Technology Contracting 101 for Providers
By Sandra Greenblatt, Esq. and Joel Schuessler, Esq.
Technology spending accounts for a large portion of a health care provider’s budget today, especially with the current movement toward electronic health records. In a perfect world, technology increases the quality of care and makes life easier for the provider. However, the real world isn’t perfect and things can, and do, go wrong with technology products and services you purchase and/or license from third parties. Unfortunately, many technology contracts fall short of giving the provider adequate protection and often contain hidden costs, yet are not given to competent counsel to help negotiate. Here are four key areas a provider should be concerned with in any technology contract:
Warranties and Limitations of Liability
Despite elaborate sales presentations, technology vendors typically disclaim most, if not all, warranties and limit their liability to only refunding all or part of the purchase price of the technology. Both results are inadequate to protect the average provider when problems arise. A technology vendor should be required to warranty that its product will perform in accordance with documented standards and for a reasonable period of time. At a minimum, this time period should be long enough for the provider to evaluate the technology “live” in its operations. A better solution is to require a warranty for the useful life of the technology, or as long as there is a support and maintenance agreement in place. A vendor should also not be allowed to limit its liability on default only to the purchase price. If a provider suffers actual damages caused by the technology, the vendor should stand behind its product and services. A reasonable compromise is to require the vendor to at least tender the limits of its insurance coverage, creating minimal additional risk to the vendor while better protecting the provider.
A provider should not pay the full purchase price up front, as is often requested, leaving the vendor with little incentive to complete its responsibilities. The parties should mutually agree in advance upon a time table with milestone targets for implementation of the technology. Payments should be conditioned upon reaching the targets. In addition, testing must be done in order to evaluate whether the performance targets have been met. The provider always should have the final say in whether a test provides a successful outcome.
Support and Maintenance
A technology purchase is only as good as the support and maintenance that goes along with it. The vendor should be willing to provide support for at least the useful lifetime of the technology. Several questions should be answered in a support agreement. Will the vendor perform on-site or off-site support and maintenance? Will the provider pay a monthly fee plus an hourly charge or is there only an hourly charge? Does the hourly charge differ depending on when or what level of support is needed? Do the charges increase over the term of the support agreement? What is the vendor agreeing to support? Will changes made to the technology by the provider automatically terminate the vendor?s support obligations?
Confidentiality of patient information is a critical issue. HIPAA has a variety of privacy rules providers must follow. In addition, Florida has recently passed legislation that requires entities that conduct business in the state and maintain computerized data that contains personal information to provide notice to any state resident if there is a breach of the security of the system. The contract should specify if the vendor will have access to any of the confidential information of the provider’s patients. If the vendor will have such access, either the contract or a HIPAA Business Associate Agreement must require the vendor to maintain the patients’ confidentiality. The technology contract should also protect the confidentiality of provider trade secrets.
For a more in depth discussion of these and related technology contracting issues, please see our article in The Florida Bar Health Law Section’s Health Care Handbook, available in 2007, or call us to consult on your specific legal issues.