How to Negotiate Health Care Contracts

A previous blog argued that most physicians and other health care providers fail to adequately negotiate health care contracts. This blog presents the “how” of negotiating such contracts. As I noted in the blog, negotiation is not limited to employment contracts.

Negotiate Health Care Contracts, PhysiciansNegotiation is a simple activity. It is essentially trading: you are trading something of yours for something the other party has, usually money, but sometimes other benefits; your opposite, on the other hand, is trading something of hers for something of yours at her lowest possible cost. The key to getting what you want is to know before you start what it is you really want and what you are willing to settle for. You must always assume that the opposite knows what she wants and is willing to settle for. You must be a realist. Make sure you value yourself, your services or your rights correctly. Do research. Work with an attorney. Speak to colleagues. Check out the business literature.

Self knowledge is important because if the other side makes an offer before you decide on what you require, your mind set will be frozen by her offer. You will not be able to overcome that block. On the other hand, you can steer the other side’s mind set, and save a lot of time, by informing the opposite party at the outset, in terms as specific and as reasonable as possible, what terms you absolutely require.

In addition to knowing what you absolutely require, it is vitally important that you estimate what your opponent wants (needs). Most articles on negotiating provide a general approach to negotiating. They provide a model that assumes both parties are willing to give up something to make a contract. In real life a general approach rarely works because of the differences in power between the parties. You need power to win in negotiation.

The question you must ask yourself is:

“Why is this person willing to negotiate with me.”

In other words, what is their incentive to negotiate with you. A realistic estimate of their incentive provides you with leverage. The more incentive they have, the more leverage you have. Leverage is the essential force ( power) that will allow you to obtain what you want.

What incentives are we talking about? Here are a few: they may need to fill a sensitive employment position where few qualified candidates exist; it could be a desire to avoid a discrimination claim; it might be a desire to avoid expensive litigation; or it might be a need to end litigation.

If you determine that your opponent has little incentive to negotiate with you, you have minimal leverage, and you have little power. Physicians usually have no significant leverage when negotiating with large institutions or powerful personalities because those entities don’t need to negotiate. To them you are fungible and powerless. Exceptions exist: if you can differentiate yourself, you can sometimes make them actively negotiate. But generally, in this situation you have three options: (1) walk away; or (2) take what they offer; or (3) take the matter to an outside decision maker (court or arbitration).

The third option, moving to court or arbitration, is rarely worth it because of the cost. A powerful opponent has a deep pocket; and because you are insignificant to it, they will make you suffer if you attempt to force your desires upon them.

If you determine that you have some leverage, both parties are clearly willing to negotiate, it is likely that you will obtain some of the terms you want, but not all. This is the situation when you are dealing with mid-size organizations such as a non-system hospital, a small medical group or a weak negotiator. This is also the situation visualized by most writers on negotiation.

If you estimate that you have a lot of leverage you will have power and can obtain most of what you want. This is typically the situation where you are negotiating with a small group or an individual you deem to be weak. Occasionally you will fail because an opponent is unable to know his best interests.

In addition to keeping the above principles in mind it is also important to always remain cool and true to your interests. Remain friendly, but analytic. Don’t want something so bad that you lose your objectivity and become overcome with greed or fear of loss. Always remember that you will rarely obtain everything you want. If you develop that mind set, you will be a strong negotiator and better at it than most of your opponents.


Health Care Employment Lawyer

Thank you for visiting R.S. Hoover Limited. We provide legal services to health care providers and individuals related to the health care industry. Please contact us anytime if we can assist you or help answer a question. Call us for a free consultation: (847) 804-3900.

Comments are closed.