Becker's Hospital Review

Register Today! Becker's Hospital Review CEO Strategy Roundtable - Nov. 5, 2014 - Chicago 9 The problem was this: No one at Gerard Medi- cal Center understood the contract authored by Cerner, and yet, the medical center still signed off on it. The contract "was incredibly complex and difficult to understand," said Holly Koch, CFO at Gerard Medical Center, in a Wall Street Journal report. "We relied on them to explain to us what the contract represented." Gerard Medical Center also had no IT team of its own that could review the contract. To avoid encountering a similar issue, when ne- gotiating a software contract with a vendor, hos- pitals need to ensure it includes language that provides them with protections. The sales people who work for IT vendors "can be overly enthusiastic about their products, and sometimes the representations and product per- formance don't match up," says Mr. Norwood. "Hospitals need to attempt to get language in- cluded in the contract that says the sales represen- tations govern performance." Unfortunately, this is not going to happen often, he says. Mr. Dagley advises hospitals to ask very specific questions to vendors before signing a contract, as vendors tend to overpromise their capabili- ties. By asking the right questions, healthcare organizations can ensure both parties under- stand the expectations for the product. In meet- ings with vendors, "healthcare organizations should designate someone to take thorough notes and to save all of the notes and related materials," he says. Negotiating the contract In cases involving failed IT, vendors have been very successful in limiting healthcare organiza- tions' monetary recovery to the price of the soft- ware. In light of this, hospitals need to attempt to get all "vendor marketing promises incorporated into the contract and also specific performance metrics," says Mr. Dagley. This is extremely im- portant because if left unchecked, many vendors will try to leave language out of the contract that would otherwise let hospitals measure software performance, he says. "Software vendors are some of the most aggres- sive at trying to limit their liabilities," says Mr. Norwood. "Vendors will try to disclaim any type of performance standards." If hospitals are unable to get vendors to agree to integrate specific performance metrics into con- tracts, "hospitals need to build contracts around what to do when software doesn't live up to mar- keting promises," says Mr. Norwood. For exam- ple, "there needs to be repercussions if software errors are not corrected in a certain amount of time," he says. Mr. Dagley also believes there needs to be reper- cussions included in the contract. "Vendors draft the contracts and most hospitals sign them with- out thinking about the consequences," he says. It is vital hospitals "have the consequences of not meeting marketing promises in the contract, in- cluding having the right to an early termination of the software," he adds. Healthcare organizations also need to make sure they are aware of all governing contract terms. Vendors will want language included in the contract that says the contract is con- trolled by the documentation supplied to the hospitals, and some vendors are now putting a link to the documentation in an online version of the contract. Mr. Norwood says this allows vendors to change the terms contained in the documentation on a whim, and the hospital may not even know. "There are contracts that even say the vendor may change the terms at any time, and hospitals are signing off on the contracts," he says. Some vendors will also only supply a very brief one or two page contract and provide a website where the rest of the terms can be found. "This is a really dangerous route for a software user," says Mr. Norwood. Hospitals should have all terms contained in the contract they are physically pro- vided with to ensure the terms are not subject to change without their knowledge. Understanding the risks Even if a hospital gets all of the terms it wants in the contract, disputes with a vendor concerning product use may still arise. "Anytime a provider makes a change in software, there is an inher- ent risk it will not work, and even if the software works there can be implementation issues," says Mr. Dagley. However, even with the increased risk, some hos- pitals are switching software multiple times. In April, EHR reviewer Software Advice released the results of a survey that found about 40 percent of healthcare providers shopping for a new EHR sys- tem during the first quarter of 2014 were seeking a replacement for their current EHR. The percent of prospective buyers looking for a replacement EHR has grown 30 percent since the first quarter of 2013. Some hospitals are replacing their EHR systems because of the need for regulatory compliance or because their current system is outdated. But if a hospital's current system is efficiently work- ing, Mr. Dagley believes it should stick with it. "There needs to be a compelling reason to make a software change," he says. "If I were in the C- suite of a hospital, I would be asking a lot of questions about why my organization should switch." Government involvement in IT gone wrong In the health insurance exchange sector, the risks associated with software implementation have be- come very apparent, causing some states to make a software switch and consider legal action against vendors. In addition to problems last fall with the federal HealthCare.gov website, many of the 14 states that created their own health insurance exchanges as part of the Patient Protection and Affordable Care Act have dealt with malfunctioning and glitch-ridden systems. For instance, the federal government spent a total of $474 million on the development of exchanges that failed because of technical problems in Massachusetts, Maryland, Oregon and Nevada. HHS Secretary Sylvia Mathews Burwell publicly stated at her final confirmation hearing in May that the government should use the full force of the law to recover federal money spent improp- erly on flawed state exchanges from vendors. The state of Oregon is also considering legal ac- tion over its failed exchange site. The state has al- ready signed a $2 million contract with a law firm to assist it with a lawsuit against Oracle — a com- puter technology company and contractor for the state's health insurance exchange site. In April, the board overseeing Oregon's health insurance exchange voted to abandon its mal- functioning site in favor of relying on Health- Care.gov. By that point the state had spent at least $134 million on its exchange site and an- other $7 million processing paper applications after Oracle was unable to repair the site's tech- nical problems. Similarly, in Maryland, the state intends to recoup a significant amount of the $55 million it paid to Noridian Healthcare Solutions, the company that developed Maryland's failed exchange. State officials from Massachusetts have said they will replace the state's flawed exchange, developed by CGI, with new off-the-shelf enrollment soft- ware. Massachusetts paid a total of $52 million to CGI for its failed exchange site. Mr. Norwood believes the government will con- tinue to pursue vendors to try and recoup pay- ment. The Congressional Budget Office stated in an April report that it is no longer possible to as- sess the economic impact of certain provisions of the PPACA. The CBO's decision to stop assessing the budgetary impact of all of the law's compo- nents will make it unclear whether the PPACA is actually reducing the federal deficit and shrinking the uninsured population. "Now that the CBO is refusing to score the PPA- CA, people are going to be paying more attention to how much exchanges are really costing," says Mr. Norwood. Because of the spike in interest, "there will be pressure on the government to re- cover the money." n

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