Want a better deal? Ask

December 19, 2003

There are often two prices: one if you ask for a discount, the other if you don't. Here's how to strike a sweeter deal for your practice.

 

Want a better deal? Ask

Jump to:Choose article section... See the opportunities and take them Aim for a win-win situation Should you hire a negotiator?

There are often two prices: one if you ask for a discount, the other if you don't. Here's how to strike a sweeter deal for your practice.

By Gail Garfinkel Weiss
Senior Editor

You signed a three-year computer maintenance contract 18 months ago, but recently one of your colleagues got a better deal. "Call and ask for the cheaper price," says Keith Borglum, a consultant in Santa Rosa, CA. "Chances are you'll get it if you agree to extend the contract beyond the original expiration date."

Indeed, in Borglum's view you'd be foolish not to attempt to renegotiate. And when a contract's term is up, don't sign another without considering the alternatives: getting a better deal, adding or deleting services, finding another vendor, or bringing all or part of the job in house.

"A medical practice is a business," says Paul Angotti, a consultant in Monument, CO. "The physician or office manager should review contracts periodically to ensure that they benefit the business, and rework them as necessary."

See the opportunities and take them

"Think about renegotiating contracts whenever the services you require change," says Mary Jean Sage, a consultant in Arroyo Grande, CA. "For example, if your accountant was doing your monthly accounts payable and payroll but now you have an in-house automated system that does them, renegotiate the fee you pay the accounting firm."

Renegotiate, too, if:

The vendor wants to raise prices.

You bring in a partner, merge your practice with another, or otherwise change the scope of your business.

You're nearing retirement and want to scale back.

You'd like to add services or clarify what you expect from vendors. "Maybe a billing service isn't resubmitting rejected claims, and as a result the practice is losing money," says Angotti. "You need to make sure that follow-up requirements are included in the contract."

Even if your contract has an evergreen clause—that is, renewal is automatic—you can still cancel or revise it. "Many contracts have a 'terminate without cause' provision," says Boston attorney Lawrence W. Vernaglia. "The power to terminate, whether it's every two years or after giving the vendor 30 days' notice, is the power to amend."

Just because you can do something, though, doesn't always mean you should. "I worked with a group that had gone through several practice administrators," says Betsy Nicoletti, a consultant in Springfield, VT. "Both the accountant and the lawyer were valuable sources of insight and continuity. I wouldn't have considered renegotiating with either of them. Some long-term relationships are worth the cost. These are the people who will go to bat for you on short notice."

Often, renegotiation hinges on supply and demand. "If there are ample resources in your area, more vendors will be willing to do what it takes to keep your business," Sage notes. "But if the opposite is true, you'll have little leverage."

Timing is another factor. "If you're looking to renegotiate with your attorney, don't do it while you're in the middle of an important legal proceeding," says Will Latham, a consultant in Charlotte, NC. "In fact, any renegotiation is inadvisable if you're too busy to devote time and energy to the effort."

Aim for a win-win situation

To ensure a smooth renegotiation, says Mary Jean Sage, you must do your homework, know what you want to accomplish, and be professional and confident.

During the negotiating sessions:

Strive for mutual fairness. "When you're seeking a concession, explain why it's equitable," says Sage. "Always have logical reasons for what you want, and to the extent possible give the other side what it wants."

Have data. "I always want to enter negotiations with more data than the people on the other side of the table have," says Angotti. "When they bring up an issue, I want to be able to confirm or refute their claim. Precise examples have an impact; generalities don't. For example, 'Our practice ordered $15,000 worth of medical supplies from your company last year' has impact. 'We're good customers' has no impact."

Prioritize. "Start with something easy, to get a feel for the process and the other party," says Sage. "Address the hardest issues midway, then finish with light ones. If you reach an impasse, set that issue aside and return to it after most of the bargaining is done. At that point, both sides will be motivated to find common ground because most elements of the deal are in place."

Be specific. "When you're renegotiating a service contract, be sure to indicate exactly what services, follow-up, and reports you want and when you want them," says Angotti.

Avoid ultimatums. "They're not conducive to an ongoing business relationship," says Larry Vernaglia. "Instead, talk about how your needs have changed over time, and note that the vendor should be flexible to accommodate those needs."

Make sure no penalty clauses will kick in automatically if you cancel a contract. "Some contracts have 'liquidated damages' provisions indicating that you have to pay a certain amount if you breach or terminate the contract prematurely," says Vernaglia. If the renegotiation is going poorly, he also recommends that you reclaim information that the vendor has—such as billing data or tax returns—that you need to do business.

Should you hire a negotiator?

In most medical practices the physician or office manager handles contract negotiations, but you might want to turn certain bargaining jobs over to an outside party.

"Many physicians are 'conflict avoiders' who can't understand why someone won't give their best price up front. The idea of negotiating seems underhanded to them," says Will Latham. "Bringing in a third party not only increases the chance of getting a cost reduction, it means the doctor won't have to play the heavy in a tussle with a business associate."

Keith Borglum sees it differently. "It's rarely cost effective to hire a professional negotiator unless you're negotiating an item of significant value, like a five-year lease on a new office," he says. In that case you'd hire a commercial leasing agent to act on your behalf, and either pay him an hourly fee or a percentage of savings realized.

"With most vendors, however, you don't need outside help. You can do it yourself. Few people are born negotiators. It's all learned, but anyone who has studied bargaining techniques can out-negotiate anyone who hasn't."

Borglum, who tutors his clients in negotiation strategies, stresses the value of the Yogi Berra mantra, "It ain't over 'til it's over." "When the deal is in place and you're poised to sign the contract, lay the pen down, look the other party in the eye, and say, 'Isn't there something else you can do for me?' Someone who has just sold you a copy machine may throw in a case of toner, or a computer vendor might give you an extra printer. You might be saving just $100 on a $25,000 purchase, but it's $100 you wouldn't have otherwise."

 

Gail Weiss. Want a better deal? Medical Economics Dec. 19, 2003;80:49.