Healthcare News & Insights

6 keys for getter a better deal in health IT vendor negotiations

handshakeHealthcare providers are under pressure to cut costs. One of the areas where they might find some wiggle room: in their contracts for IT products and services. 

Hospitals aren’t doing a bad job negotiating with health IT vendors. But there’s definitely room for improvement, according to a recent survey from healthsystemCIO.com.

Among the 241 healthcare CIOs surveyed, just slightly more than half (56%) said they’re happy with the deals they’ve gotten from IT vendors. While no respondents were downright dissatisfied with the outcomes of their negotiations, the remaining CIOs were only somewhat satisfied.

Among respondents in the latter category, many feel health IT vendors still charge too much for their services, especially in areas such as electronic health record (EHR) software where changing vendors can be extremely difficult for hospitals.

Here are some ways hospitals can tip the scales in their direction and get more value out of their health IT vendor contracts:

1. Start on the right foot

While renegotiating is possible down the road, the initial contract signed with an IT vendor is the most important.

That’s not just because a lower initial price will help the hospital save money in the future — the first negotiation will set the tone for the entire vendor relationship, CIOs say. According to 78% of survey respondents, the impact of a negotiation will be felt long after a deal is signed.

In some cases, CIOs find that pushing too hard can have a negative impact on the hospital’s relationship with a vendor — 28% said they’ve been concerned that getting a lower price means they’ll receive worse service. That’s why it’s important to be aware of what the organization may be giving up in exchange for cutting the cost.

2. Look for a win-win

When negotiating a contract for the first time or renegotiating a deal, the ideal changes to push for will be those that benefit both the hospital and the vendor. The key: knowing where the hospital’s value to the vendor lies.

For example, if an organization is growing, a vendor might be willing to settle for a lower rate because it’s likely that more business will be on the way in the future.

3. Be ready to bail out

A CIO’s goal should be to get the best deal for the hospital — and sometimes that won’t be possible with the first vendor chosen. It’s important not to force a relationship if there are other options available.

Before making too many concessions and signing a deal they aren’t satisfied with, hospitals should consider whether or not there’s another vendor that can offer a better agreement.

For that to work, organizations should also go into a negotiation with a back-up plan. Some experts recommend finding three vendor choices so the hospital is in a position to walk away if an agreement can’t be reached.

4. Educate negotiators

When asked if they’ve gotten enough help to improve their negotiating skills, CIOs surveyed were split evenly: 50% said there are enough resources and assistance within their organizations to help them along, and 50% said they’d like more information and education.

Some of those who answered positively said they’ve been helped out by mentors who are willing to share their experiences, while others said they’ve taken courses related to negotiating.

Helping those involved in negotiating improve their skills can help the organization boost its bottom line.

5. Shop around more

A lot of spending by healthcare organizations goes toward commodities such as cotton balls, linens and other items. And that may affect the way healthcare care providers shop for IT services and equipment, according to a report published last year by service provider NET(net).

Healthcare firms often do less “due diligence” than other organizations when choosing IT services and negotiating contracts, the report says, because much of what they buy doesn’t require that amount of legwork. That’s especially true for organizations without a lot of in-house IT expertise.

6. Understand contract terms

Health IT services such as EHR systems often come with complex vendor contracts that include plenty of pitfalls for hospitals. Understanding those terms will not only help keep costs down but could also help avoid expensive problems if things don’t go as planned.

Experts recommend going over big contracts with a lawyer who specializes in vendor contracts to make sure the agreement is enforceable and won’t expose the hospital to any unnecessary liability.

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