Striking Your Best Deal: Things to Look at on the Front End of Negotiating an EHR Vendor Contract

Article Contributed by Christopher L. Richard, Gilpin Givhan, PC

Backdrop

Imagine you’re selling your practice . . . or leaving your practice . . . or retiring. You want to continue to have access to the patient records you’ve maintained through the practice over the years, and in fact, you have an obligation to do so. Under Rule 540-X-9-.10(1) of the joint guidelines of the Alabama State Board of Medical Examiners and Medical Licensure Commission, physicians are required to retain medical records “for such period as may be necessary to treat the patient and for additional time as may be required for medical-legal purposes.”[1]In addition, you must provide patients notice and a reasonable opportunity to request their records or request that they be transferred to another practice. It used to be you would maintain physical copies of these records in your practice office, a secure storage area, or by some other means. However, your patient records are now stored in an electronic health record (“EHR”) system maintained by a third-party vendor. Your third party vendor is planning to charge you a regular monthly service fee for the entire duration of time you have to keep the records. The alternative is an exorbitant one-time fee for you to obtain a copy of the digital patient records maintained in the EHR system. Neither option is particularly good, but the scenario provides an important opportunity to examine key contractual provisions you and/or your counsel should pay attention to when negotiating EHR and other vendor contracts.

I Have the Need . . . for Legalese

Contracts, especially vendor contracts, can be filled with overly-complicated, legalese-ridden language that tends to earn attorneys their fair share of grief. However, a good portion of this language is born out of experience and necessity. For one, attorneys tend to loathe repeating (or allowing) the same mistakes more than once (“Fool me once, shame on you; fool me twice, shame on me,” as the saying goes). Unfortunately, attorneys cannot anticipate every possible scenario that might unfold, but we often attempt to ensure that contractual provisions at least provide clarity in situations where past ambiguities have turned into disputes.

Secondly, attorneys do their best to memorialize what are often extremely complicated arrangements between their clients. Complicated structures frequently require complicated descriptions. Otherwise, a contract may be lacking in meaningful standards and may be no more useful that the “handshake” agreement that started the contract negotiation process.

With the (perhaps) optimistic notion that attorneys craft documents out of necessity according to the principles above, consider the following contractual provisions that are worth the extra attention in the contract negotiation process.

Important Contract Provisions

Ownership of Records; Rights to Use.  It should go without saying that you and your patients are the owners of your patient records, regardless of whether they are stored in, or on, your vendor’s software and/or hardware. Be wary of any contractual language that seems to give ownership rights in your patient records to the EHR vendor. By that same token, consider what rights your EHR vendor reserves to use and/or disclose information stored on their system. When intense scrutiny of tech company privacy practices is layered on top of HIPAA and increasingly restrictive state, federal, and international privacy laws, it’s worth an extra look to ensure you’re not allowing your EHR vendor to take any actions that would impact your obligations under applicable privacy laws.

Indemnification/Hold Harmless/Limitation of Liability.  Experience tends to show that contracting parties will listen and respond to reasonable concerns, especially when they are trying to earn your business. The same principles apply to the remedies provisions of vendor contracts. For instance, the initial contract presented may require you to “indemnify, defend, and hold harmless” the vendor against a host of liabilities that may be incurred by you or the vendor. It is almost always a reasonable request to have the indemnification language be mirrored between the parties. In other words, if you are required to indemnify the vendor for your negligence, gross negligence, or willful misconduct, they should be willing to indemnify you for their similar conduct.

In addition, the contract may limit the amount of damages recoverable to the total amount of payments you make for the vendor’s services under the contract, or the number of payments in a given time period (e.g., one year or the term of the contract). These limitations are not uncommon, and they are not necessarily unreasonable. However, it’s not the kind of limitation you want to discover after you’ve encountered some significant financial harm and are expecting the other party to cover all the costs.  Similarly, it would be untenable to accept unlimited potential liability to your EHR vendor when they are putting fairly extensive limits on their liability to you.

Termination Provisions.   Now, back to where we started: what happens when you are attempting to terminate your practice or a relationship with an EHR vendor? As an initial matter, it’s worthwhile to consider your options to terminate the contract before the term is over. All too often, I’ve seen clients stuck in long-term contracts with little or no option to terminate. Obviously this is a matter of economics for the vendor. They have up-front investment costs that have to be recouped over the life of the contract, which hopefully (for them) is a long term. However, consider options to terminate the contract for “good cause.” It’s also worthwhile to consider including an illustrative list of items that constitute “good cause,” in an effort to avoid arguing about what “good cause” means when you elect to terminate the contract. In addition, consider a no-fault termination provision, which may be acceptable to both parties if there is a reasonable notice period before the contract can be terminated.

Lastly, consider what your options are to preserve the records or get them out of the EHR system upon termination of the contract. In the example above, you may be caught between a rock (continued EHR service fees for the required record retention period) and a hard place (a costly one-time fee to obtain a copy of the records). Again, these deal points can (and should) be negotiated on the front end of the arrangement with the EHR vendor, especially if you foresee a change in your practice (e.g., retirement) in the near future. An acceptable solution likely looks different for each individual physician or practice, and their respective vendors, and could vary based on the timing (early vs. end of contract term) and reasons (retiring vs. transferring to new vendor) for terminating services. Concepts like these should be considered to address this issue and other contractual issues on the front end of the agreement, rather than when the relationship has soured or ended.

Conclusion

The contracting process can be tedious, frustrating, and at times can seem unnecessary, especially if both parties “seem to be on the same page.” However, there are great benefits to a well-conceived contractual relationship. These may include robust and meaningful standards of performance. They may also include reasonable provisions and limitations on indemnification, liability, and damages, or even a plan for what happens when the relationship is terminated. At any rate, they should be tailored to meet the parties’ needs and should be a help, rather than a hindrance. They simply require some attention from the parties on the front end of the contract.Please note that the information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials contained herein are for general informational purposes only.  Readers are encouraged to contact their attorney to obtain advice with respect to contract negotiations or any other particular legal matter.

[1] Although there is no specific retention period, the Board of Medical Examiners suggests keeping patient records for at least 10 years or otherwise consulting with the malpractice liability carrier to determine an appropriate record retention period.