The Hidden Costs of Noncompliant Contracting

Traditional contract management tools have been designed to support the demands of high-volume purchasing departments, where the primary output is a purchase order. As a result, these tools have focused on serving the needs of the department’s enterprise resource planning (“ERP”) system and delivering value in terms of dollars and cents.

But in an industry as heavily regulated as healthcare, compliance takes on new importance. And within the context of compliance, process matters as much as output and has implications for everything from concerns about cybersecurity to physician satisfaction.

Generally speaking, healthcare regulations govern a health system’s relationships with the individual physicians and other healthcare providers who provide care under contract with the organization, and include:

  • Anti-Kickback Statute: Each willful violation of this law can result in criminal fines of up to $25,000, civil fines of up to $50,000, and up to five years in prison.
  • Stark Law: Stark Law penalties of up to $100,000 may be imposed for willful circumvention schemes, and civil penalties of up to $15,000 per incident may be imposed upon health systems submitting claims in violation of that law.
  • Nonprofit Certification and Conflict of Interest Disclosure: To remain certified as a nonprofit entity, health systems must establish a process for identifying and reporting all potential conflicts of interest.
  • TJC Accreditation: To achieve accreditation, health systems must demonstrate to The Joint Commission that they have implemented mechanisms for reviewing their contracts with external vendors.
  • Business Associate Agreements: A single missing BAA can result in a fine of $31,000. Despite this, many health systems are missing current, executed BAAs or BAA terms in some of their contracts.

Download The Process Revolution—Advancements in Healthcare Contracting and learn how a process-driven approach to managing agreements can help your organization avoid costly compliance blind spots.

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