Contract Drafting

Medical Group – Hospital Contracts: Beware the Open End

March 16, 2015

Legend has it that it was a bottomless basket. As much tribute to the master as could be piled into it, the basket took more and more and more.

You’ve finally closed the deal. Your cardiac surgery group has inked a contract with the hospital, Community Memorial St. Mark’s.

Maybe it’s an exclusive contract. Or, maybe it’s set your group up as the hospital-sponsored cardiac surgery group working from a clinic at the facility.

Now it’s time to get to work. The question is, how much work?

Once upon a time, this was an issue only for the traditional hospital-based groups, anesthesiology, radiology, pathology, and emergency medicine.

But now, with hospital-centric healthcare, all sorts of medical specialties have become hospital-based.

The Devil’s Details

Hospital contracts, especially exclusive contracts and similar, favored-group agreements, tend to be open ended concerning the amount of work that’s required from the medical group.

In fact, it’s not uncommon for the contract to simply specify “all services required” with reference to the particular type of services. Cardiac surgery, for example.

But exactly how much is “all?” How much is it now, and how much might it be over time? And, who gets to decide?

At the same time, hospital contracts are usually extremely specific concerning the amount of financial support, if any, that the group receives.

Did your group build in financial support adjustment provisions tied to the amount and intensity of services? Do adjustments run both ways, or only up?

What if there’s too little work to sustain your group? Do you have the ability, both within your group’s organizational documents and within the hospital contract to let someone go?

What if there’s too much work combined with insufficient reimbursement? Can you continue to retain your group’s members? Have you destroyed your financial ability to recruit?

It’s marvelous to own the bottomless basket into which tribute is paid. It’s quite another thing to be dumping your life’s work into the hospital’s basket.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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