Legal representation and negotiation in managed care organizations

Managed Care Organizations: Basics of Negotiating and Contracting

Managed care organizations, and corporations generally, have legal departments or law firms that zealously represent their interests. Consequently, in the managed care environment, practitioners need to be legally savvy when it comes to negotiation and contracting. The focus of this work in writing will be the negotiating and contracting in the managed care setting.

Three Basic Elements of a Contract

The entire U.S. economy is based on "the freedom of individuals to contract and a system of law that enforces contracts freely entered into." (Oilek, 2011) A contract is defined as "a voluntary, deliberate and legally binding agreement between two or competent parties. Contracts are usually written but may be spoken or implied, and generally have to do with employment, sale or lease, or tenancy." (Business Directory, 2011) There are three very basic and very essential elements to a contract that is legal and enforceable. Those three basic elements are stated to be the following:

(1) The offer;

(2) Consideration for the exchange (or payment); and (3) Acceptance. (Oilek, 2011)

It is not necessary for legal jargon to be used in the formation of a contract and no specific words are required to be used. There must only be as previously stated "an offer by one side and an acceptance of the offer by the person to whom the offer was made." (Oilek, 2011)

II. Stages of Negotiation and Areas of Concern

The contract negotiation process involves the parties to the contract coming to an agreement concerning the details of the agreements that are under contract. For example, the price or consideration is one factor in a contract. Other factors, and many of them considered, as areas for concern are those of:

(1) Price/charge

(2) Payment

(3) Limitation of liability

(4) Invoices

(5) Indemnification

(6) Withdrawal or termination in terms of cause or convenience;

(7) Service levels, warranties;

(8) Business continuity and disaster recovery;

(9) Confidential information and protection of data. (Upside Software, 2011)

III. Implications of a Contract that Contains Provisions for Performance of Illegal Activities

According to one source reviewed in this study, the material provisions of a contract must be legal if the contract is to be held as valid. Specifically stated is as follows: "any contracts containing material provisions that are not legal, such as provisions requiring criminal acts, the commission of a "tort" (a breach of civil law such as defamation, breach of a copyright or license, misrepresentation or trespass), or those in breach of public policy, will be ruled to be illegal and/or unenforceable. Illegality, of course, is determined by statutes." (McCandlish and Lilliard, 2010)

IV. Severability Clause Defined and Discussion of its Impact on Contract with Unenforceable Provisions