1. 1 TOP STRATEGIES FOR NEGOTIATING EHR AGREEMENTS MISSISSIPPI HOSPITAL ASSOCIATION’S 2 ND ANNUAL HEALTH LAW CONFERENCE April 16, 2010 Armin J. Moeller Dinetia M. Newman Balch & Bingham LLP amoeller@balch.com dnewman@balch.com

2. 2 INTRODUCTION TO CRITICAL ISSUES What is the Hospital’s Objective? –Interoperable EHR system by which hospital/professionals can meaningfully use certified healthcare technology –Species of IT contract –Goal: something which does not currently exist –Qualify for EHR incentive payments What is EHR Vendor Promising? –Functional EHR system? –“Best efforts” or “Commercially reasonable efforts”? –Disconnect between EHR vendor advertising and contract terms Schedule/Time of the Essence? –What excuses delay? Best Effort, Inc. Hope for the Best EHR Vendor

3. 3 INTRODUCTION TO CRITICAL ISSUES Continued Defects/Delays – Notice of Cure/Period of Cure? –What is end point? –Material breach of contract? Dispute Resolution –Mediation? Arbitration? Compulsory? Courts? –Venue? Limitations? What is a Material Breach? –Time of the essence? –Nonconforming deliverables jeopardize success of project?

4. 4 INTRODUCTION TO CRITICAL ISSUES Continued Warranty Provision –What is being warranted? Functional EHR system? Duration? –Software free of material defects? –Useable for its intended purpose? –Performance being warranted? –Not materially deviate from contract specifications? Limitation of Liability –Typically, strict LOL provisions

5. 5 INTRODUCTION TO CRITICAL ISSUES Continued Where are Broken Promises, Misrepresentations And Failure? –Documentation –Notice and demands to vendor –Follow through –Overcoming hospital breach/lack of assistance and substantial performance defenses Avoiding Looking Stupid About What Was the Bargain

6. 6 KEY CONTRACTUAL PROVISIONS Definitions Specifications License Terms Warranties Change in Law Support and Maintenance Confidentiality, Privacy & Security Disclaimers Limitation of Liability and Indemnification Acceptance Testing/Milestone Payments Pricing/Financing Dispute Resolution Final Thoughts

7. 7 KEY CONTRACTUAL PROVISIONS – DEFINITIONS Location Important Definitions –“Contract” or “Agreement – related documents –Purchased products: Equipment, Software, Third Party Software –Effective Date –Live Date –Documents –Loss –Travel Expenses –Maintenance and/or Implementation Services –Clinical Content & Medical Necessity Content

8. 8 KEY CONTRACTUAL PROVISIONS - SPECIFICATIONS Have appropriate hospital IT person confirm sufficiency of specifications Assure all functionalities are covered in contract If possible, link specifications to HITECH meaningful use requirements Warranties will be based on specifications

9. 9 KEY CONTRACTUAL PROVISIONS – LICENSE TERMS Named User or Concurrent User Licenses Intellectual Property Issues –Vendor indemnification if infringement alleged Termination of Licenses –Provisions allowing hospital to terminate licenses –Transition assistance to new EHR vendor Move data to new server Vendor provide copy in user-friendly format Ownership of data upon license termination

10. 10 KEY CONTRACTUAL PROVISIONS – WARRANTIES Warranties based on specifications Interoperability –With existing software and interfaces owned by hospital, health system –With software of other health care providers/suppliers Certified currently and in future Compliance with “meaningful use” criteria –Continuing through various Stages Compliance with all applicable HITECH, HIPAA and other laws and regulations No viruses; security protections

11. 11 KEY CONTRACTUAL PROVISIONS – WARRANTIES (cont.) Remedies on breach of warranty –Repair –Replace –Re-perform –Refund of project costs, incentive payments –Penalties –Timing, broadening of remedies Disclaimers –Use by trained personnel –“Garbage in, garbage out”: no control over content –Custom add-ons –Vendor does not practice medicine –No control over internet: interruptions, errors, lack of security

12. 12 KEY CONTRACTUAL PROVISIONS – CHANGE IN LAW Law likely to change prior to EHR “go live” date and thereafter Important to negotiate pre-purchase –Without negotiation, leverage might shift to vendor Terms –Who bears risk of change –What will costs be if change occurs –Whose responsibility is cost Upgrades, new functionalities, installation Implementation fees,

13. 13 KEY CONTRACTUAL PROVISIONS – SUPPORT & MAINTENANCE Timing of support: 24/7, answer questions On site/off site – remote diagnostics Updates, new product versions Consistency of personnel Training – type of training Limits on price increases –Termination ability of hospital to terminate maintenance/support –Limits on vendor termination rights Remedies

14. 14 KEY CONTRACTUAL PROVISIONS – CONFIDENTIALITY, PRIVACY & SECURITY Business Associate Agreement –Remedies on breach –Timing of breach notice –Termination issues Data destruction, return by BA Confidentiality of non-PHI

15. 15 KEY CONTRACTUAL PROVISIONS – LIMITATION OF LIABILITY & INDEMNIFICATION Limitation of Liability Disclaimers of Implied Warranties Carve-outs –HIPAA privacy or security breach –Failure to achieve “meaningful use” on timely basis

16. 16 KEY CONTRACTUAL PROVISIONS – ACCEPTANCE TESTING & MILESTONE PAYMENTS Acceptance Testing –Stages or milestones –Testing methods –Risk spreading Final overall acceptance –Timing Remedies for non-acceptance Milestone Payments –Risk spreading –Increase in hospital leverage and avoidance of refund requests

17. 17 KEY CONTRACTUAL PROVISIONS – PRICING Pricing Payment Terms –Limits on increases Expenses Financing by vendor –Pros Opportunity to spread out payments if milestone payments not negotiable –Cons Obligation to pay does not end if EHR fails to perform as anticipated or meet meaningful use standards Potential limited access to medical records maintained by system.

18. 18 KEY CONTRACTUAL PROVISIONS – FINAL THOUGHTS Initial hospital gap analysis important Compliance with “meaningful use” objectives is evolving target Certification standards – continued unknown Important for vendor to have “stake” in game Important to know vendor: strengths, weaknesses of product, ability to deliver product as per contract Important to control negotiations, contracting process Project management team critical Continued communication between hospital/vendor important – frequent meetings, relationship Schedules, timing of implementation important

19. 19 Dinetia M. Newman Balch & Bingham LLP 401 East Capitol Street, Suite 200 Jackson, Mississippi 39201 dnewman@balch.com (601) 965-8169 – Phone (888) 594-5407 – Fax (662) 891-8935 – Cell Armin J. Moeller Balch & Bingham LLP 401 East Capitol Street, Suite 200 Jackson, Mississippi 39201 amoeller@balch.com (601) 965-8156 – Phone (888) 594-5405 – Fax (601) 906-1083 – Cell THANK YOU!! Presented by: