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Hospital Contract Management: 3 Ways to Ensure Compliance

Risk & Compliance

While the ability to effectively manage contracts and keep up with all contractual obligations is important for any business, it is paramount for hospitals, which are faced with a number of compliance regulations designed to best protect patients’ health and interests.

Though the primary function of a hospital may be to administer patient care, just like any other business, hospitals routinely deal with a high volume of different types of contracts affecting every aspect of how they run. These include agreements with the doctors who work out of their facility, contracts with medical equipment and pharmaceutical vendors, and things like IT service agreements, even though they may not seem directly tied to the delivery of patient care.

Because of the extremely sensitive nature and importance of administering healthcare, these agreements are highly regulated and governed by a number of laws that require careful attention. Among the compliance regulations with which hospital contract management teams must be intimately familiar are the Federal Anti-Kickback Statute and the Stark Law, which governs the financial relationships between doctors and any entities that bill Medicare and Medicaid.

Though these may amount to a complex network of regulations, it is vital that hospitals take steps to ensure compliance or they may face hefty penalties. Case in point: William Beaumont Hospital in the Detroit, Michigan area recently had to pay an $84.5-million settlement over patient referrals that were alleged to be in violation of the Stark Law and Anti-Kickback Statute. The settlement resolves allegations that the hospital provided compensation in excess of fair market value and free or below-market office space to certain physicians in order to secure their patient referrals. In the event these claims were untrue, the allegations could have potentially been disputed using a strong records management system that retained supporting documents to justify fair market compensation and lease rates, averting the steep fine that resulted. This underscores the importance of a strong contract lifecycle management system as a key means of supporting and verifying compliance with the various rules and regulations to which hospitals are subjected.

Here are three important ways hospitals can use contract management best practices to meet their legal obligations and reduce the risk of compliance violations – and resulting penalties.

1. Regularly Review Your Obligations – and Ensure All Contracts Are Up to Date

Many of the rules governing health care are updated from time to time to include new terms, timelines, and other guidelines that must be met. As such, it is crucial that all new contracts are current and encompass the most up-to-date regulations. If you’re approaching the drafting of each new contract from scratch, or repurposing contracts from old agreements, it can be a lot of work to ensure that all the current requirements are included and that no key contract terms are left out.

A better tactic is to develop a set of standard agreements to address all of the various types of business arrangements into which hospitals typically enter via contract. Legal teams can review these master agreements on a periodic basis to ensure they meet the current landscape of relevant compliance requirements and update them with new rules as needed. These blank contract templates can be stored within an electronic library arranged by type so that there is no confusion over which contract to use (just make sure to archive outdated versions!).

2. Ensure Contracts are Centralized and Secure

It’s important for any business to ensure contracts are stored in a centralized, organized location where they can be readily accessed by authorized individuals as necessary. But this is doubly important for helping hospitals to meet compliance obligations.

For starters, having all contracts and supporting documents would have been a key way to dispute the sort of allegations that resulted in the massive Stark-related fine imposed on William Beaumont Hospital in the example mentioned above. But many organizations have a lax approach to organizing and storing contracts and related documents, meaning the appropriate paperwork may not be easy to find if required to demonstrate adherence to the rules.

To ensure compliance, make sure that your contract repository offers robust end-to-end security features, including access controls and protection of data both while it is being transmitted and stored.

3. Conduct Periodic Compliance Checkups

While different types of contracts will each have their own compliance requirements, it is important to have a way to periodically check that regulations are being met and that your hospital has no vulnerabilities that need to be addressed. As you determine what compliance means for each specific type of contract, you can develop compliance scorecards that can be used to measure adherence. As you onboard new contracts into the system, you can use tools such as automated reminders so that you don't forget to periodically check that the requirements are being met.

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