Linda Babcock, Laurie R. Weingart,
& Taya R. Cohen
Three Rivers Hospital vs. North Shore Internal
Medicine
General Information and Confidential Information for NSIM
North Shore Internal Medicine (NSIM) is a community practice owned and operated by five physicians.
There are three practice locations in the Pittsburgh region (i.e., Allegheny, Brighton, and Crafton). The
practice has been in operation for 15 years, and has been extremely successful. NSIM has an excellent
reputation in the community and a large number of loyal patients. Earlier in their careers, the NSIM
physicians had been employed by an HMO. They quit to form their own practice due to frustrations they
experienced working with the HMO bureaucracy. They wanted to make their own decisions regarding
staffing and the management of daily operations. Today, with the uncertainty and changes in
government regulations, insurance reimbursements, and electronic medical records systems, it is
difficult for a small practice to keep up with the dynamic environment and compete with larger
healthcare organizations. Therefore, the physicians see a major potential benefit from integrating their
practice with that of a large hospital.
Three Rivers Hospital (TRH) is a large non-profit hospital in Pittsburgh, Pennsylvania. The hospital has an
excellent national reputation for care and innovation, but it needs to grow to utilize its capacity and
equipment more effectively. One way to do this is to expand the physician base that utilizes the
hospital’s services. TRH is especially interested in purchasing NSIM because of the size of its patient list
and the fact that this list trends toward older adults who are likely to need an increasing number of
hospital services.
Informal discussions between the two parties have proceeded quite smoothly thus far. Representatives
from NSIM and TRH are ready to negotiate the details of the acquisition today. Chris Pearson, MD is the
lead negotiator from NSIM and Jamie Trapani is the lead negotiator from TRH. Both have full authority
to close any deal as long as agreement is reached on the seven issues described below.
Asset Acquisition refers to the price to be paid for the hard assets (e.g., facilities, equipment) and
intangibles of the practice (e.g., workforce in place, electronic medical records). Information available to
both parties about recent sales of medical practices to hospitals in this region suggest that the hard
assets and intangibles are worth $900,000 to $1,300,000.
There are three features of the physicians’ employment contract to be negotiated.
Contract Duration refers to the number of years that the hospital is committed to employing the NSIM
physicians. The range being considered is three to five years.
Salary refers to the salary to be paid to each of the physicians under an agreement with TRH. The range
being considered is $190,000 to $230,000 per physician annually (the productivity requirement for the
physicians has already been set at the 50th percentile).
___________________________________________________________________________________________________
© 2014-2017 Linda Babcock, Laurie R. Weingart, Taya R. Cohen. Distributed by Negotiation and Team Resources (NTR). To
request permission to reproduce contact negotiationandteamresources.com
Three Rivers – Gen. & NSIM Info. - 2
Non-Compete Clause Duration refers to the clause that prohibits a physician from leaving the hospitalbased practice and joining a new practice (or starting up a new practice) that is less than 30 miles from
the current practice. The duration being considered is one to two years
There are three features of the practice operations to be negotiated.
Control of Operations. The five NSIM physicians currently control the management of the daily
operations of their practice (e.g., scheduling; purchasing of equipment, supplies, and technology) and
the staffing of their practice (e.g., hiring and firing of all personnel; compensation paid to support staff).
There are three different options being considered.
Option 1: The hospital has full control of managing daily operations and staffing.
Option 2: The hospital controls the management of daily operations; a governing board controls staffing,
with decisions made by “majority rule.” There will be five members of the governing board, three of
whom will be selected by and from hospital administrators.
Option 3: The hospital controls the management of daily operations; a governing board controls staffing,
with decisions made by “majority rule.” There will be five members of the governing board, three of
whom will be selected by and from the current physicians.
Number of Offices refers to the number of offices the practice would staff. There are currently three
offices (Allegheny, Brighton, and Crafton). Moving forward the number of offices can range from one to
three.
Main location of the practice. The location of the practice’s main office can be in Allegheny, Brighton, or
Crafton.
___________________________________________________________________________________________________
© 2014-2017 Linda Babcock, Laurie R. Weingart, Taya R. Cohen. Distributed by Negotiation and Team Resources (NTR). To
request permission to reproduce contact negotiationandteamresources.com
Three Rivers – Gen. & NSIM Info. - 3
Confidential Information for North Shore Internal Medicine (NSIM)
You are Chris Pearson, MD, a physician from North Shore Internal Medicine. Your partners selected you
to represent their interests in the negotiations with Three Rivers Hospital (TRH) and have given you full
authority to close a deal TRH today.
You have spent the last few days meeting with your partners, discussing the issues to be negotiated and
developing a schedule of “points” that represents your collective preferences about the issues. Although
there are some differences among the partners, everyone has “signed off” on the final point schedule
on the following page. Your objective in today’s negotiation is to maximize the number of points you
receive. You can reach a deal today as long as you have agreements on all seven issues, and the number
of points is greater than or equal to 1000. For an agreement worth less than 1000 points, you and your
partners would prefer to not sell NSIM.
___________________________________________________________________________________________________
© 2014-2017 Linda Babcock, Laurie R. Weingart, Taya R. Cohen. Distributed by Negotiation and Team Resources (NTR). To
request permission to reproduce contact negotiationandteamresources.com
Three Rivers – Gen. & NSIM Info. - 4
NORTH SHORE INTERNAL MEDICINE POINT SHEET
(Confidential)
ISSUES
OPTIONS
Asset Acquisition
$900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
Contract Duration
3 years
4 years
5 years
Salary
$190,000
$200,000
$210,000
$220,000
$230,000
POINTS
0
75
150
225
300
0
500
1000
0
500
1000
1500
2000
Non-Compete Clause Duration
1 year
1.5 years
2 years
500
250
0
Control of Operations
Option 1
Option 2
Option 3
0
200
400
Number of Offices
1
2
3
800
400
0
Main Location
Crafton
Brighton
Allegheny
0
75
150
BOTTOM LINE = 1000 POINTS
___________________________________________________________________________________________________
© 2014-2017 Linda Babcock, Laurie R. Weingart, Taya R. Cohen. Distributed by Negotiation and Team Resources (NTR). To
request permission to reproduce contact negotiationandteamresources.com