Contract Negotiations, Risks, and Operating Margins

ContractNegotiations, Risks, and Operating Margins

ContractNegotiations, Risks, and Operating Margins

Thecontract negotiations, based on the scenario between the North CreekHealthcare and Community hospital, were concluded with an agreementbased on the legal (non-financial) terms. The contract’s mostcritical element is the community hospital’s lack of resources. Theresult is that most of the emergency physicians working on thecommunity hospital abandon a lot of money. These are revenue whichcould have been important in the recruitment ability of qualifiedphysicians in the hospital (Jackson, 2012). The element will have animpact on the community hospital, both short and long term, throughpayment of physicians and fulfilling the hospital’s mission ofproviding better health care as indicated in the contract.

Thehospital I work for has an operating margin, which for the past threeyears, has been consistently below the national norm. One key driverof below par performance is attributed to high patient populationwith minimal or inadequate medical resources to be used on thepatients. With lack of enough resources in the hospital I work withmeant that the hospital was forced to dig deep into the hospitalfinances to cover some for the expenses. Additionally, low operatingmargins was also attributed to high patient to doctor ratio, whichmeant that payment of doctors became hard.

Strategyfor the improvement of future management of the above driver shouldinvolve the hospital’s ability to sign a contract that has amanaged care plan. The plan will aim at reducing hospital’sexpenses through contract provisions (Jackson, 2012). These contractprovisions ensure that hospital bills are payed with all the means atthe disposal without the use of hospital revenue. These provisionswill aim at covering the expenses and increasing resources.


Jackson,T. L. (2012). Standardwork for lean healthcare.New York: Productivity Press.