Disputes between healthcare organizations and IT vendors are becoming more common with the increased use of technology such as electronic health records. Michael Dagley, an attorney who specializes in software disputes at Nashville, Tenn.-based Bass, Berry & Sims, says vendors have historically dictated the terms of IT contracts to hospitals and health systems, but that is changing.
Mr. Dagley has extensive experience in these matters, as he served as lead counsel for Minot, N.D.-based Trinity Health when it filed an arbitration claim against Cerner concerning problems with a patient-billing system. In December 2013, an arbitration panel awarded Trinity Health more than $106 million.
Below, Mr. Dagley provides seven ways healthcare organizations can protect themselves when IT vendors fail to deliver as promised.
1. Record the specifics of discussions. Mr. Dagley advises healthcare organizations to ask very specific questions to vendors because vendors tend to overpromise their capabilities. By asking the right questions, healthcare organizations can ensure both parties understand what the expectations for the product are. In meetings with vendors, "healthcare organizations should designate someone to take thorough notes and to save all of the notes and related materials," he says.
2. Incorporate all marketing promises in the contract. "Hospitals need all vendor marketing promises incorporated into the contract, and also specific performance metrics" says Mr. Dagley. This is extremely important because if left unchecked, many vendors will try to leave language out of the contract that allows hospitals to measure their performance.
3. Include repercussions for failing to meet marketing promises in contract. "Vendors draft the contracts and most hospitals sign them without thinking about the consequences," says Mr. Dagley. Vendors have been very successful in limiting healthcare organizations' monetary recovery in cases involving failed IT to the price of the software. Therefore, it is vitally important hospitals "have the consequences of not meeting marketing promises in the contract, including having the right to an early termination of the software," he says.
4. Don't be the first to use software. Healthcare organizations need to stay competitive, but they also need to exercise caution with software that has not proven itself. "Healthcare providers need to do due diligence before entering into a contract," says Mr. Dagley. They "need to know how long software has been on the market and every implementation the vendor has attempted." For example, if a vendor says they have 48 customers, "with some digging a provider might find 28 of those were failures, and the hospitals have quit using the software," he says.
5. Get input from others who have used the same product. When considering a software implementation, healthcare organizations should reach out to other providers who use the same software. It is important healthcare organizations "choose the other software users they speak with and not be steered by the vendor because some vendors will provide financial incentives to be a demonstration or reference site," says Mr. Dagley.
6. Seek guidance from expert counsel. "A hospital makes a huge mistake if it just signs a vendor contract and doesn't seek an expert for review and advice," says Mr. Dagley. Attorneys can help negotiate vendor contracts to help ensure the terms are fair and there are protections for the healthcare organization included. Attorneys can also help in the situation a hospital has implemented software that does not work and has then filed a lawsuit against the vendor.
7. Stick with what works. "There needs to be a compelling reason to make a software change," says Mr. Dagley. If a healthcare organization's software is working fine, then there needs to be a vital reason to change it. "Anytime a provider makes a change in software there is an inherent risk it will not work, and even if the software works there can be implementation issues," 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."
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