Changing Vendors: Costly Mistake or Wise Move?

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Vendor relationships can be tough, and many end in a heap of disappointments, unfulfilled expectations, and miscommunications. If your vendors didn’t deliver, is it your fault or theirs? What really went wrong? Can you fix it? These are million-dollar questions.

Arun C. Jethani

This article is the first of two on building strong vendor relationships. This installment will help you assess whether it’s time to build better relationships with your current vendors or switch to new vendors. The second article will focus on specific due diligence needed to choose vendors appropriately.

First, you must ask yourself why you are dissatisfied. The most common reasons for dissatisfaction aren’t surprising: the service costs too much, the vendor is not performing service within the expected time, service is poor or inconsistent, or you are not earning your expected results. Without knowing what’s really causing your problems, you may get into the same situation with a new vendor. If you find yourself dissatisfied with your vendor, make sure you’ve got your facts straight – on yourself and the vendor.

Tamara Labrecque

With reference to cost, do your due diligence. How does your vendor compare to market standards? Check your service-level agreements to make sure that timing and service levels aren’t actually different from what you agreed to, and check your data. What is really causing your current results?

Should you stay or should you go? Both pose a threat to you and your business if you don’t know your facts. For instructive purposes, we share the following two examples, drawn from actual case studies, to illustrate the high cost of ignoring the data.

The Cost of Switching

A radiology practice was furious with its PACS/RIS vendor and was wanting to make an immediate switch. While the PACS seemed better for the radiologists, the workflow was severely affected, costing the practice an additional $22,000 per year, per radiologist, as well as a great deal of time and lost opportunities for the practice, its imaging centers, and its hospital clients. Furthermore, the switch caused a huge battle between the radiology practice and its hospital clients.

The cost of this switch was too high. Too little due diligence and too few hard facts went into the decision, and everyone lost: the radiologists, the practice, the imaging centers, the hospital, and the patients.

The Cost of Not Switching

A hospital-based radiology practice thought that its billing was extremely efficient and was reluctant to look at its billing, despite our concerns. After two years, the group allowed us to investigate.

We found an opportunity to increase its revenue by almost $5 per work RVU, benefiting the practice by more than $1 million. Our average client performs just above 12,500 work RVUs per year, so at $5 per work RVU, the change represents $62,500 per radiologist. In this case, the cost of not switching was too high. Tell your family members that you are leaving $62,500 on the table each year and see how they react.

Should you stay or should you go? What we keep coming back to is this: How have your current vendors affected (positively or negatively) your situation? What are the data that support this conclusion? What is the cost of staying with your vendor or changing your vendor? What most of our partners and clients need help with are properly assessing the impact that the vendors have and evaluating the time, energy, and costs associated with choosing a new vendor or taking the work in-house.

The following three guidelines will lead to success with your vendors. First, evaluate yourself; look inside. What data do you have that would cause you to be dissatisfied? Have you expressed your concerns, and do you monitor these concerns? What is written in the contract to make your vendors responsible for taking care of these concerns?

Make sure that you’re not the problem by evaluating your expectations. Look at your current service agreements: What is in them? Look for prior emails, proposals, and meeting notes to see whether expectations were clearly communicated by you and accepted by your vendor. If you’ve confirmed that you’re not the source of the problem, then ask your vendor why it is not performing. Once you have communicated your expectations, and they are being tracked, you can hold your vendor properly accountable.

Second, build knowledge or hire it: Are you looking at the right relationships? If you don’t know what to expect