Service Contracts 101: 5 Tips to Negotiate and Get the Best ROI from Your HTM Partner
Whether you’ve decided to transition your hospital’s in-house Healthcare Technology Management (HTM) program to an outsourced partner or are changing external providers, negotiating the best possible service contract is critical to driving high-quality performance at the lowest cost for your hospital. After all, your HTM represents one of your organization’s largest cost centers, as well as one of the most frequently outsourced areas.
When you’re talking budgets in the millions of dollars, even small negotiated contract terms can add up quickly – and you want those numbers to land in your savings column, not in your expenditures column. Among the top 25 hospitals with the highest total medical and surgical costs, each spent an average of $569 million in this space in 2018 alone. No matter your hospital size, your investments in sophisticated and expensive medical technology – from scoping devices to the latest imaging machines – are critical to how you successfully fulfill your patient-care mission.
Outsourcing capabilities to external partners with specialized expertise and resources is a smart strategy for making the most of every dollar, especially as healthcare operational costs increase and insurance reimbursements decrease. Healthcare systems are paying close attention, with 90% of hospital leaders weighing the outsourcing of both clinical and non-clinical functions. Why? To gain cost efficiency and ensure the highest-quality patient care, which, after all, is their primary mission.
Many TKA team members started our careers working for hospitals, where we grew to understand the importance of having the right external partners and what a successful HTM contract looks like for all parties. Over the years, we’ve learned a thing or two about the contract negotiation process – and some ways to make this a winning experience for both sides:
- Understand what you expect to gain. Outsourcing isn’t a one-size-fits-all solution. Start by involving your existing clinical engineering team and the department heads who rely on them to keep your equipment available and running smoothly. Use these discussions to identify what’s working well and identify where you have gaps. Second, attempt to understand your hospital’s needs – a Level 1 trauma center has more equipment requirements and service coverage than a community hospital.
- Define your outcomes clearly. This is perhaps the most important part of the process. In the simplest terms, your HTM team takes care of the equipment that takes care of your patients. If a device isn’t working or available, you put patient care – and sometimes lives – at risk, not to mention losing revenue while that equipment is offline. Many hospitals use the cost-to-value ratio, which shows the cost of maintaining equipment as a percentage of the value it provides. Top-performing hospitals score around 5% and each percentage point represents millions of dollars. When this ratio is optimized, for example, you are benefiting from higher uptime for your equipment at lower costs.
- Be prepared. Never walk into a negotiation without having all the information you need. Is there some peripheral data tied to the reliability of a piece of equipment? Have it accessible, as it could become a vital piece of the final contract. You want to empower your side of the conversation with key HTM data, which you should have at the ready through your Asset Inventory. This key tool arms you with the value of your inventory, the age and expected lifespan of each device, checkup and repair records for each piece, and even the number of devices and where they are physically located in your hospital. Use that data to leverage the best deal for exactly the service you need – not too much, not too little.
- Keep the conversation going. Every contract has an ending point, but you start renegotiating before the ink is even dry on the first service agreement. Make it a priority to have regular touchpoints with your HTM team to confirm that trends are moving in the right direction, both in terms of equipment availability and fiscal accountability. Remember, there’s always the potential for a costly one-time hit in your HTM program – say, a tube blows in your state-of-the-art CT scanner – and your ongoing insight helps you easily manage your current budget and prepare for the new contract cycle.
You have two primary goals for outsourcing your HTM: ensure life-saving and routine equipment is at the ready for your providers and deliver this foundational healthcare service at the lowest cost. How you go about reaching those objectives starts with negotiating a service contract that aligns strategically. We provide greater insights and resources in our white paper, Service Contracts 101: Negotiating with Your HTM Partner for the Best ROI. Download your copy and learning about best practices that ensure the best HTM performance at the optimal cost, which can translate into a competitive advantage for your hospital.
At TKA, we do it better, make it easier, and deliver more to maximize your results and give you a competitive edge.
That’s the smarter way. Partner smart with TKA.