Proper contract processes save time, money
Wednesday September 12, 2007 -- Jason Thompson
In an effort to lessen potential liability relating to contracts, Kathy O’Brien, a partner with the law firm Osler, Hoskin and Harcourt, says there are several processes hospitals should have in place.

“Hospitals tend to do contract risk management quite poorly,” she says. “Largely because resources are not allocated to that area of the organization.”

O’Brien gave a presentation on contracts and risk management at the Ontario Healthcare Risk Management Network’s 2nd Annual Risk Management Conference Sept. 10.

She suggested several policies and processes that can save healthcare organizations money.

“If you don’t have somebody in house that understands the risk allocation in contracts, you need to either have a checklist of template clauses that you’re OK with or you need to send those contracts out for legal review,” O’Brien says.

She can’t recall the number of times she’s received a late Friday afternoon call from a healthcare client about a contract because they didn’t follow proper process.

To begin, policies should identify who has signing authority as well as who has the ability to amend or waive contract requirements. More signatures should be required for higher-priced contracts.

O’Brien also advises that hospitals invest in ready-made templates approved by legal counsel for documents such as request for proposals, purchase orders and service agreements.

Signed contracts should be kept in one place under lock and key with limited access. File notes or e-mails pertaining to the contract with the document. Contracts should be kept on file for a minimum of two years.

In regards to risk allocation, contracts should clearly indicate start and end dates and should guarantee that services are provided by qualified personnel in accordance with industry standards and regulations. Contractors should also agree to wear hospital identification on site.

O’Brien also suggests a staggered payment schedule to give the supplier incentive to complete services properly. Hospitals should have an indemnity from the supplier or service provider for negligence, willful misconduct, failure to meet specifications and breach of warranties.

Hospitals should also monitor their own contract compliance, O’Brien says. Lawsuits versus contractors’ accused of not living up to the terms of a contract will be unsuccessful if the plaintiff isn’t doing so as well.