The CFA Perspective

The Importance of Effective Hospital-Physician Negotiation - Part Two

Posted by Peter J. Spiers, Ph.D.

7/25/18 7:00 AM

Negotiation blog image 6-6-18In Part One of this blog we stressed the value of cardiovascular physicians acquiring or updating proven and effective business negotiation skill sets.  The premise for this notion was driven, in part, by the improved economic environment and the move by many health systems to use improving capital positions to expand or develop new cardiovascular services.  Physicians should want to participate in this enhanced financial environment to the extent that they can negotiate an improved business relationship.

In Part Two we will: 

  1. Present a CFA case study highlighting the process and outcome(s) of a re-negotiated comprehensive professional service agreement between a Southern California health system and its long standing cardiothoracic surgery group. 
  1. Explore the changing CMS regulatory landscape, which may present new opportunities for cardiovascular physicians to enter into expanded joint venture opportunities, or wholly owned cardiovascular multi-specialty services organizations. 

CFA Case Study: Creating New Value in an Existing Professional Services Agreement 

A few years ago, CFA was retained by a well-respected, high quality cardiothoracic surgery group (CTSG) to provide strategic business development and executive practice management services.  During our engagement, one of the CTSG partner hospitals desired to re-negotiate the existing comprehensive professional services agreement (CPSA) with the group.  A formal Request For Proposal (RFP) process was used by the health system to guide the negotiation process.  CFA used the RFP process to not only quantify the value the group brought to the hospital system but introduced a set of shared risk/reward provisions, increased coverage and program development incentives to best match the unique marketplace dynamics and needs associated with the target hospital.  These factors had never been considered in any level of detail in previous agreement negotiations.  After submission of the RFP and a series of face-to-face negotiations between CFA and the target hospital, the revised and updated contract was fully executed.  The net effect being that under the new PSA the CTSG would realize a net increase in regulatory complaint compensation of more than $1.5M over the 3-year term of the contract. 

CFA believes that many cardiovascular physician(s) and/or groups leave significant value on the table when negotiating with their hospital partners.  This is frequently because they do not include all available factors that produce potential benefit to the hospital (and thus increase potential compensation to the group).  Most often this failure occurs through neglecting to  effectively quantify, present and leverage the real value of their services and group during hospital–physician negotiations. 

Is a Return to Physician Hospital Ownership in the Works? CMS Calling for a Change in Physician Hospital Ownership and Stark Prohibitions. 

Change seems to be in the wind at CMS regarding the physician hospital ownership and the “anti-kick back” prohibitions under the Stark rule.  This last April, the CMS began soliciting comments on what role physician-owned hospitals should take in the overall health system as well as on which regulations should be rolled back.  While it is early in the process, CFA believes the Trump Administration and HHS Secretary Alex Azar are committed to rolling back many of the ACA restrictions on free-market policies, unnecessary or arbitrary regulatory burdens on physician practice and increasing healthcare marketplace competition.  A roll-back of the Stark Anti-kick-back rules would help pave the way for greater physician healthcare services ownership. 

Summary 

Parts One and Two of this blog highlighted the opportunities for cardiovascular physicians to re-shape their practice profiles and take advantage of an improving healthcare financial environment and changing regulatory landscape.  These facts on the ground reinforce the notion that physicians who know how to best leverage their practice value are those who have developed or improved business negation skill sets. 

For additional detail, see CFA’s white paper, “Six Keys to Successful Negotiation with Your Hospital.” 

As always, CFA welcomes your comments or suggestions. 

References:

  1. Azar eyes relaxing restrictions on physician-owned hospitals.” February 2018, Modern Healthcare
  2. “Lifting restrictions on physician-owned hospitals could be key to widening access to care.” June 2017, Modern Healthcare
  3. 3. Lifting the Limits on Physician-Owned Hospitals: Can Regulators Prevail Where Legislators Have Stalled?