The Importance of Agility in Contracting

Mar 7, 2023

Healthcare Systems rely on implantable device vendors for a wide range of medical devices and technologies. These facilities need to consider the terms of their contracts with implantable device vendors. Here, we are looking at the length of the agreement.

Here’s our problem: running new initiatives, negotiating terms with complicated market share and rebate agreements, waiting for the quiet time to end, and finally getting the agreement executed can be a tedious and drawn-out process. Healthcare facilities consider signing longer-term agreements to stave off having to negotiate that service line again. Makes sense. Rates lock-in, the work is complete, and it’s smooth sailing for years to come.

Then something disrupts the deal

The Supply Chain negotiates these agreements for a clinician or a group of clinicians. What happens if your “rainmaker” leaves one year into your three-year agreement? What happens when the same vendor comes up with a replacement for the line item you negotiated? Or the vendor changes sales reps who alienate your clinical team? We’ve seen all these things happen, and no one is happy.

Keeping it short and sweet

An old friend said to me one day, “there’s no such thing as a bad deal if two parties agree.” He’s right in theory. That theory assumes every day following is exactly how each side predicted it would go. As noted above, that is rarely the case. Keeping your facility agile keeps you out of situations if (when) things do not go as predicted.

Signing a one-year or less agreement gives your facilities that agility. First, it allows them to assess the vendor’s performance. Each facility can make sure that the devices are meeting their needs. If the vendor is not meeting expectations, the facility can end the agreement and look for another vendor. Shorter agreements also allow facilities to stay up to date on the latest technological advances. Shorter contracts also provide more pricing flexibility. A one-year agreement gives the hospital the ability to negotiate better terms and prices with the vendor. Finally, shorter agreements can help ensure that facilities are buying the best devices for their patients.

Don’t let your data impede agility

More often than not, the #1 reason we hear from the Supply Chain on why they prefer multi-year agreements has to do with their data.

  • It’s incomplete
  • It takes too long to get from IT
  • It’s on multiple spreadsheets
  • It’s impossible to manipulate

Without a purpose-built system to hold the data, making sense of raw EMR and ERP data is a very difficult chore. It can take months and months for internal analysts to make sense of the detail. Only then can an initiative begin. If it takes more than a month to prep the data for an initiative, it will be difficult to manage all service lines with any positive impact. If you wish to become more agile, new tooling is necessary for the supply chain and finance teams to change tack. One-year contracts are viable and achievable with the right technology and processes in place. Go on, be agile, you’ll love it!