Hospitals and health systems have hundreds of ways to legally pay physicians to help them manage care, oversee programs and facilities, and plan and implement strategic initiatives in addition to the traditional payments like ED call coverage and medical directorships. Contracting to provide administrative or coverage services could be a great way to strengthen ties with other providers and grow your patient base; however, there are important things to consider before negotiating hospital contracts.

Doing your research before you initiate conversations is key. The first thing I recommend doing is collecting your internal data and getting benchmark data for comparison. Is your productivity above or below the median? How does your total compensation compare to benchmarks? Are collections per FTE high, medium, or low? While you may want to talk to physicians in other practices, talking about contract rates can be illegal if it leads to collusion, and benchmarks will be used by the hospital in their negotiations and FMV documentation.

You’ll also want to understand your specific situation relative to both internal demands and market position. Coming into the negotiation, what are your strengths? What are your weaknesses? How do these duties impact you and your practice? You should consider the nature and demands of the specific position. For example, response times, back-up call, payer mix, ED volume, patient acuity, and patient volume relative to the market all go into an informed negotiation for ED call pay. Similarly, administrative positions can vary based on characteristics such as hospital size, teaching duties, etc. Benchmarks and past time records can be helpful in negotiations for these types of positions as well.

Before initiating conversations with a hospital, understand the hospital’s perspective. It’s easy to immerse yourself in your own perspective and not fully understand the other party’s position. When you are negotiating, this is a huge mistake. Not only does understanding your counterparty make the process go more smoothly, but you’re also more likely to get a better deal if you can put yourself in their shoes. Knowing the hospital’s constraints like federal/state regulations, internal or system wide policies, politics, finances, and payer mix will put you in the best negotiating position.

It is key to understand the hospital’s policies on physician pay. Hospitals generally don’t have much flexibility (or tolerance) for negotiating agreements that go outside internal policies and norms. Compliance processes and standards are often set in stone–perhaps not literally, but most certainly in practice! If the rate you’re seeking falls outside their range, there are likely many hurdles to cross to approve an exceptional payment, if it’s even allowed. Such a request will often trigger more work by both parties – for more information, more paperwork and often an external valuation consultant. Seek ways to work within their constraints, such as addition a new administrative position to pay for work you’re not currently compensated for or seeking a different payment type for weekend differentials or per procedure reimbursement. Be sure your ‘ask’ is based on well-documented benchmark comparisons before challenging a hospital’s standard policies. Alienating a hospital could impact future relations or even trigger a bidding process for alternative medical groups.

It is a mistake to downplay optics and local politics. Ask yourself: how does my position “look” across the medical staff and community and how could that impact the outcome of negotiations? Optics and politics, despite how you feel about them, are important. And lastly, be reasonable. Don’t expect the impossible from a hospital — you aren’t going to get it. Use data not emotion to validate your request and educate the hospital’s leadership. A well-reasoned and documented negotiation often results in finding ways to accommodate both parties. If the hospital’s ‘guardrails’ on their compensation policies don’t work for your group, you will likely need to compromise, so have some ideas in your hip pocket. Likewise, it’s highly unlikely that your group will get paid more than other physicians on the panel or in administrative positions, so negotiate with current contract terms in mind.

Allison Pullins
VP, Chief Strategy and Operating Officer
MD Ranger, Inc.

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