Risk managers should review contracts
June 1, 1999 3 minutes read
Risk managers should review contracts
But be careful not to get in over your head
Question: How much should I be reviewing contracts that the hospital enters into? I’m not a lawyer, but as risk manager I think I should have some role in checking contracts for liability exposure. Are there any pointers about what I should be looking for?
Answer: Risk managers should be involved in the review process for some, if not all, contracts involving the health care organization, says Roy Bossen, JD, partner with the law firm of Hinshaw & Culbertson in Chicago. He has represented hospital and physician groups in transaction and regulatory matters for more than 20 years.
The degree to which you review contracts can depend on several factors, mainly your background and experience. If you have a legal background, you will feel more comfortable reviewing contracts, Bossen says. But even if you came to risk management from a clinical or business background, you still should have enough familiarity with the issues to review contracts for liability, he says.
If you have in-house legal counsel, your responsibility for reviewing contracts may be minimized, but you still should have a role. Without in-house counsel, your role could be more significant. Either way, you may be only one of several people reviewing the contract for liability.
Keep in mind, however, that risk managers should not take on more responsibility than is reasonable when reviewing contracts. Some contracts will be so complicated, and the potential risk so great, that they should be reviewed carefully by counsel even if that means retaining outside counsel for the job.
"Today, anything to with physician referrals, tax exemptions, Medicare, or Medicaid should involve your in-house counsel, or you should retain counsel to look at it," Bossen says. "The consequences of not picking up something justify the added time and expense. The risk manager still probably should look at it first."
It may not be necessary for you to review every contract involving the hospital, but you should have a set policy on what type of contracts must get your approval. In many cases, a health care organization will establish that contracts over a certain dollar amount must be reviewed and some types of contracts, such as physician group agreements, must be reviewed. When reviewing contracts, the best approach is to look for certain red flags or omissions that could cause trouble, Bossen says.
"You can work with counsel to develop checklists to look for certain things in certain types of contracts," he says.
Remember these three tips
With that in mind, here are three general tips for reviewing contracts:
1. For a service contract with a physician group or corporation, what are the insurance requirements for continuing coverage? Are you required to purchase tail coverage?
2. What services are being provided to you? This sounds basic, but Bossen says many contracts do not adequately specify what it is you are buying or providing. If you do not settle that issue before signing the contract, you may have to deal with disagreements later in which one party is demanding service the other party says is not included in the contract.
3. In entering into a consulting agreement, make sure the contract clearly defines the scope of service and establishes a clear structure for paying the consultant.
"I’ve seen situations where the final product is delayed or the client believes it was never delivered, yet the contract requires the consultant be paid 100% of the payment on a certain date," Bossen says. "Then you have to sue for breach. It’s better to have clear demarcation lines that say the consultant gets paid in increments when certain steps are implemented."
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