3 tips for getting the supply contract your ASC needs, without a GPO

Making the right decisions for supply chain management often results in positive gains to an ambulatory surgery center's bottom line. The first decision an ASC administrator needs to make in this area is whether to contract with a group purchasing organization or to negotiate supply contracts individually.

To GPO or not to GPO? billstein use
To make the right decision, the first thing an administrator needs to know is how much the facility is paying for supplies, according to Josh Billstein, senior associate at Eveia Health Consulting & Management, and former administrator of one of the largest multispecialty surgery centers in Seattle.

"One needs to start by determining what their expenses are per case for all key items, and how those compare to other facilities that perform similar services" he says. "Having a peer group that is willing to share average costs per case can help identify if your facility is an outlier. Moreover, ask yourself key questions like: Are you struggling to meet the bottom line? What does your market look like? Are there an abundance of supply companies or are there only a few vendors?"

"Understand whether your physicians are willing to change the products they are using and to what extent they are willing to change based on which vendors are available in your market," says Mr. Billstein.

The challenges and benefits of negotiating individually
Negotiating contracts is a time intensive process and ASCs are very lean organizations that may or may not have the time available to commit to negotiations, according to Mr. Billstein. To be successful ASCs should collaboratively identify vendors and meet with them. Also, data detailing supply utilization at the center needs to be sourced and presented to physicians with options for replacements if needed.

"ASCs are busy places and they aim to maximize efficiency," he says. "They may not be able to do the legwork required to find the appropriate vendors and negotiate the best cost. Finding the time, identifying the correct people, and isolating the appropriate data are all challenges."

But there are also benefits along with the challenges.

A GPO can be a surgery center's best friend. There are also circumstances when deciding not to contract with a GPO makes sense. Occasionally, surgery centers may wish to ensure complete control over the entity they are partnering with and the kind of relationship they develop with that entity. Negotiating contracts individually allows surgery centers to have a face-to-face relationship with vendors. "Once a personal relationship is established, it may be leveraged to maximize the benefit to the center," says Mr. Billstein. For example, an ASC could develop an à la carte relationship with vendors, which would allow them get specific supplies they need in a timely manner.

"With GPOs, you will hopefully develop a good relationship but sometimes the sheer size can result in an impersonal feel. You are also dependent on the representative's word that this is the best price you can get, but you may not really know for sure," says Mr. Billstein.

Strategies for a successful supply negotiation
Here are three strategies for successfully negotiating supply contracts individually:   

1. Gain physician buy-in before entering negotiations. Physicians are the ultimate decision-makers regarding most supplies, and while administrators can select the product and go ahead and try and get the best price, it is useless if the physicians do not agree.

Administrators need to educate their physicians regarding the cost of supplies, particularly if the cost is negatively impacting the bottom line and some of the products are the cause. "Give them options, give them data and then select and negotiate the supplies needed," says Mr. Billstein.

2. Have dedicated personnel and resources. "One of the biggest strengths of an ASC is they are typically lean and efficient organizations. However, it is essential that they allocate the necessary personnel including clinical and administrative staff to vendor negotiations. The selected personnel will take on the task of learning about current supply management processes at the center, its financial impact and will examine which changes need to be made. They will also invest in learning how to negotiate well," adds Mr. Billstein.

3. Realize that this process will take time. Negotiating with vendors individually can be a time-consuming process, as it requires a great deal of preparation. "It is important for surgery centers to identify deficiencies early on and work with vendors to achieve the best price possible," says Mr. Billstein. Budget the appropriate amount of time to meet with vendor and negotiate the contract. "Be aware that these kinds of things can take time," he says.

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