[Editor's Note: Robert A Felberg, MD is a Vascular and Critical Care Neurologist with 20 years of experience. He is the CEO of Negotiation MD LLC, a firm that helps teach doctors negotiation and professional skills. We have no financial relationship.]
I was recently asked an interesting question by one of my blog readers. (I’ve changed everything to keep the details private, but the important points will remain the same.) The edited question is this:
“I work for a practice that has not changed or increased their annual salary for the last 10 years. There is a bonus, but the structure is such that it represents no more than 10% of baseline and has not increased either. When I ask the boss, he tells me that ‘All practices are the same. No one raises the salary.' I am concerned that with the loss of value due to inflation, my compensation is being reduced and will continue do so in the future.”
This is one complex negotiation! You have a relationship with your boss that is paramount. You are losing value. You are being offered a “standard policy” of a “regional norm” as a counterargument. And, if you can’t come up with a solution, you are left with the option of losing compensation value year after year. Certainly the sort of thing that leads to stress and physician burnout!
Robert Felberg, MD
Your Three Critical Skill Sets
To be a truly successful physician you need three complementary skill sets. Obviously, you will need your clinical training and outstanding patient care skills. As a reader of White Coat Investor, you understand the need for financial knowledge. Finally, there are the “professional business skills” that lack an ideal formal name. They are often called communicative or “soft” skills. Other professions like business executives and attorneys focus heavily on these topics, but physicians rarely receive any training on this skill set. The list includes skills such as interviewing, public speaking, contracts, and conflict management. Of all the physician professional business skills, the most valuable is negotiation.
The Best Contract Deal Requires Negotiation
To reach your financial and personal goals, you must become an effective physician negotiator. You cannot get the best possible deal on a physician contract without negotiating. As a physician, you have several education options available. This includes CME courses designed for physicians, self-study, or non-medically oriented negotiation seminars. Most Physicians require at least 4 practice negotiation simulations to get up to speed, so seek seminars that offer medical practice based training seminars.
Typically, most articles about physician salary negotiation cover basic bargaining on starting compensation. These scenarios tend to be straightforward and elements such as relationships do not come into play. In this circumstance, the issues are complex and require a far more specialized approach. I will touch upon some of the more intricate aspects as an introduction to advanced medical negotiation, but please understand that this cursory overview is just touching the surface.
Step One: Develop a BATNA
A BATNA or “best alternative to negotiated agreement” is your fallback position. This is the minimum you are willing to accept. If you cannot reach this agreement, you are “dead-locked” and you will pursue your other options. Your BATNA should be based on an already available option (maybe a private job search) or one that would be reasonably attained with minimal effort. What should your BATNA be in this case? That’s based on your personal goals as well as some reality. A reasonable BATNA here might be that in the next budget cycle you will get a raise of your total compensation package by 2% with a clearly defined plan for future increases. If that can’t be reached, you may be better served looking elsewhere.
Step Two: Problems Not People
Complex negotiations often take on the characteristics of “interest based negotiation” or “win-win” scenarios. I will be borrowing heavily from Fischer and Ury who helped pioneer this concept. The use of interest based negotiation protects relationships and leads to innovative solutions that grow value for all parties concerned.
Unfortunately, focusing on problems and not on people is where Doctors often go wrong. We are trained to blame people first. Look at any M&M conference for an example- we seldom look beyond individual error as a cause. A conflict-laden, blame based approach will kill the negotiation before it starts and sour your long-term relationship. Keep focused on the issues and not on personal attacks. Don’t succumb to the temptation to accusingly say “You’re the fools who can’t budget a raise every year!” In the same vein, don’t take the bait when your bosses say, “The problem is that you’re so lazy and that’s why we can’t give out raises!” Stick to the problem- the lack of annual increase in compensation- and deftly handle the personal attacks to stay on tract.
Step Three: Interests Not Positions
Ask questions and listen to understand the reasons why your bosses have not given raises in the past. Maybe they never felt the need since they felt so well compensated in the past. Possibly, they decided years ago that they would curtail raises to hire new staff or buy new equipment and the idea just stuck as dogma. Maybe they give raises only to senior staff and you’ve not been vested or they question your long-term plans and don’t want to invest in you. Do not make assumptions. Let them know your interests- you want to increase your compensation in the face of inflation and to keep up with other practices. Listen to your partner in negotiation and understand their logic, concerns, fears, and interests.
Step Four: Collaborate Together to Come Up With Mutually Beneficial Solutions
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Now that you understand your negotiating partner’s stance, it’s time to work together to come to a solution. This is where the master negotiators shine. Maybe you’ll get lucky and your bosses will accept your plea as reasonable and give you the raise. More likely than not, you’ll need to find a solution that benefits you and the other party. A few possible examples:
A: Your bosses need someone to act as director at the new hospital. You accept this position for an additional $60,000 annually, partly supplemented by the hospital administration.
B: Your practice pays a locum tenens doctor for weekend coverage at great expense. You make an agreement with a colleague to cover the shift, splitting the saved outlay.
C: You review staffing and develop more efficient processes to reduce costs and earn those saved expenses as salary.
The possibilities here are multiple, but the final outcome is the same. Both parties find a solution that increases shared value. You both achieve a win.
Step Five: Use Objective Criteria to Solve Disputes
There may be issues where you and your negotiating partner don’t agree. They may insist you are getting paid well above the average. You may insist that most physicians increase their salaries as their career advance. Agree beforehand that you will accept objective evidence as the standard to judge. This may be a stretch for several fields, but in medicine it is standard to believe in data over hearsay.
Here is a chance for you to get the best deal through legwork. Think through the negotiation and all of the possible arguments that both parties can raise. Next, preemptively obtain the data and have it available in an easily digestible form at the time of negotiation. By doing your homework and preparing in advance, you’ll get the chance to present what you want and with the spin that best serves you. As long as you do not lie or deceive, this is considered fully ethical in negotiation- you are expected to present your arguments in the best light.
We advise that you obtain an accurate market value report to have the best data available. In this scenario, you’d likely compare your compensation to regional norms, or salary ranges for number of years in practice to show an average rate of annual salary increase. The need for accurate and useful information makes a market value report an excellent investment. You could even ask your group if they’d be willing to cover the costs of the report.
Wrapping it all up
Be respectful and polite during your negotiation. When your partner gives you a concession be certain to thank them. When the negotiation is over, tell them how well they did and how much you appreciate their hard work and honest approach. Maintain a strong relationship throughout and use this process to build your next successful negotiation.
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Certainly, this type of complex mediation requires more intensive formal training than your typical used car or flea market haggling session. Hopefully, this introduction raises awareness of the evidence based aspect of negotiation and inspires you to seek further education. Your success as a physician requires your mastery of the professional business skill set. Negotiation is the shining jewel in that crown. With the proper training, you’ll be able to achieve your dreams and succeed… really succeed.
Bonus Hint: Be sure to use a “nibble” to get your raise guaranteed next year.
What do you think? What have you done to improve your soft skills, including negotiation? Why do you think doctors don't negotiate, and when they do, suck at it? Comment below!
The negotiation outcomes you gave in your example, really don’t make a win-win in my mind. If the problem is that you are already being unfairly under compensated for the amount of work you do, and you come out of the meeting with more money, but also more work, I think you’ve taken a step back, or at least sideways. It doesn’t seem like much of a step forward.
Otherwise, I do appreciate the post. Thanks.
Thanks for your comment.
It’s everyone’s dream to works less and get paid more! That’s the ultimate negotiation prize! I’m joking of course, You raise an excellent point- mainly the need to create value in negotiation. There are really a few possibilities:
1. you are truly under-compensated in relationship to the profitability of the practice and compared to regional and national standards. That type of negotiation is simpler- you ask for a fair raise and if you don’t get it, consider other options
2. You are fairly compensated based on revenue generated by the practice. In this case, it’s not a matter of just splitting the pie differently. To earn more, you need to generate value- you can do this in several ways: see more patients, see higher acuity patients, bill higher codes, seek outside revenue sources like directorships, expand the market, fire staff, etc. All of these solutions will require you to generate value which often means more work as physicians typically only bill for the work they actually do themselves. However, since you are given the opportunity to earn more at the end of the negotiation and value is generated, it’s considered a win-win.
Most physicians who are already hired and established will need to come up with a plan to increase value in order to increase compensation. You may get lucky and ask for a raise and get it outright. More likely, your boss will pull out your revenue generation numbers and cost of practice and start explaining your compensation level based on this. If you are prepared with a market value report, a BATNA, and a value added solution you are more likely to reach your goals.
Let me throw into the discussion some of my favorite audio books on this topic. The books are a fascinating listen. One was written by an FBI negotiator, and entitled “Never Split the Difference.” It is authored by Chris Voss. The second one that is absolutely incredible comes from Herb Cohen. He worked with presidents on some hostage crises. The title of his books is “You Can Negotiate Anything.” Coursera has two free online courses (one from Yale, and the other from U of Michigan). Both are excellent. Lastly, “Pre-Suasion” by Cialdini offers some new evidence based techniques to allow a negotiator to get what she wants.
I love negotiation and believe it is simply the 3rd most important skill you need as a physician- behind your clinical acumen and financial knowledge.
The books you list are very good, but may not be best for physicians who are new to negotiation. I consider them “second round” books to read after you’ve been introduced
I do love the book “Pre-Suasion” and have had several of my negotiation student use the concepts to great success.
I looked at the resources and like them very much. I would definitely add Coursera to your webpage. In the free online class you negotiate with another classmate and gain valuable experience. In your recipe and chef example, it is like reading a book and then having a lab where you practice your new found skills. I think it is underestimated how many things in medicine can be negotiated.
Really great read and terrific advice for negotiating in corporate America or for hostage return.
My experience in the real world of private practice in the Big City is much different, however. My private practice regular salary has been fixed for at least a dozen years and the “bonus” draw fluctuates a bit, mostly based on the number of people (partners) in the pool.
Our biggest payer is Medicare, and over the years, our reimbursement has been squeezed down. Any pittance of a raise is usually wiped away by coding changes or real cuts. Blue Cross and United have no interest in giving us raises, and we have no real ability to walk away if we do not like their terms. 85% of our compensation is tied to these three entities, and they hold all of the cards. We are gnats to them. Our hospital requires us to have contracts with these big players, or it voids our contract with the hospital.
Meanwhile, our expenses are generally fixed and slowly trend upwards (health insurance, being the largest driver of up trending expense). We can trim a little here and there, but my W-2 wages have changed very little over the last ten years or so.
I do not live in corporate America or work for the government, where an annual raise is a given. In private practice, we do not have a pot of money that is held back for negotiation purposes. We offer the best deal we can to recruits, a short partnership track with no buy-in, and a democratic group where everyone is treated fairly. If a candidate does not agree to the terms, we move on to the next.
I appreciate your concern and live in the same world. My personal compensation is based on revenue generation and much of this is controlled by third party payers
A few points:
1. if you are employed in a practice or hospital, where the revenue is collected in a pool and then distributed, there may be more possibilities for increased compensation. In my experience, both as an employee and boss, most directors have the ability to give 5% or so raises without having to present to a board. Why don’t we just do that? Because, I get a bonus if I keep the budget down. Use your market value report, your total compensation, and your RVU to compensation ratio here to create leverage
2. Otherwise you are going to need to generate value to create more compensation. AND don’t assume that just because you create value you will automatically get paid more, Be certain your contract clearly explains revenue scheme. The way to generate value is up to you and your practice: see more patients efficiently, open a new location, have weekend hours, seek outside funding, etc.
Look into the concepts of blue ocean strategy: https://en.wikipedia.org/wiki/Blue_Ocean_Strategy
3. Remember- you don’t need to rely just on your primary job to maximize your compensation. Like many others who read and post here, I have multiple sources of income- mostly locums and negotiated coverage. It requires me to work many more hours than my colleagues, but also generates a lot more revenue. I’d be happy to go into details about how I do this, but not in public.
Yeah I think Vagabond hit it a little better than the guest poster (although I appreciate the guest post).
The reality is that only docs in certain subspecialties or those with established primary care practices have any leverage over a hospital.
I tried to negotiate something a grand total of once in my career so far, wanted to get a few minor things changed in my contract with Big Academic Medical Center for my EM gig. I sent a detailed and polite email, the other person at the table (so to speak) responded same day with “you are more than welcome to pursue opportunities at other hospitals.”
I think this defeatist attitude is inappropriately pessimistic. Too many docs feel like they have no power and no choice in their employment or income. The fact remains that most of them choose to stay in a less ideal job/make less money because they aren’t willing to make some changes.
Doctors seem to think that negotiation is something you do between you and your employer, when that isn’t the case at all. It is what happens between you and your potential future employer. Big difference. If you’re not willing to walk away from the job, you’re unlikely to win the negotiation. In your case, your employer was willing to walk away from you, so it gave you a “take it or leave it” offer. You apparently were not willing to walk away because there were only a “few minor things”, so you lost the negotiation.
Detailed and polite emails don’t get you what you want. Negotiating power does. The way you get those “minor changes” made is you tell the employer you have an offer from Big Private EM Group Down The Street that will pay you $50K more, but that you’d like to stay at Big Academic Center if they could just change a few minor things in the contract. Either way, you win. You get negotiating power by having a better BATNA.
I once had a speaking gig offered to me for a price I viewed as unacceptably low for the time I would spend preparing and giving it (and I’m really not that expensive.) They had already booked the venue with a deposit before finalizing any agreement with me. My BATNA was spending that day mountain biking instead of preparing and giving a presentation. That was more valuable to me than the price being offered. Their BATNA was either forking over the deposit on the venue or more likely, having to scramble for another speaker, both of which required a lot more work than simply designating a little more of their budget toward my speaking fee. Guess who had the negotiating power in that negotiation? Guess who got what they wanted? And they tried all kinds of techniques, including guilt and “splitting the difference.” In the end, it isn’t about the techniques so much as having the power in the negotiation.
Doctors have a lot more power than they think they do. They are usually the rare commodity in their employment negotiations. You can be nice and polite and honest and still be a good negotiator.
Agree with everything you say above, but I would not discount the techniques. According to the evidence, the techniques are everything. Like many things in psychology, it might sound silly upon description, but the more you use them and practice with them, the more you might find they work. Herb Cohen says to sit next to the adversary, not across the table from them. Chris Voss would tell you to ask an open ended question and have them try to solve your problem: “How am I supposed to justify accepting a lower rate when I can spend my time enjoying mountain biking?” I like the concept of an “extreme anchor.” Ask for close to a ridiculous amount, but somewhat near the limit of possibility. The opponent gets anchored to the higher number. Rather than any one particular technique, the conglomeration of approaches used together in a skillful fashion will work well in pretty much any situation. That might include getting a specialist to come in at 2am to see a patient in the ED that needs to be seen or convincing a patient not to sign out AMA. They should have a section on the basics on the MCAT.
But AMA is my third favorite disposition behind jail and eloped!
Seriously though, good points.
WCI,
You can’t compare negotiating over a single speaking gig to a contract negotiation for an academic job. In your case you a) didn’t need the money, b) probably didn’t really care at all whether or not you spoke, and c) certainly didn’t need this one gig to materially advance your career.
It’s also not a win for someone who wants to do academics (whatever the reason) to come at Academic Med Center and tell them they were offered $50k more at Community Hospital. That’s not an actual BATNA that’s a career change. I can tell you what my boss back then and my boss now would say to that.
I’m not trying to be nihilistic, it’s critical that hospital-based docs w/o a practice base understand their market value compared to other docs in their field. A great piece of career advice I got about EM was that we are “burger flippers.” That doesn’t mean we don’t do important work or that some of us aren’t great clinicians, it means that the CMO/CEO of your hospital probably doesn’t really give a hoot who is staffing the ED as long as they aren’t grossly incompetent. Compare this to my friend who is a well-trained urologist willing to live in a less-than-sexy location — totally different ballgame.
Can you drop me a line?
I’d like to review your position and past attempts at negotitation and see if i can offer you some advice. You may truly be stuck in a situation where improvement is out of your hands. Maybe not.
Yes, but you also have the option to go flip burgers in a less-than-sexy location. There is value in keeping you in the job- you’re a known commodity, there are no hiring/firing costs and hassles the relationship etc. That’s what you leverage in order to marginally improve your situation. But the key to doing that is having a BATNA. If the employer knows he is the only game in town, you just bought a brand new house, and your wife refuses to live anywhere else, then he knows your BATNA is really just taking whatever he offers you.
The WCI speaks like someone with experience! The only real power stance on either side is having a legitimate ability to walk away. Absent that BATNA, then Cialdini’s book “Influence” or the Herb Cohen book “You Can Negotiate Anything” are great for teaching you the manipulative techniques to get what you want.
On the other hand, if you need a meditation on the reality of power relationship in negotiation, I suggest a return to a classic text: reread the Melian Dialogue from Thucycides “The History of the Peloponnesian War.”
I appreciate Vagabond’s and the other input, but I am concerned about one thing- possible nihilism as it comes to negotiation or improving your condition.
I live in the same world as everyone in medical care. It’s rough. We are squeezed, demonized, underpaid, overworked, and forced into menial tasks while chasing a shrinking revenue dollar. Some become burned out, some quit, some soldier on, some invest and retire early, etc.
I’m guessing many of you, like myself, got interested in physician finances and WCI through the desire to have some control over our financial futures and to not depend entirely upon the healthcare system for financial stability and hopefully eventual independence.
Now, you can complain that taxes are too high, the federal deficit is driving us to ruin, etc and therefore never can get ahead since the system is “rigged”. But, we have all learned that there is risk but also great reward through financial strategy,
The same is true for negotiation- there are forces against you. There are power differences, The other side is more experienced and has the power to reward you according to their plan. The third party payer limits revenue. This is not new. But, it’s not a reason to give up or believe that negotiation won’t help.
Negotiation is a tool and a skill, just like finances. If you learn it and apply it, you will have the best chance of getting the best outcome. If you don’t attempt to negotiate, you’re guaranteed a poor outcome. I am constantly delighted to see my negotiation student bargain an extra 5,000, 25,000, and sometimes more.
In my last negotiation, I used a well researched market value report to up my salary by 25k and improve my bonus limit as well. Will these work for you? I can’t guarantee it, but I know I’d have never gotten the raise if I didn’t attempt the negotiation. (how it went down- they used general neurology rather than critical care neurology salaries as the basis for compensation. They also quoted the wrong RVU values for myself and my field- I had my report at the ready and they were so taken aback that they agreed nearly immediately since they already agreed to use the value as the basis)
I hope that you take my comments with the right tone and don’t view me as naive or patronizing. I know it’s more difficult to be in the medical field now than ever before. It’s tough out there and many of you are stuck in situations where you believe you can’t negotiate. Maybe you really can’t. But, maybe you can. Or at least you can work on ways to increase value in the face of third party payers and improve compensation in that way. Or maybe you’ll realize that you are stuck and use your newly minted skills to negotiate your next job.
Great comment. I agree medicine has some rather unique and difficult issues, but I also agree that nihilism isn’t helpful.
My point was not that you should not try to grow your practice, add new services and facilities, and improve your own skill set to make your self more marketable and valuable. Of course you should do things and more as they will likely reward you with greater compensation, control, flexibility, and or satisfaction in your career.
In private practice medicine, we are constantly swimming upstream. If you are treading water or casually doing the breaststroke, you are probably falling behind.
In the index case, I had the impression that the person felt that raises should be automatic, like my wife gets at her company and like the nurses and techs get in our hospital.
When you go into a negotiation, you have to be armed with facts, not just the desire to get more of something (money, vacation, freedom, power, respect, or whatever).
I remember an offer I tendered to a young person finishing a fellowship, and we first gave our real best offer. The response was that ” “Group Across Town (GAT)” is offering 50% more, can you match that because I really want to work with you.”
I knew GAT, and I knew that they worked nearly twice as hard (longer days, longer nights, more weekends, and more work production/unit time, not to mention a more difficult and tenuous hospital relationship) to get that 50% more, and I had to say, no I can’t and explained why. Of course, he took the job across town and was miserable and called us back about 18 months later…
Which goes back to my point about their being no magic pot of money in private practice to dole out big salaries and automatic raises.
I tell my negotiation students to ask some final questions before they agree to go to contract, especially if they will be an employed physician:
1. How will my future base salary be determined after the current contract is expired?
2. How will future raises be determined? What criteria? What schedule?
3. Are you willing to write an addendum to the contract or send me a certified letter explaining the above terms?
Similiar questions can be asked- with much more detail- about partnerships.
Several program will do the bait and switch- they offer amazing packages for the first 2 years and then when your leverage is reduced, they switch over to some anemic base with an impossible bonus structure. You get these offers in the mail every day- 450k guaranteed! No call! see 4 patient a week! Too good to be true….
If they can’t or won’t give you a good long term compensation scheme, be wary.
Their letter proably won’t be able to be used to force them to pay you more, but as you review your contract with your legal representation, be sure that it would work in your favor to get out of restrictive covenents. Your attorney is worth every penny here.
To put some numbers to what Vagabond MD writes about reimbursement degradation, here’s my example drawn from private practice. To the best of my calculations and research, our average per work RVU payment from CMS drifted from $36.69 in 1998 to $35.98 in 2015, reflecting a true loss of nominal reimbursement AND huge loss of purchasing power (i.e. after effects of inflation) over those 17 years. Using the U.S. Bureau of Labor Statistics online calculator (at http://www.data.bls.gov), simply to keep pace with inflation over that time period, the wRVU from 1998 should have migrated upwards to $53.06. This roughly means, based on our wRVU alone, the value/purchasing power of our base unit work has been degraded by 32% over that particular time span. That is a huge pay cut.
So the base income flow from billings/reimbursement is declining. That is real. If you are in private practice, you have to make your operations more efficient to maintain real purchasing power. However, if you are employed, then the skill in the guest post can be deployed to capture a larger share that the employing entity is earning off of you. And as pointed out, if you are in a highly sought after specialty, you may even be able to negotiate a package where you claim more from the employing entity than you actually bill, because they will be willing to subsidize you out of other funds.
Bear in mind that negotiations can also be to cut your pay as little as possible, not just to get a raise!
Vagabond and the many other commenters mentioning third party reimbursements,
Thank you for your time and interesting comments. I’ve taken your thoughts to heart and reached out to a colleague of mine that specializes in negotiating reimbursement contracts with third party payers based on an interesting modeling system. After some discussion, we’ve decided to partner together to offer market value reports for third party payer negotiation, along with consulting services to help with the negotiation, and a service to act as agent to negotiate with you if you still feel uncomfortable after the training sessions.
Please realize, that there is no good “standard” for third party payers and the negotiation is based on your payer mix, CPT codes, referral patterns, etc. We’ll work together with you to model an economic map of your practice and see where the appropriate BATNA goals are for you for each payer.
I often liken third party payer contract negotiations to a chef deciding a menu. You need to match up the items with popularity and profit margin. You also need to take a loss some times to make a gain elsewhere. For instance, a steak house may take a loss offering a vegan menu, but makes more revenue because it allows families to bring vegan members to the restaurant and order the pricey items. In the same way you may take a loss in one payer if the referral pattern helps elsewhere. These patterns are only obvious with complex, deep-dive methodologies.
We look forward to hearing from you. I’m hoping that this piece of the puzzle will help those practices who are being held back be the shrinking revenue dollar.
I think Vagabonds comments are spot on. Physician income is largely determined by a fee schedule set by Medicare and other large payors. The employer (hospital or private practice group) cannot give out raises unless larger number of patients or procedures are billed for. To give employees raises without increased revenue is a bad business decision. The pot of money in healthcare is not infinite.
That presumes that all physicians are fairly paid. I would challenge the assumption and look at data first before assuming that asking for a raise is the same as asking for more than your fair share. The pie is not infinite but it also doesn’t mean that your slice can’t change.
good point. many doctors are underpaid.
Your market data research is your single most important piece of information. You are crazy to walk into a room without it. You wouldn’t buy a car just buy looking at the MSRP?
Vagabond, I would not discount the books so quickly. One of the books starts out with a lunatic holding a gun to child’s head, and asking for millions of dollars or he will shoot. That sounds like an impossible predicament to get out of. You would be surprised how the negotiator winds up getting his needs met, and how the criminal winds up getting his needs met. Give the books a try, and come back and tell us how they can apply to your situation. At the worst, you will have wasted some time, but at the best, you may pick up some good tips that can help the situation you describe above. There is a world of evidence out there that can be used to apply to your situation, and just like in investing or treating disease, use the evidence to your advantage!
agree
Negotiation is a skill that can be learned. If you go into a negotiation without some training, you’ll be at a disadvantage.
I recently read getting to yes – can’t say it helped me in my annual review with my chairman, but the techniques have helped me quickly resolve issues with nursing and with challenging families.
Getting to yes is aan absolute classic.
“getting past no” may help you in this situation. But frankly, you just may need some seasoning and practice . Negotiaion is a skill that is learned and most doctors (in my teaching experience) need about 4 go rounds before they come into their own
Thanks for tip. I will check out that book.
I’m the author of this article and I’d like to thank everyone commenting for taking the time to read the article and add their thoughts. I’ve been a HUGE fan of WCI for a while and getting an article posted is sort of a personal-professional goal for me.
Feel free to drop me a line there.
I apologize for the nitpicking, but I believe you’re incorrectly defining BATNA as the worst deal you would accept from the other side, when it should be defined as your best alternative option that doesn’t involve the other side’s agreement. A minor but important difference.
I think I explained that n the post, but if it doesn’t come across clearly, I apologize,
there is also the concept of WATNA- worst alternative to negotiated agreement. That is- if you wlak away at your BATNA, what’s the worst that can happen. Say you refuse to buy a used car because the price is too high. Well, then you have to rent a car until the next deal comes along. That may end up being more costly in the long run and should factor into the BATNA
All doctors understand this concept of WATNA- we can easily get paid better elsewhere, but moving, licensing, establishing a practice, etc takes resources that are difficult to justify.
I think I explained myself poorly.
Your BATNA is your best option if you have to walk away from the negotiation because the other side can’t/won’t meet your bottom line.
Your discussion of BATNA seems to define BATNA as your bottom line in the negotiation, by making statements like: “[a] reasonable BATNA here might be that in the next budget cycle you will get a raise of your total compensation package by 2% with a clearly defined plan for future increases. If that can’t be reached, you may be better served looking elsewhere.” Getting a raise at your current employer cannot be your BATNA, because you need your employer’s agreement to obtain a raise–it’s the negotiated agreement, not the alternative to a negotiated agreement. You also state that “[y]our BATNA should be based on an already available option (maybe a private job search) or one that would be reasonably attained with minimal effort. What should your BATNA be in this case? ” In that case, the already available option IS the BATNA.
I’m not trying to be difficult here, I just know it is possible that many MDs will encounter the term for the first time in this post.
thanks for your clarification.
My assumption in the article is that you do your due diligence and actually have another offer on the table or a reasonable assumption that you could make that 2% raise with another alternate- another job, Locums work, joining another practice, etc. That is how your BATNA is determined, as you mentioned. the best deal you could get elsewhere.
I see I wasn’t as clear as I could be in that point.
I also wanted to keep the BATNA modest. Most would consider a 2% raise to be not very exciting. However, when you are in a long term role, relationship is important. Often times, both parties will moderate their requests in deference to the importance of the relationship. How many times do you visit your in-laws when you don’t want to- just to keep your spouse happy?
the concept of BATNA really deserves it’s own post, something I address on my blog. Along with market value, anchor numbers, counter offers, and ZOPA; BATNA really forms the backbone of negotiation strategy.
I have to agree. This is a definition of a bottom line, not a BATNA.
When the other side has more power / leverage in a negotiation, it’s that much more important to improve your next-best alternative. Fisher and Ury make an important point that we tend to aggregate our alternatives and mentally view the best features of many competing alternatives. Oh, I could take a sabbatical for a year or go into academics or move to France or do locums work for more money. Sure, you could do any of these things, but it’s unlikely that you could do all of those things at once.
If you have crummy salary at your current job, you have to consider all of the other pluses and minuses of your situation. How’s your commute? Are you close to your family? Are you close to your spouse’s family (and he or she is unwilling to move? Are you underwater on your home? Will you owe money back with interest on a loan repayment scheme from your current employer? Will they court martial you if you don’t fulfill your current commitment? How are the schools here and how are the schools at a potential new place of employment?
It’s easier to hang out your shingle as a private practitioner / business owner in certain fields and specialties. Dentists, dermatologists, and plastic surgeons are in pretty good shape if they want go it alone or start a new business. On the other hand, pediatric subspecialists are unlikely to have more than one employer within a reasonable commute in all but the largest metro areas.
Network, keep you skills current and in demand, and know your worth in the market. Be able to make a numbers based argument for why your current employer should pay you more or why you should jump ship to a single better opportunity (with all its pluses and minuses). If you’re willing to work harder, do some of the things you can to grow the pie, but make sure you get enough more pie to make it worth your effort.
I agree with the premise of the post completely. Physicians as a whole are poor negotiators.
However, as mentioned in the above comments there have to be 2 sides willing to negotiate. If one side is unwilling to negotiate, then the only way to “negotiate” is leave the table. In the case of a physician this usually means either start your own practice or join another practice/hospital where you may or may not have negotiating ability. Many hospitals or practices are in the power position of “take it or leave it” negotiations. If you are not prepared to “leave it” then I would caution against beginning the discussion until you are prepared to “leave it”. As an individual you have a much better position of power if watching you walk out the door becomes something that the practice will then have to deal with.
Your discussion falls under what is commonly called “power” and is usually addressed in terms of “conflict management”.
It would require several posts to explain how to deal with this common situation. I do teach this as part of my CME seminar I put on for physicians.
Basically, you need to rely on your “bases of power” including referential, your “interdependence” with the other party, the “YES!, no, yes?” technique, the reliance of objective criteria or market value report, and finally your negotiation skills. Oftentimes, so called “negotiation jujitsu” work very well here.
The concept of negotiating with less power is one of interest to me, since I’m usually in that spot. I apologize for all of the jargon- each concept would take up a separate series of posts.
I’d be happy to discuss further– drop me a line
PS: regarding needing to “leave it”- you must have a BATNA before going in. This must be well researched and represent a meaningful and actual alternate. It doesn’t have to be “leave it”. It could be focusing on locums work or a side business.
“Negotiation Bootcamp” is another great one. These concepts not only help in contracts, they help with everything in life, like getting my 7 year old to do her homework, etc…getting a patient to accept receiving her dialysis treatment…etc…
I agree with much of what Vagabound says. Insurance reimbursements sure aren’t going up, but rent and employee expenses, etc are going up. So if you are paying an employee full market rate, it’s difficult to justify raises to keep up with inflation.
The ways a practice can earn more are to either see more patients, run the practice more efficiently to cut costs, or if you’re busy enough, drop lower paying carriers (sometimes the threat of a drop might lead to slight increase in rates but be prepared for the insurance company to agree to let you go out of network).
I completely agree that if you’re underpaying your employees then it’s a different story. That’s what happened to me in my mega group. Even armed with norms per work RVU they ignored me. So I went solo. Best decision I ever made!
I really appreciate all of the great comments and discussion
The main reason I presented this negotiation based on a real case is because it is so complex. Most presented health care negotiations are “positioned based”. There is one pizza and you are fighting for how many slices you can get.
This is different. There is a current amount of revenue- based on third party payers, expense, collections, etc. This pizza may be able to be split a little differently, but that will not really satisfy anyone. If you really want to get a raise, you need to come up with a way to turn this medium pizza into a large pizza. Thus, the emphasis on step 4; creating mutual benefit or growing value.
If you wish to become a highly skilled negotiator with the best outcomes, focus on interests and growing value. The ways to do this are multiple- create new markets, see more patients, open a practice in a better revenue mix, etc. Things that you and your medical practice can partner together to improve both your situations. This is still very possible, even in the current medical climate.
At my prior job I had not received an adequate raise for a number of years. This definitely led to burn out. Part of it was my fault as I did not seek the raise and expected it will come. Now I know you have to ask to receive, otherwise people assume you are content with the status quo.
Great point.
“In Business As in Life, You Don’t Get What You Deserve, You Get What You Negotiate”- Karass
Please tell me you didn’t just quote Karass (rhymes with harass).
This and seeking a “nibble” after the parties have negotiated presumably in good faith make me really question whether this is the sort of negotiating that one should do for the long term.
We aren’t just trying to screw over the other party. We’re trying to question underlying assumptions and achieve a fair, equitable, long term solution that works for all parties at the table for at least the next 5-10 years. Focus on growing the pie and giving away things that matter to the other party but don’t matter so much to you. This isn’t an exercise in screwing over the other guy!
Karass reminds me a lot of Dave Ramsey or Guy Fieri on the cooking channel. Many people have strong feelings about them, but you can’t deny the profound influence they have in their fields. In the end, Karass brought the science of negotiation to the masses and deserves his due recognition here.
It is a virtual guarantee that the hospital admins or third party payers you will be negotiating with took the karass course or were mentored by a karass student. There are very few harvard project on negotiation folks in business. Many of them are working for the UN or in acedemic careers. Ignore the karass model as your own risk.
All concession tactics have a good and bad side. If you use the nibble to get an extra 2500 in CME funding after the handshake, you may have stepped over a line. But, if you use the nibble to ask for the same negotiated compensation plan schema next year, I’m of the opinion that you were well within the boundaries of relationship.
Tactics have their place, but do not replace market value reports, Anchor numbers, ZOPA, and BATNA. I find that phsyicians can get pretty far with a limited use of ethical tactics. I also like to make them aware of the tactics, so you can recognize them and I teach the counter-moves. It is quite enjoyable seeing a hospital administrators squirm when I deftly counter their tactic.
Finally- relationship is valuable. Few nibble concessions are worth the long term relationship. I agree that you must use it subtly and respectfully.
I can see such a mid career negotiation to be challenging for several reasons.
a) It’s hard to say take my negotiation or leave the position because you have a second job offer. I would think a 10 year veteran would have a hard job restarting at the same or higher salary
b) We are trained to “not be greedy,” and negotiating for a higher salary can be seen that way
I have seen groups throw small tokens out, similar to your example of an extra $5000. These small tokens are sometimes directorship roles or committee position. However, some of these extra meetings are not worth the money.
I’d have to say that most doctors are likely stuck whether good or bad in their current job situation depending on their seniority. If you are early in your career and don’t have significant obligations, pick up and move. Like wise if you are more senior or financially independent, you have the ability to also pick up and move
Mid-career negotiations are more difficult for the reasons you listed. You are already a high earner, you have roots and patients that count for a lot of non-monetary value, and you have 10-15 years of relationship between you and your co-workers
The role of relationship in negotiation is a key concept. In general, the relationship in medical negotiation is very valuable and neither side wants to mess it up. I tell my students that in mid-career medical practice relationship is worth 75% of the deal. That means that I advise they be willing to accept 25% of their desires if it maintains the relationship. The same should go for the other party- if they are treating you poorly and souring the relationship then you have a good reason to leave.
Much of long term relationship negotiation is about process. For instance, it may just be enough that you and your bosses actually get together and attempt a negotiation. The negotiation may not go the way you like, but you’ll start to lay down the ground rules for the next go round. If they insist on a revenue generation model, you are prepared the next time to bargain around this model. If they insist on leadership roles, etc, you will be prepared next time. The nice thing about a relationship is that you will always have another chance, expect this time you’ll be wiser and better prepared. At the very least, set the precedent that you will negotiate and that the salary will be based on some sort of criteria. That, in itself, is a win for many physicians.
My advice remains the same in many ways 1. learn how to negotiate. 2. Express your interests and negotiate. 3. Defer greatly to relationship in the beginning. 4, try again. 5. if things don’t go your way then develop an escape plan and don’t feel guilty about it if you do decide to leave.
Remember, being underpaid for 30 years equals a lot of lost income. You’d fire an under-performing financial adviser. Dump your under-performing employment situation with as much prejudice.
Love this response! Great starter material here.
I wonder if any of these techniques could be applied for negotiating duties rather than salaries? I don’t have complaints about my compensation relative to my cost of living, and we actually got a slight raise recently. What’s more irritating is usual downsides to being an employee: constant pressure to do more work with already inadequate staffing, conflicting directives (discharge patients faster AND reduce readmission rates!), and harebrained initiatives that are a complete waste of time.
None of these are spelled out in a contract, but you can’t exactly just refuse, and I’m not sure how to “negotiate” any of these if I don’t actually want to quit.
The short answer is that evertthing is negotiable.
The long answer is that just because something can be negotiated, maybe you shouldn’t.
What do I mean here: there are 2 behavioral norms that tends to explain interactions of groups.
The first is “econimic norms” and entail paying for goods and services. You go to a restaurant and eat. In return, you pay a market based fee.
The second norm is “social norms” and are far more complex. These are the behaviors expected as part of a social group. Can you imaging inviting your grandmother over for thanksgiving and then giving her a bill for 75 bucks at the end of the meal? Or charging your friend for a ride? The things you do under economic norms would cause a breakdown for social norms.
In medical practice there are several social norms that are usually defined as “citizenship” and being a “team player.” The things you refer to are mostly in the social norm category. Yes, you could play hardball and negotiate them. But, you may be better off approaching them as a team player. If they really bother you, take a leadership role and solve the problem that way. You’ll be percieved as a leader, be more effective, and save your social standing in the group. if they don’t bother you that much, just acquiese and swallow the medicine.
I have negotiated for myself and my group twice in 4 years to attempt to get reasonable compensation. As an employed group we found that billing was was poor and improved billing and documentation prior to the first meeting. Showing increased value gave us a talking point and we came away with a decent raise. The second round of negotiations we concentrated on 3 national surveys(mainly MGMA) for our market value including region specific numbers. We then obtained the basic numbers from 4 comparable groups in the area, this was tricky but it was very important due to increased salaries and a very competitive market. We finally focused on being paid ‘fair market value’ as our hospital is a non-profit organization. By the end of our second negotiation we were finally able to get paid at, or slightly above the 50th percentile for our region.
I had no previous experience negotiating but as a small group we tried to use common sense and ‘fair and reasonable compensation’ as our basis. Both negotiations took months to finally arrange a meeting and brutal to sit through, in the end it was worth our time and agony.
We are now a private group and have a lot more control of our own destiny, at least for the short term.
I have to say that we went in to both negotiations feeling the hospital would not listen, so a few of us were prepared to eventually leave if things didn’t work out. I agree with many above that if you are willing to eventually leave that it gives you a lot more leverage to negotiate a better position.
great work and thanks for sharing your techniques
I would like to caution everyone about the concession tactic of “take it or leave it”.
In the end, having a BATNA is the ultimate leverage point. If you can’t beat your best deal elsewhere, you move your business along.
However, there is a difference in respectfully explaining that you have a better deal elsewhere versus threatening to leave. Even the most even-handed negotiator will eventually call your bluff. The minute I am told “take it or leave it”, I instantly start making alternate plans for “leave it.”
For example, if a cardiology group is unwilling to compromise towards a fair solution and instead just tells me “take it or leave it” I will probably “take it” the first go round. But, I can guarantee you, the the next negotiation will go differently, as I have a BATNA in place for this possibility. I actually saw this happen to a cardiology group in Illinois.
The problem with take it or leave it is the same problem you have as a bully. The first time you do it, it works great. The second time you do it, it works pretty well. “Aha!”, you think, “I’ve discovered the key to negotiation!”. The third time you get punched in the nose.
The difference is about respect, interests, and positions. You want to part amicably. You want both parties to feel happy about the deal. You want the relationship to be a vital part of the outcome.
You have to be willing to follow your BATNA. But, if you threaten to leave, realize this will only work a few times. If you explain the other offer and try to find something mutally beneficial, you can use this tactic often.
I should make it clear that we phrased our desire to improve the salaries of the group so that it would stay intact. We cautioned the hospital that we would lose excellent docs if we weren’t competitive. We made it clear that our goal was to maintain a good group of docs and be fairly compensated. We wanted everyone to win in the situation so that we could continue to provide care to the community. I agree with what you say that maintaining a good relationship with those you are negotiating with makes a huge difference. We continue to respect each other and the positions that we are in.
Interestingly, we presented a doomsday scenario to the hospital in which they would need to hire locums and create a financial mess. This ultimately happened because the administration was very slow to react(although I think they were trying to do the right thing) and there were some unfortunate occurrences out of everyone’s control. In the end, the hospital paid out hundreds of thousands of dollars in locum and ‘bonus shift’ pay.
I also think that a lot of the negotiation depends on supply and demand and the current market value. I feel docs are a lot more aware of when things are changing and administrators fail to see it until it is too late. Academic centers have seen this decimate their ranks in some regions over the last 2 years in EM.
Love the last paragraph.
A BATNA you may not be considering:
If you attempt to negitiate and can’t a reasonable responce, your BATNA may not be to simply up and leave,
Your BATNA may be to focus less effort on the current job and start focusing more on side jobs. Rather than seeing 5 extra patients, serving on committess, and chasing a poorly compensated bonus plan- you become an “average” employee. Now, obviously, you provide the best quality care to your patients- never harm a patient do to a crappy administration. But instead of overbooking 2-3 patient during lunch, you actually eat lunch. Instead of evenings at the governance committee, you cover the ED 20 miles away at 200 dollars/hour. You get the idea. You do the minimum required to be compensated for the primary job and explore options elsewhere.
With your extra time and effort you start your own side jobs. Maybe you do locums coverage, privately contract partial time elsewhere, start a consulting business, buy real estate, etc. The point is, your BATNA can be creative and you are not forced into the solo job role. If you can’t get the negotiated results you desire, you don’t necessarily have to quit. You could just get what you desire elsewhere.
sorry bout the typos- iphone keyboard too small for my fat fingers.