Q&A Forum

Q: Our hospital signed a contract with a company almost two years ago to develop and manage our new inpatient mental health program. We have been very disappointed with the company and would like to end the relationship. What is the best way to get out of the contract?

A: The first place to start is to review the contract to determine if any “outs” exist. These are clauses that allow one or both of the parties to terminate the contract under specified conditions. Absent the existence of any out clauses I would recommend consulting an attorney to determine if the company has breached any portion of the contract. You indicated that the hospital has been disappointed with the company and this could be due to the company not complying with the contractual terms. In the event there are no out clauses or breaches I would recommend going directly to the company and try to negotiate an early end to the agreement. If the company is unwilling to do so you should immediately develop and implement a plan to assume management of the program when the contract expires.

Q: Our hospital has made the decision to start an inpatient rehab program in May. We have never before outsourced the management of any of our clinical programs but we do not have the internal expertise to do this ourselves. What is the best way to proceed?

A: First, assemble a group of key hospital personnel to oversee the selection of the clinical outsourcing company. Create a process for the screening and selection of three finalist companies. Criteria for selection should include track record, strength of references, quality of management and other key factors. Identify three or four key negotiating points and begin discussions with each of these companies on these specific areas. Limit the discussions to no more than two weeks. At the conclusion of these discussions the selection group will evaluate the results. If Company A refuses to strike the no-hire clause and is insistent on a five-year contract with no performance clause while Company B agrees to a two-year term and waiver of the no-hire clause the selection committee will have an easy decision.

Q: Six years ago our hospital started an open-heart surgery program. We signed a contract with a company to provide perfusion services and products. The company and, in particular, the perfusionists have done a great job but everyone here at the hospital agrees that we should no longer pay the high fees charged by the company. We would like to hire the perfusionists but there is a provision in the contract that prevents us from doing this. Are there any ways to get around this clause?

A: In short, no. This is a great example why hospitals should always do everything they can to negotiate away the no-hire provisions in a clinical outsourcing contract. Agreement to these ominous terms can lock a clinical outsourcing company into a hospital for years (see the white paper, The Best Practice: Preserving the hospital's right to hire clinical outsourcing company employees). I would recommend that you meet with the company and request they release the staff. I would also advise meeting with the surgeons to enlist their support if it becomes necessary to replace the perfusionists.

Q: Over the past year our hospital has laid off a number of good people because of the deteriorating economic situation in our area. We have a contract with a company to manage one of our clinical programs and every month I cringe when I see the outrageous “management fees” on the monthly variance report. What is the best way to either eliminate or reduce this fee?

A: I assume, by your statement, that you believe the hospital is paying an exorbitant premium to the company for its services. There are several approaches to this issue. First, meet with the company and explain that the hospital is no longer willing to pay the high fees and is seriously considering ending the relationship once the contract ends. This will open the door to a trade off most companies are willing to make: reduction in fees for a contract extension. In most situations, however, this is not a good deal for the hospital. You are bargaining from a position of weakness and you have now placed limits on your future options. The preferred approach to this issue would be to assemble a work group at the hospital and identify the specific areas that must be addressed if the hospital ultimately decides to end the relationship with the clinical outsourcing company. Develop a detailed plan of action and move forward. You will now be prepared to self-manage the program and be in a far stronger negotiating position if you decide to continue the relationship.