Steven M. Harris, Esq.

AAOS Now

Published 8/1/2010
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Mary Ann Porucznik

Anatomy of an EMR contract

Make sure these areas are covered to your satisfaction

“I’m in the business of shifting risk,” attorney Steven M. Harris, Esq., told attendees at the recent AAOS Electronic Medical Records (EMR) and Other Technologies: Revolutionary Change in Orthopaedic Practice course. “The contract apportions risk between party one and party two.”

Mr. Harris advised his audience to involve professionals—such as EMR consultants, technology advisors, and legal advisors—early on. “The initial cost upfront will save you money in the future,” he said. He specifically suggested sending the contract for review before it’s signed—and enclosing any notes and questions you have. That way, the advisors can help shape the contract to address your specific concerns.

As important as the contract is, however, “relationships are more important,” he said. “If you had to pick one—great relationship or great contract—take the great relationship every time.”

In the best relationships, contracts are shelved and never looked at again. When a breach or potential breach occurs, however, the perfectly drafted contract gives the buyer a great court case, he said—as long as it’s in writing.

Contracts, he advised, should not contain “subjective standards.” The more specific and objective the language is, the better. EMR contracts, noted Mr. Harris, should include the following nine sections:

  1. Project description
  2. License and equipment
  3. Installation, implementation, and testing
  4. Support and maintenance
  5. Representations and warranties
  6. Price and payments
  7. Term and termination
  8. Security
  9. Indemnification and insurance

Project description
This section incorporates the practice’s unique needs into the contract. If a template contract is used, the project description must be attached and described in a schedule appended to the contract. The project description must also outline the practice’s specifications for the system and identify what is included in the software and services.

License and equipment
The contract must specify the type of license granted for the software (such as “nonexclusive, perpetual, worldwide, unlimited, nonassignable, fully paid, multisite license”).

“If the contract specifies authorized users, make sure you drill down to find out how ‘authorized users’ is defined. Will you have to pay for a license for each physician, for each physician extender, for each registered nurse? The answer must be in the contract,” said Mr. Harris.

The contract must also identify the equipment provider and specify who is responsible for servicing and maintaining the equipment. Equipment, he noted, is much more than just the hardware or software and should be defined. “Does it include interfaces?” he asked. “Will you need a source code escrow agreement? These are the seminal terms and conditions that need to be in the contract.”

Installation, implementation, and testing
This section should state that the EMR system must meet critical operational and calendar milestones. It may specify that payments to the vendor are tied to the achievement of these milestones, but should also address how delays will be resolved.

Training and education of staff should be covered. Issues such as payment for travel, out-of-pocket expenses, and materials should also be addressed.

Support and maintenance
These are “huge issues,” said Mr. Harris. “It’s not just a matter of closing the deal; what happens next is as important, if not more so, than the actual deal.”

This section should identify who is providing the services, hours of service, and availability of a 24-hour helpline. “If you are contracting with a national EMR provider, ask if local service providers are available,” advised Mr. Harris. He also recommended making sure that the vendor cannot subcontract these services to someone else.

Representations and warranties
This section, said Mr. Harris, should include all those promises that vendors make when they’re trying to sell the system. “If the vendor says something that you deem to be important, get it into the contract. If the vendor refuses your request to add a, b, and c to the contract, that gives you an idea of what might happen if there is a problem.”

Representations and warranties should cover software, service warranties, equipment configurations, design limitations, security measures, intellectual property infringements, and issues related to the Health Insurance Portability and Accountability Act (HIPAA).

Price and payments
“If you think about it, the only obligation that the practice has is to cut a check,” said Mr. Harris, although he did stress that successful selection and implementation requires active participation by the practice staff. Clearly, all costs must be identified in the contract, including license and service fees and upgrade charges. He recommended tying payments to specified times and events.

Term and termination
This section covers the length of the contract and the reasons for terminating the contract before its expiration. These include breach of contract, at-will decision, and failure to provide upgrades or comply with regulations.

“Give yourself adequate time between the notice to terminate the contract and the ultimate termination,” advised Mr. Harris, “so you can secure a subsequent vendor.”

He also advised including a clear definition of the difference between an “upgrade” and a “new product.”

“Upgrade is one of those terms that we all think we know what it means. But vendors may have a different view,” he warned.

Security
This section must identify who has access to and control of information in the EMR. “Under HIPAA,” Mr. Harris reminded his audience, “if the vendor makes a mistake resulting in a security breach, the healthcare provider is still held liable.”

He recommended including a representation and warranty from the vendor regarding security.

Indemnification and insurance
“Indemnification is my favorite word in the dictionary,” said Mr. Harris, because it shifts the responsibility for payment from the practice to the vendor in the event that a third party is injured due to acts by the vendor.

For example, if a patient trips over equipment left by the vendor and is injured, the patient could sue the practice. Under an indemnification clause, the practice could seek reimbursement from the vendor for any payment to the patient.

He warned, however, that indemnification clauses should be read very carefully because if the contract is written by the vendor, the clause will shift the risk to the practice.

Final tip
In conclusion, Mr. Harris offered the following advice, focused on capital letters.

“Any time a section is written or printed in all capital letters, or in bold letters, be very careful. These sections practically scream ‘read me’ and they usually result in shifting the risk from the vendor to the practice.”

Mary Ann Porucznik is managing editor of AAOS Now. She can be reached at porucznik@aaos.org