Exclusive Contracts

An Exclusive Contract Renewal Choice: No Thank You

May 29, 2013

Hospital-based medical groups are often faced with a choice upon exclusive contract renewal:  The expectation or demand on the part of the hospital that the group must provide its services, perhaps even at a higher level of intensity, for lower or no stipend support.

A group enters into an exclusive contract in order to protect its turf. In return, it takes on the obligation to provide coverage. But if, without stipend support from the hospital at an acceptable level, the group cannot recruit and retain its providers, then, if we assume that its billing and collections have already been maximized, the group has only a few choices if it wishes to remain committed to the obligation to provide coverage:

  1. It can negotiate a more efficient coverage schedule.
  2. It can reduce compensation to its existing providers.
  3. It can attempt to find new providers willing to work for less.
  4. If applicable in the medical specialty, it can shift work to allied healthcare professionals.

Alternatively, and usually not considered, the group can choose not to renew the contract. If the group had adopted a business-like attitude, it will have already expanded its business to other facilities. If it hadn’t expanded, the choices are closing up shop — there’d be no reason to exist — or to attempt to continue to provide services at the facility on a request-only basis, perhaps with a pared-down staff.

Most group leaders will probably consider that last option unworkable.  But query whether, with more hospitals pushing for lower to no stipends, and with regional groups having the power to walk away from unprofitable deals, whether more hospitals will be left begging for any assistance at all from hospital-based specialists?

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