We had the pleasure of presenting an educational webinar, Bolster Your Hospital’s Bottom Line: How to Gain Negotiation Leverage in Capital Equipment Purchases and Service Contracts, sponsored by the MN Chapter of the Healthcare Financial Management Association (HFMA). The webinar highlighted proven strategies hospitals can use to gain leverage and drive the greatest savings when negotiating capital equipment purchases and service contracts.
In case you were unable to participate, we thought you might enjoy a few highlights from the Q&A discussion:
- Are there certain types of equipment or service contracts that have the most saving potential?
The data we track from more than 50,000 global sources on more than 20,000 equipment types indicates that while savings opportunities can vary dramatically, the greatest price leverage is found in the areas of radiology, imaging, laboratory, surgical, patient beds and monitors. This holds true for both equipment and service contracts.
With certain specialized clinical technology that’s in demand and has limited competition, such as surgical robotics, it tends to be harder to drive savings. But even in those cases, there can still be savings opportunities worth pursuing.
- Our departments are responsible for planning and budgeting their own capital equipment purchases. What can I really do to help if we aren’t involved until it’s time to cut a P.O.?
This is a common issue for hospitals. In our experience, there are many expert perspectives inside the hospital that can be critically valuable for making the best equipment related decisions, including technicians, nurses, technologists, clinical engineering, and IT. If departments are managing the capital process on their own—from consideration to evaluation to selection to negotiation—our experience is that important details can be overlooked because they don’t have experience or information to know that all key details are handled and savings have been maximized. This is not a knock against the department personnel. They simply don’t have the information or insights to know what they can or should do.
The best thing to do is be proactive, reach out to them during the initial budgeting process and let them know how they can help ensure savings. Educate them on what to do and what not to do that can help them be the most successful in their vendor selection and negotiations.
- In our hospital, the doctors always tell the reps what they want and that they’re going to get it. By the time we get to negotiate, the vendors already know and they ‘laugh at us’.
Always remember that you’re the customer. While the doctors’ input is critical to the process, hospital management has to set clear lanes when it comes to vendor negotiations if savings potential are to be maximized. Do not be afraid to assert yourself and let vendors know that you’re an important part of the process and that you must take certain steps before issuing a P.O… even if the doctors told them it was “all set”. You deserve and should expect the support and cooperation of your vendors.
This is a perfect example of the critical importance of good communication. Doctors don’t always understand the consequence of communicating certain things to their vendors. Help the doctors understand that communicating information to vendors at the wrong time could sabotage your efforts and cost the hospital money. Put it to them in terms they understand, potential savings is your job to find and could enable your hospital to add another critical staff member or repair a piece of equipment. Help them understand the negative, as well as positive effect they can have on the process.
- We never have enough time to really figure out all the pieces of an equipment quote. Who has the amount of time it takes to understand the details of such infrequent purchases?
These purchases may be infrequent, but the dollars can be huge. An MRI, fleet of pumps or monitors can easily represent $1 million or more in spending and potential savings in excess of $100,000 that you’ll otherwise end up spending. This will not only increase purchase cost, but also add cost to your hospital’s bottom line for the entire anticipated life of equipment.
The good news is you can often get very valuable information and insight to help reduce the time need to make the best and most cost effective purchase. Seek out industry data or benchmarks to guide your contracting and negotiating efforts.
- You made a comment about how trade-ins can be the most expensive decisions hospitals make. What do you mean? We always get credit for our trade-ins that save us money.
We actually meant exactly what we said! To be clear – technically trade-ins don’t actually cost you out of pocket, but very often result in missed savings opportunities, because hospitals don’t know two key pieces of information:
- The true value of their equipment and what it should be worth on a trade-in AND…
- … that credits for trade-ins are often simply additional discounting applied to the purchase and will never represent the true market value available. Instead, you should consider either keeping your trade-in equipment or selling it for more money in the market.
The best way to avoid trading-ins “costing” you more than it should, is to have the right information ahead of time, and always validate your trade-in offer before finalizing the purchase of new equipment.
Please keep asking questions and expanding the dialogue about the many opportunities for hospitals to find savings in all their medical equipment lifecycle costs. Contact us at firstname.lastname@example.org or 763-225-8400 and we look forward to hearing from you.