ASC administrators and industry leaders share five negotiation mistakes that lead surgery centers to accept weak vendor contracts.
1. Hearing bids from only one vendor. According to Eric Friedlander, CEO of Starpoint Health, ASCs should always work with more than one vendor to guarantee a competitive price. If you use one vendor and receive one price on a certain supply, you have no way of knowing whether the price is reasonable. Instead, ask two or three vendors to submit bids and then pit the vendors against each other. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC leaders should never go into negotiations without 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. 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.
2. Taking the full burden of shipping expenses. Linda Ruterbories, nurse practitioner and director of surgical services for OA Surgery Center in Portland, Maine, says her center has achieved successful vendor relationships by sharing costs for delivering supplies. Don't assume that your ASC should accept the whole cost of shipping; if your center is having inventory delivered three days per week, freight expenses can add up and cost you significant funds. "If you can get vendors to pay for shipping, it can help tremendously," she says. "That way, the vendor gets the ASC's business and the center doesn't have to pay for all freight expenses." Don't underestimate the value of your business to the vendor. Especially if you have a strong market share in a particular specialty, use your leverage to ask for help with shipping expenses.
3. Letting vendors talk to surgeons before the administrator. Neal Maerki, RN, CASC, administrator of Bend Surgery Center, says administrators should never let vendors bring products into the facility without discussing price first. "A physician can't just call in a vendor, because once the physician has driven the Ferrari, it's hard to talk about price," he says. "The physician has a big grin and the rep sees that, so I have no leverage." He says he talked to his vendor rep about pricing for video systems before allowing the physicians to see the equipment and managed to save a lot of money. "Reps will say, 'don't you want to do a side-by-side comparison?' and I say, 'Not until we finalize pricing.'" Don't let the relationship between the vendor and physician take precedent over the center's finances.
4. Asking for the price you want. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC administrators should ask for a better price than they expect to receive. Administrators can also ask for extra amenities, such as free extended warranties. If you ask for the price you expect to receive, your vendor will likely offer you a slightly higher price. If you ask for a better price than you expect, you are more likely to receive either the price you want or a slightly better price. If your vendor seems to have reached a stopping point on price, push for an extended warranty, free disposables or other "extras" that will make the deal better for you. "Once I get to the point that I feel as though they're not going to go any further from a price point, I'll try to get an extra year or two extended [on my warranty]," she says. "I'll say, '[Give me] two years of extended warranty,' and while they usually won't do that, you might end up getting one."
5. Considering only name-brand supplies. Shawn Lunney, vice president of sales and marketing for Gig Harbor, Wash.-based GMD, a company that develops generic medical device products, says ASCs can yield enormous savings by considering alternative, generic brand supplies. A recent report in the Wall Street Journal showed the price of brand name prescription drugs are increasing rapidly; according to an analysis of 130 drugs by Barclays Capital, the average drug price increased approximately 6.9 percent in 2010. If your surgery center depends on expensive name-brand supplies — either because of physician preference or because name brands suggest higher quality — you may be losing money unnecessarily. According to Mr. Lunney, medical devices are increasingly produced in generic forms; for example, GMD and Gold Standard Orthopaedics in Louisville, Ky., offer devices such as slings for female urinary incontinence and orthopedic screws for around half the price of similar brand-name versions.
Read more on ASC supplies:
-Prices of Brand Name Drugs Skyrocket
-UCSF Drug Robot Prepares 350,000 Doses Without Error
-More Than 500 Healthcare Organizations Changing Supply Chain Processes
1. Hearing bids from only one vendor. According to Eric Friedlander, CEO of Starpoint Health, ASCs should always work with more than one vendor to guarantee a competitive price. If you use one vendor and receive one price on a certain supply, you have no way of knowing whether the price is reasonable. Instead, ask two or three vendors to submit bids and then pit the vendors against each other. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC leaders should never go into negotiations without 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. 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.
2. Taking the full burden of shipping expenses. Linda Ruterbories, nurse practitioner and director of surgical services for OA Surgery Center in Portland, Maine, says her center has achieved successful vendor relationships by sharing costs for delivering supplies. Don't assume that your ASC should accept the whole cost of shipping; if your center is having inventory delivered three days per week, freight expenses can add up and cost you significant funds. "If you can get vendors to pay for shipping, it can help tremendously," she says. "That way, the vendor gets the ASC's business and the center doesn't have to pay for all freight expenses." Don't underestimate the value of your business to the vendor. Especially if you have a strong market share in a particular specialty, use your leverage to ask for help with shipping expenses.
3. Letting vendors talk to surgeons before the administrator. Neal Maerki, RN, CASC, administrator of Bend Surgery Center, says administrators should never let vendors bring products into the facility without discussing price first. "A physician can't just call in a vendor, because once the physician has driven the Ferrari, it's hard to talk about price," he says. "The physician has a big grin and the rep sees that, so I have no leverage." He says he talked to his vendor rep about pricing for video systems before allowing the physicians to see the equipment and managed to save a lot of money. "Reps will say, 'don't you want to do a side-by-side comparison?' and I say, 'Not until we finalize pricing.'" Don't let the relationship between the vendor and physician take precedent over the center's finances.
4. Asking for the price you want. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, says ASC administrators should ask for a better price than they expect to receive. Administrators can also ask for extra amenities, such as free extended warranties. If you ask for the price you expect to receive, your vendor will likely offer you a slightly higher price. If you ask for a better price than you expect, you are more likely to receive either the price you want or a slightly better price. If your vendor seems to have reached a stopping point on price, push for an extended warranty, free disposables or other "extras" that will make the deal better for you. "Once I get to the point that I feel as though they're not going to go any further from a price point, I'll try to get an extra year or two extended [on my warranty]," she says. "I'll say, '[Give me] two years of extended warranty,' and while they usually won't do that, you might end up getting one."
5. Considering only name-brand supplies. Shawn Lunney, vice president of sales and marketing for Gig Harbor, Wash.-based GMD, a company that develops generic medical device products, says ASCs can yield enormous savings by considering alternative, generic brand supplies. A recent report in the Wall Street Journal showed the price of brand name prescription drugs are increasing rapidly; according to an analysis of 130 drugs by Barclays Capital, the average drug price increased approximately 6.9 percent in 2010. If your surgery center depends on expensive name-brand supplies — either because of physician preference or because name brands suggest higher quality — you may be losing money unnecessarily. According to Mr. Lunney, medical devices are increasingly produced in generic forms; for example, GMD and Gold Standard Orthopaedics in Louisville, Ky., offer devices such as slings for female urinary incontinence and orthopedic screws for around half the price of similar brand-name versions.
Read more on ASC supplies:
-Prices of Brand Name Drugs Skyrocket
-UCSF Drug Robot Prepares 350,000 Doses Without Error
-More Than 500 Healthcare Organizations Changing Supply Chain Processes