Planning Strategies
You Can Negotiate Effectively
In any situation, identifying each party's interest is the key to a favorable outcome.

BY RICHARD E. GABLE, PH.D., M.B.A., CEO

Many practice administrators and physician executives are currently in the process of renegotiating their managed care contracts, atempting to obtain increases in service reimbursements.

Practices are also working to reduce their future overhead by negotiating new 2002 agreements with outside suppliers and/or landlords. And some practices are in the process of negotiating physician buy-in arrangements, or trying to persuade their employees to accept a new compensation plan.

Do you understand your own self-interest as well as the interests of the other party when you enter into a negotiation? In this article, I'll explain why assessing these interests is central to being an effective negotiator. Next month, I'll go into some of the nuances of negotiation, including typical tactics that parties use to get their way.

NEGOTIATION IS AN ART

Negotiation is the art of settling disputes or differences between two or more parties. Another simple way to define negotiation is by saying that any time you're trying to influence a relationship in any direction, you're in a negotiating process.

Understanding your own interests and goals is fundamental to any successful negotiation. Knowing what you're trying to achieve requires, at a minimum, some honest introspection. Usually, it also means:

• collecting information or data
• anticipating the business implications of various outcomes
• considering the personal and interpersonal implications of various negotiation outcomes.

One of the most important considerations before you even begin a negotiation is to identify your "reservation" price. This is the point beyond which you are willing to walk away from the negotiation. For example, after evaluating your local senior HMO's utilization, cost and actuarial data, you decide the lowest capitation rate the practice can accept is $6 per member per month.

Before entering a negotiation, you must also determine your "Best Alternative to a Negotiated Agreement" (BATNA). Your BATNA is what you'll do if the negotiation fails. For instance, what's your plan if the HMO refuses to pay $6 per member?

WHAT DOES THE OTHER SIDE WANT?

In addition, you must know your opponents. What are the other party's needs and desired outcomes from this negotiation? What's their reservation price? Take some time and attempt to assess their BATNA.

The term "negotiation dance" has been used to describe the maneuvering and give and take that occur between parties. The "dance" takes place between the reservation prices of the adversaries, in an area called "the zone of agreement." The zone of agreement for an office lease could range between a low of $13.50 per square foot (bottom line), the landlord's reservation price, and a ceiling of $16 per square foot, your practice's "walk away" figure. In a successful negotiation, the final lease price will fall somewhere in between.

THE ELEMENTS OF NEGOTIATION

It's useful to separate a party's interests from his positions. Positions are the items placed on the bargaining table. They're specific goals or outcomes desired from the negotiation. For instance, positions may include carving out tertiary services from your ophthalmic medical/surgical capitation contract, or asking your landlord to pick up the cost of snow removal and landscaping services for your office property.

Interests reflect a party's needs, wants and fears. They're the basis on which a negotiating position is formed. In effect, interests motivate the formation of positions. Interests should be based on fundamental issues, such as achieving financial stability, obtaining a fair deal, or preserving a relationship.

Next month, I'll describe the moves and countermoves you can make to gain control of a negotiation.

Dr. Gable is chief executive officer of Dynamic Health Connections, Inc., in Lake Forest, Calif., which provides specialized consulting expertise for subspecialty physician groups, managed care organizations and other medical organizations. You can reach him at dhc38@aol.com.