By: Jon Jablon, Esq.
In this strange time (strange because of both COVID-19 and the state of self-funded in general), things move at – to quote our CFO/CIO Joe Montalto – “the speed of business.” Candidly, I have never really been sure what that means, despite my smiling and nodding when he says it, but I think it’s a euphemism for “fast.” Things move fast. And you can quote me!
How that manifests in our industry, in Phia’s experience, is that sometimes, a client needs certain services performed ASAP. There may not be time to receive an agreement, review it, collaborate with peers, make changes, have those approved by the vendor, and run a final version by upper management prior to the performance of the services. Certain vendors such as stop-loss carriers are extremely unlikely to proceed without written agreements either due to applicable law or liability concerns, but many vendors will happily begin performing services on no notice when their clients really need it.
It can certainly be potentially dangerous, since contracts are, after all, designed to protect the parties – but from a practical standpoint, relationships like this can be usually be handled in one of a few ways:
Standard industry practice
This is a method of interpretation of an implied contract where both parties act in accordance with what usually happens in the industry with respect to relationships like the one in question. Principles such as “fair market value” apply, where the vendor can’t decide to gouge the client just because no one has explicitly agreed to the fees. Standard industry practice is viewed as “the norm” – what a reasonably buyer and seller of services would reasonably expect their respective rights and obligation to be.
An unsigned service agreement
Numerous times, I have emailed a draft template service agreement to a TPA or broker that needed a medical claim negotiated ASAP. No time to review the contract – just enough time to email the claim and get it settled that day. While we could have relied on the aforementioned standard industry practice to govern the relationship, I prefer to send a copy of the contract that can be reviewed prior to, or even during, the performance of the services, so the client knows exactly what to expect. By saying “here are our terms; by asking us to perform this service sans contract, these are the terms that would have governed, and therefore we operating as if this contract were signed,” we can lay out our pricing and other terms so there can be no question of the details after the fact, and so we won’t need to look to what might be “standard” in the industry – especially since different entities may have different ideas, or experiences, of what is actually standard.
A previous agreement between the parties
Sometimes a vendor continues to perform a service after an existing contract has terminated. Runout can be specified in the agreement, in which case you likely need to look no further than the agreement’s terms – but without runout, if the agreement is truly terminated, and the vendor agrees to perform additional services anyway, it will generally be the case that the prior agreement can govern the relationship, since both parties were at the time aware of the other party’s conditions. Obviously a particularly old service agreement can’t necessarily be relied on – but the more recent the execution of the terminated agreement, the more likely the parties are to be willing to agree on the same terms.
Without a signed service agreement, some things can be left up in the air, so it’s always a best practice to memorialize any business agreement in writing to the extent possible – but when things are truly moving “at the speed of business,” sometimes you have to rely on the industry, an unsigned contract, or even a terminated contract.
If you want a second set of eyes to try to figure out a complex relationship between a health plan, TPA, or broker and another health plan-related vendor, don’t hesitate to ask The Phia Group’s experts, at PGCReferral@phiagroup.com.