Appendix F • Simulation Scenarios

Negotiation
Simulation Scenarios

Six detailed role-play scenarios for training payer and provider negotiation teams

2-4 Hour Sessions•4-12 Participants•Foundation to Advanced

How to Use These Simulations

Each simulation is designed for a 2-4 hour training session with 4-12 participants. Scenarios progress in complexity from foundational to advanced, covering the full range of negotiation dynamics.

Facilitator Instructions:

  1. 1.Distribute the Market Background to all participants
  2. 2.Divide into Provider and Payer teams (2-6 per team)
  3. 3.Distribute confidential briefs — each team receives only its own
  4. 4.Allow 30-45 minutes for internal preparation
  5. 5.Conduct negotiation in structured rounds
  6. 6.Debrief using Teaching Objectives and Debrief Guide
Scenario 1

The New Entrant

A new hospital system entering a market negotiates with the dominant payer

2-4 hours
4-12 participants
Complexity: ●●○○○

Market Background (Shared)

Setting

Metro City, mid-size metro area (population 1.2M) in Southeastern US

The Provider — Meridian Health System

Meridian: Nationally recognized non-profit system opening new 250-bed hospital + ambulatory campus in northern suburbs. $1.4B investment. Opens in 6 months. 5-Star CMS ratings nationally. No existing Metro City contracts.

The Payer — PremierBlue Health Plan

PremierBlue: Dominant plan with 48% commercial share (280K lives), plus MA (45K) and Medicaid (95K). Current network includes Metro Medical Center and Community Health Partners.

Market Dynamics

Northern suburbs growing rapidly. Current network adequacy marginal (35+ min drive times). Two large employers (8K and 5K employees) interested in Meridian access.

Provider Confidential Brief

Strategic Situation

$1.4B investment requires breakeven by Year 3. Without PremierBlue (48% share), volume drops 40%, pushing breakeven to Year 5+ and triggering bond covenant review.

Hidden Interests
  • •Want preferred-tier placement in PPO and HMO for northern suburbs
  • •Willing to accept VBC arrangements (strong infrastructure)
  • •Willing to accept rates 5-10% below national average for first 3 years with volume commitments
  • •NOT willing to accept all-products clause forcing Medicaid rates
Walk-Away Threshold
Minimum: 115% of Medicare (blended) — covers variable costs Year 1
Target: 140% of Medicare (national average 155%)
Aspiration: 150% of Medicare + preferred-tier designation
Internal Pressures
  • •CFO anxious about bond covenants, wants any deal before opening
  • •CMO wants to lead with quality, push VBC from Day 1
  • •Board chair: "Do not open without a PremierBlue contract"

Payer Confidential Brief

Strategic Situation

Meridian entry is opportunity (high-quality suburban option, employer satisfaction) and threat (competitors gain advantage if they sign first). Adding Meridian at 140%+ requires 2-3% premium increase that major employers won't absorb.

Hidden Interests
  • •Want Meridian in network at rates that don't disrupt Metro Medical Center structure (has MFN-equivalent provision)
  • •Want to use Meridian entry as lever against Metro Medical at their renewal in 18 months
  • •Interested in VBC to demonstrate innovation to employers
  • •Prefer narrow/tiered product for northern suburbs with Meridian as preferred
Walk-Away Threshold
Maximum: 135% of Medicare (equal to Metro Medical Center — cannot exceed without triggering MFN)
Target: 120% of Medicare with VBC overlay
Internal Pressures
  • •VP Sales pushing hard (2 major employers threatening to leave)
  • •Chief Actuary firm on 135% ceiling, documented premium impact
  • •CEO: "Get deal done but do not blow up Metro Medical relationship"

Session Structure

1
Internal Preparation
Each team reviews brief, develops strategy, assigns roles
30-45 min
2
Opening Statements
Each side presents position
15 min
3
Round 1
Initial negotiation on primary issues
30 min
4
Internal Caucus
Teams regroup
15 min
5
Round 2
Continued negotiation, explore trades
30 min
6
Internal Caucus
Teams regroup
15 min
7
Round 3
Final package negotiation
20 min
8
Debrief
Teaching objectives review
25 min

Teaching Objectives

1
BATNA analysis (both sides have imperfect alternatives)
Ch. 7
2
Market intelligence using transparency data
Ch. 24
3
Network essentiality assessment
Ch. 6, 19
4
VBC as a strategic trading lever
Ch. 20
5
Anchor strategy (value narrative vs. anchor high)
Ch. 18

Facilitator's Master Guide

Difficulty Progression

1
The New Entrant
BATNA analysis, creative solutions
2
The Power Renegotiation
Power dynamics, strategic trading
3
The VBC Transition
Actuarial sophistication, VBC design
4
The Contract Rescue
Power dynamics, strategic trading
5
The System Negotiation
Actuarial sophistication, VBC design
6
The Narrow Network Standoff
Multi-party competitive dynamics

Recommended Training Sequences

New Teams

Start with Scenario 1, then Scenario 4 (foundational skills)

Intermediate Teams

Scenarios 2 and 5 (power dynamics and complexity)

Advanced Teams

Scenarios 3 and 6 (actuarial sophistication and market strategy)

Full Training Program

All six scenarios over three days (two per day)

Cross-Scenario Themes

After completing multiple scenarios, facilitate cross-scenario debrief addressing:

BATNA is everything

In every scenario, the party with the stronger alternative achieved better results. How did BATNA shape each negotiation?

VBC unlocked value in every scenario

Whether as creative solution, strategic lever, transition challenge, rescue mechanism, differentiation tool, or volume-for-rate trade — VBC created options that pure rate negotiation could not.

Internal alignment was as hard as external negotiation

In every scenario, internal pressures (boards, CFOs, physicians, employers, actuaries) constrained the negotiating team. Best outcomes came when teams had pre-aligned mandates with flexibility ranges.

Contract language matters as much as rates

Scenario 2 explicitly featured contract language reform as provider\'s primary objective. But in every scenario, operational and legal terms shaped the true value of the deal.

Data transparency changed power dynamics

Price transparency data, quality benchmarking, and financial modeling gave both sides new capabilities. The party that used data most effectively gained advantage — regardless of structural power.

These six scenarios are designed to be used repeatedly — with participants rotating between provider and payer roles in successive sessions. The deepest learning comes from negotiating for the other side, where you discover that their constraints are as real as yours, their internal pressures as intense, and their interests as legitimate. That discovery is the foundation of every breakthrough agreement.

B
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