Tim, the vice president of a home care company, introduced himself to me at a health care seminar. “I really enjoy your articles and speeches,” complimented Tim. “I especially enjoy your ideas about negotiating contracts with managed care plans and other companies.
“But,” continued Tim, “much of it is ‘pie in the sky’ material for us. Companies just won't negotiate with us. They say, ‘Take it or leave it.’”
Translated, “take it or leave it” could mean any of the following:
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“The company gave us a preprinted contract and stated, ‘This is our deal.’ So, we assumed we could not negotiate.”
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“The company didn't seem receptive to getting into a negotiation discussion.”
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“They didn't want to talk about pricing.”
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“They got tired of talking about pricing before I was finished talking about pricing.”
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“This is too adversarial for me. I'll fix any problems down the line, after I sign.”
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“Negotiation makes me nervous.”
HME owners like Tim often tell me that negotiation is impossible. But contracts — and generally negotiations — are a fundamental and important part of the business for every home health provider. A home care company is foolish to accept bad contracts, or even contracts that aren't as mutually beneficial as they might be, especially when this is due merely to discomfort or lack of expertise with the negotiation process.
To move beyond “take it or leave it,” use the following negotiating “secrets,” which apply to all contract relationships involving home care companies including managed care contracts, vendor contracts, leases, service arrangements, joint ventures and other agreements. It is helpful to organize these secrets by the three discrete phases through which all negotiations progress. Phase I involves activities preceding meaningful dialog between the parties; initial communications between the parties begin in Phase II; and Phase III (to be discussed in a later article) is the actual negotiation dialog. In real life, of course, these time frames intersect and merge.
Phase I: Before the Dialog Begins
Keep your eye on the prize
You cannot negotiate effectively until you answer the key question: “What do I want from this opportunity?” While this question appears both obvious and simple, it is, in fact, neither. If a home care company seeks to prevent erosion of an existing patient base, for example, it should care more about contract security and patient protection than a company that seeks to penetrate a new market. A home care company willing to assume financial or other risks in exchange for greater reward should be particularly concerned with contract provisions that offer autonomy, clearly measurable roles and prompt informational support from the payer.
Unfortunately, many home care companies limit their self-assessment to: “Oh, no! If we don't sign this contract, someone will steal all of our patients! How much of a discount does the payer want?” Or, to say it another way, “Can I make this bad dream go away?”
This is a shame. When the negotiation process is shaped by a thorough and realistic assessment of your needs and goals, it will be far more likely to lead to contracts that are profitable and satisfying for the long term. Conversely, a careful and realistic assessment will help you quickly identify when another party is unable or unwilling to offer any attractive contract. A little forethought will go a long way toward successful negotiation.
Know thyself
Your internal assessment of needs, wants and goals can be broken into three self-assessment tasks:
Task 1 — Determine what you can afford, or are willing to accept financially.
Task 2 — Determine what you can manage, and are willing to manage.
Task 3 — Determine what support and/or protections you will need from the other party to achieve the fiscal comfort level identified in Task 1, and to manage the contract relationships effectively per Task 2.
Don't start to negotiate until you can answer these three questions.
Why should they care about you?
If you cannot differentiate yourself from other companies by virtue of reputation, risk-taking, reliability, accountability, creativity, scope of services or enhanced results, then you will be regulated to the bottom of the deep, deep pool of fungible, good-quality home care companies — who are told what they will be paid (or will pay), what services are included in that payment and what administrative and reporting quotas they must satisfy.
It is important to negotiate carefully in order to find out how you can position your company to offer superior value because of enhanced services, greater reliability, higher creativity, prompt availability, minimal “special circumstances” and/or higher patient satisfaction — thanks to clear and realistic contracts, negotiated well.
Walk a mile in their shoes
Work to understand the underlying needs of the other party. If you know what is really important to the other party, you can negotiate your key points and their key points much more effectively. This means that much of the negotiation process actually takes place outside of the other party's presence as you investigate their background, reliability, history, strengths and weaknesses.
This information is key for two reasons. The investigation will help any home care provider assess whether (a) to get involved with the other party at all and (b) to identify which weaknesses need to be addressed during the subsequent negotiations. In other words, effective contract negotiation requires you to resolve issues created by both parties' needs and idiosyncrasies; you can't negotiate effectively without this information.
Peer review
Learn how the other party has worked with your colleagues (or perhaps home care companies in other communities), how effective and responsive it is when problems arise and how quickly it honors its contract obligations (payment timing, delivery of services or supplies, repairs, etc.). Consider whether a preliminary conversation with the other party's representative can help to establish some of this information while creating camaraderie and mutual respect that will carry over to the negotiations. Plus, you will learn much from whether their answers confirm or contradict what your colleagues have said.
Be selective
When evaluating whether a particular company is an entity worth the time and effort of negotiation, be selective. Not everyone is worth a contract. Sometimes the other party is a poor partner under any circumstance. More often, the contract relationship is not worthwhile because of your company's particular needs or goals.
In any case, remember that the single greatest weapon in your negotiation arsenal is the word “no.” If you are willing to say no, and if you are willing to walk away from the negotiation, you should be able to negotiate a far more favorable contract than if you are willing to sign the document regardless of whether the other side gives you any particular concessions.
Phase II: Beginning the Relationship
Know what you want and what you'll settle for
Know in advance where you are willing to compromise (payment timing, product selection, services, delivery dates, etc.) and where you won't compromise (no indemnification, right to terminate if volume shrinks, prompt repairs, etc.). Until you set priorities, you can't present them effectively.
Your attitude counts.
Develop positive rapport with the other negotiator. It is almost always easier to reach agreement on business issues with someone with whom you have formed rapport on nonbusiness issues.
The best approach for successful negotiation is to treat the other company and your own company as businesses. This means you should seek long-term relationships only with those companies you respect, and only with those companies that respect you. Part of this respect will come when you find something of particular value to offer the other party — cost, or even better, a willingness to demonstrate superior quality, provide highly satisfying services, provide enhanced services or take on financial risks.
This also means that you should insist on value from the other party. Why offer loyalty, a long lease or a payer discount unless the other party is giving you loyalty, low rent, quick payment or quick service, new market penetration, top quality services, high volume, simpler administrative rules or some other benefits? Once you identify what those items of value are, you are ready to make sure that the contract offers them clearly and unequivocally.
If you approach negotiation professionally, with preparation and the right attitude, your efforts will produce better contracts. Moreover, your professionalism will demonstrate that you should be treated by the other party as a peer and a partner.
A calm, professional attitude toward negotiation conveys a professional approach that will yield more compromise than will an overly emotional or arrogant attitude. Also, a professional approach toward negotiation often suggests to the other party a professional approach to serving patients. This may make your company more valuable to the other party, yielding further concessions.
Larger home care companies should establish a negotiating team. This team should be small; generally no more than two or three of the company's most articulate and business-oriented officers. Team members may not be the best-known officers in the company, or even the ones who care the most about business issues. You want representatives who will earn the respect of the other party's representatives, who are well-organized and who approach negotiations from a professional perspective.
If you are a member of the negotiating team for a large company, or are conducting your own negotiation in a small company, cultivate these attributes in yourself. If the other party's representatives try to contact someone who is not on the team, the representative should be referred to one of the designated negotiators. This will help to avoid crossed signals and confusion as negotiations proceed.
The Rule of Courtship — their attitude counts
Perhaps the foremost “secret” to successful contract negotiation is to assess the other party's attitude. Remember that any business negotiation is like a new romantic relationship. Courtship is the first phase. And the cardinal rule of a courtship is this: They don't treat you better after the marriage. If your girlfriend gives you the runaround, if your boyfriend acts arrogant or if he is bumbling when trying to impress you, it will not get better after marriage — when he or she no longer has to woo you.
The same rule applies to contract negotiations. How the other party behaves is just as important as what substantive provisions you discuss. Is information forthcoming? Is the party friendly and professional, or belligerent and arrogant? Are promises kept? When copies of documents are promised, are they delivered in a timely fashion? Do such materials accurately convey what they have been represented to say? Do promises generally seem reasonable or unrealistic?
If such red “courtship” flags wave during negotiations, it's wise to rethink whether or not you want to deal with the other party. It's a mistake to think that if something doesn't work or you don't like it, you can just get out of the contract. In many instances, your contract is automatically renewed unless you initiate some action to cancel it before the deadline. Besides, who wants to hang around in a bad marriage?
There certainly may be times when you want to pursue a contract relationship with an inexperienced, low-funded, arrogant or inflexible company. But do so knowingly, and only because you perceive that the relationship will be worth the effort despite these deficiencies.
These preliminary negotiation activities require work. But they also can mean the difference between marginal and highly successful contract negotiations.
Three Negotiating Rules
All competent home care companies must follow these three cardinal rules when negotiating contracts:
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If you don't ask for it, you won't get it.
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If you don't deserve it, you won't get it.
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If you do deserve it, you must explain — or, even better, demonstrate — why you do deserve it.
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.
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.
