Exclusive Contracts

Your Exclusive Contract Is About to Be Non-Exclusive

January 17, 2014

What good is an exclusive contract if the facility demands that it become non-exclusive?

You spent time, effort and money building your group to service Facility X. And you obtained a grant of exclusivity in exchange for the obligation to cover and for a multitude of other commitments.

Several years pass, the contract is humming away and then, perhaps out of the blue or perhaps with some prior evidence (if you were paying attention), Facility X’s administrator tells you that starting next month, Group Z will be providing some of the services within the scope of your exclusive contract.

What do you do? I mean you, actually you?

The contract issue isn’t that complicated: If you don’t consent, Facility X has breached.

But the business factors are complex: If you don’t consent will your entire contract be terminated? Have you boxed yourself in by not having any other business?

And the compliance issues are incredibly complex: Is Facility X allowing Group Z to perform services as an inducement to bring a referral source on board? Is acceding to the demand and not enforcing your contractual rights itself an inducement not to have your current contract terminated so that you can continue to perform the reduced scope of services (i.e., something is better than nothing)? Are those inducements kickbacks?

The best approach involves avoidance of this situation by dealing only with facilities run by those you’ve vetted as trustworthy. (OK, I can hear the chuckling, but they do exist.) It involves special vigilance in pre-planning for possible breach when negotiating and documenting your contract. It involves building your business beyond dependence on any one facility.

But if you’ve just been told that someone else is coming, there are multiple strategies to put into play to protect your position. The key is to begin to act as early as possible when there is more time to maneuver.

Doing nothing will box you in to the one outcome that the facility has in mind.

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