6 steps to negotiating hospital stipends.

1. The first step in the process involves preparation on the part of the medical practice requesting funding. Has the medical practice done all it can to optimize its billings and collections? Has it attempted to cut expenses without jeopardizing service or patient care?

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These are important questions the hospital will need to have answered before any consideration of a stipend is entertained. In addition, the medical practice will need objective data regarding the market for physician salaries for its particular specialty, as well as benchmark data on physician productivity or workload. This may be obtained from resources such as the Medical Group Management Association (MGMA) or from specialty societies. For example, an anesthesia group should obtain and provide the hospital with data about what constitutes an accepted anesthesia full-time equivalent (FTE).

2. The second step in the stipend negotiation process is communicating the need for funding. The senior hospital administrative staff must be made aware of the request for financial assistance well in advance of their budget process. Having a medical practice make a request one or two months before the start of a new fiscal year, when budgets and allocation of funds already have been determined, will most likely result in a denial from the hospital. The earlier the request is made, the greater the amount of time both parties have to prepare for discussions and negotiations.

3. The third step is disclosure. Any medical practice seeking a stipend must be willing to share its financial data with the hospital. While individual salaries need not be revealed, aggregate data regarding revenue, expenses, salaries and fringe benefits should be made available. The more open the medical practice is with the hospital, the more likely the hospital will be willing to negotiate.

4. The fourth step is defining services to be provided for the stipend. The medical practice must realize that it may not be the only group seeking financial assistance. Likewise, the hospital must be able to justify the stipend based on service to prevent medical practices from feeling they "deserve" a stipend because one was given to another or competing group.

These services might include definition of medical directorships, service on hospital committees, administrative duties or participation in process improvement initiatives. For the case of anesthesiologists, it may involve a commitment to maintaining a certain number of operating rooms or expanding elective surgical schedule coverage.

5. The fifth step in the process is measurement. Both the medical practice and the hospital must develop objective criteria upon which to evaluate the service requirements for the stipend. For certain services this is easy. For example, in the case of the anesthesiology group whose service requirement is increasing operating room capacity, this is easily measured. It is more difficult for subjective criteria, such as performance of medical directors of hospital units.

For these situations, consider using performance management tools like a balanced scorecard or techniques such as analytic hierarchy processing. (For a discussion of use of the balanced scorecard as a performance management tool with analytic hierarchy processing, please see "The Nuts and Bolts of Business," The Physician Executive, Vol. 29(5), September-October 2003)

6. The final step in the process is compromise. The medical practice must realize the hospital may not have the means to fully fund its request. However, in general, the better the documentation the group provides--and the greater the service to be provided that results in enhanced revenue to the hospital--the more likely funding will occur.

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Likewise, the hospital must understand that failure to provide a stipend may force cutbacks by the practice and decreased service that could hurt the hospital's bottom line. Both sides must remember that a relationship between a hospital and the medical practices is symbiotic. Keeping this in mind will help to maintain and foster relationships at a time when all parties involved in the care of patients are feeling financial hardship.

By David P. Tarantino, MD, MBA 

David P. Tarantino, MD, MBA is the executive medical director of Shock Trauma Associates, P.A., a 50+ physician, multispecialty practice associated with the University of Maryland School of Medicine. In addition, he is the chief executive officer of The MD Consulting Group, LLC, a health care management consulting firm in Baltimore. He can be reached by phone at 410-328-2036 or by e-mail at [e-mail]