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April 2014

And It Shall Be Written — Forging Successful Transcription Agreements
By Susan Chapman
For The Record
Vol. 26 No. 4 P. 20

Experts offer advice on the finer points of vendor contracts.

With the pressure mounting on health care organizations to reduce costs, many large facilities and networks are outsourcing transcription services to fill at least some of their transcription needs. In fact, Cindy Barker, president of the transcription division at Amphion, believes approximately 75% of such organizations rely on some outsourcing, with facility size being a significant determinant.

“Most large organizations and networks outsource due to cost savings, but smaller, rural hospitals and clinics often find it cost-effective to keep one or two transcriptionists on staff to do their work,” she says. “The smaller facilities don’t have the same pressure as the larger organizations to look for external resources to keep costs down.”

Michael Kimball, chief operating officer at iMedX, sees a mixed bag when it comes to outsourcing transcription. In the $1.2 billion acute care market, it’s difficult to quantify how many organizations seek help from outside transcriptionists, while many ambulatory care facilities utilize in-house staff. “There is a lot of data saying that the transcription market is an $8 billion industry,” he says. “The cost of selling in the ambulatory market is so expensive, as is the cost of service. A three-doctor group, for example, will generate about $12,000 a year in revenue [for the transcription service], and those types of groups can be very demanding.”

For both large and small health care organizations, there are several factors to consider when entering into an agreement to outsource transcription services.

Details of a Successful Agreement
Stipulations concerning turnaround time and quality are among the most important aspects of a solid outsourcing agreement. “Everybody has different ideas of how quickly work needs to be turned around,” Kimball says. “For radiology, ideally, there should be a two- to four-hour turnaround time, for instance. And quality should be high. A company should have an auditing staff that pulls documents randomly and scores them. In our company, that score must be 98%.”

Facilities also must have a clear definition of what they’re paying for. For example, they should know whether the price is based on visible black characters (VBCs) or a 65-character line. “Regardless of what the two parties agree on, there must be clarity around all the standard pieces,” says Linda Sullivan, CEO of New England Medical Transcription. “If a contract is based on VBC, it must be clearly stated. If headers and footers are included in that price, that, too, must also be clear. It’s also possible that the person who negotiated the contract is not the same individual who is signing it. So it’s very important to check that everything agreed upon is not only in the contract but is also very clearly stated.”

Johnna Shook, senior director of transcription operations for Precyse, says the agreed-on unit of measure is extremely important. Also, clients should provide sample reports to help the vendor determine accurate counts and develop a fair pricing plan.

The contract also should clearly state whose responsibility it is to maintain any equipment involved in the deal. Additionally, the client and the provider should delineate all fees beyond the VBC or per line costs, such as interfaces, distribution, training, and project fees.

Shook notes that costs may be incurred for activities occurring later in the process. “Oftentimes, we have to interface with EMRs and other downstream information systems,” she says. “Perhaps we need to hand off records to another system. As vendors, we need to understand what the prospective clients’ expectations are, and those need to be outlined very specifically.”

Barker echoes the need for clarity. “Obligations must be stated very clearly between vendor and client, including dispute resolutions, the scope of the work—work times, turnaround times, any grace period to meet those time frames—pricing, confidentiality, and whether the work will be performed onshore or offshore,” she says. “In terms of the latter, labor costs are cheaper offshore, which impacts pricing. Clients should be able to choose a percentage of offshore work, which, in turn, translates into a lower rate.”

Amphion also charges up-front implementation costs, which are included in all contracts. “We have a team that helps set up the client,” Barker explains. “Consequently, we have interfaces and [virtual private network] connections that have to be paid for. That initial cost is there. After that, in our agreements, whatever the client has been quoted per line is what they are paying.”

Clients also should be aware of what course of action is available if they’re dissatisfied with the vendor’s performance. “If you’re not happy, and we can’t solve the problem in 30 days, vendors need to include a clause that allows them to opt out of their contracts,” Sullivan says. “In this way, we are being held accountable. We also include a soft detail in our contracts, a good faith paragraph that says it’s understood that both parties will approach this relationship with good faith in mind. We will work together. The vendor relationship can sometimes become contentious rather than what it should be: a partnership. The latter is how we feel about our clients. We want to be their partners.”

Getting a Fair Price
To negotiate a fair price, health care organizations must be clear about their requirements. Because hospitals frequently share pricing information among themselves, Kimball believes vendor charges generally are on target. “There can be outliers who will embellish the truth and tell potential clients that they can do the job much more cheaply,” he says. “That can make things sticky. If it’s within the United States, you’re looking at anywhere from 16 cents to 13 cents per line. Using a global firm, the high end would be 14 cents to 11 cents per line on the low side. Our company gives clients a per line—65 ASCII character—or VBC price. If a client takes the per line price and divides it by 53, they can then get the equivalent VBC. We encourage clients to make comparisons so that they can verify what they’re getting and feel good about the agreement.”

Across the industry, the VBC is fast becoming the standard to determine cost. “VBC is highly recommended because it can be very easily counted,” Shook says. “It’s very important for the health care organization to understand how that vendor counts and prices accordingly. They must compare apples to apples among vendors because some bill using different methodologies, and VBC is one way to do that. Also, because VBC can easily be counted via eye or test reports that simply use a standard word processing program, the client can verify if they are being charged appropriately.”

Sullivan notes that a large vendor can greatly reduce VBC costs. “But they may have more fees,” she says. “Some companies provide only transcription, but many large vendors also provide technology, which comes at an additional cost to the client, for instance.”

Barker says pricing methods are a matter of preference. “For so many years, it’s been by the line,” she says. “Other facilities look at VBC and take that option. Once there is a black character on the sheet, they only pay for that visible black character.”

Experts note that gross line pricing can be confusing to some clients, making VBC the better choice in those cases. For example, while reports composed of solid block paragraphs may lend themselves to gross line pricing, documents with numerous lines and only a few characters per line quickly become expensive. In these instances, the VBC method can provide clarity.

Prior to the advent of speech recognition, transcriptionists essentially utilized all keystrokes. A space was considered a character and necessary to properly format the document. With speech recognition, many transcriptionists now are editors who no longer need to perform the same functions on the keyboard as they did in the past. Therefore, pricing using the VBC method instead of on a per line basis is much less of an issue from a vendor’s standpoint.

Regardless of what pricing method is selected, facilities are advised to verify it from the outset and include it in the contract. This helps create a climate of good faith and strengthens the client-vendor relationship.

Trust and a stable working relationship are important ingredients in any agreement, Barker says. “Organizations have to trust the vendor and know what the costs are associated with that company,” she says. “The vendor then needs to provide a complete breakdown of what it will cost for that service. For instance, if there are fees for a client using a company’s system, the client needs to know what all those costs are.”

Avoid Hidden Costs
Because gross line counts sometimes can be confusing, most experts believe the VBC method lessens the chances for billing surprises. “There should not be any hidden costs with VBC,” Sullivan says. “Many line counts include spaces; VBC does not count spaces. It’s all about what a facility can document and count on their side.”

Beyond line counts, Shook recommends getting all pricing information in writing. “All fees should be clearly defined with any reputable vendor,” she says. “That way, there is no challenge in determining what they’re being billed for.”

Nevertheless, health care organizations occasionally do find themselves stuck with a convoluted and confusing contract. For example, vendors may request an up-front cost of $150,000 and then charge an additional four cents per line, a fact that may be buried within a lengthy and difficult-to-read contract. Then there are technology fees for use and maintenance that clients initially may not be aware of.

“This can be avoided if the person signing the contract knows what was discussed by the individual who negotiated it,” Sullivan says. “How does legal know if what was verbally negotiated is actually in there if the person is not involved? If the language goes from 65 characters with spaces verbally, but the contract says ‘gross,’ the latter can result in about a 20% increase for the vendor. Such situations can be avoided down the road simply by having good channels of communication between vendor and client, and then across the client team. Clear communication among the client team can ensure that there are no surprises.”

Recourse for Dissatisfied Clients
Clients must be aware of their options should they become disenchanted with their vendor’s performance. “I’ve heard that with some vendors, it’s nearly impossible to get out of their contracts and, if you do, you have to pay some fees,” Sullivan says. “So the recourse needs to be stated in the contract. Just like with other areas of the contract—what the client is actually being charged for, for example—it’s critical that the person who negotiated the contract understand it and either communicate clearly with legal or, even better, be present when it is reviewed and signed.”

Barker doesn’t view contracts as being ironclad and believes that most can be canceled with or without cause. “Every contract has an out,” she says. “Ours is that if you find you’re not happy with the service, we ask for a 30-day notice, and you’re out of it. Before we get to that point, hopefully, clients bring their problems to the table and we discuss them. Essentially, there is always going to be some sort of issue that arises. When that happens, we work together to solve it and if we can’t, each party has the option of providing a 30-day notice.”

Still, Barker notes that ending a contract can have consequences. “While you’re never locked in, making a change can be very painful,” she says. “There are IT resources involved, and there can be about a 60-day period to make the transition.”

Shook, who believes clients should have options when they become unhappy with a vendor’s performance, says the process for dissolving the relationship must be clearly noted in the contract and an attempt should be made to address any issues. “There should be notification for poor performance, along with a time period for the problem to be resolved,” she says. “Vendors should be given an opportunity to correct the situation, and the contract should spell out what terms are required for getting the problem, or problems, resolved. This can vary from vendor to vendor, and the client needs to know exactly what it’s agreeing to.”

Keys to a Good Relationship
When it comes to vendor-client couplings, the chances for harmony often come down to the basics. “If clients are getting accurate patient records, if they have confidence that their vendors are doing what they say they will do—and the vendors need to be able to demonstrate that they are delivering accuracy and promised turnaround times—those are the main critical factors [for a winning relationship],” Sullivan says.

Besides delivering a quality product, first-rate customer service greatly enhances the client-vendor experience. “The other critical factor is the person who answers the phone when someone from the facility calls with an issue,” she says. “There needs to be someone immediately responsive who understands the intimate details of the account, can solve any problem, and keep in close touch, to be sure that a problem doesn’t arise again and everything is running smoothly.”

In general, a true partnership usually translates to a successful working arrangement. “Being a partner, not just in words but working with clients, is important. We are delivering patient care; we are part of that process,” Sullivan says. “There is an element to this that takes the level of responsibility up a couple of steps. Everyone in this field feels the same way. Partnership ultimately benefits patients, and that is really important.”

— Susan Chapman is a Los Angeles-based writer.