Use of Rebates
One of the pricing strategies vendors utilize is the use of rebates. This is instead of reducing costs by applying an invoice discount.
Rebates are based on volumes purchased by hospitals, or how they utilize other vendor products.
As volumes have fallen, hospitals are paying higher prices based on shortfalls at the end of contracts.
In our work with hospitals, we offer three different ways to tackle this issue:
We advise CFOs and COOs to implement a policy of not accepting rebates.
Tracking and validating rebates is a challenging process that requires more manual work.
Hospitals need to be able to see the price clearly stated on the invoice.
The only way to ensure accurate billing is to compare the line item details of your invoices with your contracts over an extended period of time.
Through this process, you will be able to determine on-contract versus off-contract pricing and validate any rebates or credits that may be due to your organization.
The second way is to create a culture of cost awareness across your organization.
You can achieve this by having conversations with physicians and others engaged in purchasing decisions.
Physicians are influential in decision-making around quality and costs. However, many are unaware of the cost of supplies used in their cases.
Thirdly, think about how you would handle these rebates in your personal life.
Drawing parallels between work and life is something I’ve been reflecting on recently in my work with health systems.
If you’re buying something for personal use, would you accept waiting for a rebate?
Applying these parallels gives you a different perspective in your approach to working with your vendors.
All hospitals have to address the issue of vendor rebates as part of an effective contract management strategy.
Setting policies and procedures and firm expectations is essential.
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.
