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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 LLPamoeller@balch.comdnewman@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

dnewman@balch.com (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  39201amoeller@balch.com

(601) 965-8156 – Phone(888) 594-5405 – Fax(601) 906-1083 – Cell

THANK YOU!!

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