The Art of Negotiation
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Lynn Witherspoon, MD, system vice president and CIO at Ochsner Health System in New Orleans, LA, says that although he negotiates at least two major contracts each month at his system's seven hospitals and more than 35 health centers in southeast Louisiana, he has to take the time to first write an extremely detailed statement of work and negotiate that before he sits down for the actual contract negotiations. "When I say detailed, I mean very detailed. It might take a very long time to sort all of this out—months, even. But if you don't have the patience to take the time, you could end up really losing," he says.
Witherspoon recommends drafting a "punch list" of key points to address during negotiations. The list should include what will happen if the vendor cannot deliver the product as promised, how terminations will work, payment terms, and performance measurements.
Carr says she includes in her IT contracts performance indicators that are tied to payments, which helps the vendor know when she expects the tech staff to be on site, when she expects quality assurance testing to be performed, and how quickly she expects problems to be fixed. "We are 24/7 in healthcare, and here we have a very extensive electronic health record. When you have everyone from the ER to the lab and pharmacy tied to this system, it literally cannot be down," she says. Bottom line: Don't leave anything unsaid, no matter how minute the detail.
Timing is everything
Witherspoon says that the timing of the negotiations can have a lot do with how well hospitals come out of the deal. Knowing the vendor's financial calendar can be tremendously helpful, he says, because often they want to push as much business as they can before wrapping up the quarter or year. Carr, McClurken, and Witherspoon each stress the importance of patience during the negotiating process. "Anytime you have to buy something out of desperation, you are going to pay more. Like anything else, the further ahead you plan, the better," says Witherspoon.
Additionally, McClurken says it's usually a mistake to purchase anything the organization will not be using right away. Even if a vendor offers a licensing package or a software bundle at a reduced price, how much are you really saving if you never use it?
Pushing and pulling
Resistance from vendors is inevitable. The CIO's job is to get the best deal possible for the organization. The vendor has the same job.
What's the best way to deal with pushback? That depends on two things: How much do you need this product, and can you get it elsewhere? After Ochsner's recent string of hospital acquisitions, Witherspoon found himself in the position of needing to negotiate new departmental system units from a vendor Ochsner had licensed from in the past. Since the vendor knew he would need to come to them for additional licenses for the new acquisitions, the vendor was ready for a battle. "I told them I wanted a 20% reduction across the board, for both old and new units, which amounted to a pretty large dollar amount. In the end, I had to give up a longer extension on the maintenance term and a little more capital on the licensing side, but I ended up with the bottom line of a nice improvement in my unit cost going forward," he says. "Never forget that this is a negotiation, it is a give and take. It's not really fair to tell a vendor, 'Gee, I just need a better price.'"
Ultimately, if the vendor is not willing to negotiate, Carr says, IT leaders must be prepared to go elsewhere. "There are certain things we just are not willing to give up," she says. "Asking yourself how mission critical this point is should help you determine what those things are."
Kathryn Mackenzie is technology editor of HealthLeaders magazine. She can be reached at firstname.lastname@example.org.
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