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

Continue Reading...