Doctors – Watch Out for These Contracts

Physicians need to be careful when navigating the complex world of contracts. When it comes to the federal fraud and abuse statutes, contracts have consequences. It’s important that you know how to spot a bad contract so that you don’t get into trouble.

Here is how to guard your practice by watching out for three red flags that pop up in contracts!

If it’s too good to be true, IT LIKELY IS

The fraud and abuse rules are the biggest threat to your practice because of the penalties they carry. There are many well-meaning physicians sucked into fraudulent schemes disguised as legitimate business deals. 

Usually, the physicians involved were approached by a sophisticated and well-appointed company with a “shiny” proposal and a big law firm’s opinion of support, and are assured that dozens or more of their colleagues had signed on and that it was safe.

Please never believe these assurances. Ask questions, and get your own lawyer to review it. I promise you it’s money well spent to not have to unwind an illegal deal. Never trust a lawyer’s opinion who does not work for you and have an obligation to protect YOUR interests.

Medicare carve-outs are not always the way to go

Many times people say that, since the fraud and abuse rules mostly pertain to those who accept federal plans – like Medicare – that if you “carve out” Medicare patients from the deal, you won’t get in trouble.

This is simply not the case. If you try to “carve out” all the labs for one reason to a special lab, and ONE SINGLE PATIENT who is paid by Medicare gets through, the entire thing falls underneath federal scrutiny. And it’s hard to prevent that from happening.

Plus, it may be that this arrangement affects downstream referrals somehow, so the money trail is followed, and it still may get you in trouble. The government will catch on quickly if you try something like this, so it’s best to just avoid it in the first place.

Think through the END of the contract BEFORE you sign

Let’s step away from the fraud and abuse statutes for a second and talk about a general rule of thumb.

In any contract, the biggest mistake you can make is not thinking through the exit before you sign. Whether it’s a lease with a long term and no exit, terrible provisions in an employment contract with no way out, or a vendor agreement where you face liquidated damages provision or owe heavy fees if you terminate early, role-play the ending.

Literally sit there and think “Okay, if we terminated this agreement, how would we do it?” Walk through what things would be triggered, what that would cost, and how easy it is to walk away. That’s the most important thing you can do.

Whether you’re an independent practitioner, employed physician, or anything in between, you need to know how to avoid bad contracts in order to sustain your practice. If you’d like to dive into my tips further, check out Guard My Practice to gain knowledge on how to safely make more money for your practice, deal with malpractice, and more.