Negotiating Second-Generation Contracts

Abstract

As contracts between health systems/hospitals and physician groups approach their renewal dates, negotiations for second-generation contracts must consider the lessons learned from previous contracts and the changes in the healthcare industry. While productivity is still a significant factor in these contracts, changes in reimbursement paradigms, structural changes, and corporate entities must also be considered. A thorough financial analysis, an issues tracker, a letter of intent, and definitive agreements are tools that can facilitate the negotiation process. Keys to a successful negotiation include respecting the changes in the industry, delineating the key needs and expectations of both parties, creating a negotiation subgroup, avoiding misunderstandings, and allowing for changes in the future post-transaction. Ultimately, the negotiation process should be collaborative, communicative, and transparent. These considerations, along with a give-and-take spirit by both parties, can lead to a successful second-generation contract.