Temp. Reg. § 53-4958-4T(a)(3)(vii), Example 6—Simultaneous Contract
Example 6 involves the application of the initial contract exception, illustrating that E, a newly hired chief operating officer who was not a disqualified person prior to being hired by Hospital B, is a disqualified person after being hired but is protected by the initial contract exception. Example 6 goes on to describe E’s ownership of more than 35 percent of Company X, which subsequently enters into a contract to provide billing and collection services to Hospital B. Example 6 concludes that the contract between Company X and Hospital B is not protected by the initial contract exception.

Example 6 makes a worthwhile and valid point. It would be helpful, however, to clarify under what circumstances Company X would be protected by the initial contract exception if its contract with Hospital B were entered into concurrently with E’s hiring. For example, if Hospital B hired E with the understanding that it would also contract with Company X for billing and collection services, would both contracts be covered by the initial contract exception if they were entered into on the same day? In the same week?

To clarify this point, we suggest adding the following sentence at the end of Example 6: "If Hospital B contemplated contracting with Company X at the time it hired E, and entered into the contract with Company X within one week of hiring E, then both E and Company X would be protected by the initial contract exception."