When it comes to capital medical equipment negotiations, there isn’t a level playing field.
Medical equipment sales teams are best-in class-experts; one could compare them to Olympic athletes, world-class musicians or elite military squadrons. They receive months of specialized training, possess domain expertise and deep product knowledge, and perfect their craft by selling the same equipment and services to many different hospitals in a given day. Your team, however, may only negotiate a purchase or service contract for a given type of medical equipment once every five, seven or even 10 years. As a result, it is not a level playing field and when it comes time to negotiate, your hospital is at a distinct disadvantage and could end up paying far too much. This will impact your bottom line not only this year, but for many years to come.
So how can hospitals level the playing field and achieve better outcomes in their capital equipment negotiations? Here are three best practices that in our experience, help hospitals consistently buy smarter, and gain greater leverage and better pricing:
1- Create (Credible) Competition:
When it comes to purchasing capital equipment, the absence of credible competition can cost your hospital a significant amount of money. Credible means a product or service that meets your hospital’s technical, financial or other requirements, and that your clinical team would actually consider using. Clinicians often have strong preferences and may voice their opinion in support of a single product from a specific vendor. However, without true competition from multiple vendors throughout the selection and purchasing process, it’s hard to gain any meaningful negotiation leverage that can get you the preferred product at the truly best price.
When selecting a competitor, be certain to pick one that offers comparable clinical capabilities and market acceptance and that will be credible in the eyes of your clinical team and the supplier representatives. This can be new equipment from another manufacturer, or in the absence of legitimate competition for certain clinical technologies, even a used version of the model you need from another source in the marketplace can help ensure you aren’t stuck in a single supplier negotiation where they know they are going to win before the negotiation even begins.
Be certain to introduce competition well in advance of the final selection and whatever you do, don’t tell your preferred vendor that any decisions have been made or budgets approved until you are confident you have secured the best deal.
2- Communicate Early … and Often:
Your negotiation process actually starts internally and well before you engage with your vendor representative. Making sure all key hospital stakeholders are on board with the final decision before you start negotiating, and making your process and anticipated timing for final vendor selection completely transparent both internally and with your vendors is the best way to set the stage for an effective, productive and efficient negotiation. In contrast, the best way to kill momentum in your negotiations is to have unplanned questions or last-minute issues arise that are frustrating for everyone.
Remember that your vendors also need to set and manage expectations with their own teams and bosses. Good communication with vendors – even if it is not always positive news – helps set them up for being successful on YOUR behalf, and keeps surprises and the risk of potential disruption to your negotiation, to a minimum.
Ineffective communications are a surefire way to derail any negotiation, and capital medical equipment or service contract negotiations are no exception. And while having an aligned and consistent message seems like it should be a no brainer, it’s often not as easy as it sounds.
3- Don’t Fear Commitment:
As you close in on the final stage of negotiations, don’t overlook what may be the most powerful weapon in your arsenal for extracting the final concessions in your negotiations: the actual purchase order! Many hospitals fail to realize that the purchase order – which for them may be a routine formality – can be like gold for their vendor. The purchase order can be the prize that cements the vendor’s “win” and allows them to declare victory for their organization. Use the promise of a P.O. (and only if you can truly deliver) as a final “carrot” to dangle in front of the supplier sales executive as a reason for them to go to bat with their management to secure any final price discounts or incentives you may be requesting. Too many hospitals get to the final stage of negotiation, and then are unable to deliver the P.O. without weeks of delay. This can leave vendors anxious and wondering if the deal is truly “real,” or begin to wonder if you are “just shopping” and may not actually have approval or support to move the purchase forward. The P.O. is an easy and cost-free way to put everyone’s mind at ease. Your vendor has worked hard during the negotiation, and it’s fair that they receive the final things they need to be successful in their role.
Implementing these simple but proven strategies is the best way to level the playing field and ensure the best results – and most savings – in your capital equipment negotiations.
Please contact the Miga team if you’d like to learn more about how hospitals are leveling the playing field and driving savings from all their medical equipment lifecycle costs.