WePay project development team. She noted that the estimate of 150,000-170,000 disbursements a year is just a guess because the payment data have been decentralized among some 250 petty cash funds and 130 bank accounts managed by individual departments.

In addition to automating the payments and eliminating petty cash funds, which are vulnerable to fraud and theft, the WePay system also will aid Pitt and UPMC in complying with IRS requirements.

The IRS considers research payments to be taxable income and requires that institutions that pay an individual more than $600 a year issue the recipient a 1099 form. (Pitt and UPMC are considered to be separate entities, so participants who are paid for multiple research studies only cross the reporting threshold if the compensation exceeds $600 for studies administered by a single institution.)

Pitt aimed to be compliant, Gilbert said, but had no way to tally up research compensation for an individual who might have earned small amounts from multiple studies over the course of a year.

Pitt’s financial administrators began searching for a solution in 2004, contacting peers at similar research institutions to see how they dealt with payments to research volunteers. Like Pitt, they were paying subjects in multiple ways, said Gilbert, noting that one institution was juggling 600 individual bank accounts.

The schools’ general response was “Give us a call if you find something.”

The University partnered with UPMC, which also was seeking to streamline financial controls and eliminate petty cash funds overseen by individual research departments.

In 2006, they assembled a team that included end users of the payment system such as study coordinators, business office managers and research department administrators as well as finance representatives to consider all aspects of Pitt’s research payments that needed to be taken into account in the solution. Over 10 months, they pinpointed the features and issues the system needed to address before UPMC information technology employees developed the software.

Confidentiality and security of individual information were crucial. Likewise, the system needed to be able to cover research participants in Pittsburgh and beyond — including foreign countries — and a diversity of research participants who don’t necessarily have bank accounts and might range from adolescents to jail inmates.

After developing the system with input from research staff on the front lines of making the payments to subjects, partnering with the Royal Bank of Scotland (which has world-wide reach, with Citizens Bank as a local affiliate) and testing the debit cards, WePay was rolled out on a small scale at UPMC last October when the system handled 84 transactions totaling $4,070. As of the end of June, UPMC had made 12,353 payments totaling $718,232 to research subjects using WePay.

The system already is in place for Western Psychiatric Institute and Clinic and Magee-Womens Hospital research projects and is expanding into other areas. Jennifer Vates of UPMC’s Office of Clinical Trials said a Sept. 1 rollout is expected for projects in other UPMC research areas.

Pitt began training in January and launched WePay in limited areas May 13. As of mid-July, more than 175 individuals in 20 schools have been trained in the system and 350 payments totaling some $25,000 have been made through WePay.

Gilbert said a new policy and procedure for petty cash has been drafted and is expected to be delivered to the vice chancellor of budget and controller within the next month. Once reviewed and approved, it will become University policy and Pitt researchers will be required to replace petty cash with the WePay system.

Not all are going along willingly. “I have lots of problems with it,” said economics professor John Duffy, director of the Pittsburgh Experimental Economics Laboratory (PEEL), which has not adopted WePay. Not only will WePay add expense, he said — researchers must pay for the cards — but Duffy believes that the new system won’t attract as many people as did the lure of cash and could alter the pool of subjects who participate, possibly skewing research results.

“My colleagues who do experimental research are dead set against this,” he said.

Citing potential ATM fees and a lack of universal acceptance of the card, he said, “This is not the same as cash.”

In the PEEL lab, the introduction of the WePay system will mean that instead of departing with cash in hand, participants will receive a voucher that they must take to a trained staff member to exchange for a WePay card. And, unlike other research that pays a set amount to all participants, in the PEEL lab the amount each person receives can vary depending on the outcome of the experiment, making the payment process more time consuming.

“Until it’s absolutely University policy, I’m not going to do it,” Duffy said.

He questioned why other top research schools had no universal payment system for research subjects. “It’s true the University is in violation of IRS rules, but so are all the other universities,” he said. “I imagine researchers at other universities will balk as well. A lot will hinge on whether the IRS wants to really crack down.”

Gilbert said that users’ early reviews have been largely positive and critics’ fears that subjects would reject the new system have not been borne out.

Among the first areas to use the system at Pitt was the Department of Psychiatry. Tracey Wilson, program coordinator for Youth and Family Research, began using WePay in three studies in January. Wilson said she’s found the software to be user-friendly and intuitive and got “great support” from the departmental grants office during the transition.

Among the research she coordinates is the PALS study of people with attention deficit hyperactivity disorder — a longitudinal study now in its ninth year. One challenge is that participants have dispersed all over the globe during those years. Wilson said she has sent one WePay card to a subject in Germany and has received no negative feedback. “I assume his card worked,” she said.

Because her group’s studies don’t involve treatment as a benefit, the payments are an important motivator for study participants. “We pay participants for their time. There’s not a whole lot else to be gained for their participation,” she said.

Concerns that subjects in that study — adolescents with ADHD — might quit the study due to the change appear to be unfounded.

Wilson said she has noticed better acceptance among younger study participants than their parents. “The young ones are much more ATM and debit card familiar and comfortable,” she said.

Initially a few glitches had to be resolved, but solutions were found.

For instance, Wilson said some participants receive payments of $75, others get $150, but ATM machines typically dispense cash in $10 and $20 increments. “That was an issue,” she said. Likewise, the study researchers see subjects seven days a week, including days that the Oakland bank branches are closed.

“We tell people they can go to Wal-Mart or Giant Eagle (the stores are among the retailers that offer cash back on debit card transactions) and buy something and they can get the rest of their money that way,” she said.

The study’s web site now includes an FAQ page on WePay that participants can review. “I haven’t heard concerns in a long time,” said Wilson. “There have not been any problems we have not been able to resolve,” she said.

UPMC’s Vates said early analysis of usage patterns is showing that many WePay cardholders are using them like cash at point-of-sale locations and at ATM machines more often than opting to cash them in at the Oakland bank branches.

While the cards can be used at many places as if they were cash, there are several caveats, noted project consultant George Cerminara in a training presentation filmed in March. (The hour-long WePay presentation by Cerminara and Gilbert is available for viewing among the research conduct and compliance titles at

Users need to keep tabs on their card balance — attempting to use the card for more than its value will result in a transaction being declined. Likewise, they need to be aware that merchants (often restaurants or gas stations) may authorize amounts greater than the purchase, which also can cause transactions to be rejected if the authorization amount exceeds the funds available, even when the actual purchase amount doesn’t.

Looking ahead, the system may be expandable to areas not related to research — perhaps to add convenience in dispensing per diem payment advances for business travelers, or compensating blood donors, for example, said UPMC’s Vates.

Any expansion beyond the current use is at least a year away, said Linda Zang, assistant treasurer at UPMC, who also was instrumental in the WePay system’s development.

Zang said the team plans to focus on deployment within Pitt and UPMC for the first year of its use. “We think it essential that our two organizations realize the full benefit of the software, and that they have priority with the administrative management and software teams without competing external demands,” she said.

In addition, the new system is in the midst of its “shakedown” period in which reports, interfaces and training materials are refined.

“Once we have a year’s worth of experience, we will be in a better position to document the benefits we’ve realized, and to assess the potential for commercialization,” Zang said.

—Kimberly K. Barlow

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