Understanding Vendor List Price Yearly Increases

Hospital Supply Chains and CFOs Are Seeing Major Cost Challenges

Hospital supply chains and CFOs are seeing major cost challenges.

One of the biggest challenges they face is vendors changing their list price book. This usually occurs every year.

It is one of how vendors increase their margins.

The vendors’ list price book is often increased by up to 30%.

Even if hospitals receive discounts, they often find costs are still increasing. They don’t understand why.

For instance, in 2020, your hospital might have paid $10 for the list price of an item. This is even with a discount of 30%.

In 2021, that list price has gone up to $50.

At VIE Healthcare®, we see this as a major issue that we regularly present to supply chain and hospital CFOs.

In most cases, vendors list prices are increased every year.

That explains the cost challenges your hospital is facing.

We often work with hospitals that have a sense that they are paying too much however, cannot pinpoint exactly why.

All hospitals should have a degree of confidence in their relationships with their vendors.

In our experience, this may not always be the case.

To ensure market competitive pricing, hospitals and healthcare providers must constantly negotiate with vendors.

We recommend negotiation meetings with a small team of cross-functional hospital employees.

Successful negotiation requires a detailed line-item analysis of your invoices. This will allow you to carry out a comprehensive contract review.

Access to line-item details of your invoice can save your hospital money and identify hidden cost savings opportunities.

Hospitals must be certain they are only being billed for services that have been performed.

They must also understand the exact discount available. Also, you need to benchmark pricing to ensure you are paying a competitive price.

We recommend that all health systems implement a strategy to minimize increases in the list price book that are beyond reasonable CPI increases.

Reach out at lmiller@spendmend.com to discuss your cost savings goals and how 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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