How much will that "bargain" really cost you?

A recent article in The New York Times reported on hundreds of lawsuits alleging health problems caused by inferior or contaminated drywall that was manufactured in China and used extensively in the Southwestern United States as part of the Hurricane Katrina rebuilding process. This illustrates why Caveat Emptor (buyer beware) or at least "buyer be cautious" remains good advice for the professional small business.

Whether patient supplies, construction or remodeling supplies or almost any other significant purchase, doing proper due diligence and research before purchasing is an important part of business risk management. If employees or patients are exposed to hazardous products, including employees or patients with hyper-sensitivity issues who may be affected when others are not, expensive investigation and litigation can often be the result. As we have discussed here in the past, litigation is always expensive and, even if the actual costs are "covered' by insurance, the time involved in properly participating in the defense of a lawsuit is valuable time not spent in actually treating patients and transacting business.

Part of your pre-purchase due diligence should include researching the origins of the product, whether the supplier or purchase contract indemnifies the purchaser and exactly what warranties are included or disclaimed by noth the manufacturer and seller/distributor. Before a significant purchase, consulting an attorney, CPA or practice management consultant can often be the best "purchase" you will make.

The Once and Future Contract

I recently saw an article on the front page of a weekly legal publication with a photograph of two law school classmates of mine. They met and married while we were in law school and are in practice together. In the photograph, between them, was their daughter who is working at their firm while she prepares to sit for the Bar Examination. While it certainly was a visible reminder of how old my classmates have become, I knew that their daughter would have access to two experienced attorneys if she needed advice about her first proferred position as an associate attorney.

I thought about this last week when speaking to a group of Residents, in part, about things they should consider and legal advice they should seek when considering their first contract positions as Associates. Because they will be anxious, in this economy, to obtain that first post-graduate job, it is even more important that they obtain competent legal and accounting advice. Not all offers will be accompanied with the option of becoming a Shareholder or Member (if a PLLC) within a, hopefully specified, time period. But many will. There are a number of things that the candidate must consider when evaluating such a position. Does the contract contain an appropriate and not burdensome non-compete provision? Is the ownership option specified in the contract as to time, amount or percentage of ownership, time period for consideration and acceptance of the option?

The time to evaluate these and many other issues is not two or three years in the future. The time to evaluate the value of such an option, with professional assistance from an attorney and qualified CPA, is before signing the initial employment contract.

For instance, it can be self-defeating if a proper financial valuation of the practice or the percentage of ownership interest available is not determined until the Associate has worked at the practice for two or three years and only then learns that the ownership "deal" being offered is just not a good deal. If the practice is unwilling to allow the potential Associate, or his advisors, to review the financial information of the practice and its Shareholder or Operating Agreement, professional advisors can discuss this with the candidate so that she or he can make an informed and reasoned decision whether to pursue other opportunities. If the Associate is merely looking for "a job" for a couple of years before striking out on her or his own, are the non-compete and confidentiality provisions in the contract too prohibitive or confining. Remember that most non-compete provisions commence when the employed professional leaves the practice and typically last for two or three years.

Before you sign that first contract which may have consequences in the future, obtain qualified professional advice as to what those consequences might be.

HIPAA and the HITECH Act

As you know, the Health Insurance Portability and Protection Act (HIPAA) established certain requirements for anyone who deals with personal health information (PHI). On February 17, 2009, as part of the omnibus recovery legislation, congress enacted the Health Information Technology for Economic and Clinical Health Act (HITECH). In addition to creating incentives for adoption of certain electronic health record technologies, HITECH includes several provisions relating to the HIPAA Privacy and Security Rules. There are increased penalties and new enforcement procedures, higher requirements for HIPAA "Business Associates", and security breach notification requirements. There will also be requirements for providers that maintain electronic records to furnish an electronic copy of records to patients upon request.

You should review your current HIPAA and HIPAA Business Associate policies and forms with your advisors to ensure compliance with HIPAA and HITECH.

FTC Delays "Red Flags Rule"

The FTC has delayed enforcement of new requirements concerning identity theft protection, the so-called Red Flags Rules, until November 1, 2009. The Rules, imposed by the Fair and Accurate Credit Transactions Act of 2003, require certain businesses and organization to develop, implement and monitor identity theft prevention programs. The Rules, as currently stated, include dental and healthcare providers who meet certain criteria, discussed in a previous posting here and explained in detail in the FAQ section at the FTC website.

Shapes and Forms

Whether taking a lump of clay and a potter's wheel to create a useful or decorative object that didn't exist before or some wire and dental material and fashioning a bridge that will restore function for a patient, creating a new "form" from raw material takes training, skill and talent. Creating these objects is not that different than taking a blank piece of paper (or blank computer screen) and using words to create a form intended for repeated use.

However, while "form follows function" is a philosophical premise in the worlds of art and architecture, it is more important for the dental professional that the intended, and only the intended, function "follows" the written form. Unintended consequences of having a patient, vendor, lessee or employee use or sign a form that is poorly constructed can include costly and lengthy litigation. It is always important to review, when creating or updating a form:

-What's the purpose of the form? Has the purpose changed in any way since the form was first created? Could the purpose be served by amending an existing form and combining the two?

-Are there any rules, regulations or laws with which the form should or must comply? If so, does it?

-What happens to the form after it is completed? How is it stored? Is it necessary, under current privacy regulations, to destroy the form at any time?

-Are portions of the form outdated but other portions still used so that the forms can be "used up" without being wasted? Is the outdated or disused portion of the form redacted in any way?

-Is the form used because "that's how we've always done it" and is there a better way to fulfill the purpose once served by the form?

This type of analysis is always important when creating a document that will become a part of a patient's dental records or other records kept in the regular course of business and therefore subject to production and review in any litigation.

Lightning and Lightning Bugs

Mark Twain said that the difference between using the correct word and almost the correct word is the difference between lightning bugs and lightning. Using the correct language is important in all communication but can be particularly important to the dental professional.

One of the common errors I see in contracts, agreements, or waiver/release forms drafted by non-lawyers concerns the words: "will" and "shall". If your intent is to make an action or response mandatory or required then the only correct word to use is "shall", e.g., In the event of a default under the terms of this payment plan, patient agrees that P.C. shall have an immediate right to accelerate all payments due... Court's have long held that in contract or statute interpretation, shall means mandatory or required. Will may not.

Sloppy or inaccurate writing in contracts, agreements, forms and policy manuals has led to a great deal of litigation. The best advice is always to have an attorney review such documents and avoid being struck by lightning.

A number of surveys by professional dental and healthcare associations, and insurers, as well as anecdotal evidence over many years, have established that one of the most effective tools for Risk Management is clear, courteous and regular communication with patients. It is not only the patient who has suffered a bad outcome who may seek the advice of a personal injury lawyer. Often, the complaint, perceived problem or perceived social "slight" which angers a patient or patient family member enough to cause them to seek the advice of an attorney has little to do with the lawsuit that ultimately gets filed. Once an experienced attorney probes deeper into the patient "complaint" and obtains and reviews the dental/medical records, the attorney may be able to fashion a claim based on what she or he finds that has little direct connection to what brought the disgruntled patient to the law office in the first place. The better Risk Management approach is to communicate with the disgrunted patient and address the grievance before the patient chooses to visit an attorney.

It is all too easy to ignore the "problem patient" or put communication on the "back burner" when you get an angry letter, a billing complaint, or an oral concern. Encouraging an open dialogue as soon as possible, in the correct setting and format (in writing, by telephone, in the doctor's private office, etc) and addressing the patient's perceived concerns is not only good "customer service" but may prevent the loss of time and financial impact of a lawsuit. When in doubt of the best method or format for responding to a patient, practice management consultants and attorneys can offer assistance and guidance in crafting the appropriate response.