While vendors can share exciting stats, how can you make sure you’re getting the best deal possible with vendors?
These 22 industry leaders share how they effectively negotiate with vendors.
The executives featured in this article are all speaking at the Becker’s Health IT, Digital Health + RCM Annual Meeting: The Future of Business and Clinical Technologies which will take place Oct. 3-6, 2023, at the Navy Pier in Chicago.
To learn more about this event, click here.
If you would like to join as a speaker, contact Randi Haseman at rhaseman@beckershealthcare.com.
As part of an ongoing series, Becker’s is talking to healthcare leaders who will speak at our conference. The following are answers from our speakers at the event.
Question: How can organizations effectively negotiate deals with outside tech and RCM vendors?
James Lindgren. Executive director of revenue cycle systems optimization at University of Miami Health: The key is to treat these relationships like any other important relationship in your life. You shouldn’t start negotiating the details of your contract until you have established a basic level of trust and shared understanding. After you have determined that there is a strong cultural fit between your two organizations and your objectives are crystal clear (i.e. what problem are you solving?), then you can begin the process of outlining terms and conditions. In these conversations, focus less on the vendor’s proposed ROI but rather focus on the value to your organization then access that value independently. Lastly, push for terms that align incentives for you and the vendor appropriately such as paying off outcomes and value rather than transactional charges.
Jaideep Srivastava. Professor of computer science and engineering at University of Minnesota (Twin Cities, Minn.): Given the current mood of ‘pay for performance,’ the same principle can be applied to RCM vendors/technologies as well. A vendor should be asked to show, potentially through an A/B test, how much revenue and profit enhancement the new tech or product brings, and pricing should be based on that. The ROI of a new tech should be a key metric to measure success. Vendors who truly stand behind their technology should welcome this approach.
Azizi A. Seixas, PhD. Associate professor of psychiatry and behavioral sciences, director of The Media and Innovation Lab, associate director for the Center for Translational Sleep and Circadian Sciences and interim chair for the department of informatics and health data science at The University of Miami Miller School of Medicine: To effectively negotiate deals with outside tech and RCM vendors, health organizations should first identify clear objectives and research potential vendors. Creating a request for proposal, or an RFP, can help solicit detailed proposals and provide a basis for negotiations. They should leverage data and performance metrics to demonstrate their value as a client and seek competitive pricing and bundled services. Additionally, addressing data security, compliance and support services is crucial. Engaging legal and procurement experts, seeking references and building strong relationships during negotiations can lead to successful partnerships and optimized healthcare services.
Judith Wolfe, MD. Enterprise associate chief experience officer and academic emergency physician of Cleveland Clinic: In the environment of constrained hospital budgets and more stringent requirements for capital expenditures, development partnerships between systems and outside tech vendors are becoming more desirable. Proving concepts for tech adoption at the local or system level can help justify future costs. Relationship building is critical in patient experience, and having a responsive, transparent and positive relationship with vendors is critical for success of any project and is even more important for high-value, complex projects.
Ainsley MacLean, MD. Chief medical information officer, associate medical director diagnostic and interventional radiology for Mid-Atlantic Permanente Medical Group of Kaiser Permanente (Oakland, Calif.): It is important that organizations remain open minded and outward facing when it comes to evaluating new technologies and that they leverage long term strategies and economies of scale when negotiating contracts.
Ryan Cameron. Vice president of innovation of Children’s Hospital & Medical Center – Omaha (Neb.): For several years I’ve struggled with the idea that a traditional vendor model or purely transactional business model is innovative. The best path forward for organizations is to start with the goal of building long-term, trusted partnerships that extend well past transacting services with a vendor. Eliminate the word ‘vendor’ from your vocabulary and seek to create only partnerships. Consider the differences and look for those partners who are the best fit for everyone. Creating a safe space where mutual non-disclosures are in place, honest conversations happen and putting each organization’s business goals into focus is a part of the conversation. Do this and it is a game changer. I believe the ‘win-win’ still exists, if organizations invest more time upfront into productive dialog on everyone’s goals. Building strong, trusted relationships is the key to creating value between organizations. Outside technology and RCM companies alike want to do the same; everyone just needs to invest more time upfront in setting mutual goals. Mission statements and visions shouldn’t just be marketing mechanisms, these should reflect a long-term plan for everyone. Talk about these important elements that make your teams and organizations unique and uphold these goals as elements everyone can help each other work toward achieving.
Of course, having a deep understanding of your requirements before contacting outside tech or RCM companies is also critical. Quite frequently a rushed project becomes a failed or even a disappointing project as a result of urgency driving the timeline. Value creation must be the key driving factor, even if a project takes a bit longer to execute. Planning more time to check and recheck your requirements even before the partnerships are explored helps mitigate any unwanted surprises or scope creep that can pop up along the way. Everyone intuitively will leverage multiple quotes, seek the best contractual terms and search out expert advice or gather references before entering into new business relationships. What sets a value stream apart from a typical business deal is the elusive ‘partnership factor’ that comes from the relationships where everyone sees a win for their patients, patients’ families, employees and the long-term success of the business or organization they represent. When you can create value streams, everyone at the table is more comfortable with creating favorable margins and opportunities for each other. Cost is always important; however, consider all the value a partner can provide and be transparent about the unique value your organization brings to a growing business. Product and service roadmaps, user-testing, creating new and novel features: These are all collaborative areas that should be a part of your partnerships with outside tech and RCM firms. When we collaborate as partners and not just B2B vendors, everyone can win.
Steve Eckert. Chief technology officer for Cook Children’s Health Care System (Fort Worth, Texas): We look at contract negotiations as partnership discussions. In an arrangement like this, nobody wins or loses a negotiation, but rather both sides understand what is essential to the other and strive to achieve these needs collaboratively. We also look to measure the success of the partnership and agreements made. For instance, service level agreements are imperative to include for mutual benefit. How else do we manage the collaboration to success? Timing can be critical to both parties, but not at the expense of effective collaboration. End-of-the-quarter pushes typically aren’t met with positive results in our talks. However, if we can negotiate timely in good faith, we are happy to help our partner achieve business goals crucial to their success. Finally, we need our partners to be healthy. Reinvestment requires healthy margins, and we expect our partners to invest in the solutions we acquire. Therefore, negotiating the lowest price isn’t always to our benefit.
Carol Yarbrough. Business operations manager for Telehealth Resource Center of UCSF Health System (San Francisco): Big question and not easy to respond to other than ‘it depends.’ The EMR billing and reimbursement components are going to dictate what can be integrated and who foots the bill for the API. Building deliverables into the contracts which affect a payment schedule is probably a good incentive and a best outcome for both parties to the contracts.
Chris Carmody. Chief technology officer of UPMC (Pittsburgh): Not every vendor and/or solution is the same when negotiating. However, when engaging with any vendor, it is important to impose the consistency of best practices, contractual language and data protections that your organization demands. If the vendor is unwilling to meet your requirements, then they might not be a great fit. That’s why it’s also important to create and maintain competition throughout the procurement process. Most importantly, always remember your organization is the customer.
Monique Diaz. Chief medical information officer for physician enterprise west of CommonSpirit Health (Chicago): Let the total cost of ownership be your guide. Vendors will often produce cost estimates that don’t capture the full investment needed to gain value. When you are direct about needing the actual TCO, you can leverage quotes from competing vendors to home in on a desirable deal. If a vendor holds a large market share, you can negotiate a favorable price by emphasizing the value your organization brings as it can provide important feedback and piloting in what might be a compelling scale and/or setting.
Rebecca Kaul, MD. Senior vice president and chief of digital innovation at Northwell Health (New Hyde Park, N.Y. ): Negotiation with outside tech varies based on the size and maturity of both the company and product offering. If the product is sufficiently early in its development, then it is likely that the health system will be contributing value to the future roadmap and validation of the product and thus should expect to be compensated accordingly. If the product is well established, then taking an enterprise approach to contracting provides the ability to leverage the technology holistically across the organization while driving down the cost of the investment.
Brad Reimer. CIO at Sanford Health (Sioux Falls, S.D.): The most important factor in effectively negotiating with suppliers is to first choose the right supplier. Sanford Health is deliberate in selecting strategic partners who share our values and commitment to transforming the healthcare experience for our patients, people and communities. Suppliers that understand and invest into the mission of healthcare will be in the negotiation process to help provide a win-win. At that point, it becomes more of a value conversation than over-indexing on cost. In addition, having clear goals and knowing what trade-offs you are and aren’t willing to include in the negotiation provides a solid foundation for productive discussions and positive outcomes.
Tarun Kapoor, MD, MBA. Senior vice president, chief digital transformation officer at Virtua Health (Marlton, N.J.): If you want to negotiate a better deal, you should start with an internal question: What problem are we trying to solve? Once you know your answer, you can negotiate more of a transactional deal if the problem set is well-defined and the vendor has a mature solution. However, you can also negotiate more of a partnership if there is mutual problem solving and co-development to be done.
Jahmela Pech, DNP, RN. Executive director of quality management at Providence St. Joseph Hospital of Orange: Our organization employs an E=enterprise-centralized approach when negotiating with outside tech and RCM vendors. These contacts are reviewed, approved and executed in accordance with the procedures of a governance matrix. Careful consideration of evolving regulations related to data privacy and data sovereignty, along with increasing costs, is important in effectively negotiating services. This centralized approach and systematic process allow the enterprise to maximize external deals and build relationships with outside vendors.
Chad M. Teven, MD, MBA, FACS. Reconstructive microsurgeon and clinical assistant professor in the surgery department at Northwestern University Feinberg School of Medicine (Evanston, Ill.): First, a decision regarding whether revenue cycle management will be kept in-house or outsourced ought to be carefully considered. This decision should be made by each healthcare system based on its specific situation and unique needs. If outside expertise is sought, the selected vendor should demonstrate cross-functional input so that the teams in charge of operations and delivery are in concert with what was negotiated. Ideally, IT, clinical leadership, operations, finance, legal and other divisions within both the healthcare organization and vendor are aligned on key issues, thus allowing for a more efficient and effective process that reduces friction and optimizes the relationship between parties.
In addition, organizations stand to benefit from identifying whether the proposed solutions and services a vendor can offer will provide value beyond the scope of directly financial. Specifically, while the cost will be a significant consideration during negotiations, particularly in the current healthcare climate, overemphasis on price may stifle effective partnerships if other streams of value that can be provided are overlooked.
Tara Nooteboom. Head of consumer digital strategy at UCI Health (Orange, Calif.): The most effective component that health systems can bring to the table for a successful negotiation (and subsequent relationship) is a clear articulation of their ‘why’ or problem statement related to the solution. This involves a comprehensive understanding of the problem, its associated challenges and constraints. Through articulating these, health systems may be able to a) help vendors understand what it is they really need to get out of a transaction as well as what it might take to get there, b) cultivate clear and honest communication around what can actually be delivered, and c) solve for required value on both sides. Furthermore, by seeking partners rather than point solution vendors, health systems can prioritize establishing lasting relationships based on shared risk, shared incentives and shared goals.
Kumar Aditya. Director of information technology at Atlantic Health System (Morristown, N.J.): It is important to do a thorough analysis of the features being offered by our solution partners and be clear with what is existing versus what is on their roadmap because sometimes future solutions are incorporated in the current pricing.
Pricing structure should be carefully evaluated: Does a flat price for each year make more sense opposed to incremental pricing year-over-year? Incremental pricing sometimes looks more attractive due to a relatively low start in year one, but they could eventually be costing a lot more in future because the renewal of the contract would start with the last pricing, which could be quite high.
Be clear with what is non-negotiable: cloud-only solution in certain cases, duration of contract no longer than three years, etc. This could be non-negotiable for some organizations. Due to the ever-changing cybersecurity landscape and exponential influx of generative AI technology, it may not always be wise to lock ourselves in for several years with a solution especially if they cannot keep up with the pace of evolution.
Do a complete review of what features will be live at the organization and what features won’t. Sometimes organizations end up overpaying by signing up for 10 modules where in reality they are only using six.
Finally, have the KPIs clearly stated prior to contract signing and have the expected ROI agreed upon. If ROI is nowhere close to what was expected after a year, then it is time to hold the solution partners accountable and potentially request credits depending on the specifics.
Lisa Griffin. Chief consumer officer at University Hospitals Clinical Network (Cleveland): Once the organization has decided internally that a vendor is warranted, the initial drivers in decision making is to ensure the software can drive operational efficiency and enhance the patient experience. Outlining organizational goals along with operational and return on investment levers as a foundation will help uncover the appropriate vendor to leverage. Lastly, build in time to speak to current clients of the vendor to understand build time, uptime and their overall experience.
Daniel J. Durand, MD. Chief clinical officer and chair of radiology at LifeBridge Health (Baltimore): In my previous life as a consultant and in my current role as a health system executive, I utilize the following approach to ensure balanced, ethical and effective negotiations with technology and service vendors.
Know before you go: Do a thorough internal strategy session and learn about the space in order to identify the key capability gaps you are looking to fill in advance of surveying the market. Keep an open mind and don’t fall in love: Inform your analysis with a broad market survey. Don’t just take a consultant’s word for it or read the cliff notes in an industry review. Meet with the key vendors and all of their competitors. This makes you smarter, and it lays a foundation for broad-based market connectivity that will serve you well in negotiations. If you find one vendor winning you over in this stage try hard to not ‘anchor’ on them. Get multiple quotes: Do not just get a quote from the RFP winner or runner up; I like at least three. This not only increases your negotiating power, but it helps you refine your concept of ROI, which leads very naturally to step number four. Put them at risk for your success: Do your best to get 20 to 40 percent of the total contract value at risk pending the delivery of outcomes that tie into key corporate KPIs. Notice I said ‘do your best.’ These are lofty goals. Begin with the end in mind: Coming back to the first step, keep a running three- to five-year roadmap of what your overall organizational enablement strategy is with the technology or services in question. What were you trying to accomplish to begin with? This will allow you to spot opportunities to consolidate vendors and achieve additional savings by occasionally eliminating services or tech where appropriate.
Joe Moscola. Executive vice president at Northwell Health (New Hyde Park, N.Y. ): Negotiating deals with outside tech and RCM vendors is always challenging to any organization, especially to us based on our scale.
Here are several strategies we are using when facing those issues: Create an assessment team made up of trusted and influential leaders across the key impacted areas of technology. Leverage the support from consultant(s) who specialize and have expertise in this area. Assess the organization’s needs, including the gaps in functionality and the struggles with the current technology (vendor response time, consideration in security and/or regulator, technology needs). Create a business plan and conduct the vendor assessments and evaluations. Start an RFP process with leading vendors in the space. The evaluation would be around the vendor’s current and future health and viability as well as our organization needs. Negotiate with vendors by leveraging available choices among cost and service level agreements (performance, security, availability). Share the risks with the vendor and provide incentives for a successful relationship.
Ethan Booker, chief medical officer for telehealth at MedStar Health (Columbia, Md.) with Jasmine Bishop, managing director, MedStar Telehealth Innovation Center: We have experienced three key success factors in technology vendor negotiations as telehealth clinical and operational leads at MedStar Health: First, know your own organization’s value when going into a vendor negotiation. Health systems provide clinical testbeds that are well-positioned to help explore, refine and even reinvent technology products. In negotiating with a vendor, represent the value of your co-development, data and research capabilities, and work with your business partners to design a true partnership in which your expertise, creativity and brand are appropriately recognized within the final agreement.
Second, enter the negotiation process with a strong understanding of your organization’s needs. Healthcare vendors have a suite of products, including technology platforms and operational and/or clinical services, that may not all align with your organization’s requirements. As a health system, we traditionally deliver the clinical services in our partnerships, so it’s critical for both parties to be aligned on the goals of the collaboration, not just the available capabilities. Awareness of a vendor’s current and future product suite and transparent conversations about possible expansion or growth can help systems select the right partner.
Finally, remember that people make or break a deal. Working with trustworthy, aligned and mission-driven teams is the cornerstone of a successful partnership. This includes understanding the implementation support your team will receive after the vendor’s sales team has completed the negotiation. You should expect a transparent and constructive negotiation process built on realistic expectations, accurate documentation and ongoing support pre- and post-implementation.
James Forrester, MS. Vice president of information technology and chief technology officer at University of Rochester (N.Y.) Medical Center: We have seen significant increases in technology vendor costs over the last several years with the transition to SaaS and subscription models. These costs are predominantly based on linear models of volumes such as active customers, ambulatory visits, acquired studies, etc. The new financial reality in healthcare, however, is that volumes no longer translate to net revenue. In short, current vendor cost models are not sustainable for healthcare. It is necessary to negotiate cost escalation clauses into contracts that plateau or taper costs. As healthcare is under pressure to bend the cost curve, our supporting technology companies must also bend the curve. While standardization and consolidation helps drive down technical debt and associated costs, consolidation without planning puts health systems at significant risk of uncontrollable costs. This is especially true with application platforms which offer many benefits but also put health systems in the position of reduced leverage due to single vendor consolidation.
Stephen DelRossi, MSA. CFO and interim CEO at Northern Inyo Healthcare District (Bishop, Calif.): To negotiate deals, the following must be accomplished: The organization must understand their needs – sounds easy enough, but I can assure you this is a huge misstep that I am now correcting. The organization must do an analysis to determine stated goals can be met and at what price point. The organization must understand exactly what they need – again, sounds easy enough but I have seen this error in four out of eight hospitals. Once the organization knows what they need and the price point at which they are willing to negotiate, the rest is pretty easy: if management is comfortable, they can enter into negotiations; if they are not less experienced, they can hire a negotiator. I use a negotiator for payer reimbursement, but require my team to negotiate under my purview. We also negotiate with multiple companies and let them know that their competitors are lower, thus if they want the contract, they have to lower their price. I always have a price point in mind as we have already completed the analysis. Let me give you an example: the state Health Exchange Information services is seeking to add all hospitals in the state of California for data sharing. HEI offered a grant of $30 thousand, which was about half the total cost. I absolutely refused to enroll. After more than a half dozen calls or messages from them, they finally agreed to provide the service at no cost. Have a price point and hold steadfast.
