How to Protect Your Facility by Having Third Party Contracts in Place

Friday March 16, 2012

According to F500, if the facility does not employ a qualified professional person to furnish a specific service to be provided by the facility, the facility must have that service furnished to residents by a person or agency outside the facility under an arrangement, agreement or contract.  The arrangement, agreement, etc. pertaining to services furnished by outside resources must specify in writing that the facility assumes responsibility for obtaining services that meet professional standards and principles that apply to professionals providing services in such a facility and the timeliness of the services. 

Therefore the facility is required to have contracts with all third party vendors that provide contract services.  Contracts should include at a minimum:

•  Clarification of services/scope of work
• Timeliness of the services
• Payment arrangements of the services/compensation
• Clarification of reporting/documentation requirements, if applicable
• Staff training requirements, screening, licensure, etc., if applicable
• Contract terms
• Period of agreement
• Termination of agreement

From the risk management perspective, the following terms should be included in the contract: 

• Independent Contractor provision - this agreement clarifies that the contractor is not a facility employee and therefore not subject to the facility's worker's compensation benefits or professional liability insurance coverage. 
• Hold Harmless/Indemnification provision - this agreement clarifies that one or both parties agree to not hold the other responsible for damages.  This agreement indemnifies one or both parties by agreeing to not hold the other responsible for any legal liability or looses as a result of a specified incident or action. 
• Insurance coverage by both parties - this clause states that each entity will carry their own general/professional liability insurance. This provision without a hold harmless/indemnification clause is only helpful if both the facility and the 3^rd party contractor are co-defendants. In other words, if the 3^rd party contractor is not a party to a claim against the facility, the 3^rd party contractor's liability insurance will not hold harmless or indemnify the facility.

In the event an incident/event occurs in which a vendor employee is involved and a claim arises, the outcome may depend upon the terms of the contract. 

The facility may want to consult with Corporate Counsel on the appropriate wording for contracts.