Behind Closed Doors: How Hospitals Negotiate With New Private Practices

It’s July 1st plus about six months. You’re out of residency, maybe finished a fellowship, and the job you took “to get experience” is already starting to feel like a mistake. You’re watching your RVUs get chewed up by overhead, admin demands keep climbing, and the group’s “partnership track” looks more like a treadmill.

So you start thinking what every burned-out but still ambitious young doc eventually thinks:

“I should open my own practice. And I’ll just negotiate with the local hospital for support. How hard can that be?”

Let me tell you what actually happens on the other side of those doors at the hospital when you walk in asking for help to start a new private practice. Because the game they’re playing is not the one you think you’re playing.

You’re thinking: “I’ll bring them volume, they’ll help with startup, everybody wins.”

They’re thinking: “How cheaply can we lock in this service line, steer referrals to us, and keep compliance off our backs?”

What hospitals are really trying to get from you

Ignore the official talking points for a minute. I’ve sat in rooms where the CMO walks in on a physician meeting and says, “We really value independent physicians as partners.” Then the door closes, and the CFO asks one question:

“Show me the downstream revenue.”

That’s the game.

Hospitals do not care if your private practice as a business is thriving, as long as:

1. Their ORs, cath labs, imaging centers, and hospital beds fill.
2. You aren’t poaching too many profitable cases to an ASC or competitor.
3. They can defend the arrangement to their compliance and legal teams.

Your “value” to them is not your clinic. It’s the hospital-dependent revenue stream you control. Procedures. Admissions. Imaging. Referrals.

When they look at you, they don’t see “Dr. Patel starting a cardiology practice.” They see: “Annual echo volume, cath lab cases, consults, and readmissions.”

That’s why most of what they offer you is structured around supporting you just enough to capture that downstream revenue, without crossing Stark/AKS lines or overpaying.

So let’s decode the actual levers they pull.

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The big buckets of hospital support (and what’s unsaid)

When you say, “I want to start a private practice and I’d like to explore support from the hospital,” here’s what they mentally sort you into: strategic asset vs. replaceable commodity.

Strategic asset: Needed specialty or geographic coverage. Think GI in a smaller town, neurology in a hospital with stroke designation, general surgery in a community hospital with call gaps.

Replaceable commodity: Yet another outpatient IM in a saturated suburb. Another hospitalist. Another non-procedural specialty with zero access issues.

If you’re perceived as strategic, they’ll open the toolkit. If not, you’ll get a smile, a brochure, and maybe some token courtesy (“we can list you on our website”).

The toolkit usually falls into a few categories:

Support Type	Typical Use Case
Income guarantee	New-to-market specialties
Call stipends	Unpopular / uncovered call services
PSA (professional svc)	Employed-feel without employment
Co-management / MSA	Service line with metrics
Space/equipment deals	Imaging, clinic space, OR access

Let’s walk through these the way the hospital sees them.

Income guarantees: “We’ll carry you… but on our terms”

This is the one everyone hears about and misunderstands.

You: “The hospital will guarantee my income the first few years so I can build my panel.”

Hospital: “We’ll advance you money, track it like a loan, and recoup it from future productivity so we get cheap loyalty and protected volume.”

The typical structure (with plenty of local variation):

• 1–2 years of guaranteed compensation up to a cap, calculated off “FMV” (fair market value) surveys.
• Any collections above your expenses count against that guarantee (reducing what’s “advanced”).
• At the end of the guarantee period, whatever they’ve “overpaid” versus what your practice actually generated becomes a forgivable loan over X more years… if you stay and keep sending cases to them.

So they’ll say “$300k/year guarantee for 2 years.” That sounds like free money. It’s not.

Behind closed doors, the CFO will ask legal: “What’s the minimum we can guarantee and stay FMV-compliant?” And then they’ll structure it so they are never actually out true money for long, assuming you perform at a normal level.

I’ve watched more than one new cardiologist discover that their “income guarantee” was effectively just shifting their collections forward a bit, then handcuffing them to the hospital for five years with a forgivable-loan tail.

You can make these work for you, but only if you:

• Understand exactly how the true-up and forgiveness are calculated.
• Get in writing what counts as “cause” for them to terminate (and trigger payback).
• Know your practice’s likely ramp curve, not some fantasy from the hospital’s projections.

Call stipends: The quietly powerful chip you ignore

Hospitals care about call coverage more than you realize. Because the board and the community scream when cardiology, GI, neurosurgery, or OB “doesn’t have coverage.” That’s a reputational and regulatory risk.

So on the admin side, you’ll hear things like:

“We’re paying way too much in call stipends. Can we bundle this with recruitment so it looks more defensible?”

Translated: “Let’s wrap cash support to this new doc into call pay so it’s easier to justify as needed for hospital operations.”

If you’re entering a market where they’re already paying for call—in neurosurgery, OB, GI, cards, ortho—you have leverage. You can often negotiate:

• A defined call schedule with guaranteed stipends for X years.
• Priority for certain cases or at least guaranteed access to block time when you’re on.
• Stipends that quietly supplement your income while your clinic builds.

It’s amazing how many new docs walk into negotiations and talk only about income guarantees and not about call structure. The hospital team notices. And happily keeps paying the old guard their stipends while you hustle for scraps.

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PSAs: Employed-light without the W2

Professional Services Agreements (PSAs) are the hospital’s favorite halfway house between employment and true independence.

The pitch you hear: “You’ll stay an independent group, but we’ll contract with you to provide all the GI coverage / cardiology consults / ED call for our hospital.”

The internal conversation on their side: “We don’t want the political blowback of employing everyone, but we need system control. Can we tie them up with a PSA so they function like staff without being on payroll?”

Typical structures:

• You bill and collect (sometimes they bill “on your behalf”), and the hospital pays you a flat rate or RVU-based comp, adjusted to FMV.
• Or: The hospital bills and collects, and pays you a compensation that feels a lot like employee pay, but you technically remain an independent contractor or group.

PSAs work well for a new practice when:

• The hospital desperately needs a specialty and wants to guarantee you volume.
• You want predictable income while still building your outpatient business.
• You negotiate autonomy around scheduling, ancillary ownership, and clinic location.

But you give up leverage if:

• The PSA is your only major revenue source.
• They tie the PSA to non-competes that block you from practicing in the only market that matters.
• The metrics and renewal language are vague “to be determined” items written by their lawyers.

The big thing they’ll never say out loud: PSAs are also a way to test a group or doc before deciding whether to push for employment, recruit competitors, or let you stagnate.

They’re constantly measuring: Are you loyal? Do you fight them on referrals? Do you send high-margin cases to your own ASC or to their hospital?

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How hospital admins actually assess your leverage

You walk in proud: “I’m fellowship-trained, great CV, I can help you build your [insert service line].”

They pull up a dashboard on their laptop and mentally click through four questions:

1. How bad is our access problem in this specialty?
2. How replaceable is this person?
3. What’s the downstream revenue potential of this doc’s practice?
4. Do we have political landmines with the existing groups?

Let me break those down the way they really talk.

1. Access: “Is the phone ringing with complaints?”

If outpatient waits are 4–6 weeks but nobody’s screaming, they don’t feel urgency. You might get a lukewarm offer. They’ll tell you “we’re very interested,” but they’re not.

If ED is boarding patients because there’s no GI to scope overnight, no neurosurgery on weekends, or cardiology refuses transfers, the tone changes fast.

Behind closed doors I’ve heard:

“We’re going to lose stroke designation if we don’t shore up neurology.” “Our trauma status is at risk.” “OB call is about to implode; someone is going to walk.”

If your specialty solves a regulatory or reputational problem, your negotiation power multiples.

2. Replaceability: “Can we just call the big group?”

If there’s a large legacy group in town, admin will ask: “Why don’t we just give the new volume to them? Less political headache.”

That’s your real competition in most markets—not another solo doc, but the entrenched group that’s already plugged into the system.

You gain leverage if:

• The existing group is stonewalling on coverage, recruitment, or quality metrics.
• They’re openly hostile to the hospital in steering cases to a competing facility.
• The hospital wants a hedge against that group’s power.

That’s when you get pulled aside by some VP who says quietly, “We’re looking for a partner who’s more aligned.”

Translation: “We’d like to use you as leverage against the old guard, and maybe grow you into a competitor if they don’t behave.”

Use it. But don’t be naïve about being a pawn.

3. Downstream revenue: the only spreadsheet that truly matters

Let’s be blunt. A neurologist who doesn’t admit many patients is less interesting than one building an EMU, stroke program, and sending loads of imaging.

A GI doc who scopes at the hospital is more valuable than one building an ASC across the street. Same human being, different downstream revenue path.

This is where your negotiation preparation usually fails. You show up with:

• CV
• Vague statements: “I will bring you lots of volume.”

They’re sitting on:

• Historical service line volumes and margins.
• Payer mix by zip code.
• Outmigration reports: who’s going where for what.

The admin game is to underplay how much you’re worth while telling you their “limitations” due to FMV and compliance. Some of that is real. Some is just anchoring.

If you walk in with real numbers—expected procedure volumes, referral relationships, a rough pro forma—you change that conversation. You signal that you’re not just “another doc,” you’re a business partner.

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Estimated Annual Downstream Revenue By Specialty

Category	Value
GI	4500000
Cardiology	5200000
Neurology	2800000
General Surgery	4000000
Endocrinology	1200000

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What negotiations really look like on their side

Here’s the part you never see. While you’re at home trying to remember what FMV stands for, this is happening in a closed conference room.

Internal Hospital Decision Process For Supporting New Practice

Step	Description
Step 1	Physician requests support
Step 2	Service line leader review
Step 3	Polite decline or minimal support
Step 4	CFO financial model
Step 5	Compliance and legal review
Step 6	Revise offer or abandon
Step 7	Draft term sheet
Step 8	Negotiate with physician
Step 9	Final approval by execs
Step 10	High strategic need
Step 11	Risk acceptable

Some truths from that room:

• The CFO is not thinking about your burnout or your training. They’re thinking service line margin, payer mix, and capital constraints.
• The compliance officer is the one who kills the crazy offers. They get antsy about Stark and Anti-Kickback every time someone mentions “we’ll just pay them more because we like them.”
• The CMO/VPMA may like you personally, but their influence is limited if the numbers don’t work.
• The board never sees your name. They see “new GI recruitment – projected ROI 2.4x over 5 years.”

And here’s the part that catches new docs off guard: they almost always start low.

You get a term sheet and think, “This must be pretty standard.” It’s often not. It’s a test. They expect pushback from sophisticated groups. When you just accept the first draft, you’ve told them everything they need to know about your negotiation skills for the next decade.

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How to walk into those negotiations like you know the game

No, you don’t need to become an MBA. But if you want a fair deal, you need to act less like a wide-eyed trainee and more like someone who understands how hospitals make decisions.

Here’s what separates the docs who get strong deals from the ones who get “standard packages” that quietly favor the hospital:

1. They bring their own numbers

Not a 40-page business plan. Just a clean, realistic, 1–2 page summary:

• Expected clinic volumes year 1–3.
• Expected procedures and where they’ll be done.
• Payer mix assumptions based on geography and referral pattern.
• Simple P&L for the practice, showing why an income guarantee at X amount for Y years actually pencils out.

The hospital won’t blindly believe your numbers, but they’ll respect that you have them. That bumps you out of “just another doc” category.

2. They understand FMV is both real and weaponized

Yes, fair market value and commercial reasonableness are real legal constraints. But here’s the trick: the FMV range is often wider than they pretend.

I’ve seen:

• First offer: “We can’t go higher than $350k, FMV caps us.”
• After pushback and a new FMV analysis: “We found room up to $420k when we considered call burden and wRVU benchmarks.”

Nothing changed except you pushed.

You can’t demand Ferrari-level comp in a Honda market, but you absolutely can ask:

• What survey data are you using?
• Are you including call in that?
• How are you treating procedural work vs. clinic?

Make them show their work. They won’t show you every internal document, but the harder you push, the less likely they’ll hide behind lazy “FMV” excuses.

3. They negotiate structure, not just headline numbers

The rookie mistake is obsessing over the top-line guarantee and ignoring structure.

Smart physicians push on:

• Term length of guarantees, PSAs, and call arrangements.
• Triggers for termination “for cause.”
• Non-compete scope: geography and duration.
• Space and equipment terms if the hospital is your landlord or leasing you scanners.

I’ve seen “great” guarantees paired with brutal non-competes that effectively force a doctor to stay employed or supported by the hospital for life—or move states.

And I’ve seen modest guarantees paired with flexible structures that lets the doc build a thriving practice with ownership in ancillaries.

Guess who wins 10 years out?

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The political landmines nobody warns you about

You’re not negotiating in a vacuum. There’s history in your market you don’t know yet. Old feuds. Quiet deals. Protected territories.

You can accidentally step into a war you didn’t start.

Some patterns I’ve seen repeat:

• You’re the “second GI group” in town. The incumbent group has been threatening to take their cases to a rival hospital. Admin brings you in as a hedge. Then they play both sides off each other. You get frozen out of prime OR blocks and referral streams when the old group demands “loyalty incentives.”
• You’re the new cardiologist after a big group merger. The hospital is terrified of that group’s dominance, so they’re very nice to you… until they aren’t. Once the group signs a new alignment agreement, your leverage drops overnight.
• You’re recruited to “build a program,” but nobody told you the last person who tried resigned in under 18 months because nursing, anesthesia, and admin weren’t on board.

You won’t see this in the glossy recruitment pitch. To avoid being set up:

• Ask every attending you trust in that hospital: “What’s the real story with GI/cardiology/surgery here?”
• Ask explicitly: “Who loses if I win?” If one group clearly stands to lose referrals or procedural share by your success, understand that you’re walking into conflict.
• Watch who doesn’t return your calls. That’s where your resistance will live.

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Where independent practices still have real power

Despite all the doom and gloom about consolidation, independent practices are not dead. Hospitals still need you, badly, in certain lanes.

Here’s where you still have leverage:

• High-acuity procedural specialties in community or regional hospitals (GI, cards, neurosurg, ortho, OB): they cannot fake coverage.
• Subspecialties that protect designations: stroke neurology, trauma surgery, interventional radiology.
• Markets with real competition: two hospitals across town clawing for market share will fight over you much harder than a single dominant system.

If you’re in one of these spaces, you should not be quietly accepting the first lukewarm offer “because that’s what my friend got.” You should be:

• Having multiple conversations at once (yes, even with competing systems).
• Being very explicit about where you’ll do your procedures and under what conditions.
• Making it clear you understand you’re not asking for charity—you’re trading future revenue.

Ironically, the docs who act the least desperate usually get the best deals. Because admin can smell desperation. And they price it in.

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Pulling this together: how to actually move

If you’re serious about starting a private practice and talking to your hospital, here’s the blunt sequence that actually works:

1. Map your value
   What service line do you bolster? What downstream revenue follows you? What call pain do you fix? You need crisp answers to those before you walk in.

2. Do a back-of-the-envelope pro forma
   Show why you’re asking for what you’re asking. Something simple: ramp-up of patients, procedures, realistic payer mix. It doesn’t have to be perfect. It has to be coherent.

3. Know your plan B
   Could you survive without hospital support? Could you join an ASC? Work locums while building? The more genuine options you have, the less you’ll cave.

4. Use counsel and advisors, but own the strategy
   A healthcare attorney is non-negotiable. But don’t outsource your thinking to them. They don’t know the clinical politics. You do—or you will if you ask around.

5. Expect a first lowball offer and treat it as a starting point, not a verdict
   It’s a draft, not scripture. Push back. Ask questions. Request modifications in writing. You’ll be surprised how much “not possible” becomes “maybe” after some resistance.

Years from now, you won’t remember the exact dollar figure on your first guarantee or how many times they said “FMV” in the negotiation. You’ll remember whether you walked into those rooms like an employee begging for a job, or like a physician who understood that your clinical skill, your relationships, and your future referrals are real assets.

Behind closed doors, they already know your value. The only question is whether you do.