Win-win Negotiations: How to Pilot Through the Pitfalls

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 - Kenneth Davis, Jr., Esq.
Kenneth Davis, Jr., Esq.
The nature of exclusive provider agreements between radiology groups and hospitals has changed dramatically in recent years. From increasing "carve outs" to exclusivity, to constraints imposed by payor participation agreements, there are many potential stumbling blocks practices must dodge when it comes time to negotiate their next contract.  

 Over the past decade, there has been a trend to reduce group exclusivity in certain areas while obligations to provide coverage might remain.

Davis: Agreements have whittled away exclusivity for the radiology practice, and yet the group often continues to have contractual obligation to provide off-hours coverage. It's not fair that a radiology group doesn't have the exclusives for interventional radiology, for example, and yet it is obligated to provide 100 percent of the call and coverage.

Increasingly, what we see is the position that many radiology groups take—and hospitals are open to this—is to say, 'any services we provide that are exclusive will include 24/7/365 coverage, we'll be on call, etc. But anything that isn't exclusive, we're going to have to create a mechanism where the coverage and call obligation is equitably allocated among physicians who provide those services.'

 Pitfall:  Hospitals are pushing for broad payor participation agreements from radiology groups, binding the groups to accept the terms of fee schedules negotiated by the hospital. Without the capability to refuse the terms, these agreements can undermine a practice's leverage with payors.

Davis: This is the most contentious issue that hospitals and radiology groups face. Part of the solution is trying to find ways to give the hospital some assurance that the radiology group is going to come along with the hospital without tying the practice's hands too much. This might include language that says the radiology group will accept reasonable compensation in light of market conditions.

This is the ultimate slippery slope for the radiologists because once they give up payor discretion, they have completely lost control of the economic side of their practice.

 Pitfall:  As hospitals face financial struggles, they are cutting compensation for radiologists serving as medical directors, while increasing their responsibilities.

Davis: Many hospitals are asking the radiologist who is acting as the medical director to do more and more. What 10 or 15 years ago might have consisted of three or four sentences has morphed into three or four pages of very specific position descriptions and responsibilities.

In addition, the radiology practice should make it clear that medical director services are provided by the group, and that whoever is acting in the medical director role doesn't have personal liability to the hospital.

 Pitfall:  Agreements increasingly feature performance standards, not all of which are reasonable.

Davis: Be careful of overly broad performance standards that aren't clinically based, ones that are unreasonable or ones that the group could never achieve. Practices don't want to agree to performance standards where the radiology group doesn't have control over the capability to execute them. Take, for example, a standard that says all studies will be read, dictated and a transcribed report will be ready in one hour. If the hospital doesn't have the transcription capabilities to make that happen, it would be unreasonable for the hospital to request the standard and it would be unwise for the radiology group to agree to it. It's out of the control of the radiology group.

The other pitfall is subjective performance standards such as  patient satisfaction ratings or referring physician satisfaction ratings. That's not to say they are bad to monitor, but they shouldn't be a measure that forms the basis for terminating an agreement.