Healthcare Economics: Negotiation Strategies for Service Contracts

Running head: HEALTHCARE ECONOMICS
HEALTHCARE ECONOMICS
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1HEALTHCARE ECONOMICS
Hospitals and physicians have to deal with care contacting challenges that are unique in
nature. There is often a need to maximise the reimbursement of the physicians across the various
specialities. This helps to integrate new ways of practise into the medical system of the hospitals and
evaluation of the fee schedules. Additionally claims are made for troubleshooting the timely payments
and promoting marketing practices to more number of patients (Francalanza, Gauci & Pace, 2013).
This paper aims to analyse the methods of negotiation of the service contracts between the
physicians and the hospitals with the third party payers. Additionally the paper illustrates the
strategies are identified with helps to reduce the risks of contract negotiations along with suggestions
of recommendations to improve the service-delivery contracts.
With the aim of sustaining viable revenue, it is required for the physicians and the hospitals to
come to a negotiating with the third party payers regarding the payer contracts. Clarity should be
present in the understanding of the principles of business and the recent market trends along with the
delivery cost of high quality healthcare (Klein, 2017). The physicians and the hospitals, who are
involved in negotiation review the legal documents carefully before proceeding with the contract
negotiation. While negotiation a demonstration of the values is conducted in terms of the data along
with cost effectiveness and the quality of care. In addition the long term goals are also considered that
tend to benefit the team as a whole. Prior to the negotiation process, the organization primarily
conducts a SWOT analysis in order to identify the strengths, the weaknesses along with the threats
and opportunities that are related to the practise (Francalanza, Gauci & Pace, 2013). Such strengths
might be recognised by reviewing the patient number involved in the plan, revenue utilization and
quality measurements. Additionally utilization reports are created. For negotiation, the hospitals and
the physicians meet with the representatives of the third party payers.
Under the fee-for-service system (FFS), there is a provision to visit the physician whenever
it is necessary whereas under the managed care model, a heavy financial incentive has to be met to
see the physicians, only if the physician is affiliated with the plan. There are several other differences
within the two systems in terms of methods of payments like in the FFS system after paying the yearly
deductible, there will be a need to pay the physician's bill up front (Schroeder & Frist, 2013). A claim
of reimbursement will be needed to submit for a certain percentage of the amount. Whereas in
managed care charge of co-payment will be required while seeing a doctor. In the recent scenario of
healthcare, there is a transition from the fee-for-service where the hospitals requires the information