The High Road is the Best Road in Negotiations

There is a hospital system in a large metropolitan city, it is the premiere hospital for labor and delivery and has other significant service lines such as oncology, orthopedics, and crucial services. But above all it was known for the maternal program, women reported it was more akin to delivering at a high-end hotel rather than a hospital; so, let’s call it Best Baby Hospital or, because we all love acronyms BBH.

BBH was an incredible operation, flush with cash, with a stellar reputation for quality and patient experience. Due to its reputation and its location in the major city, the system delivered a staggering 60% of the babies in the state.

Despite being known for being the maternal hospital of choice, BBH nonetheless set about a strategy of contracting with payers on an exclusive basis – meaning that BBH would be in network with the insurers if – and only if – the insurer excluded several hospitals around the service area. These included a few small facilities that were struggling, but also the premier heart hospital (BBH was NOT known for hearts), and a successful community hospital in the suburbs.

All the major health plans had capitulated, providing BBH with an exclusive relationship and thereby removing the commercial revenue from these smaller, yet vital hospitals.

Our health plan was, in the eyes of BBH just another health plan – and so let’s call us Another Health Plan or AHP. AHP was the last in a line of payers to enter negotiations. Internally we were divided, some of our team sought to settle – who can fight a baby hospital, they asked. The rest of us wanted to fight. Those who wanted to fight felt that we had ‘right’ on our side. Squeezing out competition was not good for the city long term, costs would rise and BBH would call all the shots, but worse, we lived in a city with terrible traffic and a woman in labor would be forced to drive by the shuttered hospitals on their way into the city, the risks of what might happen were simply too high for us to be comfortable.

Our CEO (let’s call her Lynne) became convinced that we needed to be on the right side of this, but her upstream management was far from supportive – in fact, her boss made it crystal clear that if we failed, we would all be fired.

Lynne formed a small team to be solely dedicated to this – all other responsibilities were off-loaded to other staff. Lynne’s team had “Sue” who ran all communications and public relations, “Mike” who oversaw network contracting and provider relations, “Ellen” who was on point for physician contracting. Other members of the team were legal, finance, and other functional areas.

Lynne authorized Mike to send notice to BBH that AHP was not willing to discuss exclusivity under any circumstances, the notice made it very clear that the issue had nothing to do with money and everything to do with patient safety, quality outcomes and patient experience.

BBH responded with a termination notice and a press release warning people that in just three months, BBH would not be in network.

The major news outlets were always looking for a story; they presented it as two mammoth organizations engaged in a cage fight; but the newspaper had a reporter who wanted the ‘real story’; we told him that we would give him unfettered access to us every day, and that we would talk with him first before we announced anything or talked to other media; all that we asked in return is that he present the facts be fair.

Over the course of the next several weeks, we stayed on message; we were unwilling to make a decision that would place a woman in danger of delivering on the highway, due to BBH’s demands. BBH tried several tactics, painting AHP as the villain, as a greedy insurer, but when at the same time while offering us a deep discount if we would just agree and make this all go away.

The negotiations were not bound by confidentiality, as our lawyers confirmed, so we shared the information with the reporter under the condition that he would not use any details. We also said publicly that we would sign an agreement today with rates proposed by BBH, but not with the language that jeopardized the weaker hospitals. Proving it wasn’t about the money.

As the date of the termination neared the pressure was enormous on Lynne, but she remained resolute and her team was inspired – we worked 12 to 15 hours a day, mostly on messaging, positioning, and maneuvering.

Each day a new story hit the front page with headlines increasingly stating that AHP was (to the surprise of most) the good player, and that BBH seemed to be all about dominating the market. BBH’s sterling reputation as a benevolent provider of maternal care was becoming tarnished, and AHP was seen as the defender of hospital choice.

As the date approached, Ellen came to Mike with a plan. She said that the OB/GYN group that practiced at BBH felt underappreciated by BBH, and that while they preferred to work at BBH, they were open to moving to another facility, but it was going to cost AHP 30% more. Optically, that seemed like a bad move, but the requested rate was fair for the region. Mike approved the deal and Ellen got it done.

The next morning the paper’s headline announced that the OB group had reached an agreement with AHP, and the group assured patients that they would remain in-network and deliver at other in network facilities.

Lynne received a call from BBH’s CEO (“Rich”), who said that he wanted to meet her; Lynne said that she was open to a meeting but there were two conditions, first he would need to come to her office and second, he would have to agree before the meeting that the exclusive language was off the table. He agreed to both. He asked that they meet after 5:30 pm so that the meeting could be held without lots of staff around; Lynne agreed.

Our communications team called the media and told them that Lynne would hold a press conference at 6:30 pm, at her offices. Rich arrived to a largely empty parking lot, the meeting took place in Lynne’s office. After some posturing on Rich’s part, Lynne pushed forward and asked what was Rich willing to do. His proposal removed the exclusivity requirement but increased the rates – this, he claimed was the way to end this. At that point, Rich noticed several news trucks pulling into the lot; Lynne saw Rich’s gaze and told him that they’d have a deal if the previous proposal was honored, and exclusivity removed. She then told him that they could walk down together and update the press. Rich had very little choice, a prepared LOI was pushed in front of him, he signed, the deal was essentially done, and Lynne invited Rich to join her at the press conference; Rich opted to leave through another door.

There are a few lessons to be learned here:

• Disputes over money are repugnant to almost everyone; but a fight over principle can be a powerful force.
• Messaging must be simple enough for the average person to understand. Complicated messages at best confuse people and at worst make people feel you are hiding something.
• The media battle was central, but the deal with the doctors was the blow that turned the tide. While Rich and his team worried about the media, no one expected the doctors deal and when the news came out it hit the economics of BBH and deflated the worries and concerns of patients.
• AHP’s stand had a knock-on effect, the other payers locked into these exclusive arrangements demanded that BBH release them from these terms as well; Rich, unwilling to take more heat in the press, willingly agreed.