12 Healthcare Contract Management Best Practices

The healthcare industry relies heavily on contracts to manage finances, comply with regulations, and deliver patient care. These contracts, encompassing everything from insurance to medical equipment, can be complex due to the intricate nature of healthcare services.

Effective healthcare contract management is crucial for businesses to control costs, comply with regulations, ensure financial stability and deliver high-quality care.

This article explores the complexities of healthcare contracts and their operation. It outlines:

• Why healthcare contracts need to be well-managed
• The healthcare regulatory environment
• The regulatory impact on the management of healthcare contracts
• 12 healthcare contract management best practices

Why Healthcare Contracts Need to Be Well-Managed

While it's true that contracts are important as legally binding agreements between parties regardless of the subject matter, healthcare-related contracts hold particular significance due to several factors:

• Complexity: healthcare contracts often involve intricate terms and conditions, including regulations, compliance requirements and reimbursement structures. The complexity arises from the unique nature of healthcare services, such as medical procedures, insurance coverage and patient privacy laws
• Financial impact: healthcare contracts can have significant financial implications for providers and payers. Negotiating favourable reimbursement rates, managing costs and ensuring accurate billing and payment processes are all crucial for the financial viability of healthcare businesses
• Patient care: healthcare contracts directly impact patient care by influencing access to services, treatment options and quality of care. For example, contracts between healthcare providers and insurance companies determine which services are covered, leading to variations in patient outcomes and experiences
• Patient rights and privacy: healthcare contracts play a role in safeguarding patient rights and privacy. Contracts between healthcare providers and patients and contracts governing data sharing and confidentiality help ensure that patient information is handled securely and in compliance with legal requirements
• Provider-payer relationships: Healthcare contracts often involve negotiations between healthcare providers such as hospitals and physicians, and payers like insurance companies and government agencies. These relationships are vital for ensuring the delivery and reimbursement of healthcare services, making contract negotiations and management crucial for maintaining collaborative partnerships
• Regulatory compliance: a large body of laws and regulations in most advanced legal jurisdictions govern healthcare contracts. Ensuring compliance with such laws is essential to avoid legal penalties and protect patient privacy and other rights
• Risk management: healthcare contracts involve inherent risks, including legal, financial and reputational risks. Poorly managed contracts can lead to disputes, litigation, financial losses and damage to a healthcare business’s reputation. Effective contract management is critical for mitigating these risks and safeguarding the interests of all parties involved.
• Vendor relationships: healthcare businesses rely on contracts with vendors and suppliers for essential goods and services, such as medical equipment, pharmaceuticals, IT systems, and various healthcare and operational support services. Contracts govern vendor relationships, including procurement processes, service level agreements, and performance expectations.

It is important to note that other specific regulations may also apply, depending on the nature of the healthcare contract and the locations of the involved parties.

The Healthcare Regulatory Environment

Healthcare regulations in most legal jurisdictions have the common goals of protecting public health and safety, safeguarding patient privacy and the confidentiality of medical records, and balancing the quality of patient care with spending control.

The major categories of regulation aimed at achieving these goals are:

• Antitrust: prevent monopolies and promote competition among healthcare providers and insurers. This aims for affordable care and service options.
• Data privacy: safeguard patient information confidentiality. This builds trust and protects sensitive data.
• Drug and medical device approval: ensure the safety and efficacy of medications and equipment before they reach patients, minimising health risks associated with unproven treatments.
• Licensing and accreditation: ensure healthcare professionals and facilities meet competency and quality standards for patient care. This protects patients from unsafe practices and incompetence.
• Privacy and data security: safeguard patient privacy and confidentiality of medical records. This builds trust in the healthcare system.
• Quality and cost control: guidelines for clinical practice and reimbursement rates aim to ensure patients receive appropriate care while controlling healthcare spending.
• Safety standards: set minimum benchmarks for hygiene, record-keeping, and patient well-being procedures. This promotes consistent quality care.

Contracts must comply with these regulations, including specific requirements in the EU, UK, and USA:

EU

• Clinical Trials Regulation (CTR): standardises clinical trial conduct and protects the rights of trial participants across the EU. Contracts for research collaborations and clinical trials need to comply with CTR's ethical and scientific review procedures, informed consent, and data management requirements.
• General Data Protection Regulation (GDPR): protects the privacy and security of patients' medical information within the EU, including concerning the transfer of such data outside the EU. Contracts involving data processing or transfers need to comply with stringent consent requirements, data breach notifications, and potential limitations on data transfer outside the EU, and require ongoing risk assessments and data security audits.
• Medical Devices Regulation (MDR): regulates the safety and quality of medicines and medical devices. Contracts for development, manufacturing, distribution, acquisition or usage of medical devices need to ensure compliance with the MDR's requirements for safety assessments, vigilance reporting and traceability requirements.

UK

• Care Quality Commission (CQC): regulates the quality and safety of healthcare services provided by hospitals, clinics and care homes. Contracts with healthcare providers need to specify compliance with CQC standards and inspection procedures.
• Medicines & Healthcare products Regulatory Agency (MHRA): regulates the safety and quality of medicines, medical devices and other healthcare products. Contracts involving such products must include obligations to comply with MHRA approval processes and vigilance reporting requirements.
• National Institute for Health and Care Excellence (NICE): provides evidence-based recommendations for clinical practice and cost-effectiveness. Contracts for specific services or procedures might need to reference NICE guidelines to ensure adherence to recommended standards of care.

USA

• Food, Drug & Cosmetic Act (FD&C Act): regulates the development, testing and marketing of drugs, medical devices and cosmetics. Protects patients' medical privacy and sets security standards for handling their information. Contracts for research, development or deployment of such products need to comply with FDA approval processes and labelling requirements.
• Health Insurance Portability and Accountability Act (HIPAA): protects the privacy and security of patients' medical information, and sets standards for handling such information. Contracts need to specify how patient data is collected, stored, shared and protected, and define breach notification procedures.
• Medicare and Medicaid Programs: reimburse healthcare providers for healthcare services provided to specific patient populations. Contracts with healthcare providers must adhere to these programs' coding, billing and compliance requirements.

Other specific regulations may apply depending on factors like the nature of the healthcare contract and where the parties are located.

The regulatory impact on healthcare contract Management

The impacts of healthcare-related regulation on the management of healthcare contracts are multifaceted and significant, commonly in the following areas:

• The complexity of contract terms: healthcare regulations can add an extra layer to what might sometimes already be complex contract terms and conditions, including requirements related to privacy, security, billing and reimbursement. Healthcare businesses must navigate these complex regulations and ensure that their contracts reflect the legal and regulatory requirements of the healthcare industry.
• Compliance requirements: healthcare regulations impose strict requirements on healthcare contracts. Healthcare businesses must ensure their contracts comply with applicable regulations to avoid legal penalties and regulatory violations.
• Cost and resource allocation: healthcare regulations can increase the costs of, and the level of resources needed for, contract management activities due to compliance efforts, legal consultations and admin overhead.
• Data security: contracts may need to address data access, sharing, storage and usage controls and practices, breach notification procedures, and potential limitations on data transfer to comply with regulations.
• Documentation and record-keeping: to facilitate audits or investigations, demonstration of compliance with legal and regulatory requirements can often require extensive records to be kept about contracts, amendments, communications and compliance activities to meet regulatory standards.
• Evolving regulatory landscapes: contracts, and contracting practices, need to be flexible and adaptable to accommodate changes in healthcare regulations, potentially requiring amendments or renegotiations to ensure continued compliance.
• Negotiation and enforcement: healthcare businesses must negotiate contracts within the boundaries of regulatory requirements and ensure those contracts are enforceable and legally binding.
• Risk management: healthcare regulations introduce legal and financial risks that must be managed effectively. Healthcare businesses must identify, assess and mitigate risks associated with regulatory compliance, liability, malpractice and other legal issues.

Overall, regulation significantly influences the management of healthcare contracts, shaping contract terms, compliance efforts, risk management strategies and resource allocation.

12 Healthcare Contract Management Best Practices

Here are some key best practices that can be adopted to help ensure that healthcare contracts are well managed:

1. Clear and precise language:  To the extent possible, use as much plain language in healthcare contracts as is reasonable, but aim for maximum clarity in specifying technical terms and complex requirements to avoid any ambiguity and misinterpretation
2. Collaboration and communication: Foster open communication and collaboration between external stakeholders involved in healthcare contracts, including providers, insurers, vendors and regulatory agencies. Internal stakeholders can include teams from Legal, Contract Management, Internal Audit, and Risk and Compliance. Establish effective channels for communication to address concerns, share information and facilitate problem-solving
3. Continuous improvement: continuously evaluate and refine contract management processes based on lessons learned, feedback from stakeholders and changes in regulatory requirements. Encourage a culture of continuous improvement to enhance efficiency, effectiveness and compliance in healthcare contract management.
4. Contract termination and renewal: Develop optimised processes for handling contract termination, or renewal and renegotiation activities. Ensure that contracts include provisions specifying termination and renewal conditions, notice periods and dispute resolution procedures to facilitate smooth transitions when necessary
5. Data privacy and security:  Include contract provisions addressing the handling of protected health information and other sensitive data in compliance with applicable regulations. Set up safeguards to physically and digitally protect such details
6. Focus on patient care: When applicable, clearly define standards of care and service level agreements (SLAs) in contracts to ensure quality patient outcomes. Include provisions for patient communication and access to medical records as mandated by regulations
7. Performance monitoring: define key performance indicators (KPIs) and SLAs to measure the performance of healthcare contracts. Establish regular reporting mechanisms to track progress, identify deviations from expected outcomes, and address issues promptly
8. Record-keeping: Maintain comprehensive documentation of all healthcare contracts, including agreements, amendments, and correspondence.  Implement robust document management systems to ensure easy access, version control and compliance with record-keeping requirements.
9. Regulatory understanding: Develop and maintain a solid understanding of the regulatory environment that applies to the healthcare contracts used to readily determine their applicability. Convert those understandings into contractual obligations for incorporation into contracts. Maintain a watch for changes proposed or enacted to those regulations
10. Risk management: Conduct thorough assessments to identify potential risks associated with healthcare contracts, such as regulatory compliance, financial risks and patient safety concerns. Develop risk mitigation strategies, including insurance, and contingency plans to address identified risks effectively
11. Technological support: Using any level of technology to support contract management activity will deliver better outcomes than using none. The more, and the more suitable, technology that can be used, such as providing a centralised contract documents repository, automated workflows and extensive reporting, the more effectively contracts can be managed
12. Vendor oversight: Implement vendor credentialing processes to ensure compliance with industry standards and establish mechanisms for ongoing oversight and monitoring of vendor performance.
    
    

Wrap-up

While all contracts share common elements of legal enforceability, healthcare contracts have unique characteristics and implications that make them particularly significant in the healthcare industry.

Effective management of healthcare contracts is essential for navigating the complexities of the healthcare landscape, ensuring financial stability, promoting quality care, and complying with regulatory requirements.

As the healthcare regulatory environment changes to cope with a constantly evolving medical technology ecosystem, the effects on how healthcare contracts are constructed and managed can outpace a healthcare business’s ability to keep up.

The continuous improvement of the best practice contract management activities discussed can go a long way to ensuring that the contracting element of healthcare will be the least of a healthcare business’s worries.

To learn more about how Gatekeeper can help in the management of your healthcare contracts, don't hesitate to get in touch with us.