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Working on my "Kick Butt Contract"... but a few questions spring up!


First I want to acknowledge the excellent work of Alice and Michele! I have read your How To book on writing a "Kick Butt Contract" several times over and found the information to be indispensable! Thank you so much!

I am in the process of working with an attorney on drafting my contract, and have a few questions based on suggestions from Alice and Michele's book.

1. If you are charging a set-up fee, when do you collect that? At the inception of the contract, 30 days out, or with your first invoice? Do you state that it's non-refundable (in the unlikely event that the Client has sudden buyer's remorse after signing with you, etc?) 

2. My att'y asked me to clarify the "Early Termination" terms, and how to charge a penalty for that if initiated by the Client. I'm stating my "Length of Agreement as follows:
"This Agreement will be in effect for one year, and will be automatically renewed from year to year-unless terminated by either party upon 30 days prior written notice, at any time, with or without cause. 
Annual Renewal Date: ____________________________________________ "

The terms of "Early Termination" in this instance, are simply 30 days with written notice.

I am then stating in my contract that Early Termination will incur a penalty of 30% of the average monthly fee, and non-compliance with early termination terms will result in the immediate cessation of work.

My att'y is asking me what if, hypothetically, a client terminates the contract in less than 30 days from the signing of the contract, or less than 30 days of processing claims, so I would therefore not have an average amount for which to judge my 30% penalty?

Thank you in advance for your suggestions.  :D

Thank you!  Glad to hear the book helped.

1.  Personally I would charge the set up fee at the inception of the contract and I would make it non-refundable.

2.  Good question!  Maybe you could simply institute a minimum penalty in the case that an average monthly fee was not established. If they cancel that early a minimum would cover your expenses.  Maybe something like $300-$500.  That way you would get a couple of thousand dollars to cover your expenses.  Or you could say that "if an average monthly fee has not been established one will be estimated based on the information available."

Hope this helps!

In the past when I had overhead (software, clearinghouse, etc) my setup fee due at the signing of the contract. It was also non-refundable. My setup fee also served as a "security deposit" of sorts as well because many providers will take advantage using you temporarily in a crisis and dumping you later.

I only had an early termination clause when I charged a % of collections because I didn't want to get burned by having provider not send me the EOBs on claims I submitted and should be paid on and that process was long so Instead of having the provider send me all the EOB's my early termination fee was actually my % of anticipated collections from last 60 days (of claims not paid or to which I didn't get EOB). Later when I went to flat fee billing, my early termination fee was just one month. If you are charging a % you could do an early termination fee of 2X your % of anticipated collections. So if the client terminates with you before the 30 day's with no notice, you would simply run a report, calculate anticipated collections and charge 2X your percentage. Just an idea.  I've seen some billing companies just do a termination fee based on an hourly rate for the hours they put into the account. You could do $35 an hour, calculate the hours spent on the account and charge that as an early termination fee.

I know you didn't ask this question but many billing companies make a big omission in their contracts with addressing termination of accounts. You want to address with the client WHAT they will be getting upon termination. Doctors sometimes expect you to turn over their entire database if your using your own software, some will expect you to provide copies of all the charge slips if they didn't keep proper records, etc.. you'd be surprised what they expect when the contract is terminated. You also want to address the termination without notice to cover yourself if you suspect or know of fraud or abuse, believe me it happens. You do NOT want to provide any notice the minute you know a provider is committing fraud as it puts the target on your back as well. YOU must have a clause that allows you to say "I'm OUT NOW" and all billing ceases. Address what the client gets and doesn't get.


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