When I conduct workshops about how to negotiate, I usually wear a particular tie purchased from an art museum gift store. This tie depicts the gaunt, stylized man in the Edward Munch masterpiece “The Scream.” The central figure is an almost skeletal wide-eyed man whose mouth is shaped into a scream, surrounded by portents of chaos.
This depiction, I suggest, captures the feelings most home care providers have about contract negotiation. This fear and loathing is a shame. Negotiation is something we must address in virtually every interaction throughout every day, and it is not limited to formal contract negotiation.
Improving our ability to negotiate generally pays big dividends. Conversely, we can learn much about how to negotiate contracts more effectively by observing how we handle our successful daily interactions with others.
We have previously identified negotiating “secrets” for myriad contracts with managed care organizations (MCOs), vendors, service providers and lessors. (See HomeCare, October 2004.) We evaluated secrets to implement before commencing discussions as well as secrets for initiating a dialog with the other party. Now, let's addresses some secrets you can use during the actual negotiation sessions.
Don't be afraid to ask
In beginning negotiations, always ask the other party to justify its assertions, and then determine whether the answer seems credible and realistic. Protect yourself by flagging all language that you're not sure about, and then ask the other party's representative to clarify each item. This includes seemingly straightforward words like “adequately,” “appropriate,” “insufficient” or “other” that people may interpret differently.
If the other party's representative fails to put the clarifications in writing or says he or she doesn't have the time, write down what you believe the ambiguous language means and ask the other party to confirm that your interpretation is correct. Then you can start to negotiate the more contentious parts of the contract without having to worry that you've lost bargaining chips just getting the clarifications or the easier concessions.
Most of the time, a contract can be improved substantially just by clarifying the unclear provisions. This secret can also be valuable for dealing with the “take-it-or-leave-it” bullies.
“Take It or Leave It.”
Sometimes the other party will lead you to believe that its form contract isn't negotiable. For instance, the other party's representative may give you a preprinted form contract already signed, and say that you must sign and return it within two weeks. Or the representative may tell you outright that the contract isn't negotiable.
Must you sign the contract as is? Not necessarily. Try these two tactics.
Tactic 1 — Treat the contract as negotiable
Despite this “take-it-or-leave-it” stance, the other party often allows at least some changes in every contract. This tough stand is a negotiating tactic. Most MCOs, for example, provide their negotiating representatives with a detailed set of instructions that gives acceptable fallback negotiating positions for each contract clause. So although there may be clauses that the plan representative can't negotiate at all, or without clearance from higher-ups, many can be changed or dropped.
But this can happen only if you ask for the change; a savvy company will never volunteer to make a change to its form contract.
Tactic 2 — Point out mistakes
Most contracts have at least one mistake that needs to be corrected. For instance, the contract may need a revision to comply with your state's new patient protection law. Or a proposed fee schedule may have omitted pieces of equipment that you and the other party had agreed would be part of the contract. Item 3d may be inconsistent with Item 14b.
Point out these problems and ask the other party to clarify or correct them. Virtually all parties will change their contracts to correct omissions, clarify ambiguities or fix inconsistencies. If not, remember the Rule of Courtship: Their attitude counts.
Once a party starts making changes to improve or correct the contract, the attitude of the party's representative about negotiating the contract often changes. Once you show that the contract really wasn't ready to be signed, the other party is often much more amenable to making other changes.
Check with your colleagues, either individually or through your trade association, to see what kind of success they've had negotiating this party's form contract. (Just don't try to compare fees, or you risk an antitrust violation.) If you learn that a company will negotiate a particular issue or grant a certain concession, that gives you ammunition you can use to get the concession yourself.
Horse-trading is for horses
Negotiate from the perspective of mutual fairness. Whenever you seek a concession, explain why it's fair. If it will benefit a MCO's members, emphasize that benefit. Always have logical reasons for what you want. If the other party's representative believes you are seeking concessions just to see what you can get, he will likely resist. Or, he may throw you a meaningless concession and dig in on the remaining points.
Before you dive in, find out how cold the water is
It may not be wise to start negotiating with your most important points. Often it's better to begin with something easy to get a feel for the process and other party's representatives. To establish rapport, deal with important but relatively simple issues first. Tackle the hardest issues midway, and end with lighter problems.
Also, rather than negotiating from page one of the contract, jump around to focus on highlights, especially when issues recur or when tough issues come up early. Generally, talk first about services or operational issues, not money.
Keep the negotiation moving by reaching agreement on fairly simple issues. Save up the significant open issues to deal with as a group.
Don't play with the trash
Concede truly unimportant points readily. You will get no credit with your boss for “winning” a meaningless point, and you won't likely trade an unimportant point for an important one.
Play to your strengths
Make sure the other party knows why you are a potentially valuable asset. If an MCO with whom you are negotiating is just starting out in your area and you have a significant patient base, for example, this access can be valuable.
Even if the MCO already has a substantial share of the local patient populations, your particular location (suburban/urban, near major employers, etc.) or the mix of your product line (prosthetics, respiratory, infusion) may be of special value. Perhaps you have a superior clinical reputation, or a proven ability to manage risks and hold down costs.
All roads lead to Rome
While negotiation is typically couched in terms of demands and desires, it is important to recognize the needs that underlie those demands. You can often reach an acceptable compromise by finding alternative ways to satisfy the other party's needs, or your own needs.
For example, if you're worried that an MCO won't be able to produce the necessary patient volume to create cost savings that justify your fee discount, you might try to negotiate a clause that postpones introduction of the plan's discounts until a certain patient level is reached. If the MCO won't go along with that idea, a compromise position might be to revert to a smaller discount, or to move from a capitated payment to a discounted fee-for-service arrangement if certain patient levels are not maintained.
Another alternative might be to negotiate the right to terminate the relationship if patient levels fall below an agreed-upon level, thereby cutting your losses.
In general, when an impasse develops on any issue, take time to think through new and unique solutions not previously offered. Off-the-wall thinking sometimes produces a creative solution to a seemingly insoluble problem.
You catch more flies with honey than with vinegar
Although some home care companies have found that confrontation will help them secure a favorable contract, conciliation is the best way to attain contracts and grow the relationship. Rather than “rattling the sword,” consider a business-oriented, peace-making approach.
After you, my dear Gaston
It is often to your advantage to try to let the other side make the next proposal. Even when you are prepared to concede a significant point, let the other side speak first.
If at first you don't succeed …
Save anything that isn't resolved on the first pass-through until after most of the bargaining is done. Then there's pressure to find common ground because the success of the entire negotiation hinges on resolving any remaining issues. Of course, this only works if the other party wants to do business with you at least as much as (they perceive) you want to do business with them.
Firm up?
A “soft” negotiator can always turn “hard” at the critical point in negotiations; it is much more difficult for a hard negotiator to turn soft and maintain credibility.
Reassess
Constantly revisit the validity of your initial assumptions. New facts learned during negotiations will often cause you to revise the relative importance of key issues.
Ready-fire-aim
There is nothing wrong with businesses negotiating aggressively, as long as it is with mutual respect and an eye toward building a long-term relationship that is mutually profitable. If you approach negotiation as the “Little Engine Who Couldn't,” you will end up with poorer contracts. Equally important, you will be viewed by the other party as a mere cog in its machinery. Negotiate hard, then honor the contract well. Delight the other party.
Create a “no testosterone” zone
On the other hand, remember your ultimate goal in the negotiations, and do not let macho negotiating trip you up. Many transactions fail to come together because of the egos of the negotiators.
It's alive!
A negotiation takes on a life and a momentum of its own. Do not press for closure before both parties are ready for it. Even more important, do not let an opportunity to close slip away. A person who is ready to reach agreement today may think of a reason not to by tomorrow.
Be realistic
Finally, most home care companies will not have the bargaining position (either through numbers or position in the marketplace) to allow a wholesale renegotiation of the original contract. You must usually accept the premise that much of the contract will remain as proposed. Negotiate what counts, and as much as you can, but don't expect more concessions than your value to the other party warrants.
These secrets can be effective tools in your negotiating arsenal. If these suggestions and tactics still seem too daunting, just try to make your next contract negotiation 10 percent better than your last one. Critique your performance, and focus on what skills you wish to improve before your next contract negotiation. You will be surprised how quickly you become a competent and effective negotiator.
Finally, for those of you still afraid to give this a try, I leave you with the words of Robert Louis Stephenson: “You cannot run away from a weakness. You must sometimes fight it out or perish; and if that be so, why not now, and where you stand?”
See “The Rule of Courtship and Other Secrets,” (HomeCare, October 2004) for more of Neil Caesar's thoughts on effective negotiation for HME providers.
Neil Caesar is president of the Health Law Center (Neil B. Caesar Law Associates, PA), a national health law practice in Greenville, S.C. He also is a principal with Caesar Cohen Ltd., which offers compliance training, outsourcing and consulting and the author of the Home Care Compliance Answer Book. He can be reached via e-mail at ncaesar@healthlawcenter.com or by telephone at 864/676-9075.
Materials in this article have been prepared by the Health Law Center for general informational purposes only. This information does not constitute legal advice. You should not act, or refrain from acting, based upon any information in this presentation. Neither our presentation of such information nor your receipt of it creates nor will create an attorney-client relationship.
