Discover How important is CLM software to legal teams in healthcare

The complexities of contracts in healthcare need a solution that can address the needs of the medico-legal sector and approach challenges holistically and provide a comprehensive solution.


Umashankar Natarajan


1 min read

The disruptions caused by technology and globalization in healthcare are many and far-reaching. While innovations such as healthcare apps have improved service delivery significantly, they have also driven the need for new regulations. This is posing new challenges for the medico-legal sector. Legal departments in healthcare have the thankless job of reconciling differences between medical and non-medical parties while ensuring that contracts and agreements meet all regulatory and legal requirements.

Challenges in the medico-legal field

Technology and managed care have improved service delivery considerably. However, it has posed new challenges like conflicts over ownership of shared data, privacy breaches, and evolving regulatory obligations such as HIPPA (Health Insurance Portability and Accountability Act) and PDP (Personal Data Protection). Globalization has further complicated the issue with conflicting cross-border regulations.

The Unique Nature of Healthcare Contracts

There are many stakeholders to a single contract in healthcare. Patients today expect to traverse the healthcare system seamlessly without leaving a paper trail. They expect an end-to-end service delivery that includes not only in-hospital care but also the supply of drugs, paperless insurance claims, digital payments, and digital follow-ups and consultations. This means that apart from the implicit contract between patient and physician, contracts with insurance companies, equipment suppliers, pharmaceutical companies, partner service providers like diagnostic centers, physician employment contracts, and contracts with external consultants such as anesthesiologists may also come into play. To put it another way, a single healthcare contract may have multiple owners and stakeholders. 

This is posing new challenges for legal teams that have hitherto held the responsibility of contract creation, execution, and management. With the advent of ubiquitous digitization, however, healthcare businesses are looking toward technology for contract lifecycle management solutions.

How does a CLM work?

Once a contract is executed, its management would typically involve the following steps:

  1. Identifying risk areas including minor defaults or possible oversight

  2. Identifying KPI – Key Performance Indicators – for the parties

  3. Extracting, structuring, and entering important and relevant data from the contract

  4. Linking to third-party systems such as insurer, supplier, or partner provider systems

  5. Monitoring and tracking

The most difficult part to execute is the identification which requires expertise from both the medical and legal fields.

Will Automated CLM solutions work?

Collating a database of all contracts and the terms within them is the first and the most challenging step toward automation if only because both structured and unstructured – or quantifiable and non-quantifiable data needs to be extracted. Further, given the diverse scope of healthcare contracts, there is a likelihood of data existing in silos due to reasons of privacy.

Consider for instance a regularly defaulting physician. Even if physician employment contracts are integrated into the automated system, the best such a system can do is to alert users about the frequent defaults and suggest cancellation. And that is assuming that all the relevant data is extracted, quantified, structured, and fed into the database. 

A document repository may perhaps store, extract, and present unstructured data. But even that cannot guarantee expediency and efficiency in contract management because most extraction tools for unstructured data are in their nascent stages. Human intervention will therefore be necessary.

Hybrid CLM as a Solution

Both manual and automated systems cannot independently meet the contract management requirements of healthcare. What is required therefore is a blending of the two in a way that plugs all leaks and can manage the diverse, unstructured, and global nature of healthcare contracts. 

The answer lies in a dedicated global team of medico-legal experts who are knowledgeable about both local and cross-border regulations as well as the widespread scope of healthcare contracts. The knowledge pool must also span across industries and sectors that are external but related to healthcare such as insurance, drug administration, and manufacturing.

When such a diverse team leverages technology for support, it will have the potential to comprehensively and efficiently manage all types of healthcare contracts spanning industries, sectors, regions, and languages, so that providers can seamlessly deliver hassle-free service to patients. It also has the potential to integrate both internal and external stakeholders, reduce fiscal risks, and make the process of contract management cost and time-efficient.

In summation, the only solution that can address the diverse needs of contract management in the medico-legal sector is a dedicated hybrid contract management system that can approach the challenge holistically and provide a comprehensive solution. Since it is difficult to hire and maintain such a team internally, the answer perhaps lies in outsourcing contract management to expert service provider agencies.