Negotiating Rx: Pro Tips for Physicians and Physician Groups

Physicians and advanced clinicians spend years mastering their profession, and dedicate their lives to using these skills to help others. But in their years of rigorous training, most will never take a course in negotiation, business law, or contract management. 

When it comes to protecting their own interests during a merger, acquisition, or partnership agreement, providers benefit from outside guidance and support, says physician mentor and consultant Tom Davis, MD, FAAFP. Davis, a physician advocate who coaches practitioners through career transitions and practice mergers, offers the following guidelines to help physicians minimize unpleasant surprises during and after contract negotiations.

“The most important guideline for the smaller practice is to seek the entire value of the acquisition up front. Often during these negotiations, the larger entity will offer a certain percentage of the acquisition’s total value up front, like 50 percent, and the rest of the value is said to come from joining the network. Those types of contracts tend to be less beneficial for the solo provider or the smaller practice. Even if the full value of the acquisition is paid over several years or partly held in escrow and paid later, seeking as much value as possible up front protects the interests of the smaller practice.”

“In any consolidating industry, including healthcare, the larger entities have considerable influence over the legal resources in their region. This means that physicians or physician groups in contract negotiations with a large healthcare organization may have trouble finding unbiased legal representation in their area. This may cause them to settle for a lawyer without the expertise they need. The best tactic is to go outside your area and find a high-quality attorney who specializes in arbitration. The fact is, physicians are at a tremendous disadvantage in negotiations with an acquiring entity. Get somebody in your corner.”

“As a physician, you’re bringing your skills and talent to any organization you join, which is factored into your contract in the personal-services agreement (PSA) that is usually part of any merger or acquisition. But you need to decide how long you want to commit to working for the organization, because you don’t know yet if it will be a good fit. Do you really want to commit to working for the organization for five to seven years, for example? Would you be willing to take less money up front in exchange for a shorter PSA? Know the financial value of your time, and factor that into your negotiation. Make sure the non-compete agreement aligns with your goals: if you want to continue practicing in your local area, you may want to negotiate a shorter non-compete so that you’re not prevented from practicing locally if you decide to leave. But if you’re flexible on your location, you may be able to use a longer non-compete agreement as leverage.”

In conclusion, Davis recommends the DVD set Negotiating Skills for Physicians, produced by educational publisher SEAK Inc. “This should be mandatory for any physician entering contract negotiations,” he notes. “It provides a real-world view and demonstrates the subtleties that any skilled physician is smart enough to acquire, but may not have had the time to study. After viewing this set, physicians will have a better idea of the counsel they’ll need during the negotiation process. Because you don’t know what you don’t know.”