Navigating Tax Cuts and the Impactions on Hospital-Supplier Relations

An interesting twist for a hospital’s tax considerations brings manufacturers and hospital suppliers to the table. With healthcare provider sights set on lowering costs, there is every reason to consider incumbent negotiations resulting from this new legislation.

With many suppliers taking advantage of the newly reduced corporate tax rate and full business expenses, they’ve likely seen an impact on capital equipment and patient-facing side of business. Since supplier partners are seeing dramatic tax breaks, shouldn’t hospitals benefit from savings, too?  The short answer is yes.

Hospital supply chain teams are in the unique position to push for further savings by contacting their incumbent suppliers to ask for cost breaks that may match what the supplier is saving in the form of taxes. If this conversation between a hospital and their suppliers hasn’t already taken place in the 2018 tax season, now is the time to leverage supplier relationships to get more from their contracts.

Providers, though, aren’t the only winners of this strategy. Suppliers seeking increased market share and bundling opportunities should seize this opportunity to re-negotiate contracts as well. Through promotional discounts or bundled service packages, purchased services providers can act proactively to position themselves for more business.

The risks of incumbent negotiation are low, and the ROI potential from RFPs are high

So what levers does the healthcare supply chain have at their disposal? Now is a good time for providers to evaluate purchased services costs in the market and begin incumbent contract negotiations. To ensure your preparedness for incumbent negotiations, here are some practical steps to take:

  1. Identify upcoming contracts on your expiry horizon
  2. Collaborate with stakeholder to ensure KPI-tacking and other business requirements are captured for each category under evaluation
  3. Benchmark your purchased services spend to see how your contracts compare in the market
  4. Tailor your RFP or incumbent negotiation strategy to the history, performance, and benchmark results gathered for each category

Conclusion
By opening a dialogue and sharing what savings are available in the market, hospitals can leverage the industry knowledge to negotiate better rates and develop stronger savings strategies for the remainder of the business year. The data found within mSource an Precision Benchmarks will bring to light what savings a hospital can expect. With U.S. hospitals overspending an estimated $39 billion every year, it’s more important than ever for organizations to lean on their pre-existing supplier relationships to optimize their savings, or to find a supplier that can better meet their bottom-line goals. Start gathering the intelligence you need to access deeper purchased services savings today and contact Medpricer to determine which services are right for your organization.