The Path of Least Resistance….or Fiduciary Responsibility

The Great Recession affected all business, including Healthcare.  All aspects of Healthcare in fact have felt a tremendous impact, from research and design to manufacturing, supply and certainly care providers.  Now, as we begin to crawl back out of the abyss, it’s important for healthcare providers to carefully weigh some of the incentives they’re seeing from suppliers, service companies and manufacturers.  In some cases, a single company plays all 3 roles and the risks are high.   Are those broken eggs in your basket? It’s a great time to check!

Putting all your “eggs in one basket” as we begin to enter a stage of recovery, could be a costly mistake.  Bundling services, supply contracts and vendor captive financing is especially troubling.  We’ve all see the car ads for 0% financing, and by now most of you realize, there’s no such thing.  Even with today’s historically low rates, there is no such thing as commercial or consumer rates of 0%.  This type of incentive program includes a “blind discount.”   A blind discount is a discount that is offered to create incentive for a company to sell a number of products or solutions in combination.  It also opens a window for you, the borrower or consumer, to see the true “line in the sand.”   Ask for the “cash price”, demand the blind discount up front, outside of the bundle and now you can weigh your options more responsibly.

Manufacturers are scrambling to find ways to improve their sales.  Many top names are down by as much as 40%-60% off pre-recession sales volume.  You may want to, or may have to in some cases, give them the sale, especially for certain types of technology, however falling prey to their bundling efforts could reduce your flexibility for other options later, certainly could end up costing you more in the long run instead of less, and many times you’ll find yourself wrapped up in a web of iron clad contracts that will cause you heartburn and could negatively impact your bottom line for the term of those contracts. 

If you’re in a position of fiduciary responsibility, the solution is simple, break out the discounts and separate the solutions.  Analyze your options for each solution and make reasonable demands of your vendors.  Purchasing the equipment from the OEM, negotiating discounted service agreements from the OEM, or a reputable 3rd party, and financing your purchases through an independent lender or existing bank relationship that has no conflict of interest as it relates to your equipment purchase or services is the smart way to proceed. 

If you’re a principal in a business or sitting on the board and able to impact decisions concerning bundled services, be sure to ask for the analysis.  If the proper analysis is done and there is no downside, wicked web of over-constraining contracts or hidden traps of inflexibility, by all means proceed with the bundle.  In most cases your analysis will show you that certain providers of solutions have your best interest in mind long term, and others are looking to make a sale.  Knowing the difference between the two is critical to your continuing success and profitability.

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