The Lone STar ChapTer newS Magazine JULY 2009, VoLUMe 10, iSSUe 3

HFMA LONE STAREXPRESSHealthcare Financial

Management Association

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o, why are some individuals a n d h o s p i t a l s / h e a l t h systems successful in negotiating their managed

care contracts? Do they have a secret method or are they just lucky? There are no ‘secrets’; however there is a strategist that provides the foundation for negotiation success. The strategist is Sun Tzu; he is the author of the Art of War and the ultimate strategist of Eastern thought. If Sun Tzu had a secret (which he doesn’t) it would be that he is a master in executing strategy. All of our negotiation efforts need to be organized around execution. For me, execution is the ultimate measurement of a leader’s performance; it is the

arTofwarby Neil Godbey

Negotiations is War: How to Winmain metric of a negotiating leader’s effectiveness. SUn TzU’S FiVe ConSTanT FaCTorS How does one become a ‘master of executing strategy’ during contract renegotiations? Always thoroughly assess the payor conditions before, during and after completing the negotiations process. Consider mastering the “Five Constant Factors” to ensure successful execution of your managed care negotiations. FACTOR 1: Moral Influence Which entity possesses the greatest moral influence ─ the payor or provider? Consider the following in determining the answer:

• Financial responsibility • Community responsibility • Moral responsibility Evaluate yourself (the provider) and the payor/insurance company; use a 5 point rating scale (5 is exemplary and 1 is unacceptable) to score your answer. This provides critical insight to Factor 1: Moral Influence.FaCTor 2: weather Which entity ─ you or the payor ─ has more favorable weather conditions? Think about, analyze and discuss the four items that impact both side’s weather quotient score: • Economic climate • Employment climate • Plan rate increase

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• Plan changes Make sure you fully understand both sides’ (provider and payor) scores before you proceed.FaCTor 3: Terrain Which of you has the advantage of the terrain ─ you or the payor? Know the battlefield ─ the ground ─ backwards and forward. Your ‘terrain’ score is determined by knowing: • Position: Use statistically sound modeling and market research to determine your strengths and barriers to success. • Leverage: Do you have stakeholders’ support ─ community, businesses, hospital board, management and physicians? • Strength of services: Are your services perceived by others to be the ‘best of the best’? How are you communicating this to your stakeholders? • Quality: Do you and the hospital live by quality standards? Is quality reflected by the hospital’s patient services and staff?

Determine where the payor is vulnerable before moving forward with your negotiating team. There should never be surprises if you execute using these factors. Keep in mind Sun Tzu’s thoughts as you master the weather and terrain factors: “Know the enemy and know yourself, and your victory will never be endangered; know the weather and know the group, and your victory (negotiations) will then be complete.”FaCTor 4: doctrines Research and understand both sides’ doctrines. Your doctrines are the functional principles that guide your actions during execution. Doctrines are: beliefs (values), principles and are laced with authority. Determine if you (the provider) use the following in executing your contract negotiations—they have been successful for others and me: • Benchmark your organization: Know exactly what is being

paid in similar situations almost anywhere in the country. Avoid the temptation to guess or accept across the board increases. Focus on creating contract grids (based on modeling) to outline contract terms. Know your market position to create the leverage points. Always live by these principles in order to be successful! • Learn from the past: Utilize your previous success and failures to develop and execute your negotiation plan. Remember: (rely) “on own readiness to meet him (the payor) and the fact that we have made our position invincible.” • Managed care strategy: Develop a comprehensive managed care strategy so you know where this negotiation fits in the ‘big picture.’ Consider other payor’s percentage of increase, language trends and ‘things’ that could

derail your execution. • Develop a plan: Always know your end game before you send expectations. Base this on facts, trends, key stakeholder support and your ability to execute. Remember: “If you are not sure of success do NOT commit your troops.” • Make time your ally: “a speedy victory is the main objective.” • Compromise your position to achieve end results: Apply Sun Tzu’s wisdom during execution.

“To subdue the enemy without fighting is the supreme excellence. Thus, the best policy in war is to attack the enemy’s strategy. The second best way is to disrupt his alliances through diplomatic means.”FaCTor 5: Commander I prefer to think of the Sun Tzu Commander as a leader who is wise, compassionate and invests in the long

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term vantage point. When you, the leader, prepare and execute use the following to ensure success: • Team of negotiators: The provider team must be diverse and highly skilled in communications, interpreting work/communication styles, asking probing/reflective questions and refraining from value judgments. • Commit to the approach: Simple ideas executed with gusto have a tendency to work. Be consistent, communicate often and openly and ensure that all key stakeholders are aligned and part of the ‘Sun Tzu army.’ • Well prepared: As the Sun Tzu Leader you must know more than the payor; do your homework and avoid surprises. Sun Tzu writes: “Know the weather and know the ground, and your victory will then be complete.” • Deliver your requirements first: During execution of your negotiation strategy leave your options open so you can take advantage of the best opportunities. Use the payor’s responses as you re-evaluate both the payor’s and your Weather and Terrain factors.

Sun Tzu sums up successful execution and taking the initiative as: “Generally he (commander and team) who occupies the field of battle first and awaits his enemy is at ease; he who arrives later and joins the battle in haste is weary.”aSSUring ViCTorY (a.K.a. SUCCeSSFUL ConTraCT negoTiaTionS) I’ve found that you can’t put good contract negotiation strategy on top of bad execution and expect the strategy to work! Planning is critical and execution is imperative. As you prepare and execute your next contract negotiations remember these 4 points. Each point predicts victory for you and your

managed care contract negotiations: • Knowing when to fight and when not fighting will win • Understanding how to handle both superior and inferior forces will win • Uniting all ranks (e.g. the negotiating team and stakeholders) in purpose will win • Being well prepared and lying in wait for the enemy (who is not well prepared) will win

one FinaL ThoUghT Mastering the Five Constant Factors

prepares you for developing your plan and executing your negotiation strategy. This takes the emotion and uncertainty out of the process. It also mirrors the wisdom of John F. Kennedy when he said: “Let us never negotiate out of fear. But let us never fear to negotiate.”

Neil Godbey, president of The Godbey Group, has more than 30 years of healthcare experience. The Godbey Group is the leader in provider contracting and reimbursement strategy. For information, visit www.TheGodbeyGroup.com.

Let us never negotiate out

of fear. But let us never fear to

negotiate.

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