Review Contracts Up Front to Avoid Getting Stuck for Years in an Agreement That Behooves the Vendor, Not the Physician
Practice Management Feature — June 2015
Tex Med. 2015;111(6):57-61.
By Kate Harrington
After attending a presentation by Utah-based Legally Mine, LLC, at a county medical society meeting earlier this year, Port Arthur radiation oncologist Ernest Hymel, MD, and some of his colleagues signed a contract with the company, which provides tools and specialized consulting to businesses to help them manage liability risk. Days later, Dr. Hymel says he started to feel unsettled about the agreement. Legally Mine's representatives indicated they had a "good rating" with the Better Business Bureau (BBB). When Dr. Hymel and his colleagues went to the BBB website, he says they couldn't find a rating for the company at all.
"In retrospect, a few of the things they said caught my attention, and one of my partners who also signed up for services tried to check out one of the claims," Dr. Hymel said. "Their claims didn't quite check out."
Among the many tasks private practice physicians must handle is negotiating vendor contracts, many of which often come with some fine print that's worth taking some time to examine.
Unfortunately, that fine print often doesn't come into view until a reason to dispute a service or product surfaces, and that can mean costly arbitration and interrupted services for a practice. The Texas Medical Association's Comprehensive Guide for Physician Employment, which is available for purchase, can help, but physicians also need to know to ask the right questions and seek advice when necessary, experts say.
Dr. Hymel says the "red flags really started going up" upon attempting to get out of his contract with Legally Mine. He and the other physicians who had signed with Legally Mine received letters informing them they could get out of their contracts, but only after signing another contract preventing them from contacting their medical society members or leaders.
"Their service was to provide us with peace of mind in the event that we got sued. We figured if we don't have peace of mind with the very people who are supposed to give us peace of mind, the goal of doing this hasn't been accomplished," he said.
Dr. Hymel says Legally Mine's service cancellation request form included this language: "breach of this agreement will nullify my right to request mandatory arbitration before the American Arbitration Association, as stipulated in my initial purchase contract which I am attempting to cancel."
After contacting an attorney, Dr. Hymel and the other physicians learned they had three days to terminate the contract without those penalties per Texas law, arguably because the sale was consummated outside a business or home.
"At the end of the day, I have no idea if Legally Mine provides a valuable service; my hesitation with them was centered entirely on the threatening tactics they used to prevent cancellation of a service that had not yet been provided," Dr. Hymel said.
They were able to cancel the contract without any fallout, but Dr. Hymel says he learned a valuable lesson from the ordeal.
"You have to have a comfort level with the people you're working with," he said. "It's helpful to get independent feedback on different vendors from another clinic who's used them or from a third party like the Better Business Bureau."
Red-Flag Contractual Provisions
No one contract is the same, says Michael Kreager, a San Antonio business attorney, but, he says, all contracts generally share the same types of provisions.
In particular, he advises physicians to examine the terms of payments, especially prepayments and deposits and product or service warranties. He says the contract should contain language that says a vendor will be responsible if the product or service doesn't meet expectations.
Along those lines, there are also some red flags to watch for, he says.
"One is that many vendors of products and providers of services are very careful to limit or totally disclaim warranties," Mr. Kreager said, "meaning, if the product doesn't live up to its specifications or perform the way it's supposed to or achieve results, then the vendor's responsibilities to make it right are severely limited."
Mr. Kreager adds many large companies that provide products and services on a national scale will include deep within their contracts "boilerplate provisions in a font size of 10 points or smaller that say the most a vendor will owe you is to pay your money back, and perhaps not even that."
This type of provision, Mr. Kreager says, releases a vendor from responsibility for collateral damage, which could include lost revenue. He recalls representing specialists who had seen a vendor at a trade show selling a product they thought would enhance their services. The product didn't live up to its promises. But because doctors had prepaid and the contract had no provisions to cover the product's failure, they had no leverage to get their money back, according to Mr. Kreager.
Mr. Kreager says another red flag is automatic renewal of contracts. He explains some vendor contracts have what's called an "evergreen provision," a one-year or multiyear term that can renew without any action on the part of the physician. While there may be a window near the end of each term in which a physician can terminate the contract, he says vendors don't always send a notice the period is approaching, and a practice can all too easily find itself stuck in a contract with no negotiating power for several years.
"Physicians may want to insert the ability to terminate the contract, with some notice," Mr. Kreager said of automatic renewal provisions.
EHR Contract Considerations
Shannon Vogel, director of TMA's Health Information Technology Department, says physicians sometimes make the mistake of simply stopping payments to a vendor with which they're unhappy. The vendor, in turn, may then cut off access to a service. If that service happens to handle third-party data, the impact to a practice can be huge.
Contracts with electronic health record (EHR) vendors, in particular, warrant extra scrutiny, Ms. Vogel says.
According to a TMA EHR survey, 81 percent of physician respondents either currently use or are planning to implement EHRs in their practices.
"EHR has probably become my largest and most critically important contract," said Allen Schultz, MD, a family physician in Abilene and a member of the TMA Ad Hoc Committee on Health Information Technology. "EHR is now the core of my medical practice and on the financial side, too, in terms of billing. I feel very vulnerable; should anything happen, where would I be in terms of data and medical records?"
Because EHRs involve critical protected patient data, it's especially important to review transferability of data within EHR vendor contracts. According to a TMA white paper, "EHR Buyer Beware: Issues to Consider When Contracting with EHR Vendors," many EHR contracts do not include information about whether a practice can access its data if the contract is terminated or if the vendor goes out of business.
Experts says it's worth negotiating transferability up front so that a nasty surprise, like losing data forever, doesn't occur. Physicians should ensure in a contract that an EHR vendor will maintain data in a transferable format and will help in making the actual transfer if and when that time comes.
Another important issue that warrants careful reading when it comes to EHR contracts is that of regulatory compliance. Federal requirements regarding software updates and HIPAA often change, and it can be costly to keep up.
"The software we use needs to be upgraded to meet criteria for government standards," Dr. Hymel said. "The upgrades are crazy expensive. I just requested a quote, but I anticipate that the upgrade will cost us $80,000 to $100,000. Vendors have to spend a lot to implement this, and they certainly pass those costs along."
TMA's white paper suggests EHR contracts contain a requirement that the vendor must provide software updates to maintain compliance, ideally in a way that controls costs for the practice. Dr. Hymel says his practice at one point had the choice of an annual contract with an EHR vendor that included technological support and free upgrades, but it cost close to $120,000 a year.
"We couldn't afford that," he said. "We had no choice but to terminate. At that point, they said, 'In the language of your contract if you terminate, you have to pay early termination fees.' We said, 'But you're not doing anything for us.' That's where reading fine print is important. That was a big expense for us to just get out of that contract," he said.
Situations like the one Dr. Hymel's practice found itself in can become even more complicated when a loan is involved.
"If you discontinue services with another contractor, you might just separate," Ms. Vogel said. "But with an EHR contract, you might have a loan through a bank. So what happens with the company that's the lender? If you get out of an EHR contract, but you still have three years of payments left, are you going to get out of the loan too? Probably not."
Some EHR vendors offer relatively inexpensive services, but those too warrant a close look, Ms. Vogel says. At least one company offers free EHR services, but it comes with heavy advertising, and the company sells its data, she says. It's doing so in a HIPAA-compliant way so that patients aren't identified, but some physicians might not be comfortable with their patients' data being sold by a vendor.
Given the complexities of EHR services and the importance of the data, Ms. Vogel recommends doing some research and seeking advice from a lawyer before signing a contract.
Before You Sign
James Walker, MD, a Corpus Christi family physician and a member of TMA's Ad Hoc Committee on Health Information Technology, says his independent practice also runs a physician-owned lab, allowing him and his partners to become familiar with a variety of vendor contracts. He has learned it's worth taking the time up front to get the details in a contract right.
"For the laboratory information system contract we have, we were going back and forth with them on language," he said. "The business associate agreement was a sticking point. Our concern was that they'll have access to our patient data, and we need to make sure we're indemnified. Their original language was one-sided. We did eventually get there, but it took some doing. We had to prod them a little bit," Dr. Walker said.
Mr. Kreager says one of the most common mistakes physicians make is not sitting down to read the contract.
"And while national companies have superior bargaining position, particularly companies providing unique products or services, physicians and staff should never be reluctant to ask for changes," he said.
Dr. Walker echoes that advice, adding that if the language doesn't make sense, seek out a colleague or an attorney to help clarify.
Sometimes, that's easier said than done, Dr. Hymel acknowledges. Doctors, through training, learn to portray confidence, and that may make them reluctant to ask for advice.
"With patients, that's something we know about," he said. "But we carry that confidence over into other parts of our life. There's no reason we'd know about the legalese of a contract. You read the contract over; you see lots of words you don't know, but you think, 'I'm smart. I can figure it out.' That's what gets us into trouble. Just because I can read the words doesn't mean I know what should or shouldn't be there."
With contracts containing so many deadlines and provisions, it can be hard to stay on top of them all. Dr. Schultz says he uses some basic apps to help him. The note-taking app Keep, available on Android phones, works well for him. He says automatic alerts on smartphones also work and can help prevent missing an important — and costly — deadline.
"I missed a deadline to re-up our building lease, and the building owner used that opportunity to increase my rates," Dr. Schultz said. "I was forced to sign another contract anyway because I didn't want to go through the pain and cost of moving. With all these changes, you have very little peace of mind, and anything you can do to regain that is very valuable."
Kate Harrington is an Austin-based freelance writer and principal of Thumbtack Communications.
Discounts, Special Offers Just for TMA Members
TMA supports Texas physicians by providing solutions to the challenges they face. Whether it's help setting up a practice, resolving payment issues, or finding a reputable vendor, physicians can turn to TMA.
All of TMA's endorsed products and services undergo a rigorous due-diligence process and regular evaluations to ensure they are — and remain — valuable resources for members.
TMA provides members with access to low- or no-cost resources as benefits of membership, including TMA practice help services and TMA group discount programs.
June 2015 Texas Medicine Contents
Texas Medicine Main Page