"You need to understand where this contract fits into the spectrum of contracts you have," Kobe explains. "Then you can talk to the payers about the rates and have an understanding of where the [contract] needs to go. Once you know the benchmark … you can be more aggressive in your negotiations. You can potentially push back to get what you need."
Kobe says to keep in mind that your analysis may also reveal that you don't have as much market power as you might think. "Even if you don't have any market power, by understanding and knowing where your strengths lie you may be able to pick up a couple of additional points," he notes.
Strategy 3: Know Thy Options
When it comes to negotiating, it helps to have a tactical plan. The first two strategies avail you of the information you have in your system, now you need to run some best- and worst-case scenarios.
"You need to know what's financially viable with this contract; what you're willing to accept in terms of rates, and what your fallback position is," Kobe says.
Part of your tactical approach should include revealing the data you chased earlier. By showing the payer this information the financial leaders is indicating an awareness of the economics of the contract as well as how the reimbursements are reflected in the health system, Kobe explains.
For instance, if the hospital's internal analysis uncovered that a large number of the payer's clients come through the system, then now is the time to play that up as market power. Bear in mind however, that you should be aware of what percentage of your overall patient census is coming from this payer, too. If the payer is your largest source of revenue and the payer knows it, it could weaken your negotiating position.
Alternatively, if you have little market power, Kobe says, healthcare leaders could take their case to the public via the press. "You look at the numbers and explain to the press that the hospital may have a difficult time providing care if it doesn't at least get a market rate from the payer, or you may want to show how it could cause financial trouble for the hospital if the rate stays the same," he says.