Locum vs. Counteroffer

The situation

A hospitalist program director is notified that a productive attending physician plans to leave for a locum agency offering a 35% rate premium. The group depends on this physician for a difficult overnight shift that has been hard to fill. The program director has partial authority to match on base compensation but would need to involve administration for anything beyond that.

Background

Physician retention negotiations are bilateral bargaining problems where both parties have private information. The employer knows its budget ceiling but not the physician's true outside option value. The physician knows their true willingness to stay but not the employer's ceiling. Each side has incentives to misrepresent. The program director's partial authority creates a complication: making a full offer requires escalation, which takes time the physician may not wait for.

What this reveals

Why counteroffers fail to close

Most retention failures are information failures. The employer guesses at the reservation price and either undershoots or overpays relative to what the physician actually needed. The physician withholds their real concerns because revealing them feels like negotiating against themselves. The first move that improves outcomes is always the one that surfaces what the other party actually wants.

How to counter it: Ask 'what would make this an easy yes?' before making any offer. Most physicians can name it. The answer is almost always more specific than money and often cheaper to provide.

A question to sit with

When was the last time a retention negotiation in your organization started with a question rather than a number?

Frequently asked questions

What game theory concept does Locum vs. Counteroffer illustrate?

Locum vs. Counteroffer illustrates Bargaining Game. A retention counteroffer is a bargaining problem with asymmetric information. The employer does not know the physician's true reservation price, and the physician does not know the employer's true budget ceiling.

What is the situation in Locum vs. Counteroffer?

A hospitalist program director is notified that a productive attending physician plans to leave for a locum agency offering a 35% rate premium. The group depends on this physician for a difficult overnight shift that has been hard to fill. The program director has partial authority to match on base compensation but would need to involve administration for anything beyond that.

What does Locum vs. Counteroffer reveal about how people decide?

Why counteroffers fail to close. Most retention failures are information failures. The employer guesses at the reservation price and either undershoots or overpays relative to what the physician actually needed. The physician withholds their real concerns because revealing them feels like negotiating against themselves. The first move that improves outcomes is always the one that surfaces what the other party actually wants.

How do you avoid the trap in Locum vs. Counteroffer?

Ask 'what would make this an easy yes?' before making any offer. Most physicians can name it. The answer is almost always more specific than money and often cheaper to provide.

What is the research behind Locum vs. Counteroffer?

Physician retention negotiations are bilateral bargaining problems where both parties have private information. The employer knows its budget ceiling but not the physician's true outside option value. The physician knows their true willingness to stay but not the employer's ceiling.

How long does Locum vs. Counteroffer take to play?

About 8 min, at core difficulty, across 1 decision points. It runs in your browser with no account and no sign-in.

Keep exploring

More Healthcare Ops scenarios, or browse all scenarios. New to this? Start with how DecisionPlay works or the game theory glossary.

Topics: physician-retention, compensation, bargaining, hospitalist