Cost containment has proven an elusive target in the current era of healthcare reform. Numerous opaque forces in the medical device marketplace have in large part hindered recent health care reform initiatives. The forces at play represent a range of often conflicting interests, including: the absence of alignment between physicians and hospital administrators, rapidly changing technology, asymmetrical information, limited price transparency and physician utilization habits.
Due to the issues outlined above, many health care systems attempt different negotiation tactics to initiate cost savings programs. Some may focus on aggregating costs and driving single or dual supplier medical device agreements, while others may focus on threshold pricing or ultimatums to bring costs under control. Ultimatums inadvertently create defensive negotiation orientations, decreasing the opportunity to drive additional incentives and cost reduction strategies.
Without serious consideration, these types of transactional negotiation tactics have the potential to stymie competition, reduce physician choice and create even more entrenched supplier relationships that will ultimately lead to higher overall costs in the long-run. Subsequently, manufacturers can exploit these dynamics to their advantage.