Digital Health
Contracts Law Blog

Will Your Digital Health Company’s Contracts be Vulnerable to a Recession?

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If your digital health company is like most companies right now, your company is nervous about the possibility of an impending recession.  Of course, the real challenge is how to handle those nerves, and what steps your digital health company should take to better protect itself in the current environment.  The conventional wisdom is to focus on generating more sales and to cut costs, particularly costs that executives perceive to be expensive such as legal expenses that digital health companies might otherwise spend on negotiating and drafting contracts with customers of digital health software and services.  However, the reality is that the conventional wisdom is completely wrong in the current environment and may have dire consequences for a digital health company, if the digital health company blindly follows convention in the current climate.  In fact, a savvy digital health company will anticipate that a recession is exactly when good contracts matter the most, and exactly when companies should focus more of their resources on ensuring that contracts, particularly key contracts, will not fall victim to their customers’ cost-cutting efforts.

Why would contracts be more vulnerable in a recession?  Well, digital health customers are making the same kinds of calculations that digital health companies are making, except that they will examine the spending commitments that they have already made on digital health software and services and explore how they might be able to reduce those commitments.  Accordingly, the digital health contracts they have already signed will receive extra scrutiny, and potentially become the subject of a dispute.

If you believe your digital health company is immune to economy-driven renegotiation efforts, you may want to reconsider your position.  It has been my experience that, whereas in good economies, my client base is largely comprised of digital health companies trying to close large business deals with software customer, in poor economies, my client base is the quite the opposite: digital health customers engage me to advise them on how to renegotiate or terminate altogether software and/or services that they no longer want to pay for.  In fact, in the last recession, my entire business was almost entirely comprised of advising health technology software customers on problems with their previously signed contracts and how those problems might be exploited to escape their previously agreed to financial commitments.  Ironically, the experience of advising health technology software customers in the last recession became the basis for the digital health contract drafting practice I have built today, as the experience I developed from advising customers on how to exploit drafting vulnerabilities in their previously signed contracts enabled me to thereafter advise digital health companies on drafting best practices to avoid subsequent customer disputes.

What can your digital health company do today to protect itself against economy-driven contract vulnerabilities in a recessionary environment?

First and foremost, identify your digital health company’s most significant contracts and have a digital health contracts lawyer review them now for vulnerabilities.  Once any contract vulnerabilities are identified, your digital health company can work closely with the digital health contracts lawyer to adopt a strategy that addresses and deals with any such vulnerabilities before the customer decides to exploit them.

Second of all, identify your digital health company’s contracts that may be up for renewal during the anticipated recession, and have a digital health contracts lawyer identify any terms and conditions pertaining to renewal and any laws that your company may be subject to relating to the issue of renewal, which might be exploited by a customer, if such terms and conditions or laws were not closely followed by the company.

Third, closely involve your digital health lawyer in the negotiation and drafting of any new contracts during the anticipated recession, so that you can avoid entering into new contracts with otherwise avoidable vulnerabilities that might be exploited by an economically-motivated customer in the future.

All in all, working closely with a digital health contracts lawyer to anticipate and address potential customer renegotiation and termination tactics in a depressed economy can ensure that your digital health company will survive and thrive through a recession.  Investing a few extra resources with a digital health contracts lawyer today can save your digital health company significantly later when customers look to attack vulnerabilities in your companies’ contracts to solve financial issues later in a depressed economy.

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Kristie Prinz

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