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Negotiating and Contracting in the Managed Care Setting

Managed Care Organizations have legal departments or law firms that zealously represent their interests. Consequently, in the managed care environment, practitioners need to have some savvy when it comes to negotiation and contracting. The focus will be on the basics to negotiating and contracting in the managed care setting.

Respond to the following:

1. Identify and describe the basic elements of a contract?

2. Identify and discuss the stages of negotiation and areas of concern.

3. What if a contract contains provisions for performing illegal activities?

4. What is a severability clause and what impact does this clause have on a contract with one or more provisions that are unenforceable? In other words, does an unenforceable provision make the entire contract void?

Solution Preview

Let's take a closer look at these interesting questions:


1. Identify and describe the basic elements of a contract?

The basic elements are an offer, acceptance and consideration.

? An offer: an expression of willingness to contract on a specific set of terms, made by the offeror with the intention that, if the offer is accepted, he or she will be bound by a contract.
? Acceptance: an expression of absolute and unconditional agreement to all the terms set out in the offer. It can be oral or in writing. The acceptance must exactly mirror the original offer made. *
? Consideration: each party to the contract must receive something of value. E.g. This is best illustrated by an example: suppose I promise to give you my watch, but you don't give me anything in return. If I break my promise and keep my watch, you can't then go to court and make me give it to you. The contract isn't legally binding: you didn't give me any consideration for my promise (Smithies, 2007,

*A counter-offer is not the same as an acceptance. A counter-offer extinguishes the original offer: you can't make a counter-offer and then decide to accept the original offer! But...a request for information is not a counter-offer. If you ask the offeror for information or clarification about the offer, that doesn't extinguish the offer; you're still free to accept it if you want. (




Our whole economy is based on the freedom of individuals to contract and a system of laws that enforces contracts freely entered into. But a lot of people may not be aware of what are the essential elements required to make an enforceable contract. Recently I was asked if a contract not in writing is binding. We are so accustomed to seeing contracts in writing that many people assume that a contract must be in writing (and lengthy) before it is enforceable.

Agreement is essential to any contract. Before there can be a contract, there must be a consensus ad idem: that is, there must be a meeting of the minds. The two sides to a contract, whether for the construction of the liner Queen Elizabeth or for having your lawn cut, must agree on the fundamental terms of the contract. There must be an intention to enter into a legally binding contract. Whether the parties have reached an agreement is determined by an objective standard. What each party believes the other to be agreeing to will not be the determining factor. Rather, would an objective bystander, acting reasonably, looking at all of the facts relevant to the question concludes that the parties had come to an agreement on the essential terms of the contract with the intent to form a legally binding relationship? If so, there is a contract between the parties.

An agreement can be found in the simplest of words or conduct. The contract for the construction of the Queen Elizabeth, one of the largest liners in its days, was contained in a letter from the builder containing words to the effect "We agree to build the Queen Elizabeth for 5 million pounds".

To form a contract, there are no particular words that must be used by the parties. However, there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. Without both an offer and an acceptance, there can be no consensus ad idem or a meeting of the minds which is essential to form a contract.

1. An offer is simply a statement or other indication that the individual is prepared to enter into a contract with another on certain terms. The offer must be expressed in a manner capable of acceptance without anything further required of the person receiving the offer other than to indicate acceptance. It must also be clear that the person ...

Solution Summary

Through addressing the questions, this solution focuses on the basics to negotiating and contracting in the managed care setting e.g. basics elements of the contract, etc.