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Negotiation: The key to financial success
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Attorneys do it. Politicians do it. Businessmen and women do it. They all negotiate.
Every day, people come to the table and attempt to make arrangements to reach a settlement, orchestrate a compromise or make a deal. Obstacles are present, but when successfully surmounted allow for each side to benefit from the agreement.
Some of the best practitioners of the art of negotiation are employed by insurance companies. However, some of the worst are physicians.
In fact, physicians often do not use even the most basic language of the work place, preferring to use the term honorarium, rather than the more sullied term “paycheck”. Often, physicians portray the attitude that because they are professionals, the laws of economics don’t apply to them; they have trained long and hard and “deserve” a high level of remuneration. But is this true? Perhaps more true is an advertisement that I once saw in the seatback pocket of an airplane. It proclaimed: “You don’t get what you deserve. You get what you negotiate!”
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In our current environment of declining reimbursements, the ability to negotiate has become more critical than ever. However, many physicians are ill prepared. Most of us focused on the sciences during our formal training, rather than on business courses to develop a foundation in accounting, finance or economics. Yet, these are all part of the arena we enter when we negotiate.
Often, we are pitted against the best in the business, people whose full-time job is to negotiate reimbursement contracts with physicians. They enter the room much better prepared than the physicians they are about to take on. These negotiators have usually had in-depth training in negotiation and come with extensive experience from dealing with other physicians, such as what other physician groups are being paid for office visits, procedures and lab fees. And perhaps even more important, they have a vast amount of data and information at their disposal that the physician does not. Physicians may find themselves relying on the information presented by the negotiator; for example, when an insurance negotiator says, “We will pay you for your lab the same amount we pay the national labs, 65% of Medicare rates.” The physician should wonder whether he or she is being told the truth, if this number can be verified and whether the rate should be accepted.
With the government, the decision is binary. Medicare and Medicaid rates are either accepted or not accepted. With the private insurance market, there is room to negotiate. In light of falling government rates, physician survival may come down to how well he or she is able to negotiate in the private marketplace.
Physicians are in a very strong position, but many may not realize it. After all, if the insurance company cannot reach an agreement over rates, they are not going to be able to treat the patients. At the end of the day, when all is said and done, only a physician can actually treat the patients. Insurance companies need physicians. Physicians do not necessarily need insurance companies.
When negotiating, the physician does not have to accept what is offered. All things are negotiable. But after a long day of seeing patients and possessing a limited skill set, how many physicians are up for the task? It may be preferential to hire a negotiator, similar to hiring an accountant or attorney.
There is a huge variation in what endocrinologists are paid when charging for the same exact billing codes. These variations exist not only from city to city, but in different practices right down the street from each other in the same city. Skeptics may consider asking a new patient, who has previously seen another endocrinologist, to bring in his bills and see what the other physician was being paid. For non-Medicare patients, the average reimbursement nationally is 140% of Medicare rates; but the rates vary from 68% of Medicare to well above 140%. What is your rate?
It may be time to hire a negotiator.
Richard Dolinar, MD, is a senior fellow in health care policy at Heartland Institute in Chicago and a clinical endocrinologist in private practice in Phoenix. He is also an Endocrine Today Editorial Board member.
Disclosure: Dr. Dolinar reports no relevant financial disclosures.