Managing Vendor Price Increases on Minor Enhancements

Vendors use six key ways to increase the price and their margins. 

Making minor enhancements is one way. 

We often see this strategy with Physician Preference Items (PPIs).

At VIE Healthcare®, we categorize enhancements into either:

1. A new technique

2. An additional aspect to the component. 

While enhancements are minor, vendors often raise their prices by 30% or more. 

In some cases, they charge $1,000 more per new component. However, hospitals can’t charge more for their services. 

It can seem that vendors are introducing enhancements that should come standard. 

In my opinion, vendors should include innovations or enhancements in their vendor services. They should not be given as a reason to increase prices. 

At VIE Healthcare®, we advise hospitals to:

  • Include enhancements in your vendor contracts. This ensures similar items are not subject to price increases. 
  • Ensure all new entrants go through a value analysis process.

Value analysis and physician engagement are essential in effective cost management. 

This approach will prevent higher costs through market enhancements and price increases. 

A further strategy we recommend is to have a conversation with your vendors

Vendors are trusted advisors to your hospital and their actions should reflect this. 

Increasing prices at every opportunity does not help to build trust. 

I encourage all hospitals to have these conversations with vendors. 

Their decisions and strategies designed to raise prices, including pricing committees, impacts us all. 

This is healthcare, and our priority is to reduce non-labor costs while enhancing patient care. 

We all need to work towards that aim. This can be accomplished by having regular conversations with vendors. 

All hospitals should have a negotiation strategy in place. This needs to include hospital support, and alignment from physicians, executives and department contract owners. 

Introducing best practices in contract management can help hospitals to manage costs effectively. 

Reach out at lmiller@viehealthcare.com to discuss your cost savings goals. We can support and accelerate cost savings opportunities in your organization.

Lisa Miller

Lisa Miller

Lisa Miller is a consultant, speaker, and podcast host. Her consulting firm, VIE Healthcare, has provided services to over 1,000 hospitals and organizations since 1999.

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DOWNLOAD FREE REPORT

Discover 15 Effective Cost Savings Strategies That Most Hospitals Can Apply Right Now

Learn how these five principles can help you reduce costs immediately.

VIE Healthcare 15 Effective Cost Savings Strategies Report Cover Image

A strategy developed from analyzing over 5,000 hospitals

A simple step-by-step plan in plain language

Proven processes to organize and motivate your team to find savings

We protect your information