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Leadership skills can help doctors gain power during negotiations

Employing one’s leadership skills when negotiating with health plans may be the difference between walking out with a signed contract or leaving empty-handed.

“When you’re in a leadership role, you’re negotiating all the time. You’re either trying to get people to follow your lead or bring people together by solving their differences,” noted Jennifer Lucas, MD, associate staff in the department of dermatology at Cleveland Clinic, who serves on the AAD’s Leadership Development Steering Committee and directed a leadership session at the most recent Summer Academy Meeting. These same leadership skills can be used to successfully negotiate payer contracts and agreements with accountable care organizations (ACOs).

While negotiating with a managed care plan and an ACO involve similar skills, it’s important to remember that the mindset across the table may differ. “ACOs need us and want to negotiate with us,” said Mary Maloney, MD, chair of the Leadership Development Steering Committee and chief of the division of dermatology at the University of Massachusetts in Worcester. “Big payers feel like they have more control than us.” In either case, she said, good negotiation skills are key. [pagebreak]

Know your strengths

While a dermatologist in solo practice may feel like David going up against Goliath, size is not always the decisive factor in negotiations.

“Dermatologists may not realize how much leverage they actually have,” said former AAD president David Pariser, MD, who is in private practice in Norfolk, Va. A dermatologist who provides care for a significant number of a health plan’s members, either as a solo practitioner or as a member of a larger group, has leverage in negotiations because health plans don’t like to have major disruptions in their members’ care, he said. Having the availability and capacity to serve a health plan’s members in a market where dermatology appointments take weeks or months to schedule are also strengths. Having a practice in a geographic location where the health plan needs a dermatologist is another form of leverage because they don’t like to have holes in their network, Dr. Pariser added. Offering full-service dermatology, not just medical dermatology, is another strength. Offering pediatric dermatology, dermatopathology, and Mohs surgery, for example, keeps the plan from having to shop around for other dermatologists to provide such services.

Think about your unique value proposition before you negotiate. “When dealing with large payers, you have to give them a reason to negotiate with you,” Dr. Lucas said. That reason could be that you are the only Mohs surgeon for 100 miles or that you are available to schedule evening appointments. “It’s about what you bring to the table.” [pagebreak]

Bringing alternative employment options to the table also may work to a dermatologist’s advantage, added Rochelle Torgerson, MD, PhD, assistant professor in the department of dermatology at the Mayo Clinic in Rochester, Minn. Providing coverage in an underserved area through teledermatology, telecommuting, or working a scheduled block of time, such as 10 straight days, in the area, are options that show initiative by thinking outside the box and an eagerness to work together — two prized leadership skills.

Quality measurement

Demonstrating quality in the new world of health care reform is increasingly important. Dermatologists should inform an ACO of their involvement in quality improvement projects, perhaps as part of their participation in Maintenance of Certification, or participation in the Medicare’s Physician Quality Reporting System. “ACOs are very interested in measuring quality and knowing that you are already doing this is a strength,” Dr. Lucas said.

Be prepared

Being prepared is another leadership skill that is beneficial when negotiating. For example, know the market and specifically the health plan’s service area and how many dermatologists currently serve its members. That way, you will have a sense of how many dermatologists the plan may need and whether it needs them in an area you want to be in, Dr. Torgerson said. If a particular part of its service area is underserved, then the plan will need to negotiate. [pagebreak]

Dermatologists should come to negotiations with knowledge about their revenue and expenses and have reviewed the data to back it up, Dr. Maloney advised. “You should know your financials, but not necessarily share them with the ACO before agreeing on a realistic profit margin,” she cautioned. “If the ACO develops a plan that nets 1-5 percent revenue over expense, this will probably be a poor business model. But if the proposed profit approaches 20 percent, then you have a starting point to work from.” At this point, the many other issues besides financial issues can be negotiated.

Dermatologists negotiating with an ACO that pays on a capitation basis will want to know the ACO’s statistics regarding the number of patient visits and complexity of the patient population, Dr. Maloney said. “You can compare what the ACO will pay you per patient versus what your expenses are to determine if you are getting a fair return. You may not have that information walking into negotiations or you may need a little time to think about whether this type of model will work for you. Either way, it is certainly acceptable to suggest taking a few days to review all you have discussed and schedule a follow-up meeting.”


Leaders also know that compromising is an alternative to outright accepting or rejecting an agreement that helps build relationships. Turning a negotiation from a positional argument in which one party wins and one loses to finding areas of mutual agreement helps two parties reach a compromise, Dr. Lucas said. So does figuring out the other person’s reasoning behind the position that he/she has taken. [pagebreak]

Sometimes physicians won’t compromise and sometimes it’s the health plan. “If you have good leadership skills, however, you can circle back to an issue that you agree on,” Dr. Maloney added.

Some issues, such as patient care, are not up for compromise. But others, such as the type of provider the patient sees or number of follow-up visits, may be. For example, if the ACO wants patients to see a nurse practitioner versus a physician for their initial visit, the compromise may be that uncomplicated patients can see the nurse practitioner and more complex patients must see the dermatologist. “Know what you will compromise on and what you won’t,” Dr. Maloney suggested. “Find common ground before you talk about things you don’t agree on.”

Length of the contract may be another item worth compromising on. “Building very specific wins and losses into a one-year contract is a long-term commitment that you may not feel good about,” she said. One option may be to sign a short-term contract and start a pilot program to make sure that the assumptions the contract is based on are correct. For example, the dermatologist assumes that the ACO will send him/her 1,000 patients, but the pilot project reveals the actual number is 100. After the pilot project ends, discuss the reality as well as the unintended consequences to hash out a longer-term contract based on more realistic assumptions. “This makes you look like you want to work with the ACO and make it a win-win situation,” Dr. Maloney said. [pagebreak]

Having said that, she cautioned against “calling it a compromise when it’s really a loss. If you’re cut below costs, that’s a loss, and you will always be taken advantage of.”

Be self-aware

Along those lines, knowing one’s bottom line is crucial. Before entering into negotiations, decide what issues are not negotiable. For example, is it salary, patient access, or return visits? “That way when these issues come up, you’re well-prepared to discuss them,” Dr. Maloney said, adding, “Be clear about the deal-breakers.”

In addition to knowing what they can and cannot accept, dermatologists should know the “best alternative to a negotiated agreement” or BATNA, Dr. Torgerson advised. The BATNA could be negotiating two different jobs in the same city or it could be telecommuting. Dermatologists should spend a lot of time determining their BATNA before they enter negotiations. “Brainstorm options making sure to think outside the box, narrow down to the apparent best at a gross level, research and get detailed information on a few, and then choose best,” Dr. Torgerson advised. “A BATNA cannot be an unattainable generalized pipe dream (e.g., there are oodles of people who would hire me to work one day a week for a million dollars). A BATNA is also not the conglomeration of a wide variety of options (e.g., I can live on the beach, in the mountains, in the south and the north...I can do pediatric derm three days per week, surgery four days per week, cosmetics two days per week, volunteer at the free clinic one day a week and see hospital consults two days per week, all in a five-day work week). It is the single, specific, well-researched best alternative,” she said. [pagebreak]

“Your BATNA will keep you from accepting an agreement that you should reject,” Dr. Torgerson said. “Use your BATNA as the standard that all proposed agreements are measured against. If the offer is better than the BATNA, accept it. If not, reject it.”

While payment mechanisms may be at the forefront of negotiations with ACOs, dermatologists may have to accept payment other than fee-for-service. Thus there are other issues of equal or greater concern that could be deal-breakers, Dr. Pariser pointed out. Among them are the definition of medical necessity, the policy regarding off-label treatments, and the use of formularies. Vitiligo, for example, is considered a cosmetic condition by health plans and therefore treatment isn’t medically necessary. In addition, many health plans deny coverage for certain treatments because they are not approved by the Food and Drug Administration (FDA) for specific indications, yet these treatments are standard of care. “Physicians are within their legal, ethical, and moral right to use off-label treatments when they are standard of care,” he said. The health plans won’t cover the non-FDA-approved treatments, but will require their use before paying for a more expensive FDA-approved therapy. An example is the off-label use of antibiotics to treat acne, which is required by many plans before they will pay for treatment with isotretinoin. The use of systemic drugs for hyperhidrosis is off-label, but plans almost always require a six-month course of it before allowing a more expensive treatment of botulinum toxin, which works much better. “These issues can make physicians’ lives either miserable or tolerable in the world of managed care,” Dr. Pariser said. [pagebreak]

If these are deal-breakers, the biggest leverage a dermatologist has is threatening to drop the plan if they do not give some concessions, he said. “But that’s playing with fire because sometimes the plan will let you walk.”

Communicate effectively

Relaying one’s bottom line requires finesse, especially when the dermatologist may want to keep the door open for discussions in the future. But communicating effectively refers to both talking and listening. “Your ability to communicate and actively listen can help bridge gaps,” Dr. Lucas said. “But half the time we don’t listen because we’re too busy thinking about our next argument, so we’re not hearing what the other party is saying.”

While negotiations are intense by their very nature, they don’t have to become a battleground.

Dermatologists should keep their emotions “in check” and be sure to separate the individual from the issue, she advised. “In a good negotiation, you get what you want or at least not worse than what you started with, and you do so without ruining the relationship.”

Dr. Maloney concurred. “If you feel yourself starting to get angry or frustrated, take a step back. You may even want to say let’s go back to things we agree on.’” [pagebreak]

Using data helps leave one’s emotions outside the door, she said. “When you are able to pull up data that show you saw two of the plan’s patients each day for the last six months when the assumption was that you would see four, it’s not a point made in anger. It is simply the data and they can’t argue with the numbers.”

Even if the other person says that the negotiation is over, disengage, go home, and run the numbers, Dr. Maloney said. “Come back and present the deal that you want. This signals that you want the negotiation to be successful.” If both parties still can’t agree, suggest meeting again in three months or so, she advised. “That gives the plan some time to do a pilot project with another physician and gives you an opportunity to get back in the door.”

Remember, a negotiation is not about whipping out an agreement. “Ask yourself, do I need to get a deal finished today or build a relationship?’” Dr. Maloney concluded. “I think we all forget about that as soon as the negotiations become intense.”