Cut out the middleman, do your homework and negotiate like Donald Trump. That's my advice to anyone who wants to save money on surgical supplies. About five years ago, when I started working at the surgery center that I'm currently the purchasing agent for, the new ophthalmology practice was spending $8,000 on a GPO to buy $15,000 worth of supplies a year. That was, in a word, absurd, and served as the catalyst for my dropping our purchasing company to handle purchasing myself.
The decision has proved to be beneficial, even today, when our supply costs have increased substantially. We've managed to keep our costs relatively low while enjoying greater flexibility in the supplies we can buy.
Rules of the game.
After letting go of the GPO security blanket, you'll be faced with the prospect of dealing with supply reps on your own. That idea can be intimidating to some, but it shouldn't be. Here are five tips for winning the supply-purchasing game, because that's really all it is.
Get to the rep.
The phone call to negotiate supply prices starts with ensuring you're talking to the right person. Get a company's sales rep for your area on the phone; the customer service department isn't the group with which to negotiate prices. That might sound like menial advice, but price inquiries to companies are often stonewalled by boilerplate claims that the information is only available through supply distributors. You can always get the name of the sales rep in your area - all you have to do is ask.
Do your homework.
Arm yourself with knowledge before calling a sales rep. The best way to self-educate is through company Web sites, contacts you have at other surgery centers and discount sources like facility liquidators. These outlets will provide you with list prices, an idea of what other facilities are paying for supplies and a bottom-line price (liquidators buy failing facilities and sell supplies).
The price offered by liquidators is a low, but unlikely, price to reach. I expect to negotiate down to - on average - 50 percent of the list price. Some companies will refuse to negotiate; some will slash 20 percent off the sticker price; some 80 percent. My experience has shown, however, that half the listed cost is a good ballpark figure for which to aim.
Haggle - it's expected.
Not long ago, I was in the market for a diamond ophthalmology blade, and had negotiated the price down to $850 per knife. Before officially making the switch, I requested a sample so our docs could sign off on my decision. The company I was working with sent me the blade, but when I opened the package it became obvious a mistake had been made.
Instead of sending me a sample, the company sent me a knife already purchased by another surgery center. Imagine my surprise when I read the invoice - the facility paid $2,300 for the exact same blade that I had negotiated to $850.
Talk about sticker shock. I called the company to explain the mistake, but I also had to ask about the pricing discrepancy. The answer I received from the company was amazing: "They just didn't ask for a lower price. All they said was that they wanted the blade, and told us to ship one out for the list price."
Take this story to heart and puff out your chest a little when dealing with sales reps. Companies expect you to haggle over prices, and will actually be stunned if you don't ask for less than list.
Speak the language.
The negotiating process becomes easier when you go in having done your research and enter the fray armed with the knowledge that bargain shopping is expected. That being said, you still have to speak the language of sales.
Once you get a company's rep on the phone, I guarantee the first question out of his mouth will be "what kind of usage do you expect for the product?" If your answer is once every six months, you won't have much of a negotiating leg to stand on. But if the product you want to buy is in constant rotation through your ORs, you'll be in a position of power.
An important point to remember, however: While a certain amount of truth bending is acceptable in price negotiations, be completely honest and up front about your facility's usage levels.
The truth will eventually come out in the wash if you negotiate a low price based on a claim that a product is used 200 times a month, and six months later, you're placing an order for 10. A sales rep won't appreciate such a lie, and you can be assured opportunities for future business with his company will vanish.
After establishing the usage levels for a product, it's time to broach the subject of price. Your research has provided you with the list price, and therefore, a number to shoot for. Don't blurt out a target figure at the start; remember, you're in the position of power. Here's a rap I often use and it's been very successful: "I know your list price, and another group has offered me a better price than that. But listen, I really want to work with you and your company. What can you do for me?"
Even if you don't have another offer, make one up. I'm not telling you to lie - I prefer to call it being savvy. I've never used a fake company name - I often identify small firms to bluff a rep - but as my experience has grown I've quoted prices that may be random, but I know they're fair based on other negotiations. You'd be surprised how often it works.
Play reps off each other.
You'll also be surprised how easy negotiating for a product's price becomes after you've established a supplier. I'm constantly approached by reps that ask the same question: How can I get your business? The answer is easy. If I'm paying $13.50 for a blade, I tell the rep that I'd go with his product if he can supply it for $12 a pop. If he can, then I'd make the switch. Before long, the company I was working with originally will notice a drop in my orders and send a rep to see what it would take to get my business back. Again, the answer is easy - I'd switch back if they gave me their knives for $10 apiece.
Trust me, once you establish yourself in a market, you'll have companies competing for your business. Every time you're approached, you'll be able to name your price. You may not get it, but you'll always have the ability to say, "If you want my business, this is what I need." Besides, if a rep doesn't bite, you already have a product you're happy with at an acceptable price.
I usually don't switch suppliers unless I'm going to get at least 10 percent off what I'm currently paying. Ideally, I'd like to get a 30-percent reduction, but I need to at least eclipse the 10-percent threshold before I make a change.
Time is money.
Working with a GPO eliminates many of the headaches associated with supply buying, but handling the job in-house is not the labor-intensive chore some make it out to be. The time invested on the front end of the process is significant - 10 hours to 15 hours a week spent researching products, determining target prices and contacting companies. But once you have a purchasing system in place and your facility is an established customer, the hours you'll spend ordering supplies will be far less significant than the amount you'll end up saving on each order.