1 TOP STRATEGIES FOR NEGOTIATING EHR AGREEMENTS MISSISSIPPI HOSPITAL ASSOCIATION’S 2 ND ANNUAL HEALTH LAW CONFERENCE April 16, 2010 Armin J. Moeller Dinetia M. Newman Balch & Bingham LLP [email protected] [email protected]
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TOP STRATEGIES FOR NEGOTIATING EHR AGREEMENTS
MISSISSIPPI HOSPITAL ASSOCIATION’S 2ND ANNUAL HEALTH LAW CONFERENCE
April 16, 2010
Armin J. MoellerDinetia M. Newman
Balch & Bingham [email protected]@balch.com
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INTRODUCTION TO CRITICAL ISSUES
• What is the Hospital’s Objective?– Interoperable EHR system by which
hospital/professionals can meaningfully use certified healthcare technology
– Species of IT contract– Goal: something which does not
currently exist– Qualify for EHR incentive payments
• What is EHR Vendor Promising?– Functional EHR system?– “Best efforts” or “Commercially
reasonable efforts”?– Disconnect between EHR vendor
advertising and contract terms• Schedule/Time of the Essence?
– What excuses delay?
Best
Effort,
Inc.
Hope for the
Best
EHR Vendor
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INTRODUCTION TO CRITICAL ISSUESContinued
• Defects/Delays – Notice of Cure/Period of Cure?– What is end point?– Material breach of contract?
• Dispute Resolution– Mediation? Arbitration? Compulsory? Courts?– Venue? Limitations?
• What is a Material Breach?– Time of the essence?– Nonconforming deliverables jeopardize success of
project?
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INTRODUCTION TO CRITICAL ISSUESContinued
• Warranty Provision– What is being warranted? Functional EHR system?
• Duration?– Software free of material defects?– Useable for its intended purpose?– Performance being warranted?– Not materially deviate from contract specifications?
• Limitation of Liability– Typically, strict LOL provisions
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INTRODUCTION TO CRITICAL ISSUESContinued
• Where are Broken Promises, Misrepresentations And Failure?– Documentation– Notice and demands to vendor– Follow through– Overcoming hospital breach/lack of assistance and
substantial performance defenses• Avoiding Looking Stupid About What Was the
Bargain
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KEY CONTRACTUAL PROVISIONS
• Definitions• Specifications• License Terms• Warranties• Change in Law• Support and Maintenance• Confidentiality, Privacy &
Security• Disclaimers• Limitation of Liability and
Indemnification
• Acceptance Testing/Milestone Payments
• Pricing/Financing• Dispute Resolution• Final Thoughts
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KEY CONTRACTUAL PROVISIONS – DEFINITIONS
• Location • Important Definitions
– “Contract” or “Agreement – related documents – Purchased products: Equipment, Software, Third Party
Software– Effective Date– Live Date– Documents– Loss– Travel Expenses– Maintenance and/or Implementation Services– Clinical Content & Medical Necessity Content
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KEY CONTRACTUAL PROVISIONS - SPECIFICATIONS
• Have appropriate hospital IT person confirm sufficiency of specifications
• Assure all functionalities are covered in contract
• If possible, link specifications to HITECH meaningful use requirements
• Warranties will be based on specifications
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KEY CONTRACTUAL PROVISIONS – LICENSE TERMS
• Named User or Concurrent User Licenses• Intellectual Property Issues
– Vendor indemnification if infringement alleged
• Termination of Licenses– Provisions allowing hospital to terminate
licenses– Transition assistance to new EHR vendor
• Move data to new server• Vendor provide copy in user-friendly format
• Ownership of data upon license termination
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KEY CONTRACTUAL PROVISIONS – WARRANTIES
• Warranties based on specifications• Interoperability
– With existing software and interfaces owned by hospital, health system
– With software of other health care providers/suppliers
• Certified currently and in future• Compliance with “meaningful use” criteria
– Continuing through various Stages
• Compliance with all applicable HITECH, HIPAA and other laws and regulations
• No viruses; security protections
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KEY CONTRACTUAL PROVISIONS – WARRANTIES (cont.)• Remedies on breach of warranty
– Repair– Replace– Re-perform– Refund of project costs, incentive payments– Penalties– Timing, broadening of remedies
• Disclaimers– Use by trained personnel– “Garbage in, garbage out”: no control over content– Custom add-ons– Vendor does not practice medicine– No control over internet: interruptions, errors, lack of
security
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KEY CONTRACTUAL PROVISIONS – CHANGE IN LAW
• Law likely to change prior to EHR “go live” date and thereafter
• Important to negotiate pre-purchase– Without negotiation, leverage might shift to
vendor
• Terms– Who bears risk of change– What will costs be if change occurs – Whose responsibility is cost
• Upgrades, new functionalities, installation• Implementation fees,
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KEY CONTRACTUAL PROVISIONS – SUPPORT & MAINTENANCE
• Timing of support: 24/7, answer questions• On site/off site – remote diagnostics• Updates, new product versions• Consistency of personnel• Training – type of training• Limits on price increases
– Termination ability of hospital to terminate maintenance/support
– Limits on vendor termination rights
• Remedies
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KEY CONTRACTUAL PROVISIONS –CONFIDENTIALITY, PRIVACY &
SECURITY• Business Associate Agreement– Remedies on breach– Timing of breach notice– Termination issues
• Data destruction, return by BA• Confidentiality of non-PHI
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KEY CONTRACTUAL PROVISIONS – LIMITATION OF LIABILITY &
INDEMNIFICATION
• Limitation of Liability• Disclaimers of Implied Warranties• Carve-outs
– HIPAA privacy or security breach– Failure to achieve “meaningful use” on timely
basis
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KEY CONTRACTUAL PROVISIONS – ACCEPTANCE TESTING & MILESTONE
PAYMENTS• Acceptance Testing
– Stages or milestones– Testing methods– Risk spreading
• Final overall acceptance– Timing
• Remedies for non-acceptance• Milestone Payments
– Risk spreading– Increase in hospital leverage and avoidance of refund
requests
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KEY CONTRACTUAL PROVISIONS – PRICING
• Pricing• Payment Terms
– Limits on increases
• Expenses• Financing by vendor
– Pros• Opportunity to spread out payments if milestone
payments not negotiable– Cons
• Obligation to pay does not end if EHR fails to perform as anticipated or meet meaningful use standards
• Potential limited access to medical records maintained by system.
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KEY CONTRACTUAL PROVISIONS – FINAL THOUGHTS
• Initial hospital gap analysis important• Compliance with “meaningful use” objectives is
evolving target• Certification standards – continued unknown• Important for vendor to have “stake” in game• Important to know vendor: strengths, weaknesses
of product, ability to deliver product as per contract• Important to control negotiations, contracting
process• Project management team critical• Continued communication between hospital/vendor
important – frequent meetings, relationship• Schedules, timing of implementation important
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Dinetia M. NewmanBalch & Bingham LLP
401 East Capitol Street, Suite 200Jackson, Mississippi 39201
[email protected] (601) 965-8169 – Phone
(888) 594-5407 – Fax(662) 891-8935 – Cell
Armin J. MoellerBalch & Bingham LLP
401 East Capitol Street, Suite 200
Jackson, Mississippi [email protected]
(601) 965-8156 – Phone(888) 594-5405 – Fax(601) 906-1083 – Cell
THANK YOU!!
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