New payment models are creating the need for physicians to develop new skills, with negotiation being among those at the top of the list. And, as with so many other aspects of being a physician, experts say preparation is the key to success in this arena.
Knowing your medical group’s strengths, allies and shared view of success may sound like interesting ground to cover at a staff retreat. But it is also absolutely vital that these elements be identified before entering into contract negotiations with a payer, hospital or accountable care organization (ACO), according to the AMA’s new webpage on payment essentials. The page offers a nuts-and-bolts approach that physicians can use for evaluating proposals, negotiating agreements and managing revenue cycles under new payment models.
“Every ‘deal’ has its own logic, its own rhythms and its own personalities,” wrote David W. Hilgers, who was named a health care “super lawyer” by Thomson Reuters and is the author of the resource on negotiation on the AMA payment essentials webpage. But, he added, there are common steps physicians can take to prepare for negotiations that will help them bargain from a position of strength—no matter what twists and turns these talks may take.
“Planning is absolutely essential; the physicians must have a clear-headed understanding of their goals and their leverage in the market,” wrote Hilgers, an Austin, Texas-based partner with the Husch Blackwell firm. “A failure to appropriately understand the goals of the group and its power in the discussions will result in unhappy results.”
Size up your bargaining power
Step one is to undergo a candid and objective evaluation of your group’s value to the plan, hospital or ACO it is negotiating with and to assess who the competitors are in the local market.
A large medical group in a mid-sized town may have substantial bargaining power, but still may overplay its hand. A hard line taken by a local anesthesiology practice, for example, may drive a hospital to partner with a national practice-management company. It is important to recognize the negotiating power of your opponent.
Practices should also know their strategic alternatives, who their allies may be and who might be lined up with the other side. If physicians reject a plan’s contract offer and are forced out of the network, it is important to know whether patients will complain to their employer or local hospital demanding that their physicians be returned to the network.
“Employees going to their employer’s human relations department complaining of the plan’s refusal to contract with the physicians can be a powerful motivation to restart negotiations,” Hilgers wrote. “Will the hospital tolerate the complaints from patients when the medical group goes out of network?””
Before starting negotiations, medical groups should determine their members’ aspirational goals and make objective assessments of what their costs will be and what the market value of their services is. There are a number of national phsyician compensation surveys and insurance company data on your patient pool’s demographics and health status are helpful tools in determining these vital elements of your negotiating strategy.
“The group cannot go into a negotiation without a clear picture of what it hopes to achieve,” Hilgers wrote, adding that taking stock of the group’s cohesiveness and willingness to support its leaders through a long and arduous deal-making process is also an important part of any pre-negotiation assessment.
Keep the conversation focused
Other tips Hilgers offers include:
- Pledging to avoid casual interaction with the opponents’ negotiating team.
- Identifying who can play “good cop” or “bad cop” at the bargaining table.
- Basing agreements on the totality of the contract package instead of settling on items one by one.
Hilgers noted that physicians can lose some of their overall bargaining power if they negotiate each issue separately.
Attorneys for the opposing side commonly declare aspects of the physicians’ proposal to be illegal. So, Hilgers suggests that it pays to have legal counsel available because an opponent’s legal staff “will be less cavalier” about issuing an opinion declaring a proposal illegal. Also, knowledgeable attorneys can often make adjustments to the proposal that “will enable physicians to achieve their goals without running afoul of the law,” Hilgers wrote.
One of the last steps preliminary steps for groups to take is to assess the other side’s reputation in negotiations. Then groups can adjust their initial proposal accordingly, depending on whether that reputation is one of being reasonable and conciliatory or the organization is known to be hard-nosed and contentious.
If it’s the latter, Hilger recommends being “significantly more aggressive” and demanding with an opening offer—and to not be afraid to alienate the other side by asking for too much.
“They may feign anger or disgust but rarely refuse to continue negotiating,” Hilgers wrote.