Do You Trust Your Vendor?

This article was written by Jim Cagliostro.

When working with our clients at VIE Healthcare Consulting, one of the most important questions for hospitals to answer is ‘Do you trust your vendor?’

‘Do you trust me?’

When my six year old daughter watched Aladdin for the first time, this very question posed to Jasmine that helped her to discover the identity of the mystery prince was one that stood out. Why does it fascinate young audiences so much?

It is a question we all face on a daily basis.

• We trust the grocery store to provide healthy, safe food.
• We trust the cars driving in the opposite direction to stay on their side of the double yellow lines.
• We trust the barista to provide a hot cup of coffee that’s not compromised in any way.

Do you trust me?

Hospitals demonstrate a remarkable amount of trust when they rely on a wide range of vendors to provide services and goods that are vital to patient care.

Any vendor seeking to do business with a hospital is essentially asking the following questions:

• Do you trust me?
• Do you trust me to provide the services as advertised?
• Do you trust me to provide fair and competitive pricing?
• Do you trust me to ensure your patients’ safety will be a priority?
• Do you trust me to protect patient data?
• Do you trust me to support your organization’s mission and goal of providing quality patient care?

The term ‘vendor partner’ is often used because this is a relationship which requires a certain amount of trust.  While your organization may not have specifically been asked these questions, it answered them by signing a contract with your vendors.

When it comes to placing your trust in a particular vendor or supplier, multiple factors come into play and much is at stake, including the financial future of your organization.

Where do you start?

As in all relationships, building trust takes time and effort.  Most vendors understand this and will do whatever it takes to quickly gain your trust. If you have any responsibility in the decision to partner with a particular supplier or vendor, I recommend the following four step process to help you to make your decision:

1. Determine the specific need that exists.
2. Benchmark. Compare the services and prices of multiple vendors that can meet the need.
3. Vet your top three vendors.
4. Handle contracts with care.

Each of these areas is expanded on below.

Determine your needs

Hospital needs are often similar, but variation arises relating to differentiators including hospital size, geographic location, and community health needs. Some organizations have established strong reputations for bringing outsourced services in-house while others recognize the need to outsource particular services to focus on their strengths. When your hospital decides which needs to outsource, your vendor, in addition to meeting their contractual obligations, must be trusted to embrace your goals while contributing to quality patient care.

Benchmark

Once your specific needs are determined, the search begins to find a supplier who can meet those needs at a fair and competitive price. Some vendors may offer a competitive rate but fall short of meeting your specific needs. Others may offer services to meet your requirements but charge significantly higher prices. Your hospital should never compromise quality or safety for a discounted rate, but paying for services you do not use will impact your bottom line. If a vendor cannot be trusted to provide the customized services or goods you need at a competitive price, I recommend continuing the search until you find one that can.

Your hospital should never compromise quality or patient safety for a discounted rate from your vendor. Click To Tweet

Vet your top three choices

Once your options are narrowed down to your top three, carry out a background check on these vendors:

• Research the work and reputation of each company.
• Find out if they have worked or currently work with comparable hospitals.
• Seek out your peers to see if they have any recommendations or warnings regarding your top choices.

While this is not a guarantee of future success, a vendor organization that has proven itself capable and trustworthy in the past is most likely to do it again.

In our experience at VIE Healthcare, quality of communication is a great indicator of whether or not a potential vendor can be trusted.  As in any healthy relationship, there should be honest communication and transparency between the hospital and the vendor.  If there is a lack of honesty or transparency at the outset, it is likely to continue and become an even larger issue once a contract is signed.

Handle contracts with care

Contracts are legally binding documents. They must be handled with care and managed by an experienced team. Hospital contracts are particularly complex, which makes negotiation even more challenging.  Not only does your team need to be experienced in contract negotiation but they must also have the hospital’s best interests in mind. Personal relationships between vendors and those negotiating a contract can lead to unreasonable or one-sided contracts that are not mutually beneficial.

One way to combat this potential issue is to create performance-based contracts with your vendors, also known as shared-risk or shared-benefit agreements.  Your organization must then monitor a vendor’s performance based on the contract and provide feedback on whether or not standards and expectations are being met.

Remember, the contract is the foundation for the relationship between the hospital and vendor, it is much easier to persuade a vendor to agree to specific terms when they are attempting to win your business.

To learn more about how you can handle your contracts with care, click here.

Gaining and maintaining trust

Unhealthy relationships are sometimes easy to recognize, but it can take time for underlying issues to surface, which can lead to dysfunction. Relationships characterized by some level of over-dependence, lack of trust, or selfish tendencies can be very damaging to one or both parties involved.

Just as in personal relationships, these traits are often difficult to see in a vendor who, early on, is putting their best foot forward in an attempt to gain your trust.

As a healthcare provider, you do not want your dependence on a particular vendor to be so great that they have all the leverage with no motivation to maintain your trust. Even if a vendor partnership begins well, it is never a guarantee that the vendor will always do what is best for the hospital through the life of that relationship.

One way in which vendors may take advantage of your organization’s trust is through expense creep. This can occur in three ways:

1. Product Creep – when unauthorized, higher-priced products are introduced on an unmonitored basis (frequently at list price) or when a growing utilization of higher-cost products occurs, resulting in an increased use of more expensive items.
2. Price Creep – when vendors slowly increase prices over time or subtly apply fixed discounts to new price lists.
3. Cost Shifting – when vendors seek to compensate for discounts by quietly increasing prices.

At VIE Healthcare, we are acutely aware of and familiar with the more commonly used techniques that vendors use to enhance their profit.  We often find that hospitals are paying prices that do not line up with the original contract that was set up with a vendor.

At VIE Healthcare, we often find that hospitals are paying prices that do not line up with the original contract agreed with a vendor. Click To Tweet

Comparing invoices to the actual contract is one way your organization can not only avoid overcharges, but also ensure it has a mutually beneficial relationship with a supplier you can trust.

While fostering healthy relationships with your vendors should be a priority, your hospital must ultimately prioritize your patients. That means placing and maintaining your trust in vendors who are both honest and who provide quality services at competitive prices.

Years to build. Seconds to break.

Trust truly does take years to build and seconds to break.

• Have your vendors proven that they can keep their promises by honoring their contract?
• Can they be trusted to provide quality services at competitive prices, protect patient data, and prioritize patient safety?
• Are they open and honest in their communication and in working with you to achieve your goals?

If you answered “no” to any of these questions, then you need to start looking for a vendor you can trust.