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Who’s Responsible For Claim Liability?

March 20, 2014

 
Question:

Dear Jennifer,
 
I work with a billing company that is asking me to indemnify them against liability should they be sued for submitting my claims.  Why are they asking for this?
 
Dr. A

Answer:
  
In this regulatory environment, it is imperative that healthcare providers and their billing companies, management companies and other third party vendors have a clear agreement as to who is taking on different levels of liability and exposure.
 
One way for all parties to protect themselves is through contracting.  For example, one party may agree to indemnify the other party in their service agreement.  Indemnification is where one party agrees to hold harmless the other party against any liability, cost or expense that the party may incur as a result of the others actions or omissions.  This may be drafted as a general indemnification clause or may be limited to actions and omissions related to specific activities or liabilities.
 
In additional to contractual protections, internal policies, procedures and training are recommended to ensure that staff members act within the scope of their individual and company job descriptions and duties.  For example, a billing company staff member with no expertise in coding who provides coding advice to a medical practice client is opening themselves and their employer (the billing company) to liability.
 
As an illustration of why contractual protections and internal policies, procedures and training is important, an insurance company recently named a medical billing company as a defendant alongside a medical doctor in a very public litigation. Aetna Health Inc. v Hishmeh, 40 Misc. 3d 1230(A) (N.Y. Sup. Ct. 2013).  The claims against the billing company included tortuous interference, fraud, negligent misrepresentation and violations of general business law.  If this were to happen to you as a provider or to the billing company you work with, it would be in both parties interests to have a clear understanding of each party’s rights to contractual protection from the other party.  In the above (albeit, short) case example, the billing company was actually recently dismissed from the on-going case because, among other reasons, deficiencies in the plaintiff's pleadings.  Despite the good news for the billing company in its release from the action, the billing company still was subjected to public naming in the suit, as well as cost and toll of being part of the litigation.  The best way to avoid exposure is to take preventative measures such as proper contractual protections. 
 
If you need assistance drafting or reviewing your service contracts or are interested in revamping or implementing new policies, procedures and training into your practice or company, give us a call.

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