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

1. Avoiding Traps in
EMR/Technology Contracts
(You mean I’m stuck with this for 5 years!)
Presented by
Sandra P. Greenblatt, MBA/HA, JD
Board Certified Health Law Attorney
for
Gassman Law Associates, P.A. Webinar
September 10 & 12, 2013
Sandra Greenblatt,
P.A.
Lubell Rosen, LLC
Columbus Center
1 Alhambra Plaza
Suite 1410
Coral Gables, Fl 33134
Phone: (305) 442-1172
Direct: (305) 577-9995
Fax: (305) 442-9047
Email:
sg@flhealthlawyer.co
m
Email2:
spg@lubellrosen.com
www.lubellrosen.com
© 2013 Lubell Rosen, LLC

2. 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

3. 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
© 2013 Lubell Rosen, LLC

4. 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.
© 2013 Lubell Rosen, LLC

5. FEDERAL INCENTIVES
Federal Government subsidies for EMR* spurred growth
Enacted 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 Harbor
Regulations 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.” © 2013 Lubell Rosen, LLC

6. 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
© 2013 Lubell Rosen, LLC

7. 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
© 2013 Lubell Rosen, LLC

8. 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
© 2013 Lubell Rosen, LLC

9. 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
© 2013 Lubell Rosen, LLC

10. 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
© 2013 Lubell Rosen, LLC

11. 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
© 2013 Lubell Rosen, LLC

12. 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.
© 2013 Lubell Rosen, LLC

13. 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.
© 2013 Lubell Rosen, LLC

14. 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.”
© 2013 Lubell Rosen, LLC

15. 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.”
© 2013 Lubell Rosen, LLC

16. 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
© 2013 Lubell Rosen, LLC

17. 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
© 2013 Lubell Rosen, LLC

18. 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.
© 2013 Lubell Rosen, LLC

19. 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
© 2013 Lubell Rosen, LLC

20. 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
© 2013 Lubell Rosen, LLC

21. 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
© 2013 Lubell Rosen, LLC

22. CONCLUSION
Technology can and does fail
 “When” not “If”
• Plan and Negotiate Technology
Contracts for the Worst and
Hope for the Best!
© 2013 Lubell Rosen, LLC

23. Sandra P. Greenblatt
Board Certified
Health Lawyer
Sandra Greenblatt, P.A.
Lubell Rosen, LLC
Columbus Center
1 Alhambra Plaza
Suite 1410
Coral Gables, FL 33134
Phone: (305) 442-1172
Direct: (305) 577-9995
Fax: (305) 442-9047
Email: sg@flhealthlawyer.com
www.lubellrosen.com/attorneys
THANK YOU FOR
YOUR ATTENTION!
© 2013 Lubell Rosen, LLC
2013 Top Rated Lawyer in Health Care Law, Martindale Hubbell® & American Lawyer Media
Martindale-Hubbell® Bar Register of AV Preeminent Lawyers™ & Preeminent Women Lawyers™
2006-2013 named a Florida Super Lawyer, Law & Politics
2001-2013 named to Top Lawyers in S. Florida, S. FL Legal Guide
2010 Top Impact Law Leader, Business Leader Media
2005-2009 & 2011 named to Legal Elite, Florida Trend
2005 named as Heavy Hitter in Health Care, S.FL Business Journal
2003-2005 named Best of the Bar, S. FL Business Journal
1996 selected as Best Health Care Attorney, FL Medical Business