AHLA's Speaking of Health Law
AHLA's Speaking of Health Law
Drafting Health Care Contracts: Tips from the Trenches
Jenna Brofsky, Partner, Husch Blackwell LLP, and Thomas Spellman, Associate General Counsel and Vice President, Fresenius Medical Care North America, discuss approaches for drafting health care contracts, focusing on negotiation techniques and strategies and non-compete provisions. Jenna and Thomas are co-authors of AHLA’s Health Care Contracts: A Clause-By-Clause Guide to Drafting and Negotiation, Second Edition. From AHLA's Labor and Employment Practice Group.
Watch the conversation here.
To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.
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Speaker 2:This episode of A HLA speaking of health law is brought to you by A HLA members and donors like you. For more information, visit American health law.org.
Speaker 3:Hello and welcome to this podcast. My name is Jenna Browski . I am a partner at Hush Blackwell. I'm joined today by Tom s Spellman. He can introduce himself in a second, but we are brought together over a really excellent book that we put together. I'm gonna hold it up for you guys here. It's called Healthcare Contracts, A Clause by Clause Guide to Drafting and Negotiation. And yes, I did tap my own chapter , um, which is the best chapter. So with that very small introduction, let me pass it along to Tom.
Speaker 4:Thanks, Jenna. Uh , my name is Tom Spelman. Uh, I'm in-House counsel at Fresenius Medical Care , um, which is a , uh, healthcare company, mostly focused on , uh, kidney dialysis and, and renal health.
Speaker 3:Thanks, Tom. Tom, would you just , uh, remind us how long have you been there for a little bit about your background?
Speaker 4:Sure. Yeah. So I joined Fresenius , uh, in 2015 after , uh, working at a Boston Law firm for about six years. Um, I joined , uh, to do mergers and acquisitions. Um , it was one of the few in-House jobs that , uh, primarily the, the, the job description was doing deal work , which is what I had been doing at a law firm. Uh, so I came in with very little healthcare background. You know, I had been doing private equity and bank mergers and things like that, so I was a little, little wary to join up. But, but honestly, I, I say this all the time. Organizations like a HLA make it so wonderful for , uh, non-healthcare lawyers to dip their toe in and, and learn all about the, the fun complexities that, that keep us , uh, all, all having a good day, every day , <laugh>.
Speaker 3:Yeah, absolutely. Um, and now I feel like you've really embraced a HLA as have I, I think you're involved in , is it the fundamentals of law?
Speaker 4:Yes. So , uh, I've been , uh, I've been presenting at the fundamentals of law, which , uh, is in November in Chicago. So if anyone , uh, you know, younger lawyers looking for good opportunities to, to really get a , a good grasp of the, you know, a lot of the healthcare world. We do Medicare, Medicaid , uh, three days on really all the key basics. Um, or if you were a person like me who had a lot of legal experience, but maybe not so much healthcare experience , uh, it's a great, great primer conference. Um, and I've also presented a couple times at the A HLA Transactions Conference in Nashville in April , um, as a transactions lawyer. I, I went there before I presented there of course , uh, and had a really great time. A lot of different wonderful topics that , uh, you know, if you're in the deal space , uh, for a full-time job or if you find yourself, you know, your organization is gonna be approaching some mergers and acquisitions , uh, it's, it's a great opportunity. Um, and actually I'll, I'll dive in through that. Um, the, one of the presentations I had done at transactions was called Contract Negotiations. Um, and we had written a white paper for it , uh, as we typically see with, with most A HLA presentations. They want a white paper for background for, for the attendees. Um, and after we wrote that , uh, we were approached by the A HLA publishing team asking us to see if we would consider taking that white paper and, and trying to make it into one of the chapters in the treatise.
Speaker 3:Okay. So it looks like you may have had a little bit of something to go off of. That's
Speaker 4:Right, yeah.
Speaker 3:<laugh> <laugh> . I guess the question that comes to my mind is how do you convert that white paper into a full chapter as part of this kind of bigger book about healthcare drafting and contracts?
Speaker 4:Yeah, so I'll be honest, it was something I was, that , that when, when I was reached out to, that was probably the biggest pause that I had because I am not an author. I , you know, this was my first foray into any kind of publishing, so I didn't really know what to expect. Um , but the A-H-L-E-A-H-L-A publishing team was excellent in kind of one assuaging my fears, letting me know, you know, we know everyone's a volunteer and has a day job , um, but two more importantly, just giving a lot of tips. They, they do a lot of work with folks who aren't, you know, writers, publishers , uh, and, you know, they're lawyers, right? And so they're, they're here to, to help figure that out. Um , for me personally, I think the two big things I did were, one, just take a step back. In the white paper that I had written, it had a very transactions focused , right? It was written for what are expected to be intermediate or advanced lawyers , um, in the m and a space. So it was, you know, thinking about what are some ways I can make this more generally applicable to healthcare? Um, and then two , I , I felt fortunate that I was gonna contribute to the second edition. So I was able to buy the first edition and read through it and get a sense of, you know, what is the tone? How is everybody else writing? Um, and so that gave me a lot of background as to kind of how to, how to tweak things a bit to, to help the, that what I had already written mesh well with, with the rest of the book.
Speaker 3:That makes sense. That seems like a thoughtful approach. We're glad you did it, <laugh>. Thanks,
Speaker 4:<laugh> . Now, that wasn't the case for you, right? When, when you contributed?
Speaker 3:That's right. Yeah. I didn't have anything in writing. I've certainly been advising on non-compete agreements and litigating non-compete agreements. So I, I should say I practice labor and employment law, and I'm kind of on all sides of the issue of non-competes and non-solicitation. So I'm advising employers on that. I'm also advising physicians on that. Um, but I hadn't actually put together a chapter , um, before, so this was kind of new and exciting for me. I presented on non-competes at the annual conference, and I think it was 2023 if I have my years correctly. Um, and I was asked to kind of put that into, onto a piece of paper , um, which is a little bit challenging, especially 'cause as, you know, non-competes are so state specific. Um, you're in Massachusetts, there are a lot of restrictions on non-competes in Massachusetts. Um, I'm in Kansas and Missouri, and we don't really have any, so it's , um, it was interesting, what was kind of cool for writing was the first edition didn't have a chapter on non-compete, so this was brand new. I kind of got to devise it the way I wanted to. And when I say I, I should not take full credit. My associate , um, Allison Mani was critical , um, in getting this off the ground. And , uh, I think one of the most valuable things we did is we included a state index. So we put the states that specifically had , um, restrictions for physicians or other healthcare providers. Now that's changing every day , um, or every month or so. But I think it's helpful to see the kind of things and, you know, if you're , um, interested in seeing what's being proposed or what's out there or how, how I can draft something that's enforceable , um, yeah, I think it's a useful, useful resource.
Speaker 4:Yep . No, that makes a lot of sense. Um, so as you mentioned, you know, state specific things and that it's a very , um, I won't say fluid, but there's, there's always changes. Non-competes have been in the news very much so lately. Um, how, how did you balance, you know, you want , you wanna say something, you don't wanna say, Hey, this is up in the air, or it depends on how a court would look at it. You know, you wanna be authoritative, but but you don't want to go too far.
Speaker 3:Absolutely, yeah. And that was tricky. So I'll start with obviously the elephant in the room, which was the FTC proposed band . Um, so when we wrote this timing wise , it was a proposed ban . I don't think we had had anything finalized yet. And obviously then it came out and a court in Texas has set it aside, and right now we're in the window to see if the FTC is gonna appeal or not. Um, they still have like another, they have till like the middle of October. So we'll see. And I put that in kind of this miscellaneous category , um, because I think most people thought there was a good chance that it would not fly through , um, the, the proposed ban. But yeah, it could be a distraction. I think from the everyday negotiations that I'm doing that do involve non-competes in states where non-competes are , are permissible. And so we tried to focus on the things like the general , um, idea behind a non-compete, which is, it has to be reasonable, has to be reasonable, and in geography it has to be reasonable in time. And we try to draft those as best as we can. And then also indicate, you know, if you're in a state that has restrictions, like, please go check that state law because I can't, I can't like have clauses for every single state here. Right, right. That's where it got tricky. Yeah. Yeah . I mean, your topic negotiations just a little easier to, it wasn't necessarily state specific, right?
Speaker 4:Yeah. So yeah, so I , I think we went in the other direction where, you know, negotiations. So as , as a little bit of background, one of the reasons we, we proposed the negotiations topics to transactions was, you know, we sit in a lot of these conferences where it's, here's the black letter law, or here's some recent court case developments. It's very specific and it's all crucial information for how you do your day to day . Um, but a lot of times I felt like there , there's not much focus on what I'll call the soft skills, right? Like how, you know, how is your job as a lawyer taking all this very important information, but then, you know, being able to convey it, being able to negotiate effectively, a lot of things like that. Um, so we were on the other side of it where there's not really like a right or wrong way. Um, and one of the challenges we ran into when we were drafting the white paper and then revising it for the book was, you know, one, there's hundreds of different ways to negotiate, right? So for us to try to say here's, you know, 40 or 50 pages worth of stuff, you're gonna obviously leave out a lot of things. Um, and then two , I think we all have kind of innate negotiation strategies, just how we do our jobs, right? Um , and, and I should also call out my co-author , uh, Jennifer Hutchins, who was , uh, at, I think Brian Cave. She's at Brian , I know she's at Brian Cave right now. At the time she was at Robinson Bradshaw. Um, you know, we, we know what works for ourselves, but , uh, that doesn't mean it works for everybody. So it was kind of taking this topic that I find very interesting , uh, trying to explain it in a way that's one accessible but not so accessible that it doesn't say anything. Um, and then also not trying to get my personal preferences to , uh, you know, too evident as to what I think is a good way or a bad way of doing something in particular. Um ,
Speaker 3:Yeah, I, I appreciated your chapter , um, how you kind of issue spotted and called out things that everyone should be looking for. And I think you, you were able to kind of make it specific. I, the part I'm thinking of is when you said like , know the culture, right? Um , so can , do you wanna elaborate a little bit on that? Yeah,
Speaker 4:Yeah. So a lot of what we, we go into, and this is probably more evident in our presentation , um, but a lot of what we talk about is it , it's, there's a lot of ways to negotiate effectively, but underlying most of those is having an understanding about what you're negotiating, right? Like my company now, we have a lot of repeat conversations and negotiations with folks in the, the renal space. Um, there's not that many dialysis providers in the us . Um, and so, you know, we're constantly seeing physicians over and over again , uh, compare that to when I was at a law firm. It might be a private equity firm, you know , trying to buy a company one time, right? And there's gonna be no repeat interactions. Um, so, you know, a lot of people are gonna have different levels of, I'll call it aggression. Um, in that private equity context, they're focused on getting the best deal . And if they step on some toes or burn some bridges in the process, it's probably okay because what are the odds you're gonna be across the table from that particular c-suite again? Um, it's the opposite for my job currently. Um, I may negotiate a transaction with, you know, a hospital and then a year later I'm, I'm back doing another one with them. So, you know, knowing the culture of not , uh, frankly not being a jerk <laugh> , uh, go , you know, was important when I was figuring out how do , how do I negotiate now that I'm at Fresenius Medical Care? Um , and , and there's a lot of things like that, like doing your homework, understanding how the business works , you know, all that kind of stuff. Really you should be doing that independent of, of how you wanna negotiate. So it was a lot of like tips like that that, that we were trying to make more universal in, in the context of, again, something very amorphous, like negotiation strategies and figuring out leverage and things like that.
Speaker 3:Yeah, I think that's really useful. Um, especially, you know, this book contains so many different things, so it's good to have some of the big picture strategy negotiations and then dive into, okay, I wanna draft a clause that's gonna be enforceable for this cardiologist or whoever it may be. And this is kind of the way to do it. So it , we kind of have a little bit of everything in here, I think .
Speaker 4:So when you were drafting your chapter, did you find kind of, because I, I love the clause banks that this book has and, you know, I , I go to them a lot. Um, you know, they've made it into a lot of our templates. Uh, but you know, 'cause on one hand you want great, you know , crisp language, that's, that's gonna work no matter what. On the other hand, you know, you don't wanna have 10 definitions and, you know, 50 pages just to get somebody the one clause that they need. So how do you balance that in terms of being a good, you know, contractual drafter?
Speaker 3:Yeah, absolutely. And I do think sometimes, especially in the world of non-compete , there's a lot of buildup. There's setting forth what is the confidential information or what you're trying to protect and what happens if it doesn't work out, and can you get injunctive release ? So there, right , there are several different provisions. Yeah. Um, it's, it is tricky. Um, but I think being more succinct is beneficial , um, because then you kind of know at the end of the day , what is the obligation, which , and is it fair and is the person gonna do it? Um, because that's, you know, this is all the goal of this is to protect your information and to ensure you're getting the benefit of your bargain. So , um, it's, it's tricky stuff. And those template , um, the contractual template language in the book I think is really helpful for all practitioners if you kind of wanna, you know what you wanna say, but you don't know kind of the best way to say it. Um, and we did do a couple where we put some bracketed language to indicate this is gonna be a little more specific. So for example, like how far is reasonable? Like what's a reasonable geographic scope? Obviously in rural communities it's a little bit different than in high dense , um, cities. So yeah, there all the information is in there, there, but with a little, yeah, you gotta know the culture to your point, right. And understand kind of what you're trying to get at , um, and , and where you're located. Mm-Hmm ,
Speaker 4:<affirmative> and along those lines , uh, you know, me coming from a a an m and a space, whenever I'm reading a contract and when I'm, when I'm explaining it to my business team, you know, I'm usually putting phrases like buyer favorable or seller favorable on there. Um , I'm sure that's especially evident in the, the non-compete in the labor world. Um, how do you kind of balance, you know, do you, do you just say, here's seller favorable, here's buyer favorable, or do you try to get the middle ground and, and how do you think about that?
Speaker 3:Yeah, it's a little bit tricky 'cause I am , you know, usually hired by one side or the other. Um, in, in these type of situations when we're, you know, if it's a sale of a business or if it's an individual kind of negotiated contract. So , um, at the end of the day though, if we want it to be enforceable, it kind of has to be fair. Mm-Hmm . So if it's so , um, you know, no limitations in any way, that's not really, yes, technically that's more employer favorable, but in the end of the day, if it's not gonna be enforceable, that's not , uh, favorable to anybody. Right ? So <laugh> you really try and make it so that everyone, I guess, has an understanding of what it is that there is being agreed to. I think that's the most important.
Speaker 4:That makes sense.
Speaker 3:Yeah. Um, Tom , I, you know, I can ask you about some of the things I saw in your , um, in your chapter that I thought were interesting. You said , um, you used an acronym, B-A-N-T-A
Speaker 4:Batna . Yes. <laugh> .
Speaker 3:Batna . Um, do you wanna tell us about that?
Speaker 4:Yeah, so batna batna , it comes up a lot. Um, so as an aside, when I went to law school, there was a, a , um, uh, a business school next to it and we got to have some crossover classes. Um, and so one of the, the negotiations law school professor also had some business school classes, and, and we got to sit in on them , um, as auditors. And , uh, that , that came up certainly more there in the business school context. Mm-Hmm . <affirmative> . But basically the idea is, alright , if we don't have this deal, what are, what else are we gonna do? Um, and so as an easy example, if I'm, you know, a , a physician and I wanna sell my practice , um, okay, this private equity firm is, is offering me a deal, but I don't like it. What are my alternatives? Well, is there a hospital nearby that might wanna buy it? Um, or are things going well and I can just keep running my practice for a few years? Things like that. Um, and so that was something that, you know, once I got in-house, I found that was a very easy thing to understand. But when I was at a law firm, and I always coached the junior associates that work with us, is when you're thinking about a deal, you know, at the law firm, you're the expert on reps and warranties and indemnity and, you know, you're great drafters and you're able to get stuff to work together, but the more you can understand your client's business and their options, that's gonna really go a long way. Um, and again, I think most times, you know, executives and, and the folks on the business side that are managing a deal, they're usually pretty upfront , right? Like, we gotta do this merger, you know, come hell or high water, that kind of attitude. But a lot of times when you're dealing with smaller companies, smaller providers, maybe less sophisticated folks who, who aren't always in negotiations , um, just talking to them and reminding them like, or one, one, if you don't know, saying, Hey, what are our options? Uh, or if you're in-house like me and you have more of an advisory role, then being able to talk through that kind of stuff. Um, and again, that's not necessarily something that ties to any one particular negotiation strategy, but it's that little piece of homework that, that we tried to emphasize in , in the chapter about, you know, let's understand the culture, do your homework, figure out everything there is on the sides in the periphery of this transaction, because all that information is gonna be really useful. And so, you know, for batna , if you don't have any alternatives, right, if it's this transaction or bankruptcy, then if you know that you're probably not gonna be a a , a hard line negotiator trying to win every point, you're gonna be a little bit more , uh, give and take because, you know, and maybe the other side doesn't know, but, but you know, if if we can't figure out a good transaction here , uh, my company's gonna be in a lot of trouble.
Speaker 3:Absolutely. Absolutely.
Speaker 4:Um , and so I I have a question for you. Yeah . When you're drafting your clauses and you're kind of thinking about how your chapter works, how much are you looking at the other chapters and is there back and forth in the editing process where, you know, maybe you're using this term, but the, you know, dispute resolution, arbitration chapters using a different term, and, you know, how , how much do they kind of put on you to, to mesh things together like that?
Speaker 3:Yeah, that's a great point. You know , um, as outside counsel , I'm often given different documents and templates from whoever it is that I'm serving. So very rarely do I get to kind of create the wheel from scratch, which isn't, you know, obviously it's not efficient to create the wheel from scratch. So I do try and create some kind of uniformity within the document. Yeah . Um , it is important, yes, exactly for terminology to match, but practically, I think there are other things that probably take priority <laugh>.
Speaker 4:That makes sense. Yeah.
Speaker 3:But there are some good stuff, there is some good stuff in here that , um, I certainly am continuing to look through as I , um, as I negotiate. So I'm just, I'll hold up for you guys. You get a sneak peek, I don't know if I'm supposed to do this, but <laugh> Here, I will public that as these are actually my coworkers at Hus Blackwell who did this first chapter. You probably can't see it , but , um, really touching on key laws that impact healthcare contracts. And I think, you know, for me, I do labor and employment law, and I have clients in all the different industries. I'm in our healthcare , um, strategic business unit, so I love my healthcare clients the best. But , um, anyone who has a employee user or workforce often has issues , um, that need dealing with. But healthcare is so highly regulated and specific, and so it's important for me to be thinking about things outside of just general non-competes or whatever it is that I'm drafting. So for example, this chapter just, you know, it touches on Stark Law, anti-kickback statute, hipaa , um, and so again, things that I need to be aware of in the back of my mind, even if that's not directly relevant to the provision I'm looking at, we're in this space where it's so important that everything is cohesive and we're aware of all the different regulatory, the regulatory framework.
Speaker 4:Yeah . It's funny you mentioned that first chapter because I've done something similar where , um, you , you know, we have a lot of business folks, we have a lot of folks in operations that, you know, have contact with, with our referral source partners, right? Physicians, hospitals , um, and we , like you said, highly regulated and saying the wrong thing can get you in a lot of trouble, even if it's not somebody you know, so high up that they're making decisions. Uh , so I'll rely on the chapter a lot to just kind of, you know, here's a two or three sentence, or one or two paragraph summary of this law. So when there's someone who's, you know, maybe not familiar with the, the overall laws that, that we're facing, you know, and , and they're not a lawyer, I can't give them a hundred page book to start reading, but from just a like, simple compliance, you know, Hey, keep this in mind. Here's a law, think about it. You know, be mindful as to, you know, how we're you're presenting for the company externally. Uh, yeah. It's a great resource.
Speaker 3:Yeah.
Speaker 4:Well, I think we've used up most of our time. Okay . Um , thank you, Jenna. This was, this was great, and thank you to the audience for listening in. Um, I'm not sure if you'll have our contact information, but I don't think we're too hard to find on LinkedIn or, or elsewhere. Um , so if anyone has a question or wants to learn more about the treatise , uh, we'd be happy to, to give more info.
Speaker 3:Thank you. Thanks, Tom. Yeah.
Speaker 4:Bye folks.
Speaker 3:Have everyone <laugh> .
Speaker 2:Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA, speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law org .