Relationships with your vendors are vital to your success, and guess what? Your success is vital to them. So why does it often feel like a one-way street? Vendor relationships should be evaluated as frequently as employees—bad ones come in many forms:
- Vendors competing directly for customers. As our DME market continues to shrink, the demand for the product remains the same. However, manufacturers sometimes lose faith in their DME distributors. Unfortunately, this drives some companies to bypass their distribution and sell directly to end users. This can happen discreetly, where a small or regional DME is purchased by a vendor. Most distributors do not even know that they are now competing with their supplier. It can also happen publicly, where a vendor contracts directly with an insurance company to "manage" their entire PAP patient program (common practice for the VA).
- Vendors strategically working against suppliers. I worked with a DME provider who provided equipment to patients while in rehab. My client negotiated a fair contract with a decent profit margin with one of the rehab facilities. Over time this facility's business grew to represent close to 25 percent of their entire business. The facility would always pay but was notorious for paying slowly. Often, their balance owed would grow to more than $2 million, and the business owner would inevitably offer a discount. The facility would jump at the chance to pay in full. This cycle repeated a few times before the owner crunched the numbers and discovered he was not making a profit because the majority of the AR was discounted.
- Cash flow when the vendor is also the bank. Many times bad vendor relationships occur around cash flow, lines of credit and the overall financing of their products or services. Inherent in the DME industry are many temporary cash flow interruptions: January deductibles, audits, etc. These often trickle down to vendors, as they are usually the first to not get paid. This is a particularly difficult situation for the vendor, who knows that if they cut off the DME from their product, they will likely not be able to continue feeding the cash flow cycle. Thus, the vendor will not only lose future revenue, but also take the double hit of losing the AR currently owed. In this situation, a good vendor would be proactive and work with the distributor to develop a payment plan while limiting exposure.
Good vendor relationships can go far beyond a salesperson taking you and your staff out to Applebee's with unlimited drinks (But really, how do you top that?). Your vendors' successes are tied to your success, so why not ask (or demand) utilization of their resources? Smart vendors know this and are usually willing to oblige.
What does a good vendor relationship look like?
In my experience, successful vendor relationships all begin with expectations that it's a true partnership. In one particular circumstance, I had a new patient whose medical needs surpassed my company's clinical expertise. Instead of rejecting the order, I reached out to the vendor who would be supplying the equipment and explained my predicament. They flew in an expert to properly evaluate the patient and diagnose the most appropriate solution. The expert then put on a training clinic for not only my staff and me but also for the prescribing doctor and his staff. After this, we were the go-to company for the doctor's office and our vendor was the go-to company for our orders. Some other favorite examples: Pride Mobility offers free reviews of Medicare powerchair or scooter claims, and other industry manufacturers pay for memberships to advocacy groups (VGM, MedGroup, etc.) that offer services and resources to DME providers. Most importantly, a relationship with your vendor needs to be a cyclical relationship because, ultimately, if you are successful, they will be, too.
