Boundaries make for successful vendor negotiations

Sep 16, 2004

Drive thy business or it will drive thee. -- Benjamin Franklin

Stating needs and setting boundaries are important aspects of any meaningful personal relationship, and the same is true in business. When it comes to equipment negotiations, however, radiology administrators often find themselves swayed by persuasive vendor tactics. Determining and defining a facility's business boundaries are the first steps in creating a successful vendor negotiation.

"The vendors are only trying to make a living," said Georgann Bruski, a radiologic technologist and manager of invasive cardiology at Beth Israel Deaconess Medical Center in Boston. "They want to close the deal -- you need to take this lesson to heart and make it part of your strategy."

Bruski and Sara Cutler, president of Advance Healthcare Consulting in Schenectady, NY, shared their vendor negotiation strategies at the 2004 American Healthcare Radiology Administrators (AHRA) meeting in Boston.

Knowledge is power

"The vendors get together, they strategize, they plan, and they decide how they're going to get the deal," Bruski said. "You need to get together, you need to strategize, and you have to figure out who's going to get the deal and how you're going to get the best deal."

The first element to getting the best deal is determining what the practice is looking for.

"It's so easy to say, 'I want a CT scanner, or I want an ultrasound unit.' But what do you want on that unit? What are you going to use that unit for? Because it's like 31 flavors out there, you can have any configuration in the world," she said.

A facility needs to research the product that it is looking to acquire. This means reading all the literature about the product, both from the company and from outside sources. Check with personnel at other institutions, on both the professional and technical sides, and see what they feel are the strengths and weaknesses of the manufacturer and product they use.

Bruski cautioned the audience to avoid being swayed by a well-known brand when selecting potential vendors.

"You have to know the product before you buy it," she insisted. "Not just because it's a name brand."

Equally important is determining whether the product fits the needs of the institution. For example, a hospital-based practice will want to consider if the equipment will meet the needs of other departments, such as orthopedics and cardiology, which may want to use the modality. For an imaging center, the practice will want to consider how the acquisition will provide a competitive advantage.

"I really believe that before you buy a piece of equipment you have to look at how it's going to affect your operations," Bruski said. "For example, if you're doing cardiac CT, you need a 16-slice or 32-slice scanner, not an 8-slice scanner, even if it's a better deal."

She advised conducting a readiness assessment that includes the physical and network infrastructure, the staff competency to operate and maintain the quality of the equipment, and the financial implications on the facility's budget.

"Every department is different," Bruski said. "Just because the community hospital up the street has something or the academic center down the road has something, it doesn't mean that it's going to fit in your department."

On board or overboard

Once you've decided on your equipment needs and features, ensure that every group in the facility knows that you're negotiating a purchase. This includes the physicians, the staff, the administration, the information systems (IS) department, and the purchasing team.

Bruski suggested forming a collaborative group comprised of those who will either use or integrate the modality. In a hospital environment, this would be radiology, IS, cardiology, administration, and vascular or orthopedics, if necessary. In an imaging center practice, the group would have a technologist, radiologist, administrator, and IS person.

"The group should meet monthly at the beginning of a project, biweekly when it's committed to the project, and weekly when the project is under way," Bruski said.

The group should also select a leader to serve as the sole point of contact with vendors. According to Bruski, this eliminates any confusion that can be created by having multiple personnel responding to the vendor.

In addition, vendors can only contact that individual in the practice. All staff will need to be notified who the group leader is and to report any vendor contact regarding the negotiation to the group leader. The vendor must be advised that any contact with any other personnel without the group leader present will result in its disqualification from consideration, Bruski said.

This prevents the vendor from attempting to influence others in the practice and prevents personnel in the practice from inadvertently disclosing proprietary information, such as other vendors' offers, she said.

"Be clear about what you want, and state what you're going to pay," Bruski advised. "It's no good looking at a piece of equipment that's $1.5 million if you only have $650,000. Be honest with the vendor. They'll try to help you, and they'll tell you if they have to walk away. There's always someone who's willing to meet your price."

After vendor responses to a proposal request have been submitted, the project group must narrow the selection down to two or three vendors that are acceptable to everyone. There should be a consensus among staff so that no one cares which vendor is selected, Bruski said.

"I call it two spiders in a bowl," she said. "Only one is coming out."

At this point in the negotiations, a site visit to view the equipment in a working environment is needed. Bruski suggested that a practice select sites with similar settings and similar equipment to establish a fair comparison. She recommended that a project group conduct two to three visits for each vendor, and that they time their visit between 11 a.m. and 3 p.m., generally the busiest time of day for sites.

References need to be checked. In addition to getting five references for sites that have purchased and are using the equipment, Bruski advised obtaining references for five sites that did not purchase the equipment and determine why they didn't purchase the equipment.

One size does not fit all

No matter how good the modality model is, it will have to undergo periodic maintenance. For Bruski, service is a primary consideration in awarding a vendor an equipment contract. As such, a practice needs to investigate the competency of service in its area for the manufacturers and models under purchase consideration.

"What is great in New York may not be so in Boston, or Vincennes, Indiana," she said.

As part of the service investigation, a practice should insist on meeting the vendor's area service team. According to Bruski, this will enable a group to assess how well the sales and service teams work together within a vendor organization, and also get a sense of how well it will work with the area's service personnel.

"I don't just want to see one service person, I want to see a team," Bruski said. "I want to know who the people are that will be taking care of my equipment."

A modality is only useful when it's working. If it is down, it's not making money -- it's costing money, she said.

"When I buy a piece of equipment, one of the things I put in my contract is a clause requiring 99.9% uptime. And I put penalties in that contract if the vendor doesn't meet it," Bruski said. "If they don't come within that percentage -- and we go over it every three months -- we call the vendor in, and we tell them that they owe us an agreed upon amount on our service contract."

As for vendor contracts, Bruski stressed that a practice should put every single agreement detail in writing, and that it should never sign the first contract a vendor delivers.

"Don't take the company contract and sign it. You need to amend it, and you need to make it ironclad with penalties for default," she said.

By Jonathan S. Batchelor
AuntMinnie.com staff writer
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Part II: Exploring PACS secrets, July 6, 2004

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Part I: Exploring PACS secrets, May 14, 2004