10 Tips from ASC Administrators on Tough Vendor NegotiationsWritten by Abby Callard | January 18, 2012
Negotiating supply costs with vendors can be a frustrating experience for surgery center administrators, but knowing how to negotiate, when to negotiate and when to walk away can make the interaction better — and help a center save money.
Here are 10 tips from ASC administrators and directors on how to succeed in tough vendor negotiations.
1. Start every negotiation with high standards. Karen Cannizzaro, administrator of Physicians Day Surgery Center in Naples, Fla., advises surgery centers — regardless of their size — to go into negotiations expecting to pay a fair price. She says centers should never paying list price for an item outside the center's GPO contracts. She says centers don't have to accept bad prices just because they are "little guys."
2. Ask for a better price than you expect to receive. 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. If an administrator asks for the price they want to pay for an item, the vendor will most likely make a higher counteroffer. Chances are the final price will be higher than the starting price. If the negotiation starts at a lower price, the final number is more likely to end up where the surgery center administrator wants it.
3. Negotiate prices when bringing in a new product. A great time to negotiate prices on supplies is when the surgery center is planning on adding a new product, says Josh Billstein, practice manager of the ambulatory surgery center at The Polyclinic in Seattle.
"If we're adding procedures for our urology group and we need more scopes, we want to know how long we can lock in the price for those scopes," he says.
4. Use case costing reports to negotiate. ASCs can use new technology to help with case costing report generation, according to a presentation given by Marion Jenkins, PhD, founder and CEO of QSE Technologies, and Todd Logan, vice president of sales - Western region, SourceMedical Solutions, at the 9th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference There are programs available that can estimate revenue based on fixed costs and supplies for the case, and these case reports can be used during vendor negotiations. They help surgeons see their per-case contribution to the ASC.
5. Ask for extras. Even if a vendor refuses to budge on the price of a certain item, administrators can ask for extras, such as free or extended warranties, Ms. Cannizzaro says. This can also be the place to negotiate delivery charges and possible storage options.
6. Ask the vendor to share delivery costs. Linda Ruterbories, nurse practitioner and director of surgical services at OA Surgery Center in Portland, Maine, recommends a surgery center promise its business to a vendor and ask to share delivery costs for those supplies.
"If your center is having inventory delivered three days a week, paying for freight expenses can really add up," she says. "If you can get vendors to share the expenses for shipping, it can help tremendously. That way, the vendor gets the ASC's business and the center doesn't have to pay for all freight expenses."
7. Ask the vendor to store surplus supplies. Another thing the OA Surgery Center negotiates with vendors is supply storage. Ms. Ruterbories says she entered into an agreement with vendors who agreed to store supplies at a warehouse nearby so the center would not have to pay for overnight delivery of supplies.
"The vendors promise to have a certain level of inventory stored away in those warehouses, so in case we have any weather-related or back-order problems, the center avoids the risk of being low on supplies needed to run the facility," she says. "On the other hand, that also means we are not paying double the cost to have extra inventory."
8. Use credit cards to make supply purchases. Making supply and equipment purchases with credit cards will gain a surgery center extra leverage with vendors because vendors no longer have to wait for payment; a credit card can be billed as soon as the invoice occurs, says Lori Vernon, regional vice president of operations of Health Inventures.
"Just the same as we sometimes ask our patients to provide a credit card which we will hit with their patient balance when their EOB comes in, the vendor will allow the ASC to do the same thing and they hit [the ASC's credit card] as invoices occur," she says. "Obviously you still need to monitor those invoices carefully for accuracy. But the vendor is getting their money in a very quick turnaround and you can leverage some of that negotiation for shipping and freight."
If the card has a rewards program, the earned reward can be applied to other expenses such as travel, supply discounts or cash.
"With the dollar amounts ASCs put on those, there's really some potential there," says Ms. Vernon.
9. Pit vendors against each other. Brooke Smith, administrator, Maryland Surgery Center for Women, recommends centers threaten vendors with the possibility of switching a center's physicians to another product or another vendor.
"We use that fact," she says. "We literally have all the gynecologists from the local hospital. If I make a move to go one way or another, I have the power to sway X number of doctors not to use that product."
Eric Friedlander, CEO of Starpoint Health, says ASCs should always work with more than one vendor to guarantee a competitive price. When entering into price negotiations, surgery centers should have bids from other vendors. He says, surgery centers should ask two or three vendors to submit bids and then pit the bids against each other.
10. Walk away. Tracy Hoeft-Hoffman, administrator of Hastings (Neb.) Surgical Center, advises administrators to simply walk away from the negotiation when the vendor offers an unreasonably high price. When a vendor introduced a 20 percent price jump, the center asked the vendor to come back with a better offer, which they eventually did.
"It's about being persistent, especially if they want our future business," she says. "We're hitting our five-year anniversary, and they know we have equipment needs coming up."
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