Negotiating Blood Services ContractsPurchasing blood has become more challenging than ever, due to supplier consolidations and shortages of platelets and rare blood types.
Negotiating Blood Services Contracts
Purchasing blood has become more challenging than ever, due to supplier consolidations and shortages of platelets and rare blood types.
As a result, skillful negotiation of blood service contracts is essential to meeting your health system’s needs while containing costs. By following the below tips, you will be able to fortify your blood service agreements while ensuring that rising costs don’t get the drop on you!
Analyze Your Situation
Obtain current benchmarks! Rapid changes in the blood market due to consolidation result in rapid changes in benchmarks. Old benchmarks may include pricing from blood centers that have been acquired and have subsequently changed their tactics and pricing. Be sure to attain regional benchmarks, as prices can vary dramatically.
Fortify Your Contract Clauses
Contract term length. Instead of the 2-year terms that were common in the past, today’s contracts may be 3 years or longer due to conversion challenges. If you’re happy with your vendor and prices, consider locking in pricing for a longer term.
Purchase commitments (low or nonexistent). Be sure you’re not bound to purchase a certain amount of blood. If you’re working on reducing your utilization (and you should be!), you could be penalized for not meeting your commitments. If the vendor requires a volume commitment, provide leeway—e.g., 80%–90% of volume commitment.
Blood drive discounts. Ask for discounts for successfully performing blood drives.
Performance metrics. Vendors must deliver blood promptly, according to a regular schedule and to meet immediate needs. Be sure to include these service levels in your contract:
- Fill Rate. Vendor will fill at least 90% of orders.
- Notice of Unfulfilled Orders (100% compliance). Vendor shall provide notice of an unfulfilled standing order within two hours of the regularly scheduled delivery.
- STAT Orders (100% compliance). If the vendor can’t fill a STAT order, the vendor will notify the hospital within 10 minutes of the order request.
- Turn Around Time (TAT). TAT should be met at least 92% of the time.
- Routine/Stock blood requests. These should be filled within eight hours of the request.
Negotiate like you are “Type A”
Start by negotiating directly with your current vendor for an extension. Whenever possible, avoid conversion by getting your target price and terms from your current vendor.
If an RFP is in your future, plan ahead. Submit your RFP early. Allow at least six months for negotiations and conversions.
Consider the source: dual-sourced vs. sole–sourced. Having more than one supplier is optimal but will depend on leverage and competition. If you have a sole vendor, include a contract clause indicating that the blood center is responsible for incremental cost if they are unable to provide products or meet clinical/patient care timing needs. As mentioned above, try to negotiate leeway (e.g., 80%–90% of expected volume).
If the thought of negotiating with vendors makes your blood run cold, let our expert contract negotiators get you the best contract terms and pricing.
TractManager’s experts shared these blood services negotiation tips during one of our recent Table Talks—informal discussions about Strategic Sourcing strategies. Please join us for the next Table Talk session to discover more best practices.
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Skilled negotiators are like musical virtuosos. They have an extensive repertoire of tactics from which to draw, and they know when and how to make them a part of their performance. But negotiating healthcare contracts for capital, purchased services, and IT services can test the artistry of even the most masterful negotiator.