Risk Management Tools & Resources


Contract Administration in Healthcare Practices: Managing the Moving Parts


Contract administration and management in healthcare practices can be daunting tasks. Healthcare providers often are involved in numerous contractual agreements, including arrangements with managed care organizations, office and equipment supply vendors, technology systems vendors, landlords, collection agencies, answering services, insurance carriers, partners, employees, and employee benefits providers. Contracts also might be in place for other services, such as serving as a training site for students or fulfilling a medical director role for a long-term care facility.

Even in a solo practitioner setting, the number of contracts can be staggering. In practices with two or more practitioners, the state of the practice's contractual commitments can quickly become disorganized — particularly if each practitioner is making contractual arrangements individually. Contractual provisions and commitments might be inadvertently overlooked, creating liability and financial risks. For example, contracts might be automatically renewed without appropriate individuals in the practice performing an adequate assessment of the quality and cost of services received.

To avoid contract-related issues and risks, healthcare practices should develop policies and procedures that delineate (a) responsibilities for contract oversight and authorization,(b) contract review processes, (c) due diligence assessment of contractors, and (d) considerations for practice-based research contracts.

Contract Oversight and Authorization

Because of the number of contracts that healthcare practices might have in place and all of the "moving parts" associated with them, the practice should empower one individual with responsibility for overseeing the contract administration process. Generally, the office practice administrator fulfills this role.

The practice's written contract administration policy should specify who is responsible for oversight, as well as which individual(s) have authority to sign contracts on behalf of the practice or group — whether it is the practice's managing physician or another authorized representative. Further, the practice should keep all contracts in one secure location and maintain a separate index of all contracts and their current disposition.

Contract Review Process

The contract administration policy also should include responsibility for, and steps associated with, a formal contract review process. A formal process will help ensure designated office personnel and qualified legal counsel provide a timely review of all contracts. The review process should:

  • Include an analysis of the contracted entity's quality of service
  • Provide sufficient time to notify the vendor if the practice does not plan to renew the contract
  • Ensure that all sections of the contract are reviewed, including attachments and amendments, before the contract is signed
  • Ensure that every new or renewed contract is reviewed for hold harmless or indemnification clauses

Due Diligence of Contractors

When purchasing contracted services or supplies, the practice should establish critical requirements or criteria to select the contractor and compare several options prior to selection. Such criteria should not be based solely on price, but also on quality and risk.

The practice should require that contractors provide audit reports on quality and risk measures to the practice on a regular basis. Further, all contracted parties should document their compliance with applicable state and federal regulations.

Office administrators and other practice personnel involved in contract administration should keep in mind that contractors that perform certain functions or activities that involve the use or disclosure of protected health information are considered business associates (BAs) under HIPAA. Conducting due diligence of BAs is essential for reducing risks associated with violating state and federal privacy laws and standards.

Practice-Based Research Contracts

When participating in a research project sponsored by another corporate entity — e.g., a pharmaceutical company — healthcare providers are strongly advised to seek legal review and advice before signing any contract. The contract should not indemnify third parties, and — to protect human subjects and prevent litigation — it should clearly define project ownership, hospital Institutional Review Board oversight, and research protocols.

In Summary

Contract administration is an important element of a sound practice management strategy. Because of the number and various types of contracts that healthcare providers might enter into, managing all the moving pieces can be challenging. To reduce the risks associated with inadequate contract administration, healthcare practices should establish written policies and procedures that address contract oversight, authorization, review processes, contractor assessment criteria, and special considerations related to research and legal review.

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