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Have "evergreen" provider contracts lost their bloom?

Terese Mosher-Beluris¹, J Peter Rich

¹McDermott, Will & Emery, Los Angeles, USA.

Managed Care Quarterly

|July 31, 2004

Summary

Evergreen contracts automatically renew unless terminated. Health plans and providers should consider fixed-term agreements for strategic advantages and to avoid perpetual obligations.

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Area of Science:

Contract Law
Healthcare Administration

Background:

Evergreen contracts feature automatic renewal, posing potential risks for healthcare entities.
Fixed-term agreements require explicit renewal, offering greater control over contractual terms.

Purpose of the Study:

To define evergreen contracts and contrast them with fixed-term agreements.
To advise healthcare plans and providers on the strategic implications of contract termination.

Main Methods:

Legal analysis of evergreen contract provisions.
Comparative review of contract types in healthcare.

Main Results:

Evergreen contracts are legally valid but can lead to unintended long-term commitments.
Termination of evergreen contracts allows for renegotiation and alignment with current healthcare needs.

Conclusions:

Healthcare organizations should carefully evaluate evergreen contracts.
Transitioning to fixed-term contracts can enhance strategic flexibility and risk management.

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