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Watch Out for Wage-Hour Minefields<div>​</div> <div> In the struggle to attract and keep good employees in today’s competitive job market, many long term care facilities offer creative incentive packages. Employers that do so without fully understanding wage and hour implications put themselves at risk for devastating liability. Federal law makes it easy for employees to pursue claims as a group and provides successful plaintiffs automatic doubling of back pay. Simple mistakes can create liability in excess of $100,000, and, occasionally, over $1 million. <br></div> <div><br></div> <div>As staffing challenges grow, maintaining appropriate levels is more important and complex than ever. The Centers for Medicare &amp; Medicaid Services’ (CMS’) Five-Star Quality Rating System is based partly on nursing staff per resident. In 2019, CMS updated staffing ratios and added an automatic downgrade to one star for facilities that report at least four days per quarter with no registered nurse on site. Many states also impose stringent staffing ratios. <br></div> <div><br></div> <div>Employers that rely on payroll companies for wage calculations retain responsibility. Vendors can—and do—make errors, especially when employers don’t understand the overtime implications on incentives and bonuses.</div> <div><br></div> <div>Following are some issues and potential pitfalls that long term care employers and their payroll and human resources departments should watch for.</div> <h2 class="ms-rteElement-H2">Fair Labor Rules</h2> <div>The general rule under the Fair Labor Standards Act says employers must pay overtime to non-exempt workers for all hours over 40 in a work week at not less than one and one-half times the employee’s regular rate, as spelled out in Title 29 of the U.S. Code of Federal Regulations (CFR). That “regular rate” is not necessarily the employee’s base rate. <br></div> <div><br></div> <div>To calculate the regular rate, divide total renumeration in a work week by the total hours worked (including overtime hours). Do not include dollars or hours paid but not worked, such as vacation.&#160;</div> <div><ul><li>Shift Differentials/Incentives. Generally, shift differentials must be included in the employee’s regular rate of pay for determining overtime. The same is true for incentives offered to fill open shifts or work certain days.</li> <li>Payroll Pointer. Premium pay for working on a “special day” (holiday, weekend, or scheduled day off) that is not less than the employee’s overtime rate can be excluded from the regular rate and counted toward the employer’s overtime obligation in some circumstances, according to the CFR. Given the complexity of this determination, employers should consult with legal counsel.</li> <li>Payroll Pointer. Employers can limit the need for some complex rate calculations by carefully structuring bonuses to be based on a percentage of total earnings before the employee provides the services. In that case, per federal code, the employer does not need to recalculate overtime on the bonus payment.</li></ul></div> <div>For example, the employer could offer a retention bonus of 15 percent of the employee’s annual straight-time and overtime earnings. Because the percentage applies to the employee’s overtime earnings, no further calculation is needed. <br></div> <div><ul><li>Multiple Rates. When different rates are paid for two different jobs, the default rule is to pay overtime based on the weighted average (that is, total compensation divided by total hours worked).</li> <li>Discretionary Bonuses. Payments made to employees without obligation or prior promises may be excluded from the regular rate and not subject to overtime calculations. Discretionary bonuses are uncommon; think twice before excluding any bonus from the regular rate.</li> <li>Nondiscretionary Bonuses. Most nondiscretionary bonuses must be included in the regular rate for the weeks when the bonus was earned. Referral bonuses do not need to be included, according to U.S. Department of Labor guidelines, if “1.) participation is strictly voluntary; 2.) recruitment efforts do not involve significant time; and 3.) the activity is limited to after-hours solicitation done among friends, relatives, neighbors, and acquaintances.”</li></ul></div> <div><img src="/Monthly-Issue/2020/February/PublishingImages/legal_staff-chart.jpg" class="ms-rteImage-1" alt="" style="margin&#58;5px;" /><br><br>A bonus is considered nondiscretionary under federal regulations if the employer has promised, agreed, or even implied that it would pay it. Examples include attendance, production, quality, and retention bonuses. The employer must identify each work week during which the employee earned overtime and calculate the additional overtime due.</div> <div><br></div> <h2 class="ms-rteElement-H2">Adding it Up</h2> <div>Fictional employee, Pat, works for a center as both a certified nurse assistant (CNA) and as a certified medical assistant (CMA). Pat earns $13.00/hour as a CNA and $15.00/hour as a CMA. All nursing department employees receive a $1.00 per hour shift differential for hours between 2 p.m. and 10 p.m. and a “pick-up” premium for filling vacant shifts, which varies based on the urgency of the need. Pat’s schedule for a recent workweek is on the facing page.</div> <div><br></div> <div>Pat also received a $30.50 attendance bonus for this work week. In total, Pat worked 49 hours and earned $808.50 in straight-time wages.&#160;</div> <div><br></div> <div>Pat’s regular rate of pay for overtime calculation purposes is $16.50/hr. ($808.50 divided by 49 hours). This regular rate calculation is where payroll often trips up, failing to include the bonus amount or using one hourly rate instead of the weighted average. Incorrect calculations can result in liability for underpayments, or in the alternative, consistently overpaying employees on top of their costly incentives.</div> <div><br></div> <div>Beware, users of outside payroll companies—many may default to using the hourly rate the employee happens to be working when the overtime hours occur without telling the employer they are doing so. In order to legally use this method instead of the weighted average rate, the employer and employee need an advance agreement, according to 29 CFR. Sec. 778.419. <br></div> <div><br></div> <div>Additionally, since many work weeks end over the weekend (when premium pay is more likely), using that method will base overtime pay on a rate higher than the weighted average. <br></div> <div><br></div> <div>Total compensation can be determined with the formula (40 hours x Regular Rate) + (OT hours x 1.5 x Regular Rate). Here’s how the math works out for Pat in this example&#58; </div> <div>40 hours x $16.50 = $660. </div> <div>9 hours x 1.5 x $16.50 = $222.75</div> <div>Total compensation owed is $882.75. </div> <div>Calculating instead just additional overtime due (Regular Rate x 1.5 x OT hours) and then adding in straight-time wages would reach the same total amount. <br></div> <div><br></div> <div>An easier path? Not so fast&#58; The Labor Department recently proposed revisions and clarifications to the “fluctuating work week” (FWW) method of determining overtime for non-exempt employees who receive bonuses, which allows employer and workers to agree to a weekly base for all hours worked with only additional half-time pay for hours above 40.</div> <div><br></div> <div>While the proposal would extend FWW rules to bonus payments, the new model is not likely to have broad applications in long term care staffing where non-exempt employees generally have set base and variable OT hours. Long term care employers that may need workers to stay late or meet surge needs may find it difficult to convince employees to work an overtime hour for what may feel to them like a half-hour’s pay. </div> <h2 class="ms-rteElement-H2">Getting it Right</h2> <div>These are just a few of the many rules and approaches to properly attract and retain workers through properly calculated bonuses and overtime. There are other compensation arrangemewnts that can alter calculations and allow employers to fully pay and motivate employees while controlling labor costs. There could be state and local regulations, too.</div> <div><br></div> <div>But the headaches of getting it right usually pass with experience, attention to detail, and some help from experts when needed. The pain of getting it wrong while scrambling to keep fully staffed through creative overtime and bonus and incentive packages can last much, much longer. </div> <div>&#160;</div> <div><em>Michaelle L. Baumert is a principal in the Omaha office of Jackson Lewis. She is a seasoned litigator and has extensive experience in human resources counseling with an emphasis on wage and hour issues. She can be reached at Michaelle.Baumert@jacksonlewis.com or&#160;402-827-4270. Catherine A. Cano is an associate in the Omaha office of Jackson Lewis, representing management in all areas of labor and employment law. She can be reached at Catherine.Cano@jacksonlewis.com or 402-391-1991. </em></div>2020-02-01T05:00:00Z<img alt="" src="/Monthly-Issue/2020/February/PublishingImages/legal_t.jpg" style="BORDER&#58;0px solid;" />Legal;WorkforceMichaelle L. Baumert and Catherine A. CanoIn the struggle to attract and keep good employees in today’s competitive job market, many long term care facilities offer creative incentive packages.
Compliance in Patient Care Comes Into Focus<div>​</div> <div> The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently updated its Work Plan to add an additional topic focusing on nursing facilities that receive Medicare and Medicaid reimbursement. </div> <div>&#160;</div> <div>The Work Plan provides a summary of new, revised, and continuing reviews for HHS programs and operations, including Medicare and Medicaid. It describes ongoing audits, evaluations, and specific legal and investigative matters. In addition, within the first four months of 2019, OIG has issued two reports and one data brief regarding nursing facilities. </div> <h2 class="ms-rteElement-H2"> An Opportunity for Review</h2> <div>The release of these reports and the addition to the Work Plan provide an opportunity for nursing facilities to review their own operations and practices while comparing them to the objectives in the Work Plan in order to identify areas for compliance improvement.</div> <div><br></div> <div>OIG conducts investigative activities that involve allegations of fraud, waste, and abuse in all HHS programs. Medicare and Medicaid constitute a significant portion of its work. Areas that OIG can investigate include billing for services not rendered, provision of medically unnecessary and misrepresented services, patient harm, and the solicitation and receipt of kickbacks. <br></div> <div><br></div> <div>In addition to performing investigations, OIG is also involved in facilitating compliance in the health care industry and the exclusion of individuals and entities from participation in Medicare, Medicaid, and other federal health care programs.</div> <h2 class="ms-rteElement-H2">The New Topic</h2> <div>Recently, OIG added a new topic to the Work Plan focusing on post-hospital skilled nursing facility (SNF) care to individuals eligible for Medicare and Medicaid, or dually eligible individuals.</div> <div><br></div> <div>Similar to topics added in the past, OIG noted previous reviews as the basis for the addition. Here, OIG references previous reviews that showed some residents who lived in and received Medicaid-covered nursing facility care were admitted to a hospital, discharged, and then returned to the same facility to receive Medicare-covered post-hospital SNF care.&#160;</div> <div><br></div> <div>OIG found that nursing facility physicians certified that individuals needed skilled care even though the hospital discharged the individual home to a Medicaid facility rather than a SNF. This is concerns the Centers for Medicare &amp; Medicaid Services (CMS) because of a belief that nursing facilities have a financial incentive to increase the level of care since Medicare pays more for SNF care than Medicaid pays for nursing facility care. </div> <h2 class="ms-rteElement-H2">Increased Scrutiny</h2> <div>With this new topic, OIG will be examining the level of care requirements for post-hospital SNF care provided to dually eligible beneficiaries. Specifically, OIG will be determining whether&#58;</div> <ul><li>The SNF level of care was certified by a physician or a physician extender; </li> <li>The condition treated at the SNF was a condition for which the individual received inpatient hospital services or was a condition that arose while the individual was receiving care in a SNF for an eligible stay; </li> <li>Daily skilled care was required; </li> <li>The services delivered were reasonable and necessary for the treatment of an illness or injury; and </li> <li>The Medicare payments made were improper.</li></ul> <div>In one report, OIG determined that CMS improperly paid claims for SNF services when the Medicare three-day inpatient hospital stay rule was not met. OIG attributed those improper payments to several factors, including the failure of hospitals to provide correct inpatient stay information and SNFs reporting erroneous hospital stay information with their claims. </div> <h2 class="ms-rteElement-H2">Addressing the Issues</h2> <div>CMS concurred with several recommendations from OIG to address the issues from this report. </div> <div>The first was to confirm that the Common Working File qualifying inpatient stay edit is enabled during the processing of SNF claims for payment. Also, CMS concurred with OIG’s recommendation for the provision of additional education to hospitals and SNFs about three-day inpatient stay documentation.</div> <div><br></div> <div>The second report issued by OIG addressed the need for the improvement of CMS guidance to State Survey Agencies (SSAs) on verifying correction of deficiencies to help ensure the health and safety of residents. Specifically, OIG found that seven of nine state agencies did not always verify the correction of deficiencies by nursing facilities and that the state agencies did not consistently obtain or maintain evidence of the corrections.&#160;</div> <div><br></div> <div>Ultimately, OIG determined that CMS guidance to SSAs regarding the verification of correction of deficiencies and the maintenance of documentation to support that verification needs to be improved. </div> <h2 class="ms-rteElement-H2">Deficiency Trends</h2> <div>Complementing that report from February, OIG issued a data brief in April that identified and analyzed trends in the deficiencies identified by SSAs in nursing facility surveys nationwide. Of note, several of the trends identified by OIG include that approximately 31 percent of nursing facilities had a repeat deficiency in the four-year review period and that the top 10 deficiency types comprised more than 40 percent of all the deficiencies reviewed. </div> <div><br></div> <div>The top 10 deficiency categories identified by OIG were&#58; free of accident hazards; establish an infection control program; provide care and services for highest well-being; food and sanitary; develop comprehensive care plans; drug regimen free from unnecessary drugs; drug records, label, store drugs, and biologicals; resident records; dignity and respect of individual; and investigate, report allegations, and individuals.</div> <div><br></div> <div>These audits, evaluations, and reports by OIG serve as an important reminder that nursing facilities must remain vigilant with their documentation, level of care certifications, and provision of services. The Work Plan provides insight into the areas that could come under scrutiny and ultimately can help guide internal compliance activities for a nursing facility. In addition to the Work Plan topics, the recent reports and data brief by OIG provide further confirmation of this increased review activity. </div> <div><br></div> <div>The recommendations, trends, and topics identified by OIG serve as helpful hints for nursing facilities when reviewing their own operations and compliance activity. For example&#58;</div> <ul><li>Nursing facilities need to ensure that physician certifications are compliant with applicable requirements. </li> <li>It is essential that nursing facilities properly train billing and claims staff and that staff keep current with regulatory service provisions. </li> <li>Nursing facilities need to be sure that they obtain complete and accurate documentation to verify the three-day stay requirements and documentation. </li> <li>As SSAs work to improve their processes regarding verification of corrective actions, nursing facilities should anticipate additional follow-up and closer scrutiny regarding documentation and corrective actions. </li> <li>To be prepared, nursing facilities must thoroughly document their plans of correction. </li> <li>Further, it is important for nursing facilities to implement their corrective action items and maintain adequate records to document implementation and completion.</li></ul> <div>With these recent developments in mind, nursing facilities should review their operations and take the steps necessary to be better prepared to achieve and maintain compliance and provide proper and quality care. </div> <div>&#160;</div> <div><em>Iain Stauffer serves as Of Counsel at Poyner Spruill in the Health Law Section. He can be reached at <a href="mailto&#58;istauffer@poynerspruill.com" target="_blank">istauffer@poynerspruill.com</a>.</em></div>2019-06-01T04:00:00Z<img alt="" src="/Monthly-Issue/2019/June/PublishingImages/legal_t.jpg" style="BORDER&#58;0px solid;" />LegalIain StaufferThe HHS OIG recently updated its Work Plan to add an additional topic focusing on nursing facilities that receive Medicare and Medicaid reimbursement.
What is New with Revised Appendix Q<div>​</div> <div> The Centers for Medicare &amp; Medicaid Services (CMS) recently completed an overhaul of Appendix Q of the Medicare State Operations Manual (SOM), which provides the guidance for survey agencies in identifying and citing conditions of immediate jeopardy for providers. The guidance was reorganized to include a main core that will used by surveyors of all provider types and subparts that focus on specific concerns for nursing facilities and clinical laboratories. </div> <div><br></div> <div>The stated purpose of the revised guidance is to standardize the key components of immediate jeopardy. It provides some additional clarity by defining key terms and including an immediate jeopardy template that must be completed by surveyors in every immediate jeopardy situation and shared with administrators.</div> <div>However, the definitions of “psychosocial harm” and “likelihood” remain somewhat broad and lend themselves to surveyor discretion, which will make identification of immediate jeopardy still subject to surveyor interpretation. </div> <h2 class="ms-rteElement-H2">A Standardized Format</h2> <div>The definition of immediate jeopardy has remained unchanged in the guidance. It is defined as “a situation in which the provider’s noncompliance with one or more requirements of participation has caused or is likely to cause serious injury, harm, impairment, or death to a resident.”</div> <div><br></div> <div>The revised guidance says in the introduction that “an immediate jeopardy situation is one that is clearly identifiable due to the severity of harm or likelihood for serious harm and the immediate need for it to be corrected to avoid further or future serious harm.”</div> <div><br></div> <div>It goes on to say that surveyors are expected to make an immediate jeopardy identification onsite and that such finding should be immediately communicated to the facility administrator in writing, using the template that outlines the elements of immediate jeopardy.</div> <div><br></div> <div>The purpose of requiring a standardized format for determining when immediate jeopardy exists and providing definitions of the various concepts included in the immediate jeopardy elements is to promote more consistency in the process. To that end, several significant changes were made and are outlined below.</div> <h2 class="ms-rteElement-H2">Changes to Note</h2> <div>First, the revised guidance clearly outlines the three elements of immediate jeopardy&#58;</div> <ul><li>Noncompliance. </li> <li>Noncompliance has caused or created a “likelihood” of serious injury, harm, or death. </li> <li>Immediate action is necessary to prevent occurrence or recurrence of the serious harm or death.</li></ul> <div>Previously, an element of immediate jeopardy was facility culpability, but this element has been removed. However, whether or not the facility was culpable for the immediate jeopardy situation was rarely taken into consideration by most survey agencies anyway, so the failure to include the concept likely does not constitute a major change.</div> <div><br></div> <div>“Likelihood” is defined in the revised guidance as follows&#58; “The nature and/or extent of the identified noncompliance creates a reasonable expectation that an adverse outcome resulting in serious injury, harm, impairment, or death will occur if not corrected.” </div> <div><br></div> <div>This definition is meant to better define when an “immediate jeopardy” to a resident exists by saying that jeopardy does not exist because there is a mere possibility of serious harm or death but because there is a reasonable expectation that serious harm or death will occur if immediate corrective action is not taken. </div> <div><br></div> <div>Whether this definition contributes to more consistent and narrowly drawn immediate jeopardy findings remains to be seen. It is important to note that the guidance specifically states that surveyors do not need to prove when serious harm will occur or that it will occur within a specific time frame.&#160;</div> <div><br></div> <h2 class="ms-rteElement-H2">The Timely Template</h2> <div>Once the elements of immediate jeopardy are found to be met by the surveyors, they must document their findings in a template and share those findings with the administrator. This will represent an improvement in the process since facilities have historically been concerned with issues of timely notification of the immediate jeopardy as well as lack of clear understanding of the basis for the immediate jeopardy, which made it difficult to timely draft and implement an effective removal plan. </div> <div><br></div> <div>A written template precisely outlining the immediate jeopardy should eliminate this concern.</div> <div><br></div> <div>Additionally, the revised guidance makes it clear that surveyors are expected to identify the immediate jeopardy to the provider prior to exit. While there is language that acknowledges the possibility that a jeopardy could be determined by the state agency or by CMS to exist post-exit, these circumstances are described as “rare.” </div> <div><br></div> <div>Thus, the longstanding problems relating to being told about the jeopardy weeks or even months after exit should theoretically be eliminated or at least minimized.</div> <h2 class="ms-rteElement-H2">Other Definition Issues</h2> <div>The definition of serious harm also represents a change that may be helpful to all parties in determining when a jeopardy exists. The definition indicates that the adverse outcome or likely adverse outcome must result in death; a significant decline in physical, mental, or psychosocial functioning; loss of limb; disfigurement; or life-threatening complications. </div> <div><br></div> <div>Finally, the issue of “stacking” immediate jeopardies, that is, citing multiple jeopardies under different tags based on the same set of facts, was also addressed. Revised Appendix Q now clearly states the surveyors cannot cut and paste facts to support multiple jeopardy citations, and that each citation must be independently supported.</div> <div><br></div> <div>In other words, an immediate jeopardy finding at one tag does not automatically trigger an immediate jeopardy finding at a related tag (for example, an immediate jeopardy for pressure ulcers, abuse, or elopement) that was also cited under Administration, Quality Assurance, or even multiple abuse tags.</div> <div>The revised guidance makes it clear that independent examination of the facts under each tag must be made before jeopardy involving the same events can be cited under multiple tags. </div> <h2 class="ms-rteElement-H2">Toward More Accountability </h2> <div>Based on the revisions made to the guidance, more consistency and accountability is expected on the part of surveyors and state agencies in making immediate jeopardy determinations. Further, the number of immediate jeopardy findings should be reduced as a result of the elimination of the practice of “stacking” jeopardy citations.</div> <div><br></div> <div>Where multiple immediate jeopardy tags are cited based on “cut and pasted” facts from the Statement of Deficiencies, providers should consider challenging them. They could pursue an Informal Dispute Resolution (IDR) request or an Independent Informal Dispute Resolution (I-IDR) request to have the additional cited deficiencies either deleted or reduced in severity, since each immediate jeopardy citation constitutes at least 50 points (75 if a substandard quality of care tag). Such scores can contribute to a poor survey profile and land a provider on the Special Focus Facility list.</div> <h2 class="ms-rteElement-H2">Removing Immediate Jeopardies</h2> <div>Providers should also be better informed about the nature of the immediate jeopardy findings as a result of the template and thus be able to establish and implement a removal plan more quickly. It is important to remember that if a provider can prove that the noncompliance existed after the exit of the last standard survey, but was completely corrected before the current survey, the facility should be eligible for a finding of “past noncompliance,” which results in only 20 survey points in the CMS Five-Star Program and does not require a plan of correction or revisit.</div> <div><br></div> <div>In addition, when the surveyors are contemplating whether the facts and circumstances constitute immediate jeopardy to one or more residents in the facility, the provider should consider whether the harm or threatened harm is “serious” as defined by the guidance or “likely” as defined by the guidance and argue accordingly at the time of survey or on survey appeal.</div> <div>&#160;</div> <div>Finally, CMS has an online training course on this revised Appendix Q, which is available to both providers and surveyors, at https&#58;//surveyortraining.cms.hhs.gov/. It is recommended that providers access this training to understand what CMS believes are the most significant changes and aspects of this newly revised SOM.&#160;</div> <div><br></div> <div><em><img src="/archives/2019_Archives/PublishingImages/0519/CarolRolf_legal.png" alt="Carol Rolf" class="ms-rtePosition-1" style="margin&#58;5px 15px;" />Carol Rolf, Esq., is senior partner at Rolf Goffman Martin Lang. She focuses her practice on long term care regulatory matters. She has also served on the Survey/Regulatory and Legal Committees for the American Health Care Association for many years. She can be reached at Rolf@RolfLaw.com or 216-682-2115. <br></em></div> <div><em><br></em></div> <div><em><img src="/archives/2019_Archives/PublishingImages/0519/MicheleConroy_legal.png" class="ms-rtePosition-2" alt="Nichele Conroy" style="margin&#58;5px 10px;" /><br>Michele Conroy, RN, BSN, Esq., is a partner at Rolf Goffman Martin Lang. She frequently speaks at the state and national level on the areas of survey and enforcement and licensure and certification for post-acute providers. Conroy also has more than 19 years of nursing experience, which provides her with a unique perspective on issues affecting health care providers. She can be reached at 216-682-2131 or Conroy@RolfLaw.com.</em><br></div>2019-05-01T04:00:00Z<img alt="" src="/Monthly-Issue/2019/May/PublishingImages/legal_t.png" style="BORDER&#58;0px solid;" />LegalCarol Rolf and Michele Conroy, RNCMS recently completed an overhaul of Appendix Q of the Medicare SOM, which provides the guidance for survey agencies in identifying and citing conditions of immediate jeopardy for providers.
Reducing Risk with the Contracting Process<div>​</div> <div> Long term care providers, be it skilled nursing, post-acute, or assisted living, can execute contracts with many different vendors, including food product and service vendors, laundry and linen providers, information technology companies, and others. </div> <div>&#160;</div> <div>Whether working for a single-site operator or a multi-center system, a thorough review of all contracts and a careful consideration of the “what-ifs” are crucial steps. Too often, the language and terms of a contract are only carefully reviewed after an issue arises. By then, it may be too late. </div> <div> </div> <div><br></div> <div>Not all problems can be prevented, but there are steps that providers can take in the contracting process to reduce risks. Below are eight key tips to help with the contracting process.</div> <h2 class="ms-rteElement-H2"> Define the Contract</h2> <div>A contract can be a single piece of paper, a hundred or more pages, or even an oral agreement. It is important to remember that a contract, in whichever form, is an agreement that creates a legally enforceable obligation in exchange for a benefit. With vendors, this most often is the supply of a product or a service in exchange for payment by the long term care center.</div> <div><br></div> <div>While one form of a contract may be more appropriate than others in certain situations, providers should always reduce the contract to written form. When the contract is in writing, it is easier to identify and define the terms. This will help reduce any uncertainties and confusion. Also, do not agree to a vendor’s request to “work it out later.” Providers should insist that all terms be in place and in writing for review before signing the contract.</div> <h2 class="ms-rteElement-H2">Have an Established Process for Contract Review</h2> <div>Centers should have an established policy that includes the procedure for contract review and the individuals in the organization who need to be involved. The procedure should include a specific process for the intake, initial review, and advancement of all contracts through the organization. In addition, all centers should designate a person to conduct the initial review of a contract. </div> <div><br></div> <div>At this stage, there is also an opportunity to involve legal counsel as necessary, depending on the complexity of the contract being reviewed. </div> <h2 class="ms-rteElement-H2">Own the Review Process</h2> <div>When reviewing a contract, never forget that the details matter. This includes often overlooked items such as names and dates. When these are omitted, it is difficult to tell when the contract term begins and, sometimes, even if it is enforceable.</div> <div><br></div> <div>Make sure to clarify the legal name of the entities that are involved with the contract, especially when a “Doing Business As” or “DBA” title might apply. It is important that the legal name of a company be set out. <br></div> <div>Remember, the contract is a legally enforceable agreement so one should be sure the parties are properly identified.</div> <div><br></div> <div>Verify that the dates reflect when the obligations and benefits of the agreement become effective. Work with the vendor to assure clarity for the dates, and this will help reduce the potential for uncertainty later. A discrepancy can easily become an issue later when least expected.</div> <div><br></div> <div>Many contracts start with areas pre-filled, and those should be carefully reviewed. A vendor might claim that certain terms cannot be changed. However, question and seek to negotiate changes when the terms are not suitable to the center’s needs. </div> <div><br></div> <div>In addition, after receipt of the complete contract signed by all parties, always take another look at the final copy to make sure that no unwanted or unexpected extras have appeared. </div> <h2 class="ms-rteElement-H2">Know Who Has Authority</h2> <div>It is important that a center knows who is and is not authorized to sign a contract on behalf of the organization. This can be different people based on the type of contract. However, it is important that the center has designated those individuals so that the established procedures can be followed. </div><div><br></div> <div>Please note that a contract, even when signed by a person without authorization, might still be enforceable against the organization. This emphasizes the importance of having policies and procedures in place to assure that the contracting process is followed and contracts are reviewed and signed by authorized individuals.</div> <h2 class="ms-rteElement-H2">Specify the Length of the Contract Term</h2> <div>The contract term is the stated period of time the contract covers. At the conclusion of the term, the contract expires unless the parties renew the contract, negotiate an extension, or enter into a new contract. Beware, however, because some contracts contain “automatic renewal” provisions, meaning that unless one party gives notice of nonrenewal within a defined time frame, the contract automatically renews for a defined period or periods of time. </div> <div><br></div> <div>When reviewing the contract term, consider how the service or product might be needed and how long the center should remain obligated by the contract. For instance, a contract with a longer term can provide a center with certainty because it has secured the services of the vendor for a specific period at a specific cost or rate. However, a long-term contract also locks in the center, and it could be forced to remain with a poorly performing vendor. </div> <div><br></div> <div>On the other hand, a contract with a short term provides less certainty for the center but avoids a lengthy relationship without the need to terminate the contract.</div> <h2 class="ms-rteElement-H2">Know the Termination Provisions</h2> <div>Other contract provisions to pay careful attention to are the termination provisions. A termination clause provides the method for a party to end a contract prior to its expiration. There are generally two types of termination provisions&#58; for cause and without cause. </div> <div><br></div> <div>Generally, a termination for cause occurs when one party is noncompliant with terms of the contract that cause the other party to want to end the contract. A termination without cause or for convenience on the <br></div> <div>other hand is when one or both parties simply want to end the contract early. </div> <div><br></div> <div>Both for cause and without cause termination provisions generally have notice requirements. This means that the party seeking to terminate the contract must provide notice a certain number of days in advance to the other party. The respective notice periods for termination can differ, and the exact language should be consulted before giving notice. Never assume that notice periods are the same.</div> <div><br></div> <div>When reviewing these provisions, pay close attention to the termination provisions so that it is known when the center and the vendor may end the contract. Also, it is important to be aware of the length of the notice period so that there is enough time to locate and secure another vendor but not so long that the center might have to continue dealing with a troublesome vendor for an inconvenient period of time.</div> <h2 class="ms-rteElement-H2">Be Familiar with Dispute Resolution and Venue</h2> <div>These provisions will most likely only arise when there is a dispute between the parties. Hopefully these provisions will not be used, but it is wise to be aware what restrictions or provisions are in place regarding how and where disputes would be resolved if a problem does arise.</div> <div><br></div> <div>For instance, check to see if the contract specifies where a dispute must be resolved, or the venue. If the center and the vendor are not based in the same area, then the venue or location for the dispute resolution could be complicated. The vendor would most likely want the venue to be in a location close to its headquarters, which might not be close or convenient for the center.</div> <div><br></div> <div>With dispute resolution, the provision could require a party to use arbitration instead of filing a lawsuit. The vendor preparing the contract might have boilerplate language associated with dispute resolution and venue. However, this should be considered negotiable in review and preparation of the final contract. It is important to be familiar with these provisions when entering a contract in the event issues arise. </div> <div><br></div> <div>Organize, Organize Again Once the contract has been signed by all parties and is in effect, it is important to conclude the contract procedures with the filing and storage of a fully executed copy, meaning a copy of the contract with a start and stop date and signed by all the authorized individuals. In the event questions or issues arise with the other party’s performance, the center should have access to a complete and legible copy of the contract. </div> <div><br></div> <div>Secure digital solutions are becoming a must for storage, especially when replacing outdated paper storage. In addition, all centers should maintain a contracts calendar to include payment schedules, termination dates, renewal and notice deadlines, and any other important dates relevant to the context of the contract. </div> <div><br></div> <div>When it comes time to contract with a vendor, it is important to follow the center’s policies and procedures for contracting, take time to review the contract, and verify that it reflects all the negotiated terms before signing. Some of these practices seem simple and straightforward, but it is important to have a consistent and thorough process to identify contract issues and to help minimize any problems. </div> <div><br></div> <div>These reminders will help reduce surprises and avoid costly mistakes. If any questions arise during the review of a proposed or existing contract, seek guidance from legal counsel. </div> <div>&#160;</div> <div><em>Iain Stauffer serves as Of Counsel at Poyner Spruill in the Health Law Section. He can be reached at istauffer@poynerspruill.com. Christopher Dwight is an Associate at Poyner Spruill and serves clients in a wide variety of transactional matters. He can be reached at cdwight@poynerspruill.com. </em></div>2018-11-01T04:00:00Z<img alt="" src="/Monthly-Issue/2018/November/PublishingImages/legal_t.jpg" style="BORDER&#58;0px solid;" />LegalIain Stauffer and Christopher DwightNot all problems can be prevented, but there are steps that providers can take in the contracting process to reduce risks. Below are eight key tips to help with the contracting process.