Why You Must Understand the Intersection Of Incentives And Negotiation Strategy

When most medical group leaders think about incentives, it’s usually in the context of structuring performance incentives for the group’s physicians, or in the context of incentives that flow to the group  itself pursuant to contracts with payors or facilities.

But, the issue of incentives is important in an entirely different way: the incentives that impact the behavior and thinking of the individual or individuals on the other side of a negotiation, whether that negotiation is a major contractual negotiation, for example, for a system wide anesthesiology or radiology exclusive contract, or whether that negotiation is simply for some position in the context of an already existing relationship.

If you understand the incentive then you’ll understand the person and why he or she is acting the way they are. In a very real way, incentives are the  “super-drug” that controls human behavior.

Many mistakenly believe that preparing for negotiation, whether in the guise of a formal negotiation session or a day-to-day meeting, is restricted to boning up on the points you want to push for, to determining your “must haves” and your  “like to haves,” and so on.

But to be fully prepared, you need to spend hours and hours, sometimes even weeks, to suss out the details that underlie incentives that drive both opposite party and the people negotiating for it.

Incentives are often at the root of what appears to be wacky positions and whacky decisions. It explains why a CEO will scuttle a favorable deal for her employer when it’s at odds with the metrics behind her bonus. It explains deals based on a short term world view versus a long term one. It explains border line (and over the border line illegal) behavior.

Understand the incentives to understand your contracting opposite and the people behind it.

Then, once you do, turn the microscope around and see whether the incentives driving your negotiating team are at odds with your own medical group’s best interests.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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Kickback | Negotiation

Pain Medicine Doctors Alleged to Have Received $115,000 in Kickbacks … Plus $40 Million in Illicit Profit

A recent article by Joseph Walker in the Saturday/Sunday, Feb. 4-5, 2017, issue of The Wall Street Journal, sheds light on the marketing of opioids, the payment of kickbacks, and the high profits that can be made via their sale through physician owned pharmacies. A review of the related indictment reveals even more.

The context is the ongoing trial of two pain medicine physicians, Drs. John Couch and Xiulu Ruan. Prosecutors allege that they received $115,000 in kickbacks from Insys Therapeutics, Inc. in connection with its fentanyl drug, Subsys. The prosecutors allege that the doctors prescribed, and also sold through their owned pharmacy, large quantities of Subsys, and that they defrauded insurance companies by misleading them as to diagnoses. The government also alleges that the doctors’ profit of $40,000,000 from dispensing Subsys and other controlled substances was an illicit profit from a “pill mill.”

A former Insys employee testified that the company would pay the doctors speaking fees based on the number of prescriptions they wrote. Another former employee who plead guilty to conspiring with Drs. Couch and Ruan in the scheme testified that she was under constant pressure to schedule the doctors for speaking engagements and that if she couldn’t, or if events were cancelled, she could have her pay docked.

In general terms, the federal Anti-Kickback statute makes it illegal to receive anything of value for the referral of federal health care program patients. Wire fraud statues, the federal Travel Act and other laws turn what are “simple” violations (a huge simplification!) of state laws into federal criminal offenses. The federal Controlled Substances Act permits prescribing and dispensing only for legitimate purposes, not in respect of “pill mill” activities. Federal healthcare fraud makes it a crime to defraud a healthcare benefits program, including a commercial insurer.

It must be noted that, at this point in time, the case is in trial and neither Drs. Couch nor Ruan have been convicted. Others, though, have plead guilty to conspiring with them.

The takeaways for you:

1. Money: The are many legitimate ways for physicians to increase their practice income. They include, depending on state law, investments in pharmacies and the direct dispensing of pharmaceuticals.

2. Structure: But any deal must be structured in compliance with the federal Anti-Kickback Statute, the Controlled Substances Act, Stark, and numerous other federal laws, as well as with various state law counterparts and other restrictions. Your investment in structuring things correctly is an investment in yourself and your jail-free future.

3. Compliance Auditing: No matter how well structured, it’s essential that you engage in periodic compliance audits coordinated through legal counsel. Laws change and actual behavior impacts all of the structure and planning. Even the best planning can be made worthless if illegal conduct takes place within the context of what was planned to be a proper structure.

4. Investigations: If you learn that you (or any person or entity connected to the operation) are under investigation, immediately engage a team of experienced healthcare attorneys and criminal defense counsel. Many potential prosecutions are resolved at this stage.

5. Indictment and trial: Again, immediately engage a defense team of healthcare and criminal defense counsel.

We’ve established a strategic alliance with noted white collar defense attorney Lawrence Brown and his firm, Brown PC, in order to bring a wider set of skills and experience to select clients at the auditing, investigation and indictment/trial phase. Please contact me for additional information.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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