A doctor makes calls while looking at her computer. It's good business to renegotiate costs on a regular basis. Think of it as a health screening to help gauge your practice’s financial well-being.

Cost negotiation is a smart business strategy for post-pandemic financial recovery, too. Top medical organizations suggest that suppliers, vendors, and others are more willing than ever to negotiate better terms with medical practice owners. The key is to know who to ask for the savings — and how to approach them.

Here are some insights, along with a worksheet (PDF) to put them into practice.

Divide payees into categories

It makes sense that larger vendors and suppliers have more room to negotiate, while small distributors or family businesses may be struggling. With that in mind, it can be helpful to categorize your payees, so you know where to start.

  • Most likely to negotiate: This includes landlords; banks and financial institutions; insurance reimbursement contracts; medical equipment leases; and any large companies, manufacturers, and direct suppliers. This is the group to focus on first.
  • May be able to negotiate: This includes general office service expenses, such as phone, internet, and other utilities; PPE and other supplies; technology and software subscriptions, etc. Total possible savings here may surprise you. Focus here second.
  • Less likely to negotiate: This includes small businesses and distributors and any independent contractors who are unlikely to negotiate.

  Tip  

For local small businesses, such as your cleaning or yard service, consider offering a discount on your services if they do the same.

Arm yourself with data

Successful negotiation often depends on preparation. Be ready to define the value you bring to a vendor, even as you're asking to pay less, refinance, consolidate payments, or extend payments over a longer period. Some examples:

  • For landlords: Point out the value your business brings, such as any upgrades you’ve made to the property or the foot traffic you bring to their other tenants. Also, research nearby rental properties to compare prices so you will know what a reasonable request is.
  • For manufacturers and suppliers: Determine how much of a given product you sell or how many customers you reach with a product. You may be able to negotiate a lower per-unit cost outright. If not, ask about options to reduce monthly costs, such as extending the payment period or buying in bulk for the year but paying quarterly.

  Tip  

If you’re located in a multi-unit facility, consider working with other tenants to secure a better contract that benefits all of you.

Don’t overlook the “costs of doing business”

Yes, office, breakroom, and restroom supplies are a necessity but they can add up. Not to mention phone and internet service, tech support, software, and everything else that’s considered the “cost of doing business.” The truth is, everything here may be negotiable — and there may be other ways to save.

  • For supplies: Consider buying in bulk (if you don't already). Or look into joining a Group Purchasing Organization (GPO) that specializes in healthcare. GPOs pull together multiple small and midsize businesses to create the bargaining power often only enjoyed by larger businesses. Also try to stagger payment dates for regular orders so bills don't all come due at the end of the month.
  • For utilities: Internet, cable, and phone companies, in particular, offer introductory deals that you can get if you switch—or that your current provider may match. Just be careful to read contracts regarding future rate increases.

  Tip  

Have there been items you’ve gone without during the pandemic? Consider if those costs can be permanently eliminated without being missed.

Talk to financial institutions, too

It’s always smart to re-evaluate your banking options after a time of financial uncertainty. For this step, gather and review any loan, credit card, and banking terms and agreements. (If you’ve misplaced them, simply ask for new copies.) Use them to consider which of the following options may be a smart move.

  • For loans: You may be able to refinance to get a lower interest rate or a lower monthly payment—or you might find that loan consolidation would lower your monthly costs. This is true for mortgages, as well as for equipment loans and even student debt.
  • For equipment: If the cost of buying equipment outright is prohibitive, consider whether financing or renting may be an option. Keep in mind that there are lenders that specialize in medical practices and can provide special options for financing medical equipment purchases.
  • For banking and credit cards: Review banking and credit card fees and benefits. Some credit cards charge for basic processes, while others include some surprising perks for free. Consider all your options, including lines of credit, checking products, and other treasury management services with extras (like fraud monitoring) that can save you time and money.

  Tip  

Consider looking into a bank that understands how medical practices differ from other small businesses so you can enjoy the best possible outcomes.

Keep in mind that whenever there’s a major change in the life cycle of your business, it’s wise to review your plan — including your costs — in the context of your new normal.

Consider this: To put the tips above to good use, take a look at this cost negotiation worksheet (PDF), which makes it easy to get started.

Sources: ADA, AVMA, Business Know-How, Clinic Service, Forbes, KQED, Una, VetBilling, Wells Fargo

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