Negotiating with vendors over supplies and equipment can be difficult and intimidating. Carol Slagle, CASC, administrator of the Specialty Surgery Center of Central New York, offers seven ways to make sure you use information to your advantage and get the best price out of your negotiations.
1. Align with a GPO. Ms. Slagle recommends ASCs align with a group purchasing organization, a move she believes will be critical to centers' financial health and negotiating leverage going forward. "There are a lot of ASCs that are aligned with management companies, and sometimes they can access the GPO through their managing company or the managing companies have their own corporate contracts," she says. "If the ASC is not aligned with a management group and they're having difficulty finding a GPO, they can always try working through their state ASC association." For example, the New York State ASC Association is affiliated with Amerinet.
2. Pit vendors against each other. Ms. Slagle 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.
3. Do your price research. According to Ms. Slagle, an administrator who goes into a negotiation without research and market information is setting him or herself up for failure. She says two years ago, her ASC built a fourth OR and needed a new microscope. "I'd caught wind there was an ASC that was going to stop doing ophthalmology, so I called them and said, 'Do you have any microscopes you're looking to get rid of?' They said they had a two-year-old microscope, and I asked how much they wanted for it." She says the other ASC quoted her $36,500. Before agreeing to the price, Ms. Slagle called Zeiss, the manufacturer, and asked how much a two-year-old microscope would cost, then visited a used microscope seller online and asked for a price there.
Zeiss said a two-year-old used microscope would cost $30,000, instead of the $75,000 charged for a brand new model. Eventually Ms. Slagle got the price down to $25,000, thereby saving a significant amount of money. By doing her research into comparative pricing, she was able to make an educated decision about the purchase and negotiate effectively.
4. Ask for more than you want. When you're negotiating prices, Ms. Slagle says you can also negotiate for extra amenities, such as free extended warranties, for example. If your vendor seems to have reached a stopping point on price, push for 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."
She says administrators must always go for "bigger than you want." If you're negotiating on an orthopedic camera, try to get the vendor to throw in a couple of telescopes or disposable products at no charge. Even if you are unsuccessful, the vendor will know you can't be pushed around.
5. Don't accept bundled procedural costs. Ms. Slagle says for some specialties, such as ophthalmology, companies like to bundle supplies together and offer a "procedural cost" that includes everything necessary for a particular procedure. "Never accept that," she says. "When you're doing your original negotiations between a few companies, make them break out what is in that procedural package and give you line item pricing. Otherwise, you'll never be able to negotiate."
For example, if a company puts 10 items in a pack and charges $100, you have no idea how the products' prices are making up that total. Several items could be vastly overpriced but hidden by that pricing "black box." "I want to know the price of each thing in that package, because that's when you can start going from one vendor to another and saying, 'I'm paying a lot less for this one particular item from my other vendor'," she says.
6. Use your ASC's strengths to your advantage. Never go into a negotiation thinking that the vendor is doing you a favor, Ms. Slagle says. You should approach every negotiation with the mindset that you are bringing valuable business to the company. In order to do this, Ms. Slagle says administrators must understand their ASC's strong points and use those in negotiation. For example, if your ASC performs 70 percent of all ophthalmology cases in your region, your business will make a substantial difference to the vendor's financial health. "If there's a center that has a particular specialty that dominates the market, they can be even more aggressive with the manufacturers and vendors," Ms. Slagle says. "Also, if your center is fiscally fit and pays vendors on time this gives you added strength. Vendor representatives usually work on commission and the sooner invoices are paid the sooner they receive their commissions."
7. Re-negotiate when your center makes changes. If your center accepted a high price from a vendor a few years ago, you may find it difficult to re-negotiate a lower price because the vendor already has you slotted in to a particular budget. Since they know you accepted a high price before, they may be less likely to lower it now. However, Ms. Slagle says you should absolutely re-negotiate if your center is undergoing changes that will affect the amount of business for the vendor. "Let's say you're adding a few more procedures and/or surgeons and increasing your volume" she says. "If there has been a significant change within your business model that impacts your volume that also impacts the number of goods you're going to purchase." She says these changes can mean extra leverage for negotiating a better price.
1. Align with a GPO. Ms. Slagle recommends ASCs align with a group purchasing organization, a move she believes will be critical to centers' financial health and negotiating leverage going forward. "There are a lot of ASCs that are aligned with management companies, and sometimes they can access the GPO through their managing company or the managing companies have their own corporate contracts," she says. "If the ASC is not aligned with a management group and they're having difficulty finding a GPO, they can always try working through their state ASC association." For example, the New York State ASC Association is affiliated with Amerinet.
2. Pit vendors against each other. Ms. Slagle 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.
3. Do your price research. According to Ms. Slagle, an administrator who goes into a negotiation without research and market information is setting him or herself up for failure. She says two years ago, her ASC built a fourth OR and needed a new microscope. "I'd caught wind there was an ASC that was going to stop doing ophthalmology, so I called them and said, 'Do you have any microscopes you're looking to get rid of?' They said they had a two-year-old microscope, and I asked how much they wanted for it." She says the other ASC quoted her $36,500. Before agreeing to the price, Ms. Slagle called Zeiss, the manufacturer, and asked how much a two-year-old microscope would cost, then visited a used microscope seller online and asked for a price there.
Zeiss said a two-year-old used microscope would cost $30,000, instead of the $75,000 charged for a brand new model. Eventually Ms. Slagle got the price down to $25,000, thereby saving a significant amount of money. By doing her research into comparative pricing, she was able to make an educated decision about the purchase and negotiate effectively.
4. Ask for more than you want. When you're negotiating prices, Ms. Slagle says you can also negotiate for extra amenities, such as free extended warranties, for example. If your vendor seems to have reached a stopping point on price, push for 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."
She says administrators must always go for "bigger than you want." If you're negotiating on an orthopedic camera, try to get the vendor to throw in a couple of telescopes or disposable products at no charge. Even if you are unsuccessful, the vendor will know you can't be pushed around.
5. Don't accept bundled procedural costs. Ms. Slagle says for some specialties, such as ophthalmology, companies like to bundle supplies together and offer a "procedural cost" that includes everything necessary for a particular procedure. "Never accept that," she says. "When you're doing your original negotiations between a few companies, make them break out what is in that procedural package and give you line item pricing. Otherwise, you'll never be able to negotiate."
For example, if a company puts 10 items in a pack and charges $100, you have no idea how the products' prices are making up that total. Several items could be vastly overpriced but hidden by that pricing "black box." "I want to know the price of each thing in that package, because that's when you can start going from one vendor to another and saying, 'I'm paying a lot less for this one particular item from my other vendor'," she says.
6. Use your ASC's strengths to your advantage. Never go into a negotiation thinking that the vendor is doing you a favor, Ms. Slagle says. You should approach every negotiation with the mindset that you are bringing valuable business to the company. In order to do this, Ms. Slagle says administrators must understand their ASC's strong points and use those in negotiation. For example, if your ASC performs 70 percent of all ophthalmology cases in your region, your business will make a substantial difference to the vendor's financial health. "If there's a center that has a particular specialty that dominates the market, they can be even more aggressive with the manufacturers and vendors," Ms. Slagle says. "Also, if your center is fiscally fit and pays vendors on time this gives you added strength. Vendor representatives usually work on commission and the sooner invoices are paid the sooner they receive their commissions."
7. Re-negotiate when your center makes changes. If your center accepted a high price from a vendor a few years ago, you may find it difficult to re-negotiate a lower price because the vendor already has you slotted in to a particular budget. Since they know you accepted a high price before, they may be less likely to lower it now. However, Ms. Slagle says you should absolutely re-negotiate if your center is undergoing changes that will affect the amount of business for the vendor. "Let's say you're adding a few more procedures and/or surgeons and increasing your volume" she says. "If there has been a significant change within your business model that impacts your volume that also impacts the number of goods you're going to purchase." She says these changes can mean extra leverage for negotiating a better price.