When was the last time you re-negotiated prices with your vendors? 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 For Better Rates
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.
Video Transcript
Jason Long
Hello, everyone, my name is Jason Long. I’m the general manager of Cantata Health Net Solutions division. And I’m here with Kevin McCormick, who is in account management and technical sales. And today, we’re going to be talking about more ways you can save money for your long term care organization. We’re gonna be talking about sole and single source providers. So, welcome, Kevin, thank you so much again for all your time.
Tell me about when you talk about providers, what’s, what are you talking about, like what kind of providers providing providing what
Kevin McCormack
Vendors providing medical supplies, food, all the supplies you consume within the skilled nursing facility? Okay. When I when I talk about single and sole source providers, a single source is you you’re getting it from everything from one provider and one of the key benefits there is that evil you’re only negotiating pricing discounts and it’s easier to negotiate with one supplier than with, you know, 25 different ones. It takes a lot of time and effort to do that. This allows you to negotiate with one and get it from that one. Somebody like Medline or geriatric medical. Okay.
Jason Long
And we have a list of of a number of them?
Kevin McCormack
Yeah, everybody’s gonna know who they are Sysco for your food. And I’m sure that are certainly regional ones that other people use around the country. And the same goes for the med supplies, but these are the national, the big, the big providers.
A sole source is when you have when you’re purchasing where there’s only one supplier that sells that particular product. So if you needed a specific PPE, for example, and only one provider sells that, then that’s a sole source provider. Sole source providers normally have unique products. I’s not typically an issue with skilled nursing facilities. But the primary advantage that the single source is it you’re negotiating with just one supplier.
Jason Long
Okay, gotcha, gotcha. So So why go with a single source?
Kevin McCormack
Yes. So, you know, your each SNF has the choice to buy from any any vendor that they want to strategically you know, and call for for Strategic and cost reasons a company will most likely decide to go with a specific vendor, or supplier and because it takes time and money to contact every different vendor request prices.
You end up going to Amazon or some other online store. So this is what it’s doing is they’re doing the work for you. You can have confidence in you’ve negotiated discounts with them because you’re buying everything from one supplier.
Jason Long
Okay, gotcha. How much do they add to the cost, though? What’s the difference? If I’m working with that single source am I paying more? How much more am I paying?
Kevin McCormack
You’re gonna be paying less because they’re billing hundreds of thousands if not millions of dollars over the course of a year. So they’re gonna say, hey, we’ll give you 15% off list or 20%, of whatever you can negotiate. If you’re a good negotiator, you’re only doing it with that one single source.
Jason Long
Okay, so maybe maybe a really good question for this is do you you know anything about their margins? Could you tell people how to negotiate these things? How much you usually bring those costs down?
Kevin McCormack
It’s a negotiation. When I ran facilities, I got 15% off, if I recall, for the for most of the products. For some of the products, the single source vendor was not willing to negotiate. But they would go down briefs you use a lot in a skilled nursing facility. So we would, we would negotiate specifically on those and haggle about that, oh, and they bring in different suppliers over a period of time. And I was working with geriatric medical at the time so I can knock down the price on certain ones ones that were new, for example, to the marketplace versus brand names.
Jason Long
That really good to know. So 15% What’s the most you ever got off?
Kevin McCormack
That’s hard to say. Because you never know what manufacturer’s suggested retail price really is. Ut’s very similar to going to Sysco. You’re getting a deal on each item, and it’s hard to know exactly what the extent of the deal it is that you’re getting.
But you’re typically getting between that 10% and 20% less than if you bought that same product from another provider.
Jason Long
So to help the administrators out who have have never thought about negotiating these things. What are the words that you would use? Let’s I’d pitch you on the thing. I’m the salesman and I tell you here’s our price list or here’s our proposal. What would you say back to me to negotiate that price?
Kevin McCormack
I would look at the things that I’ve spent the most money on.
We’ll use briefs for as an example, that you’re I would, I would try, I would knock down, you know, my biggest costs first and negotiate and say, “Hey, I can get this at another place. They said I could get it for, you know, X number of dollars. Can you match that? Can you get closer to my price point, because I’m looking at, you know, over the course of the year, the amount of money you’re spending, I want, you know what, it totally affects the bottom line.”
“We’re working in this industry on razor thin margins, it’s very difficult to make any money and it’s also you know, the last 10 months have been catastrophic to the industry.”
A key thing to go in and renegotiate and relook at pricing. You have to know what you’re paying for your supplies.
Jason Long
Okay, so so go through pull up all the supplies are currently use right now then put them into a spreadsheet. Figure out the things that you are buying the most of then call them your single source vendor and say, “Hey, I’d like a discount on this particular thing. I’m buying a whole bunch of them from you.”
Kevin McCormack
That’s exactly it.
All right, look at I’m not gonna bother with Qtips that you spend $100 a year on, but what I’m looking at are things that you’re spending tens of thousands of dollars a year on where you’re just, it’s the same goes for, you know, the biggest expense in a nursing facility is the payroll. You know, you, your staff, of course, you’re going to do your best to keep that down. You know, reduce over time and watch all that. But the same goes for when you’re purchasing items. One of the other ways to do this is a group purchasing organizations.
Jason Long
That was my next question.
Kevin McCormack
A group purchasing organization, you know, either company or organizations that do the negotiating a price for a group of providers, and that’s food, medical supplies, medical products and other services and professional services as well.
So virtually all, you know, skilled nursing facilities are already members of aka are leading age, their state organization or other provider organizations. And one of the key advantages that they offer is the that they can cut costs. They have programs that can cut costs on products and services that you use every day. So if you sign up with them to in their group, purchasing organization, what you’re going to get is the benefits almost like it You are joining and spending the money to join Costco for the year. Okay? When I go and do that on a yearly basis, I can go into Costco feel confident that they’ve done the work, they’ve all their suppliers, they beaten them down and gotten a, you know, the best price they possibly can for the consumer. And this is what these purchasing organizations do.
Now, there’s also independent GPOs. So you pay a fee on a yearly basis, and then you get that group buying discount. So they can again, save you, you know, 10%, 20%, 30%, depending on what type of risk our product or supply that you’re buying.
Jason Long
Gotcha. Okay. So that that sounds so it sounds like is everybody doing this? Are there other people that are groups that don’t know about this?
Kevin McCormack
They’re certainly facilities that don’t know about this, I would, you know, I would make the assumption that a lot of them do. But I’ve always done that. And I find that, oh, wow, I didn’t realize they did that, or they see it, but don’t make a move on it.
It’s easier to keep things the same than to make a change. But that change is going to save you money. And when we don’t, when, when your nursing facility doesn’t have a full house, you can’t get that money back, if you had an occupancy rate of 85% that 15% is gone. So you have to make it up somewhere. And this is a way to do that. So it’s certainly something that each nursing facility or chain of facilities needs to look at and look at, you know, really deeply and, you know, see what, see where they can save because it turns out it’s a lot of money.
Jason Long
Okay, so what are some of the other values that the GPS bring to SNF?
Kevin McCormack
Yeah, so what they’re doing is basically That’s a service for you, you know, they’re not taking title or possession of the products, what they’re doing is that they’re enhancing the quality of the services and lowering their members operating costs by doing reducing transaction costs.
Maybe you’re going to get an electronic invoice of everything and you don’t have to enter that in, in the AP side to track your expenses, which could be you know, right there, you might be saving time and energy and effort. They’re going to negotiate lower prices for suppliers, then an individual provider would not be able to obtain on their own to their buying power.
They can also find hard to get supplies like PPS. You know, during this covid 19 crisis, you don’t want to be spending all your time trying to find personal protective equipment for your employees and any service people that come in, you want to have you want to have someone else doing the digging around for you know, that’s going to save you time money and make sure the supply is there when you need it.
Jason Long
It’s funny you bring that up, because we’re actually in the process right now of donating PP to some of our customers. We’re actually looking for groups to talk to to get PPE donated. Maybe I need to actually go to talk to some of these guys to see if we can contract with them to get to so we can donate that PPE.
Kevin McCormack
So, I mean, it’s all about, you know, increasing the efficiency of the supply chain with a single buyer, meaning the, if I was the administrator, or the controller of a small group of nursing homes, I don’t have that capability. The other thing that it does, it decreases the transportation costs because you’re not dealing with multiple different vendors and having it charged on each one. That’s another thing that’s negotiable as well. Well, and we all know Amazon, we, you know, everybody pays that 99 a year. And you get amazon video amazon prime and but you also but you get that free delivery. Yep. And so what they’re going to do is, you know, decrease that delivery cost costs for you the transportation. So that’s key.
Jason Long
I didn’t even think about that, getting people to negotiate free delivering versus just negotiating the price for products. That that’s a nice little card in your hand to play.
Kevin McCormack
Right. One truck comes to your facility, and versus, you know, a half dozen trucks. Yep, each one of them is going to have a transportation costs. So you do have the ability to negotiate that and also GPS can Bring down that cost for you and do the do all the work. So it’s certainly worthwhile to take a look at that.
Jason Long
Okay, great. That’s, that’s fantastic. Any, any other? Anything else on single versus sole source stuff?
Kevin McCormack
No, I think I’ve covered it all.
Jason Long
Okay, that was definitely a learning experience for me. So, I hope this is helpful for everybody else out there. And any other any other notes? Anything else anything we forgot?
Kevin McCormack
No, I don’t think so. I think we got everything and, you know, I hope, you know, everybody’s out there looking at this and trying to save some money. So especially,
Jason Long
let me ask you, let’s say there’s somebody out there who wants to talk to you about negotiating their, their their vendors, could they call you and just talk like, would you talk to them? Oh, absolutely. Okay, great.
So if they were going to get in touch with you, it’s Kevin.McCormack@cantatahealth.com, right?
So if anybody out there wants to renegotiate contracts, give Kevin a call or shoot me an email, and he’ll help you help you get that stuff negotiated down.
Thank you so much, Kevin. This is super, super valuable.
Finally, I want to let you know that we actually had one of our customers reach out to us right after your last video and let us know that they found it so valuable. And they were looking forward to more of these. So I’m really excited to keep doing this. And by the way, your sound sounds amazing. That new mic is doing a great job. So yeah, I’ll talk to you. I’ll talk to you next week then.