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Contract Negotiation In Health Care

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There are many differences between health care and other industries regarding the process of pricing and charging. Businesses that are non-healthcare related receive revenue from the set prices that they charge customers and the vendors are paid through the customer's purchases (“Lecture 4”, 2017). On the other hand, health care prices vary on the negotiations that are made between the healthcare organization, and insurance company. The aggressiveness in charging and pricing process of health care is seen in the competition between the insurer and healthcare facility. Each is trying to secure the desired contract based on their organization's goals and desires. Hospitals and other healthcare organizations compete to try and gain contracts to pull in …show more content…

The price of the negotiation effects the possibility of other negotiations with other insurers and causes price cost shifting to make up for lost costs (“Lecture 4”, 2017). However, there is no contract negotiation with the government, and the price they offer for services are well below the cost of the healthcare organization for providing the service. Therefore, to make up for the lost costs, healthcare organizations have to shift the lost costs in their contract negotiations and include it in their price negotiation with private insurance companies (Cleverley, Song & Cleverley, 2011). Measuring competition services, product, and the geographical market area is important before a negotiation takes place. The most popular measure is Herfindahl-Hirshman Index (HHI) (sum of squared market shares of health care facilities that are a part of the market) (Rivers et al., 2008). The negotiated prices can vary, meaning that one visit to the doctor’s office may vary on pricing because the visit will be dependent on the negotiated price with their insurance carrier. Also, predetermined rates do not guarantee payment because an approved payment is a complicated process that is determined on proof of

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