Contracts

A “contract” is defined as “an agreement between two parties that creates an obligation to perform or not perform a particular duty”. Organizations are sometimes taken aback when a surveyor asks them to see any contracts they have in place during the survey. Accreditation agencies are certainly not law firms nor are surveyors lawyers, but the contracts a DME organization has in place have relevance to the survey process and the quality standards.

For the purposes of our discussion, the contracts we are talking about are typically agreements between the DME organization and a service provider who is performing billing, delivery, shipping, clinical services, equipment maintenance and/or repair, or some other patient care-related task or service. Some commonly seen examples include:

• Contracts to provide patient care or equipment rentals for a Hospice organization
• Third party billing contracts (an outside entity billing DMEPOS claims)
• A delivery service delivering supplies or equipment on behalf of the DME
• An outside organization doing contracted clinical respiratory services such as patient assessment OR doing patient equipment set up/education
• PAP re-supply services
• A service company doing equipment repairs and regular preventive maintenance on DMEPOS
• Answering services, assuming patient information is potentially shared

It does not include things like coffee service for the office or copy machine maintenance agreements. The differentiation between contracts to which the standard applies and ones where it does not is whether the contracted organization, group, or individual are providing services to the DME organization’s patients.

HQAA has a dedicated standard specifically for an organization’s contracts, PRO 2:

PRO 2: Contracted Business Agreements:

The organization has a legal contract in place that states the responsibilities of all parties doing business with the organization or on behalf of the organization, either internally or externally, when related to patient care and equipment. Business agreements for the organization are approved by authorized individuals. The organization’s business agreements include the following:

• Terms of agreement/length of contract
• Requirements of all parties
• Services/equipment provided
• Responsibilities for preventive maintenance on equipment (when applicable)
• Payment/rates
• Signature of all parties
• Date of execution

HQAA asks the organization to submit a sample contract into the workroom during the application process. The submitted contract will be reviewed to ensure all the elements (the bullet points above) are included. The contract should spell out “the requirements of all parties” (what each side is responsible for) clearly. For example, with a contracted equipment maintenance and repair service, which party will track the timeframe or equipment hours to monitor when maintenance is due? Who picks up and replaces the equipment?

The contract also should define the term of the agreement. Many contracts are in effect for a specified term such as a year, sometimes with provisions to automatically renew. The auto-renew feature is referred to as an “evergreen contract”. Evergreen contracts automatically renew after the initial term and continue indefinitely until one of the parties gives notice that they’d like to terminate the contract. In addition to the timeframe, terms should include payment structure. How much is being paid for a given service, how is it billed, and when is payment due.

Finally, contracts should be signed and dated by both parties to be fully executed. The date that the contract begins should be specified as well.

In addition to the contract submitted into the workroom, expect the surveyor to ask to review all contracts. It’s a good idea to keep contracts in one place: a binder, folder, or file; so that they can be accessed easily and quickly.

In Florida, there are some state specific requirements for any licensed DME organization. In addition to many/most of the provisions of PRO 2, Florida licensure requires:

• The organization has a policy that specifies that records of contracts are retained for six years after they expire;
• There should be verbiage in the contract that contractors maintain liability insurance and that the DME organization maintains verification of that insurance;
• There should be verbiage in the contract to include a description of how progress notes, repair records, summaries, or any other kind of pertinent record is communicated to the DME organization (electronic, paper, etc.); and
• The organization’s policy should clearly state that the DME organization has the ultimate responsibility.

Contracts are important legal documents and organizations should take them very seriously. Although the accrediting body and in some cases state license boards will be reviewing the contracts, it is important for the organization to have a lawyer write or at least review all agreements and contracts.

Think of contracts as the rules of the road with regards to relationships with outside individuals, groups, and companies. Without clearly defined road rules, there exists the potential for chaos. With contracts in place, the rules are established and communicated to all parties—easy to refer back to in the event of a question or concern. Accreditation standards require your company to have these contracts in place, but much more importantly, they make good, solid business sense.