Pay Now So You Don't Pay Later
Our society has become so attorney dependent in recent years many of us will do most anything to avoid utilizing an attorney for our normal business matters. Hence, we try to review all of our own contracts thinking we are educated people that can spot the areas of concern and make corrections. The problem is many of us are far too trusting of the other party in the contract, or their attorney, and forget that often the other party has created a contract that is very one-sided in some areas. This thought process can lead to a very bad mistake. While the cost of a good health care attorney or industry expert experienced in contract review can be expensive in the short-run, the cost of a contractual mistake can be much more costly in the long-run.
As most of you know, billing contracts can be very lengthy and difficult to read as most attorneys don't write these contracts in a language that is understood by the common man. This is precisely why you should pay now to have an expert review your billing contract. For the purposes of this article, we are going to focus on a few main areas that you should review in great detail prior to signing any billing contract.
Termination Clause
Other than the billing fee arrangement, the termination or exit clause might be the single most important area to review. Many billing contracts do not contain termination clauses “With Cause” and “Without Cause”. You should insist on a contract that contains language clearly defining how and when a contract can be terminated with and without cause. By signing a contract that fails to contain a “without cause” clause, you could be stuck in a legal battle trying to define whether an action or lack of action was in fact a breach that constitutes “with cause”. If you sign a multi-year agreement, you might consider “without cause” language that allows termination after one year given a sixty or ninety day notice. From the billing company perspective, in the absence of “without cause” language I think you create an enormous amount of bad will and potential negative publicity by forcing a client to continue working with you for a short period when they want out and will terminate legally in short order anyway.
Automatically Renewable Terms
Many contracts have terms for automatic renewal, also called Evergreen clauses. While these terms are fairly standard and designed such that you need not rework contracts frequently, they can be very dangerous for both parties if not written correctly. From the physician group standpoint, I would advise that you don't have automatically renewable terms unless you structure the termination clauses such that you have the option to terminate “without cause” in a short period after the initial term of the contract has expired. These clauses can also be dangerous from a billing company perspective in that the economic variables that drive the collections might rapidly change and thus the billing company is stuck in an arrangement that is materially different than what was originally negotiated.
Billing Fee Arrangement
If you choose a fee arrangement that is not a percentage of collections, be certain that you understand the exact fees and that you have clear language stipulating the performance expectations of the billing vendor. A fee arrangement that is not a percentage of collections is particularly dicey when at end of the contract as the billing company has already been paid and yet you need them to continue collecting on the A/R they have previously been paid to work. This is where you need clear understanding of how they process claims and have enforceable protocols for working claims at the end of the contract.
If you sign a percentage of collections arrangement, be certain that the percentage of collections is taken from net collections rather than gross collections. Some companies do not deduct refunds of overpayments from their collections; therefore, the physician group pays a billing fee on monies that eventually must be refunded. Additionally, you should clearly spell out refund policies and when they will be performed.
The aforementioned issues represent only a few of the contractual pitfalls; therefore, you should consult an industry contracts professional prior to signing any agreement. It is far better to pay now than pay later at a much higher price.