Renewals and notice
Auto-renewal clauses: what to watch in healthcare contracts
An auto-renewal clause keeps a contract going unless someone stops it. That's convenient for a service you love and expensive for one you stopped using.
The clause is often short and easy to skim past, so it's worth reading closely before you sign and again before each renewal.
How the clause usually reads
Most auto-renewal clauses have three parts. A renewal term, which says how long each renewal lasts. A notice period, which says how far ahead either side must say no. And sometimes a price term, which says what happens to the rate when it renews.
A typical version reads something like this: the agreement renews automatically for successive one-year terms unless either party gives written notice of non-renewal at least 90 days before the end of the then-current term. Every piece of that sentence decides a date or a dollar amount.
The clause isn't always in the term section. Check the order form, the pricing exhibit and any terms the contract pulls in from the vendor's website.
A worked example
Say you signed a three-year phone system contract starting January 1, 2024, at $2,000 a month. It renews for one-year terms, needs 90 days' notice, and allows a 5% increase at each renewal.
The first term ends December 31, 2026, so notice was due by October 2, 2026. Miss it and 2027 runs at $2,100 a month. That's $1,200 more for the year, on a system you may have meant to replace.
And because the renewal term is a full year, your next chance to leave without a fee is twelve months away.
What usually goes wrong
In my experience, most vendor contracts renew on their own, and nobody notices because the invoice looks the same as last month's.
The costly versions are predictable. A renewal price set at the vendor's then-current list price, with no cap. Online terms the vendor can change, linked from a one-page order form. Early termination fees equal to the rest of the term's payments. And a new order form for one extra line or user that restarts the term for everything.
What to watch
How long does it renew for?
A one-year contract can renew month to month, or for another three years. The renewal term isn't always the same as the first term.
Does the price change on renewal?
Some contracts allow a yearly increase at renewal. Know the cap, or whether there is one.
Can you leave mid-term?
If you miss the window, check whether there's a termination for convenience clause and what it costs.
Do new orders restart the term?
Adding a user, a location or a line on a new order form can start a fresh multi-year term.
Are any terms only on the vendor's website?
Terms pulled in by a link can change after you sign. Save a copy of what applied when you signed.
Who decides whether it renews?
If nobody owns that decision, the contract decides for you.
How Sapphires helps
- Each contract records whether it auto-renews, its renewal term and period, and its notice period.
- Sapphires works out the next renewal date and the last day to give notice, and marks contracts renewing in 31 to 90 days and in 0 to 30 days.
- The dashboard counts auto-renewals in the next 30 days and the contract value sitting in the notice window.
- A daily email reminds you ahead of notice deadlines and renewals, so the decision comes up while you can still act.