Government // Leadership
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12/14/2010
03:48 PM
Anthony Guerra
Anthony Guerra
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Guerra On Healthcare: What To Know Before Negotiating With Vendors

Whether you're buying an electronic health record system or making repairs to your home, you usually get what you pay for.

In the world of software acquisition, they call it an request for proposals (RFP), while in the world of home ownership, they call it "getting a few estimates."

I recently entered the latter world for the first time after I determined my new home needed some crawlspace insulation work. I hit the local phone book and called all four companies that had taken out oversized ads (very scientific, you see). Two of them called me back, and I wound up making appointments to have them come look at the house.

The first individual hovered at the threshold of the crawlspace in question, but said he need not investigate further, while the second went all the way around the interior on his knees to get a good assessment of the situation. The two suggested very different solutions, at very different price points. Ultimately I decided to go with the more comprehensive -- and expensive -- solution, suggested by the person who did the more extensive inspection.

Let's back up and look at my jumping off point: I was looking to get the type of work done that should only be needed once (quality), and to get it done on a structure very near and dear to my heart (again, quality). In this situation, price was not the main determinant of who I would select to do the work. I wanted to hire a company that I could trust to do the job right. I wanted it done once and well.

With budgets (always) tight, it's easy for CIOs to blast out an RFP and hire the lowest bidder. This is doubly easy because it requires no explaining to the CEO/CFO, who will want to know why a higher bid was chosen. The problem with taking this easy way out is that price and quality often go hand in hand -- the old, "you get what you pay for" adage. Many companies that charge a premium over their competitors plow those earnings back into the product, giving the customers value for their investment and resulting in a continuous research & development loop.

Now, there's also another pitfall to beware, and that's beating up the higher priced vendor to get nearer their (seemingly) cheaper competitors. After the inspection, when I sat down with the individual who had been more thorough, I said, "Listen, I'd like to hear about your philosophy on quality. As you well know, you could promise me the moon and do whatever you want down there in that crawlspace, and I'll never know if you used the materials and did the work you promised." While I know he could have said anything, I still asked the question because I wanted to see his reaction. Would he react as if the question was bizarre? Would he fumble through a rote answer? Or would expound on a philosophy that made sense with examples and anecdotes to back it up? He came through.

Believing at that point the company would do quality work, why would I then want to knock his price down a few hundred dollars? If I did, I guarantee he'd immediately plan the hidden downgrades in materials and service that would return his margin. We'd just had a meeting of the minds, why would I want to cast the first stone? By haggling, I'm either saying "Your margins are false and fat" or "I don't think your work is worth what you're asking." And what basis do I have for making either of those assumptions?

There are similarities to be drawn in the relationships hospitals have with their main software vendors -- these associations are often five-plus years old, and sometimes decades, and thus demand trust and nurturing. You will never be able to guard against every sleight of hand with a contract, no matter how detailed your service level agreements. You must rely on the goodwill of the vendor to get you the right products and services in a timely manner. Goodwill is attained through trust and generosity (yes, I just said that) on your end, as well as that of the vendor. As in many other parts of life, you must give to receive, you must empower to see ownership taken, and you must appreciate to get ever-increasing efforts.

There are some arrangements, some relationships where price is close to the bottom of the list. The next time you issue an RFP, examine everything but the price first. See which vendor you like based on the service they are offering and their track record of coming through. Only then look at the cost and see how you can make the proposal you've selected work. Pay what they're asking (within reason) and you'll have started this marriage on the right foot.

SEE ALSO:

Guerra On Healthcare: Frustration With Meaningful Use Widespread

Guerra On Healthcare: Fixing Difficult Vendor Relationships

Guerra On Healthcare: Don't Underestimate CPOE Challenge

Guerra On Healthcare: Best Of Breed Vs. Enterprise Health IT

Guerra On Healthcare: Achieving Job Security

Guerra On Healthcare: Mentoring Key To IT Continuity

Anthony Guerra is the founder and editor of healthsystemCIO.com, a site dedicated to serving the strategic information needs of healthcare CIOs. He can be reached at aguerra@healthsystemCIO.com.

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