The Art of Negotiation Between Providers and Regulators: Finding the Balance for Sustainable Healthcare

Negotiations have been front and center in the news this week. I've found many fascinating articles and takes from people, but the most interesting of all came from the Financial Times. The article (“The Art of the Peace Deal”) argues that lasting peace requires carefully balanced negotiations—grounded in credibility, mutual understanding, and firm limits—while cautioning that hasty or overly conciliatory approaches, risk perpetuating future conflict.

That made me think about how negotiations go down in healthcare today. It’s easy to make war, it’s much more difficult to make lasting peace between the different stakeholders.

In healthcare, negotiations between providers and regulators shape the financial and operational realities of care delivery. These negotiations determine payment models, incentives, and regulations—impacting everything from hospital margins to patient access. Yet, too often, they fall into one of two traps: rigid power plays that create friction or overly conciliatory approaches that compromise long-term sustainability.

The Three Pillars of Effective Negotiation

It’s been my experience that for negotiations to drive lasting success, they must be structured, deliberate, and enforceable. That requires three core elements:

Credibility – Both sides must trust that commitments will be honored and consequences will be enforced. If providers don’t believe regulators will adjust policies in response to market realities, or if regulators doubt provider adherence, agreements become meaningless.

Mutual Understanding – Sustainable deals come from recognizing each other’s incentives, constraints, and red lines. Regulators aim to control costs and ensure quality; providers need financial stability and operational flexibility. The best agreements reflect these dual realities.

Firm Limits – Over-accommodation can signal weakness and create long-term instability. If one side concedes too much to quickly secure a deal, it invites future exploitation, making negotiations more contentious down the road.

Healthcare is filled with examples of short-term fixes that ignored these three pillars and created bigger problems:

• Aggressive cost-cutting mandates have led to provider financial distress, staffing shortages, and reduced access to care.
• Rigid payment models without room for adjustment have unintentionally driven up total costs by pushing volume-based workarounds.
• One-sided risk arrangements have forced providers to take on financial burdens they weren’t prepared for, leading to contract failures.

When either party feels pressured into an agreement that doesn’t reflect a balanced reality, the long-term effects can be detrimental.

A Better Way Forward: Balanced Negotiation

“Negotiation is not an act of battle; it’s a process of discovery. The goal is to uncover as much information as possible.” - Chris Voss

Most people look to win negotiations in healthcare. I look to create balance under the premise that we are all actually trying to achieve the same goal, no matter if we are a provider, payer, or state regulator. There are three beliefs that have guided me.

First, policies should balance cost control with incentives for quality, efficiency, and access. Pure cost-cutting without reinvestment in healthcare delivery creates system instability.

Controlling healthcare costs is a no-brainer—it’s critical for affordability and keeping the system sustainable. But slashing budgets without reinvesting is a recipe for trouble. I’ve seen hospitals forced to cut services, and the fallout is real—burned-out staff, longer wait times, and quality that takes a hit. Cost-cutting alone isn’t enough; it can destabilize everything. I’ve also seen tremendous waste in hospital costs where there is difficulty in explaining why their cost structure is so much different than their peers while quality is low.

The approach needs to be more thoughtful, one that pairs spending controls with incentives for efficiency, access, and better care. And providers need to be taking action on how additional funding will provide improvement in all of those areas, not at a theoretical level, but with defined metrics.

The fix isn’t rocket science, but it takes guts. Take those cost savings and pour them back into the system—think preventive care, tighter care coordination, or digital tools that actually work. Track the expected benefit of that re-investment and make certain that it has the intended impact. Underfunding delivery sparks workforce shortages and declining results—we can’t afford that. Strategic investment, not blind cuts, is what transforms healthcare.

Second, financial sustainability must be built into agreements—but not at the cost of efficiency or accountability. Seeking flexibility should not mean avoiding necessary transformation.

Financial sustainability is the backbone of any contract, partnership, or policy that’s built to last. Whether it’s government deals, reimbursement models, or public-private collaborations, success hinges on agreements that don’t saddle anyone with impossible burdens. I’ve seen too many healthcare systems limp along under deals that sound great on paper but bleed them dry in practice. The principle is simple: long-term stability matters more than short-term wins. It’s not enough to keep the lights on today if tomorrow’s obligations pull the plug.

But here’s the kicker—sustainability can’t be a free pass for inefficiency or dodging accountability. A hospital payment model that shores up finances should still demand quality care, smarter processes, and real cost-effectiveness, not prop up old habits. This is where providers can lose credibility in negotiations with regulators.

Flexibility’s key too—think economic dips or surprise crises—but it’s a tightrope. Give too much wiggle room, and you risk stalling progress. Take an organization begging for looser deadlines; fine, but not if it means dragging their feet on patient safety upgrades or operational fixes.

Third, the best agreements are those where both parties have a stake in their success. Negotiations should create a structure where compliance is not just mandated but mutually beneficial.

Agreements in healthcare—or any field—thrive when both sides are invested in making them work. It’s not enough for one party to win while the other just nods along; that’s a shaky foundation waiting to crack. I’ve seen partnerships falter when the incentives don’t line up—one side’s coasting, the other’s grumbling. Mutual investment is the glue here.

Negotiations set the tone, and they’ve got to focus on mutual benefit, not mandates. Forget heavy-handed enforcement—effective deals align interests so compliance feels natural, not forced. Think of a partnership: a contract loaded with shared efficiency incentives beats one stacked with failure clauses any day. Profit-sharing models are a great example—both sides hustle for long-term wins because they’re in it together. When the benefits are clear and tangible, people don’t just follow rules—they chase results.