Here are five established strategies for gaining leverage and prevailing in vendor contract negotiations.
1. Be prepared for lengthy negotiations. Renegotiating rates with payors can take a full year to complete. "There is a lot back and forth," Mr. Ashby says. "You send a rate proposal and then they send a counter-proposal." However, these negotiations only involve an amendment to the contract rather than involve changing the basic terms of the contract. You should open negotiations every few years, but some plans refuse to do it annually.
From: 5 Ways ASCs Can Keep in the Black
2. Increase your negotiating power. There are several ways ASCs can gain leverage in negotiations with suppliers over supply costs. Two ways to achieve greater leverage is by working with a larger hospital or taking a competitive pricing approach during negotiations. Central Illinois Endoscopy Center in Peoria, Ill., previously had a service agreement with Methodist Medical Center in Peoria and had all accounts and pricing negotiations handled by the hospital, which is able to receive better price points for supplies than the ASC would have received on its own.
"Currently we are looking at taking over the purchasing portion of our service agreement," says Karen Smith, nursing director at Central Illinois Endoscopy. "We gave McKesson, who we now have an agreement with, a list of our prices the hospital negotiated and we were able to retain those prices."
Ms. Smith says that although there were a few items the ASC pays more for now that prices are negotiated without the hospital, the lower prices for other supplies makes up for the difference. "For the rest of our instruments we are using a competitive approach. We informed all of our instrument suppliers we would be taking over our ASC's purchasing, and basically if the physicians liked their equipment and there were no safety issues then the best price would be the one we go with," she says.
From: 3 Ways to Increase Savings for Surgery Center Supplies
3. Let physicians test drive implants. During the consensus building process, it is important to let physicians evaluate any implants they are not familiar with before sealing the deal with a vendor. This may mean having numerous sales representatives spending time with their product in your facility, says Beth A. Johnson, vice president of clinical systems for Blue Chip Surgical Center Partners.
"If [physicians] have never used a plate, they'll want to try it before making a purchasing commitment to a vendor," says Ms. Johnson. "During this process, and in the final agreement, ensure that all implants are brought in on consignment, and that the associated instrumentation are kept at the facility as a 'loaner' set. It is less efficient for all parties involved if a set of instrumentation must be secured each and every time a procedure is performed."
After physicians have tested the various implants, a decision on standardization can be made quickly. The entire consensus process should take no longer than a month, says Ms. Johnson.
From: 6 Steps for Reducing Spine Implant Costs
4. Conduct product comparisons. Since there may at least two companies that offer equivalent versions of a particular product, ASCs should diligently conduct product comparisons to see which product helps deliver high quality of care but at a lower cost.
"For instance, our biggest supply needs for orthopedics are anchors and screws, which act as implants," says Steve Corl, administrator at Mackinaw Surgery Center in Saginaw, Mich. "We look at each company's product and involve our physicians in the process, which is key because it's not always about prices. Even though one product might be cheaper, you might want the more expensive equivalent because it'll add more value to the facility."
From: Quick Tip: Negotiating Prices With Supply Vendors
5. Pit vendors against each other. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC leaders should go into negotiations with a competitive quote from another vendor. While you should not divulge the pricing you're receiving from a competitor, a competitive quote can let you know when to push the vendor for a lower price — and give you leverage in asking for it. "Let's say you have company A and company B. If company B just gave me a better price, I'd go to them and say, 'Well, you didn't do well enough, because company A gave me an even better price,'" she says. If you let a vendor know they're offering you the lowest price on the market, they won't lower it more because your business will essentially be guaranteed.
Negotiation should start with the first quote, she says. A weak negotiator will assume his or her ASC's business is not valuable and therefore accept the first quote on the table — a serious mistake, Ms. Slagle says, considering that price is probably much higher than you should accept.
From: 7 Ways to Improve the Results of Vendor Negotiations
1. Be prepared for lengthy negotiations. Renegotiating rates with payors can take a full year to complete. "There is a lot back and forth," Mr. Ashby says. "You send a rate proposal and then they send a counter-proposal." However, these negotiations only involve an amendment to the contract rather than involve changing the basic terms of the contract. You should open negotiations every few years, but some plans refuse to do it annually.
From: 5 Ways ASCs Can Keep in the Black
2. Increase your negotiating power. There are several ways ASCs can gain leverage in negotiations with suppliers over supply costs. Two ways to achieve greater leverage is by working with a larger hospital or taking a competitive pricing approach during negotiations. Central Illinois Endoscopy Center in Peoria, Ill., previously had a service agreement with Methodist Medical Center in Peoria and had all accounts and pricing negotiations handled by the hospital, which is able to receive better price points for supplies than the ASC would have received on its own.
"Currently we are looking at taking over the purchasing portion of our service agreement," says Karen Smith, nursing director at Central Illinois Endoscopy. "We gave McKesson, who we now have an agreement with, a list of our prices the hospital negotiated and we were able to retain those prices."
Ms. Smith says that although there were a few items the ASC pays more for now that prices are negotiated without the hospital, the lower prices for other supplies makes up for the difference. "For the rest of our instruments we are using a competitive approach. We informed all of our instrument suppliers we would be taking over our ASC's purchasing, and basically if the physicians liked their equipment and there were no safety issues then the best price would be the one we go with," she says.
From: 3 Ways to Increase Savings for Surgery Center Supplies
3. Let physicians test drive implants. During the consensus building process, it is important to let physicians evaluate any implants they are not familiar with before sealing the deal with a vendor. This may mean having numerous sales representatives spending time with their product in your facility, says Beth A. Johnson, vice president of clinical systems for Blue Chip Surgical Center Partners.
"If [physicians] have never used a plate, they'll want to try it before making a purchasing commitment to a vendor," says Ms. Johnson. "During this process, and in the final agreement, ensure that all implants are brought in on consignment, and that the associated instrumentation are kept at the facility as a 'loaner' set. It is less efficient for all parties involved if a set of instrumentation must be secured each and every time a procedure is performed."
After physicians have tested the various implants, a decision on standardization can be made quickly. The entire consensus process should take no longer than a month, says Ms. Johnson.
From: 6 Steps for Reducing Spine Implant Costs
4. Conduct product comparisons. Since there may at least two companies that offer equivalent versions of a particular product, ASCs should diligently conduct product comparisons to see which product helps deliver high quality of care but at a lower cost.
"For instance, our biggest supply needs for orthopedics are anchors and screws, which act as implants," says Steve Corl, administrator at Mackinaw Surgery Center in Saginaw, Mich. "We look at each company's product and involve our physicians in the process, which is key because it's not always about prices. Even though one product might be cheaper, you might want the more expensive equivalent because it'll add more value to the facility."
From: Quick Tip: Negotiating Prices With Supply Vendors
5. Pit vendors against each other. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC leaders should go into negotiations with a competitive quote from another vendor. While you should not divulge the pricing you're receiving from a competitor, a competitive quote can let you know when to push the vendor for a lower price — and give you leverage in asking for it. "Let's say you have company A and company B. If company B just gave me a better price, I'd go to them and say, 'Well, you didn't do well enough, because company A gave me an even better price,'" she says. If you let a vendor know they're offering you the lowest price on the market, they won't lower it more because your business will essentially be guaranteed.
Negotiation should start with the first quote, she says. A weak negotiator will assume his or her ASC's business is not valuable and therefore accept the first quote on the table — a serious mistake, Ms. Slagle says, considering that price is probably much higher than you should accept.
From: 7 Ways to Improve the Results of Vendor Negotiations