Avoiding traps in EMR/Technology Contracts by Sandra P. Greenblatt

Avoiding Traps in

EMR/Technology Contracts

(You mean I’m stuck with this for 5 years!)

Presented by

Sandra P. Greenblatt, MBA/HA, JDBoard Certified Health Law Attorney

for Gassman Law Associates, P.A. Webinar

September 10 & 12, 2013

Sandra Greenblatt, P.A. Lubell Rosen, LLCColumbus Center1 Alhambra PlazaSuite 1410 Coral Gables, Fl 33134Phone: (305) 442-1172Direct: (305) 577-9995Fax: (305) 442-9047Email: [email protected]: [email protected]

© 2013 Lubell Rosen, LLC

OVERVIEW OF PRESENTATION

Intersection of Technology & Healthcare

Federal Incentives Spurred Growth Federal Government EMR Subsidies Stark Exception & Anti-Kickback EMR Safe Harbor Regulation

Benefits & Risks of EMR

Role of Attorney

Software License Agreements Can and should be negotiated! Equally relevant to other technology & other clients

Key provisions & tips

2013 Lubell Rosen, LLC

TECHNOLOGY & HEALTH CARE

• Technology spending continues to account for a major and growing portion of many health care providers’ budgets, whether the provider is a hospital, physician group practice, solo physician, or other kind of provider or health care business.

• Practice Management/Billing Systems• Electronic Medical Records (“EMR”)• Laboratory or nursing information systems • Programs that operate the newest MRI and

CT scanners• Technology Consulting Contracts


GROWTH IN EMR

As of 2009, healthcare providers in the U.S. spent $2.18 billion on EMRs.*

By 2015, this number is expected to rise to $6.05 billion, with the country seeing an estimated compound annual growth rate of 18.1 percent in the EMR market between 2010 and 2015.*

* “U.S. Electronic Medical Records Market, 2010-2015 (Market Share, Winning Strategies and Adoption Trends).” The report includes research on the market drivers, restraints and opportunities for EMR and EHR providers throughout the country.


FEDERAL INCENTIVES

Federal Government subsidies for EMR* spurred growthEnacted in ARRA of 2009

Medicare incentives up to $44,000 Medicaid incentives up to almost $64,000 No up front money; paid over 5 years Penalties starting in 2015 if no “meaningful use” of EMR Reduction in Medicare reimbursement rate (1% to 5%) Subject to audit and recoupment!

Stark Law Exceptions & Anti-Kickback Safe HarborRegulations for eRx and EMR

Eased ability of hospitals, group practices and MedicareAdvantage Plans to provide technology items, services & training to physicians using paper records

Only up to 85% of cost of certified software, training, and upgrades; no hardware Not based on volume or value of referrals Complex requirements for both parties Sunset 12/31/13; CMS proposed extension to 2016

*Note: We refer to “EMR”, the popular term; such systems are alternatively referred to as electronic health records, or “EHR.”


BENEFITS OF EMR

Goals/Benefits of EMR: Improvements to patient safety Enhanced productivity for clinicians Better access to clinical data Gains in privacy and security Reductions in paper handling Decreased costs of health care system in long run, i.e.,

reducing redundant or ineffective tests and procedures


RISKS OF EMR

High Cost in Dollars, Time and Effort

Lack of Physician Cooperation

Loss of Productivity

Security Breaches/HIPAA Violations

Technology fails to perform as promised

Need to update technology

Long term contracts; how to terminate?

Vendor Bankruptcy/business failure

Vendor Resells Contract to Financing Company


ROLE OF THE ATTORNEY

Technology Relationships are Governed by Contracts: Software License Agreement Hardware Purchase or Lease Agreements Maintenance and Support Agreements Financing Agreements

These contracts ARE negotiable, in whole or in part! As presented, all are vendor favorable Look like non-negotiable “form” contracts Technology will always have problems: “when,” not “if” Many clients don’t even read them! Even if terms are not all negotiable, clients will know what they can

expect If not negotiated, can end in significant losses with virtually no remedy


SOFTWARE LICENSE AGREEMENTS

THE KEY DOCUMENT!

Key Provisions: Scope of License: who can use EMR and where? Delivery, Installation, Testing & Acceptance Payment Terms: amount and timing Performance Standards: Get what they promised! Warranties/Disclaimers Limitation of Liabilities Maintenance & Support Data Ownership/HIPAA Compliance Termination Rights Remedies


SCOPE OF LICENSE

User-Based License: Based on number or type of users who are allowed access to the

software, or the number of computers on which the software may be installed

Most appropriate for a client with a relatively small number of users, a server with a relatively large number of computers and can anticipate its needs for the duration of the license

Software may only be used by client’s employees. If the client uses independent contractors or other agents who need access, you must make sure the contract clearly defines all authorized users.

Beware designating specific hardware; what if hardware changes?

Site-Based License: Based on reference to a geographic or physical location

More costly than user-based license Unlimited users, computers within defined location, e.g., hospital


DELIVERY, INSTALLATION, PAYMENT

Beware vendor’s disclaimers of liability for late delivery, installation, yet want payment in full on “delivery”

If timing is important, build in mutually agreed timeline for all activities and penalties for late performance

Withhold substantial portion of contract price until after installation and client testing & acceptance of software

Vendors seek to “book” revenues at earliest stage Clients/Licensees need to ensure performance


PAYMENT & PERFORMANCE

The only performance guaranty generally made by the software vendor is that the software will perform in accordance with their “Documentation,” which is often subject to revision by the vendor during the contract term.

See all Documentation in advance; limit unilateral changes

Specific requirements of software or customization material to the client’s purchase decision should be expressly stated in the software licensing agreement.

At minimum, attach and incorporate any sales presentations into the software license agreement.

Withhold significant portion of payment pending testing & acceptance of software performance.


TESTING & ACCEPTANCE

Spell it Out! Who does it; when, how

Software testing that leads to acceptance & payment by the client should start at a time mutually agreed by the parties.

Never allow acceptance to be “deemed” -- give client control.

Testing should involve using software on “live” data, after installation and preliminary diagnostic testing.

Vendor must fix “glitches” arising during testing and client must notify vendor in writing.

Failure of the vendor to remedy problems after reasonable opportunities should allow the client to terminate the contract and receive a full refund of any prepaid amounts.


WARRANTIES/DISCLAIMERS

EXAMPLE #1: DISCLAIMER OF WARRANTY FOR SOFTWARE

“EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS AGREEMENT, SOFTWARE VENDOR DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES FOR THE SOFTWARE, INCLUDING WARRANTIES OF INFRINGEMENT, MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE. SOFTWARE VENDOR MAKES NO REPRESENTATION CONCERNING THE QUALITY OF THE SOFTWARE AND DOES NOT PROMISE THAT THE SOFTWARE WILL BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.”


MORE WARRANTY DISCLAIMERS

EXAMPLE #2: DISCLAIMER OF WARRANTY FOR SOFTWARE“Software Vendor warrants to Client for a period of ninety (90) days from the completion of the Software Diagnostic Test Run of the Standard Licensed Software that the Licensed Software shall perform in a manner substantially consistent with the Documentation. Software Vendor’s sole obligation or liability under this warranty shall be to use best efforts to correct the Licensed Software, in a reasonable time, to perform in accordance with the Documentation, upon written notice of its failure to so perform from Client. In the event Software Vendor fails to remedy a material defect in the Licensed Software, Client’s sole remedy shall be to receive a refund of six months of license fees paid hereunder. Software Vendor does not warrant that the Licensed Software will meet Client’s requirements or that its use will be uninterrupted or error-free. EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH, SOFTWARE VENDOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, INFRINGEMENT, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.”


BETTER WARRANTIES

Non-Infringement: Vendor should warrant it either developed or has right to license software Vendor should indemnify client in the contract against any Intellectual Property

infringement claims arising from the client’s use of the software in accordance with the contract.

At a minimum, the vendor should agree to refund all funds paid by the client for the software if the vendor is unable promptly to provide non-infringing replacement software acceptable to the client in the event of an infringement claim.

Fitness for Particular Purpose: Always disclaimed; limits client’s right to recover damages if patient is harmed due

to software glitch

Warranty Duration: Warranty should last for the useful life of the technology, or as long as there is a

Support and Maintenance Agreement in place


LIMITATIONS OF LIABILITY

Vendor will disclaim any direct, indirect, consequential, or special damages arising out of the use of the software, regardless of fault.

At minimum, make this disclaimer mutual

Vendor will disclaim or limit actual damages to a set amount, i.e., refund 6 months of license fees.

Software failure may expose the client to liability to third parties, including patients, while the vendor, whose product could be the main cause of the failure, is contractually protected against such liability.

Negotiate hard for vendor to pay actual damages. Fallback: Vendor tenders insurance limits for client’s actual damages

Allocation of Risk: Vendor may seek higher price in exchange for warranties or fewer limits on vendor liability


DATA OWNERSHIP & PROTECTION

Clearly state Client Data is sole property of Client Data has commercial value; client should control

Access and Confidentiality of Protected Health Information (“PHI”) FL DOH: Health Professionals must have access to medical records FL Statute 817.5681: If any personal info in computerized data system of FL business,

requires notice to affected persons of security breach (not limited to health care)

Vendor access to PHI requires HIPAA (and FL Law) Compliance Vendor = Business Associate; Need Business Associate Agreement

Vendors, subcontractors, consultants

Vendor should warrant that software & services are HIPAA compliant Clearly state Vendor’s obligation to report breaches to client and assume cost

Require vendor in writing, in event of contract termination, to return data to client at vendor’s cost, in a standard format that will allow client easily to migrate data to new system.


HONEYMOON IS OVER!

HIPAA HAS TEETH AS OF

SEPT. 23, 2013!!

Government audits & sanctions starting in earnest

Fines up to $1.5 Million per category of violation & possible Criminal sanctions

Omnibus Rule Changed Everything!

Need to update HIPAA Compliance


TERMINATION RIGHTS

CRITICALLY IMPORTANT PROVISION

Long-Term, i.e., 5 year contracts

Software Licenses generally non-cancellable by client/licensee except for material breach by vendor

Negotiated termination rights may be superseded by Financing Agreement -- obligation to pay even if cease using technology

Often overlooked by clients; signed after the fact

Post-termination rights & survival clauses Need to cease use and return all software Client must prepare for transition to new system Hidden costs, delay if not planned & negotiated


REMEDIES

Vendor offers “repair or replace” technology remedy How many chances to repair? Client suffers delay, disruption, additional cost, lost productivity

Vendor offers refund of few months license payments Insufficient

Coordinate with limitations of liability in contract

Negotiate payment of actual client damages Limit of vendor liability insurance coverage at minimum Verify vendor’s coverage

Arbitration, Venue, Choice of Law

Protection against Vendor Bankruptcy/Cessation of Business Source Code Escrow


CONCLUSION

Technology can and does fail “When” not “If”

• Plan and Negotiate Technology Contracts for the Worst and

Hope for the Best!


Sandra P. GreenblattBoard Certified Health LawyerSandra Greenblatt, P.A.

Lubell Rosen, LLCColumbus Center 1 Alhambra PlazaSuite 1410Coral Gables, FL 33134

Phone: (305) 442-1172Direct: (305) 577-9995Fax: (305) 442-9047

Email: [email protected]

www.lubellrosen.com/attorneys

THANK YOU FOR

YOUR ATTENTION!


2013 Top Rated Lawyer in Health Care Law, Martindale Hubbell® & American Lawyer MediaMartindale-Hubbell® Bar Register of AV Preeminent Lawyers™ & Preeminent Women Lawyers™ 2006-2013 named a Florida Super Lawyer, Law & Politics2001-2013 named to Top Lawyers in S. Florida, S. FL Legal Guide2010 Top Impact Law Leader, Business Leader Media2005-2009 & 2011 named to Legal Elite, Florida Trend2005 named as Heavy Hitter in Health Care, S.FL Business Journal2003-2005 named Best of the Bar, S. FL Business Journal1996 selected as Best Health Care Attorney, FL Medical Business

Avoiding traps in EMR/Technology Contracts by Sandra P. Greenblatt

Health & Medicine

Transcript of Avoiding traps in EMR/Technology Contracts by Sandra P. Greenblatt