When was the last time you negotiated for discounts with single source providers? Now is a great time!
What is the difference between single and sole source providers in long-term care?
Single Source Provider: When your long-term care facility is purchasing from one vendor even though there are other suppliers that provide similar products. An example of a single-source provider is Sysco.
Sole Source Procurement: This refers to those purchases where there’s only one supplier that sells a product. Usually, these are unique products that you cannot find anywhere but only thru one supplier/manufacturer.
The primary advantage of a sole-source contract is that it cuts down on the time you spend sorting through all available options. Something many managers don’t realize is that you can negotiate discounts easier with one supplier than multiple because your spend is greater with this provider.
Why Skilled Nursing Facilities Should Go Single Source
For an individual skilled nursing facility it takes time and money to contact different vendors to request prices and to negotiate contracts and discounts. Having only one supplier/vendor reduces the amount of time you must spend researching products and negotiating prices with vendors. You can also save on administrative costs with just one vendor, because you spend less time haggling about things such as price and delivery schedule.
The primary advantage of a single source contract is that it gives you the option to shop based on factors that affect your bottom line. It also allows you to negotiate more favorable terms, and to change vendors if one doesn’t meet your expectations.
How To Negotiate Discounts With Single Source Providers
When purchasing from a single source and spending hundreds of thousands if not millions of dollars over the course of a year, you’ve got great leverage to get a discount.
Here’s your ‘Get a Discount’ process, step by step:
- Make a list of all items you’re purchasing from the single-source provider in a spreadsheet.
- Figure out what products you’re spending the most on.
- Reach out to your account manager at that group and request 15% to 20% off of the top 5 items you spend the most on.
Group Purchasing Organizations
Group purchasing organizations (GPOs) are companies/organizations that negotiate prices for a group of providers for food, medical supplies, devices, and other medical products and services. Most SNF’s are already members of AHCA/NCAL, Leading Age and other provider associations one of the key advantages is you can benefit from their programs to cut costs on products and services that you use every day. If you’re not already a member of these GPOs, it’s worth a look!
There are independent GPO’s which you can join to get the same benefits as you would using provider associations.
GPO’s Value to SNFs
GPOs are owned by their member providers they do not take title to or possession of products. Rather, the purpose of GPOs is to enhance the quality of the services delivered and lower their members’ operating costs by:
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- Helping find and provide Personal Protective Equipment (PPE). Supply is strained due to Covid-19 demand. Having a GPO doing the “digging around” for you is going to save time and money and keep your supply there when you need it.
- Reducing transaction costs
- Negotiating lower prices for supplies than providers might otherwise obtain on their own.
- Finding hard to find items. With their buying power, they can find hard to get supplies during the Covid-19 crisis.
- Improving efficiency in the supply chain which a single buyer can’t do alone
- Decrease Transportation cost
- Increase Discounts. Typically, a SNF will save 10-20 percent.
For more on recent trends in long term care, read our blog and subscribe to the LTC Heroes podcast.
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