QUESTION: I was just reviewing a contract to draft a second amendment and noticed that the original contract has the hospital as a party but the first amendment has the hospital’s physician group as a party. What should I do?
ANSWER: This doesn’t happen that often, but it does happen enough. The good news is that it looks like you were watching the details when drafting the second amendment.
In any event, confirm which entity is to be the party in the contract. It may be that the person who drafted the first amendment inserted the wrong party (or, conversely, the person who drafted the original contract had the wrong party). Or, it may be that the contract was assigned by the hospital to the physician group, but you would not know that because the assignment was not included in the package of documents you were given to draft the second amendment.
The correct party is important for compliance reasons – for example, if the contract is supposed to be with an entity that qualifies as a “group practice” under Stark, but is with the hospital, and incentive bonuses include the group’s in-office ancillary services then the contract would violate Stark.
Also important is the issue of liability. The hospital may set up a physician corporation, or limited liability company, to shield the hospital’s assets. If the contract is with the hospital instead of that separate entity, the hospital’s assets are at risk.
Some other details to check are to make sure the entity on the first page is the entity listed in the signature block on the last page. Again, having a different legal entity in the signature block does not happen that often, but it does happen and making sure the entities are the same can save much heartache.
Finally, make sure the employment contract is signed by both parties. An unsigned employment contract could spell trouble from a Stark perspective. For example, although the Stark employment exception does not require a written contract, if an employer wants to take advantage of certain things, such as directing referrals, the contract must be in writing and signed by the physician.
So, make sure to dot those “i”s and cross those “t”s when drafting or reviewing contracts.