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September 1, 2010 News 2 Comments

Software Contracting with Meaningful Use in Mind

The final rule has been published, the incentive structure is in place, and hospitals and physician groups are investing in EHR technology. Here are some straightforward thoughts on contracting for the successful implementation of your chosen EHR.

Care must be taken by the provider customers. Some will be investing capital based solely on the prospects for reimbursement. Protection of their interests is important. This is by no means a complete list.


The best situation would be for the vendor to warrant that its EHR technology has been certified by the appropriate authority and is installed and live at more than XX (vendor to fill in the number) sites. The fallback position today would be a warranty that the product will be certified in the appropriate timeframe for full reimbursement eligibility.

Further, they must warrant that certification will be maintained throughout the reimbursement periods (note that the timelines for provider reimbursement differ for Medicare and Medicaid participants). It is technically possible for a provider to lose a year or more of reimbursement if the vendor’s EHR product was initially certified, but then misses certification during the reimbursement period. The year of ineligibility still “counts” for the provider, but they will not receive associated funding.

Be wary of “best efforts” clauses. Some vendors will take care and be uncomfortable warranting that a product will be certified, and for that they should be applauded. Others will take the “we have no choice” approach and provide the warranty. Their gamble is weighing a potential breach of warranty against lost business today when the customer selects an EHR vendor that provides the warranty. The customer has little practical choice. The warranty is essential.

Delivery and Live Status

The delivery date for certified EHR product, together with the implementation timeframe for the product, must result in the EHR in use in live environment so as to enable customer to achieve Meaningful Use. Keep in mind, though, that for long projects with work to be done on both sides, a vendor should not be expected to warrant that something will be live when considerable work must be done by the customer. That work which is completely out of the vendor’s control.

This one factor is greatly reduced as a consideration when dealing with an EHR provided in the SaaS model since time from delivery to live is in some cases negligible.

What you should look for is guaranteed timelines that, if all is accomplished on time by both vendor and customer, will allow for live use by a certain date. This is very reasonable.

Payment Terms

Assuming a certified product is delivered on time, payment should flow accordingly over the implementation timeline. That is fair.

However, some implementations will be quick and some will not. Delaying payments until reimbursement occurs would be outstanding for the small providers, if you can find a vendor that will take those terms.

Undoubtedly the primary concern for some providers is laying out capital on a project and counting on reimbursement when the possibility exists that reimbursement may not occur. If the circumstances are solely the fault of the vendor (failing to maintain certification, for example) then the customer should be protected and monies should be refunded. The requirement to make payments on a product that ultimately does not qualify the provider for reimbursement is patently unfair to the provider customer.

Some accommodation must be made for the hopefully never-to-occur failure of the project. Keep in mind that some of these contracts will be executed with the full intent and purpose of obtaining reimbursement, otherwise the investment would not be made at this time. That one major factor cannot be ignored.

Finally, Meaningful Use

The items above are tailored toward protection of the customer provider, while hopefully acknowledging the fairness factor to the vendor. Meaningful Use is another situation entirely.

In my opinion vendors cannot guarantee or warrant that any customer will achieve Meaningful Use. Vendors only provide the tools needed for that process. The customers are responsible for the work on their side, using the certified EHR tool acquired from the vendor in their operations necessary to achieve Meaningful Use.

The best I could do if writing the warranty for the vendor would be to warrant that the certified product, delivered in the appropriate timeframe, will enable the provider customer, through its efforts and implementation, to achieve Meaningful Use, but that the vendor cannot ultimately warrant that the customer shall achieve that goal. Achieving that goal is the responsibility of the customer providers that will receive the reimbursement if all goes well.

William O’Toole is the founder of O’Toole Law Group of Duxbury, MA.

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Currently there are "2 comments" on this Article:

  1. Good piece, my question/ comments are:
    How can a vendor agree in a contract they they will ‘enable’ the client to achieve MU when the feds have said repeatedly that the criteria in the second and third years will change and will expand.

    At this time no one can really say with any degree of certainty what the MU criteria will be in years 2 & 3. In my experience, if I allow a clause like that to be included and I am a public company I can’t book a dime of contract revenue till I meet all the ‘enabling’ warranty conditions. As I have said on this blog before, this is a real problem for public companies, no big deal for the private one’s like Epic, Meditech, and private best of breed vendors.

    As is usually the case with regulation, it can be a real boondogle for lawyers! And as I have said many times…it’s a Meaningful Ruse!

  2. To Frank P,

    I agree about the meaningful ruse. The NIST script for testing and certifying the devices for the meaningful ruse is an example. The requirements are elementary. I could see EMR and CPOE devices getting a perfect score on this script, but will be life threateningly dangerous in real use because the script ignores vital needs of the clinician in the ordering of complex therapies. Sure, the device may be good at enabling the ordering of lasix two times per day, which is about the highest level of complexity tested by the CPOE cert script.

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