Time for New Rigor on Vendor Contracts

More commonly, Fox says, vendors pressure hospital and medical group CIOs and other executives to sign clinical IS implementation contracts that severely disadvantage the patient care organization customers and strongly favor the vendors. Among the biggest mistakes involved: when a vendor pressures a CIO to sign a very long-term contract (such as a 10-year contract), given how quickly conditions are changing these days; and when a CIO fails to insist on including a clause that requires the vendor to ensure that the vendor’s solution will continue to be certified through upgrades and later versions.

More generally, Fox emphasizes, “The vendors are simply much more sophisticated than most of their customers; they establish relationships, and take people out to dinners and golf. I’ve had the experience where I suggest specific elements of language in a contract, and they say, ‘Oh, we don’t need that language, I know the salesperson’!”

ACCOUNTABLE CARE’S DRAMATIC IMPLICATIONS FOR CONTRACTING

More broadly, says Fran Turisco, a Boston-based principal in Aspen Advisors, a Denver consulting firm, the emergence of new reimbursement forms, organizations, and collaborations in healthcare, such as accountable care organizations (ACOs), bundled-payment contracts, and patient-centered medical homes, is set to change everything.

“I’m working for an organization that’s setting up an accountable care organization right now,” Turisco reports. “I’m working for the hospital, and they’re going to be a member of this new ACO. They brought us into the infrastructure, and it has required a huge process just to identify what the IT pieces of this would be, because the leaders at that hospital couldn’t identify what the required processes were. We asked them, how are you going to do quality reporting, performance measurement, incentives and contract management, cross-organizational care management? They didn’t have any answers. So we put together for them a four-year roadmap of what the technology should look like, which was no small feat. They said, OK, now we need to put together an RFP [request for proposal] and send it out to vendors.”

Fran Turisco

Here’s the key point in all this, Turisco says. “We sent out 18 RFPs and got 16 responses back. Of the vendors that had the majority of capabilities needed—patient portal, provider portal, health information exchange, EMPI, rules engine, cross-care management, business analytics, quality reporting, and ACO/back-office accounting/contract management—all of them had to partner to be able to offer all those capabilities; it was unbelievable. One vendor had six partners it needed to provide those offerings.”

In short, Turisco says, “If you’re an integrated delivery network and are trying to set up an ACO, you’re going to be dealing with multiple vendors. Some have not even executed any of this yet; they’ve just gone out and bought the pieces. They don’t even have references to give you for their umbrella solution, so what does that tell you?” In other words, Turisco says, “This is the wave of the future. I think we’re in a really volatile time, where healthcare is getting shaken up, and so the vendor world is totally getting shaken up. Unless you’re putting in a core EHR system or core revenue cycle or core ERP, you’re really trying to find a vendor partner, because a lot of them don’t have a lot of installs; they’re partnering with someone else to bring you a solution, and they’re also looking for sites where they can put their stake in the ground.”

ADVICE FROM I.T. LEADERS

As a result, say Patty and Archuleta, obtaining and enforcing good contract terms at a time of experimentation and instability, when relationships with vendors going into the new healthcare will necessarily require real partnerships, will be more important than ever. “Obviously, you want to have a good working relationship with any vendor you enter into any partnership with,” Patty opines. “That being said, you always want a good contract backing you up, in case the relationship goes bad. We have always relied on legal firms that have significant experience in the healthcare IT contracting market. There’s no way I can know everything about those details. I’m really seeing the need now, as we disentangle ourselves from our current vendors. In some of the contracts we had signed with the vendors we’re leaving now, our vendors have the upper hand, because some of the terms were more favorable to the vendors than to us. That reinforces to me how important it is to hire really good legal counsel.”