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Tips for Negotiating Service Provider Contracts

June 20, 2019 1909

Sometimes dentists need assistance from outside vendors for certain services, whether it be waste hauling, marketing, website development or other types of service contracts. When using these service providers, it is important for dentists to analyze the contracts closely during the negotiation process to make sure they know exactly what they are signing up for.

Sherry Mostofi, a California attorney who handles the legal aspects of service provider contracts for dentists, says one of the biggest problems dentists face is signing a long-term agreement that includes automatic renewal provisions without being aware of the terms.

“Sometimes after a certain period of time they don’t see improvements from the service they are paying for, or they find another company that provides the same service at a lower cost, but they are locked in due to the multi-year contract they signed,” Mostofi said. “This is not to say that dentists should not enter into contracts that have terms longer than a month-to-month basis, but they should be aware of the terms of the agreement.”

Mostofi offered dentists the following things to look for when signing a contract with a service provider:

Duration of the contract

Many companies require a long-term contract to provide any type of service. It is especially important for a dentist to clearly know the duration of the agreement.

Legality of contract provisions

Ensure that a contract does not contain any provisions that are not in compliance with applicable law, in particular, the California Dental Practice Act. For example, a contract that enables a service provider who is not licensed to practice dentistry to derive a percentage of patient treatment fees from the practice would constitute “fee splitting” with a nondentist. It is illegal for a service provider to obtain fees based on the number of patients sent to a dentist or the revenue derived from patient treatment.

Detailed description of services

The contract must set forth a detailed description of the types of services being provided and the frequency of such services. Any vague or generalized statements regarding the description of services would enable a service provider to not provide the services that a dentist may anticipate at the time of entering into the contract. Try to get in writing the duties that are going to be fulfilled and, if applicable to the service, the amount of time the service provider is going to expend providing this service.

Termination rights

Dentists should know whether a service contract provides them with the right to terminate the contract with written notice to the service provider.

Payment schedule

Dentists should be aware of the right for refunds under service contracts that require full payment for services up front.

Automatic renewals

Dentists should have knowledge of any automatic renewal provisions in a service contract in order for the dentist to plan in advance for the automatic continuance of the service contract or its termination, which may require additional action on the part of the dentist.

Ownership of product or services

If the service in the contract is the provision of a product (i.e., website and domain name), a dentist should have knowledge of whether the service contract provides ownership of the product to the dentist or whether the provision of the product is limited to the duration of the service contract and reverts back to the service provider at the termination of the service contract.

HIPAA compliance with patient data

If a service provider has any access to patient information, HIPAA compliance matters should be addressed by the service provider and the dentist.

Whether the office manager is handling communication between a service provider or not, the dentist needs to be highly involved throughout the service contract process.

“Make sure you are involved because you need to understand the terms of the agreement completely and don’t want to have anything lost in translation,” Mostofi said.

For more guidance on such contracts, consult with a legal professional or contact CDA Practice Support at 800.232.7645.