The ASA Committee on Practice Management has compiled a compendium of resources to help groups understand the process of developing a value proposition and, if necessary, respond to a request for proposal (RFP). RFP is the process that hospitals use to put a contract up for bid. ASA is committed to anesthesiologists in independent practice and felt this would be a benefit to our members who find themselves faced with an RFP but perhaps not the necessary tools to provide a competitive response. It is impossible to completely review these two important (and related) topics in this brief article, so we encourage you to review the complete compendium, which may be found at asamonitor.pub/3BbBxQK.
What is an RFP?
An RFP is how a hospital or other business entity asks for bids on a contract. It could be for anesthesia services or a new HVAC system. For anesthesia services, the document lists the requirements that the hospital has for the relationship and poses a series of questions for potential bidders. This may reflect that the hospital is unhappy with their current vendor, or it could be that they need to prove they are not overpaying for services. In the end, winning the bid is about establishing and communicating your value proposition.
What is a value proposition?
It is a demonstration of how your group’s activities address your customers’ needs and deliver quantified value. In short, it communicates the unique differentiation in value between you and your competitors. Customers include, but are not limited to, patients, surgeons, the health care system, internal and external communities, and payers. The value proposition should provide direction and strategic focus to the organization. Clinical excellence is no longer enough; leadership, both within the group and in the environment (OR, preop, PACU, NORA, board, and community), is critical to establishing your value proposition.
The importance of leadership
Good governance is the foundation of a strong group. Effective leaders sustain the forward progress of the group by establishing and communicating its value. They are the “face” of the group to all internal and external stakeholders. They need to be affable, trusted, and working for the best interest of the group while serving the needs of the community. However, no leader can do it alone. Solid governance includes a team of leaders committed to the group and to communicating its value.
Anesthesiology service contributors to value
Intraoperative management of the patient is critical but not sufficient to differentiate value. As such, the entire team must collaborate to increase throughput and efficiency, as well as work seamlessly together via coordinated anesthesia protocols. The group must validate with data how common protocols are able to decrease length of stay (a major concern of hospitals), manage acute pain management services, and improve crisis management.
Demonstrating excellence in anesthesia care
W. Edwards Deming (the “father” of total quality management) once said, “In God we trust. All others must bring data.” This concept is credited for the Japanese manufacturing miracle of the 1970s and 1980s. How does your group quantitatively show excellent performance or patient satisfaction? If your group doesn’t provide fancy graphs and charts, just know that other groups will. Key quality indicators must be monitored every month and actively managed to paint the very best picture of your group’s performance.
Understanding compensation and productivity benchmarking
In a quantitative world, benchmarking compensation and productivity will be key to developing a value proposition or producing a competitive RFP response. If productivity is too low, it may be challenging to support competitive physician salaries. Similarly, if the group offers a low bid to maintain the contract, it likely will be unable to attract talent in the future. If the group bids too high, it likely will not win the contract. There are several institutions that publish data on compensation and productivity to help support the financial portion of any negotiation. This information can also help the hospital understand the cost of underutilized rooms.
Demonstrating efficiency of provider workforce
One key element of the value proposition is determining how to reduce cost and increase revenue to minimize the financial support the anesthesia practice needs from the facility. Establishing the most efficient staffing model is always a challenge. Of course, this must be balanced with safety considerations, as well as patient satisfaction scores. In the end, it is about offering alternatives and communicating the various ways the group can bring efficiencies and save money for the facility.
Understanding your customers
The best way to negotiate is to understand the needs/desires of the other stakeholder(s). This requires a great deal of listening and adjusting one’s perspective. Even when the data set is agreed upon, people can interpret it differently, so it is important to be open to alternative interpretations and be ready to validate your position. Moreover, understand that there is commonly more than one customer. Most anesthesia groups will need to satisfy patients, hospital administration, nursing, other physicians, the external community, the board, and probably many others (such as lawyers).
Legal and contractual issues
Contracts have legal ramifications and require legal review. But many of the concepts ultimately boil down to business decisions, so understanding them will give you a head start. Common concepts include termination clauses, grace periods, due process, the hospital’s ability to remove an individual physician, noncompetes, malpractice insurance requirements, intellectual property rights, confidentiality, indemnification, and methods for dispute resolution.
You have been awarded the contract – now what?
Many believe signing the contract is the end of the negotiation. However, it is really the beginning of the relationship. If you have not previously had a value proposition, now is the time to develop one and keep it updated. The group should always be “marketing” itself by communicating its value proposition to the various customers (patients, administration, surgeons, nursing, ancillary services, etc.).
This article is just a summary of the topics covered in the compendium. Each chapter is two to three pages of written description covering the topic, coupled with many resources for further reading for those seeking a deeper dive. It also includes a sample value proposition and RFP to give the reader an idea of what to expect from each of these documents. We hope you find it to be helpful as you navigate today’s challenging waters.