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June 5, 2012

10 Steps for Spine Surgeons to Negotiate Best Vendor Contracts Featured

Adam Higman of Soyring Consulting discusses 10 steps for spine surgeons and groups to take when negotiating contracts with implant vendors.

1. Decide whether to consolidate vendors.  "Make financial decisions about whether it makes sense to use the same mix of vendors or if you can get a better deal with consolidation," says Mr. Higman.  "Or, you may want to introduce new vendors into the mix."

2. Bring all partners together for a discussion on preference items.  "It's a good idea to have a sit down meeting with every practitioner involved to get an idea of what their 'must haves' are and what they are willing to negotiate," says Mr. Higman.  "Sometimes they will feel no difference between two or three vendors."

3. Standardizing pricing information and set caps.  To prepare for the actual negotiation, figure out the standard price in your area for each device and set a price cap you aren't willing to succeed. 

4. Make a demand for implant savings and stick to it.  Tell vendors you are looking to see specific margins to save a certain amount in the upcoming year, which means you are looking to cut materials costs and ask them what they can do for you.  "Don't make the demand unless you are really willing to switch vendors to get what you want," says Mr. Higman.

5. Meet with vendors face-to-face.  After making the initial connection by phone,meet with the vendors face-to-face to get the real pricing done.  "If you are in a rural area or part of a smaller practice, your options are more limited," says Mr. Higman.  "You might have three vendors to reach out to instead of 10, but face-to-face meetings are still the best way to go."

6. Prepare for a long negotiation.  Be prepared to spread the back and forth negotiations across several weeks or months to get the best contract. 

7. Highlight practice strengths during the negotiations.  Don't be afraid to highlight the group's strengths in explaining why you want to negotiate a lower rate.  For example, if you are a larger group, you could provide the vendor with more business.  If your surgeons have influence in the community and spine field, their use of the product will also be valuable to the vendor.

8. Understand market fluctuations.  "Cost of living calculates into what you pay in terms of product prices," says Mr. Higman.  "I've seen it to where someone talks to a friend in another part of the country and then demands the same rates.  Vendors can't always meet these demands because they have different bottom lines for various reasons."

9. Set reasonable goals from the vendor's perspective.  Your sales representative is making a commission from their sales, and proposing a 30 to 40 percent cut on their pricing can have a huge impact on their business and your relationship with them.

10. Bring in a third party group purchasing organization.  "If you are first starting a practice and you don't have good insight into what you should be paying, it's not a bad idea to get some kind of baseline," says Mr. Higman.  "You can go to a GPO or consulting firm to figure out these baselines."

Read the full article from Becker's Spine Review.

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