A large healthcare company contracts hundreds of vendors a year. The extreme time and cost of doing so delayed entry into key business relationships. Luckily, operationalizing the law is one of our specialties.
A large client in a heavily regulated industry is required by HIPAA to enter into business associate agreements with all of its vendors that require health information to perform their services. While the client has been fulfilling this obligation for years, our client wanted to migrate their existing vendors to an updated form and use the updated form with new vendors. Of course, this was much more easily said than done given the complexity of each contract, volume of contracts and limited internal resources.
We interfaced directly with the General Counsel, Chief Privacy Officer, Privacy Counsel, Risk Management team, and Information Security team to develop a form that incorporated the legal requirements, best practices, and favorable liability provisions. We consulted with all of these internal stakeholders to ensure the template reflected their preferred positions. We also developed negotiating and escalation guidelines and workflows to ensure favorable contract terms and effective contracting execution across vendors. Specifically, knowing the client would be using the standard contract with thousands of vendors, we created a negotiation guide that we called a “PADU.” The PADU includes every provision of the contract, starting with the Preferred position (the “P” in PADU) that is reflected in the contract. We then developed alternatives for each provision based on our deep experience negotiating similar agreements. The alternatives include Acceptable positions (“A”), Disfavored positions (“D”) that can be used with additional discussion with business owners, and Unacceptable positions (“U”) that cannot be used without appropriate escalation internally. We worked with all the key stakeholders to make sure the alternatives were appropriate and to identify when changes needed to be escalated to the internal team. The PADU is reflected in a twentypage chart that is shared with all stakeholders with responsibility for these agreements.
The development of the template contract and PADU resulted in a highly efficient negotiation process that allowed us to process a high volume of contracts in a short time. In the first year after rolling out the new form, we used the PADU to negotiate and/or advise on approximately 220 agreements. The second year we processed around 110 agreements, and in each of the subsequent 4 years, we’ve processed approximately 40-60 agreements. In total, we have assisted our client in approximately 500 agreements over six years. Development and use of the PADU allowed Jayaram to negotiate the agreements swiftly with minimal involvement from the client. This allowed them to place their attention on other business priorities. We had clear authority on what modifications we could accept, and we knew exactly when we needed to reach out to the client for approvals. This process also helped our client treat its vendors consistently and minimized inconsistencies across the enterprise.