Limit your liability before signing with a consultant

Contract Language. By Steven M. Harris, AMNews contributor. April 5, 2004.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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While most consultants are well-qualified, there are unscrupulous consulting firms engaged in improper practices. Simply hiring a consultant does not relieve you of responsibility for complying with state and federal regulations, and dealing with federal health care programs.

If you follow bad advice, the cost to you and your practice can be enormous. You could incur legal expenses and be exposed to governmental fines and penalties.

You can, however, take steps to reduce your liability and limit your damages if you unknowingly rely upon bad advice. The first step you should take is to include an indemnification provision in all consultant contracts you negotiate and sign. An indemnification provision will assist you in recovering expenses you incur as a result of a consultant's improper actions or advice.

Here's why getting that indemnification matters. In June 2001, the Office of Inspector General issued a special advisory bulletin regarding the practices of business consultants. The OIG stated that "hiring a consultant does not relieve a provider of responsibility for ensuring the integrity of its dealings with the federal health care programs." This bulletin also indicated that consultants and their clients could face liability under the False Claims Act or Anti-Kickback Statute if the practices advocated by the consultant leads to a federal investigation or legal proceedings.

The OIG provided the following examples of abusive practices:

• A reimbursement specialist suggesting that a client use inappropriate billing codes to elevate reimbursement; suggestion might include describing methods to avoid detection.