Steps to determine validity of vendor
[Editor's note: This is the second part of a two-part series in avoiding liability in contracting. In last month's issue we told you about how you can end up contracting with the wrong company and what your liability can be. In this issue, we give you specific steps to take to investigate vendors, and we offer a list of items to watch for in the contract. We also discuss accreditation requirements.]
When looking at contracting with an outside vendor, follow the paper trail, say experts interviewed by Same-Day Surgery.
Look up the company's articles of incorporation, suggests Richard Bays, RN, MBA, CPHQ, CLNC, health care consultant with R Bays Consulting, Houston, TX. This information should be available on the secretary of state's web site in the state in which they organized. Public records often list the officers, Bays points out. "That's a big deal, if someone is holding themselves out as the CEO or COO or authorized agent to make decisions at a certain level," he says. The date that the articles of incorporation were filed indicate when the corporate structure was initiated, Bays says.
When Bays was looking at contracting with one company, he cross referenced to another company they were supposedly affiliated with, but the second company had different officers, he says.
"They said it was a different entity formed prior, and since modified, but they didn't modify with the state," Bays said. Tax statements indicated different tax ID numbers, he says. "What we found out was that they were operating independently and paying taxes as two entities," he says.
When Bays asked for clarification, he found out that one operated out of another state, and there were two sets of investors. Because the representatives of the business had not been upfront about their organizational structure, Bays decided not to do business with them. "The word 'fraud' comes to mind," he says.
Ensure the company has named all of its locations and entities, Bays suggests. You can ask for a copy of their insurance contract and look under "locations and entities," he says. You also can cross reference what you find with the articles of incorporation, he says.
Consider these other suggestions:
Follow the money trail.
Look at the vendor's tax status, Bays advises. Your state might have a comptroller of public accounts that can be accessed online, he says. You can determine the vendor's tax status and use the company's taxpayer ID number to cross reference, Bays says.
Vendors who are licensed by the state department of pharmacy also might have tax records, he says.
Bays points out that the Office of Inspector General has a web site with a list of individuals and entities excluded from federal contracts (oig.hhs.gov/fraud/exclusions/exclusions_list.asp). The General Services Administration also has an excluded parties list (www.epls.gov), he says.
Consider a request for proposals (RFPs).
RFPs can be useful when a contract is complex and spans more than one year, or touches several facets of your organization, says John Schario, MBA, CEO of Nueterra Healthcare in Leawood, KS.
"RFPs allow you to clearly articulate the parameters of your service needs," Schario says. "It is the who, what, when, and where along with service expectations and response times."
However, determine how much you want to disclosure, Bays advises. "If it's a construction bid, it's fine to get more competition in," he says. However, if it's a more sensitive area such as a line of business you're considering developing, you'll want to be more discreet, Bays advises.
Representatives of group purchasing organizations (GPOs) often are willing to confirm whether a vendor is a member of the GPO, even if the facility requesting the information is not a member of the organization.
Credential.
Anesthesiology services are being contracted more often to outside groups, Schario says.
"In those cases it is even more important to understand who you are dealing with and who will be delivering the actual service," he says. "I would encourage interviewing the actual service providers to make sure that their credentials meet your standards and that their attitudes regarding customer service and interpersonal interaction match your surgery center's culture."
Ask if the anesthesiologists have worked with CRNAs, says Stephen Trosty, JD, MHA, CPHRM, ARM, president of Risk Management Consulting Corp., in Haslett, MI. Ask how many OR suites were assigned to each anesthesiologist, he says. Also ask how they hire CRNAs and ask about their qualifications,Trosty says.
Find out how long the vendor has been providing the service and what organizations they provided their services for, he says. Obtain references for the individual physicians, Trosty advises. Ask if those physicians are affiliated with the organizations and whether the organization did independent credentialing, he says.
In the case of anesthesiologists, surgeons should talk to surgeons in their specialties at the facility where the anesthesiologists currently are working, advises Mark Mayo, an ASC consultant and executive director of the Ambulatory Surgery Center Association of Illinois. Another option is for the manager to contact the surgeons, Mayo says. Ask if they are pleased with the professionalism of the anesthesiology team, he advises.
Know your vendor and know who they are using to provide the service, Schario advises.
"I would mandate the right to interview and approve all staff coming into my facility and working on my patients," he says. "Credentialing is an important part, but I would not sacrifice a face-to-face interaction."
Contract pitfalls you should avoid Finding a vendor you want to do business with is only the first step, says Richard Bays, RN, MBA, CPHQ, CLNC, health care consultant with R Bays Consulting, Houston, TX. "Most contracts you have to look at closely," Bays says. Examine these areas: Payment terms. Payment terms and fees associated with late payments can be a surprise, says John Schario, MBA, CEO of Nueterra Healthcare in Leawood, KS. Ask how soon their accounts payable (A/P) department can process a monthly service bill, Schario suggests. He says to ask, "if the invoice is due within five business days after the close of a month, can you make that?" Also determine whether if you miss that deadline, you are assessed interest or late fees. Also, make sure you give your A/P department adequate time (15-30 days) to process payment, Schario says. Extra fees. Service repair contracts, especially, can hide extra fees for items you consider standard, Schario warns. "Watch for when overtime rates are charged and how much after-hours call will cost you," he advises. Some contracts begin overtime rates at 3 p.m., Schario warns. "If your service repair contract covers parts, does it cover new or only refurbished parts, or is that the choice of the vendor?" he says to ask. Also, be aware of large fees for routine or "special delivery" shipping and handling fees for "rush" orders. Sometimes the processing and shipping bill can exceed the cost of the item, sources warn. Notification of concerns. Know how to properly notify your vendor of concerns, Schario says. For example, "I may be expressing concerns to my sales rep, but by the terms of the agreement, I have to express those concerns in writing and send them to a specific address to be compliant with the contract," he warns. Assignment. Often contracts are assignable to affiliated companies, Schario says. "And when that language exists, ask about those affiliated companies and the likelihood of a transfer," he says. "In the end, if the vendor is misrepresenting itself, that can usually be uncovered through references, banking relationships, or a simple credit check." If the services can be assigned to another group at the discretion of person singing contract, look at that clause and mutually agree upon it, Bays says. "If you agree to unilateral ability to assign a contract, you may have someone sent to you [that] you never saw before," he warns. "You may be unhappy with them, unhappy with the quality of service. This happens a lot." Indemnification. When a vendor asks for indemnification or a hold harmless agreement, look at what you're actually doing for that vendor, Bays advises. "Don't sign something that gives them all the favor, he says. "Make sure it's a level playing field." Ask, "Are you going to indemnify me, and at what level?" Bays suggests. You don't want global indemnification for your vendor, he says. Be specific, Bays says. Term and termination. Termination clauses are important, Schario says. "How you get out of a contract can often be expensive or not available," he says. Determine how you renew a contract and under what timeframe, Schario advises. "Many people get caught in evergreen contracts with automatic increases simply because they did not realize they had to give 90 days notice and are now looking at a three-year extension," he says. Termination, breaches and cure periods should be specified to protect yourself, Bays advises. You might have a clause addressing material breach of contract, with a mandatory cure period, he says. "It's an opportunity for the person in breach to rectify, within the confines of the agreement," Bays says. "Examine these areas closely with any contracts: medical supplies, linens, services for physicians, anything," Bays says. "See where you stand if you want to terminate or modify services." Also, don't forget standard questions such as whether the vendor is licensed if needed, whether they carry a minimum amount of general liability insurance, sources say. You need a copy of the insurance certificate and if you are a named-insured, ensure you are notified if the vendor drops the insurance, they say. |
Build a process to manage contracts Managing contracted services is required by The Joint Commission, the Accreditation Association for Ambulatory Health Care (AAAHC), and the Centers for Medicare & Medicaid Services (CMS), and if not managed well, can be a huge risk to your organization. As Frank Ruelas, MBA, principal of www.hipaabootcamp.com and director of compliance and risk management at Maryvale Hospital in Phoenix, says, "if it happens under your roof, you better know what's going on." The Joint Commission requires an annual evaluation of whether to continue or terminate a contract. AAAHC requires a continuous and ongoing evaluation off all issues within an ambulatory facility, including contracts, by the governing body; however, responsibility for contracted services can be delegated, says Marsha Wallander, assistant director of accreditation services at AAAHC. CMS requires that a senior staff person be responsible for contracts, which led to a new element of performance this year for The Joint Commission, says Michael Troncone, FACHE, principal of Michael T. Troncone and Associates and administrator for patient intake services at Calvary Hospital in the Bronx. Because it's a high-risk area, accreditation groups might be looking closely at this, Troncone says. Can you imagine, he asks, going in front of a judge and saying "No your honor, I didn't know the person installing the new televisions was a sexual predator. No your honor, I didn't know what cleaners the window washer was using, and I didn't know he was going to use bleach and ammonia to wash our windows." He evens recounts a story of a surgeon bringing in his unemployed brother-in-law to assist in surgery. Troncone says that, when thinking about contracted services, a manager should ask: "Who is representing the facility? Do those contracts you have in place meet all the appropriate regulatory and legal requirements? Are we getting our money's worth? Are we getting what we paid for?" Getting started Troncone suggests these steps to effectively manage all contracted services:
The Joint Commission requires a process for corrective action, should a contract fail to meet required specifications, and a contingency plan for contract termination. Who should be at the table? Troncone suggests:
He also promotes using templates for your contracts and assigning responsibility for each contract to a senior lead, with the department head most closely associated with the particular service monitoring the contract day to day to ensure quality and delivery of services. That department head reports on the contract to the contract management group. "By having that department head involved on a daily basis, problems are identified early," Troncone says. Each department head might have up to seven contracts, but it's within his or her span of control, he says. They should have a checklist with the appropriate indicators, which could be supplied by the contract management company or by data already collected on that service line. The contract management group should meet at least once a year to determine if a contract should be renewed or terminated, and if terminated, where you are going to go to get the service. Troncone says you should be able to review 25% of your contracts at the meeting. The department head should make a recommendation for renewal or termination. The second item on the agenda should be any worrisome contracts and what you're going to do about them, he says. Look at whether you have identified a need for a new contracted service. Consider a one-year term agreement, sources suggests. A one- year term forces an annual review, so vendors are less likely to ignore you for years, they say. You also need to ensure your contracted services are oriented to your policies. For example, gardening services are spraying pesticides and fertilizers and using power equipment. Troncone says you should ask yourself: "Do they know where the oxygen lines are? Do they know where your air intakes are so they're not spraying pesticides in the air intake for the operating room? Are they following the appropriate infection control procedures?" If you take anesthesiologists, he says, "What standards are they following? What are their outcomes? If an anesthesiologist call in sick, who do they provide as back up? Is it someone who's already been oriented and privileged by the hospital?" With accredited services, you should be aware of their accreditation status. With those not accredited, you should do your own "tracer" of sorts, Troncone says. You should make sure they're fulfilling standards. "So you need to do an onsite review," Troncone says. "You need to review and approve their policies and procedures. You need to ensure that they're doing all the appropriate life safety things, and that means you need to get your infection control person, your safety officer, your privacy officer, and your clinical people to do an in-depth review." Medical staff should have the opportunity to review and comment on clinical services and performance data. Troncone says the corporate compliance officer should ensure that contract terms and bidding and awarding of contracts meet the organization's corporate compliance requirements. Offsite services should meet credentialing and privileging standards. "Clinical services require the most intensive orientation, and the organization has to ensure current competency, licensure, education, and continuous improvement of competency for contracted clinical staff," Troncone says. Maintain a personnel file for each clinical staff person. Surveyors with an accreditation agency are "not going to sit down and review individual contracts and [try] to identify a problem," Troncone says. "If they identify a pattern or trend with contracted services, they will certainly start reviewing contracts." They might ask to see a contracted person's competency and credentialing and privileging files. They might ask people on the floor if contracts are being monitored or if services are being delivered appropriately, Troncone says. They might ask senior leadership if there is a process for managing contracted services, he says; or if someone is installing television, they might ask if he or she got an infection control and patient privacy inservice. The most work-intensive part of the process is getting all the contracts together and creating your process for managing them. "Once the process is set up, ongoing compliance becomes easy," Troncone says. |
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