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Vendor Issues - How to partner with vendors to get the best results Presented by [Joe Kalaidis] (60-minute Webinar) [03-08-2011]

Angie LaFlamme: A brief overview of our REACH Program. REACH is a non-profit Federal HIT Regional Extension Center, dedicated to helping providers and clinics, small hospitals and other rural settings in Minnesota and North Dakota implement and effectively use their electronic health records (EHR). Our mission is to assure that each of our REACH clients achieve meaningful use.

REACH is a program of the Key Health Alliance, which is made up of a partnership of Stratis Health, the National World Health Resource Center and the College of St. Scholastica, which also collaborates with the North Dakota Healthcare Review and the University of North Dakota School of Medicine and Health Sciences Center for Rural Health.

Today our moderator is Joe Wivoda, an HIT Consultant with the Regional Extension Assistance Center for HIT (REACH). Joe has worked in information technology since 1990 and has been working in health information technology since 1993. Joe’s expertise is in IT leadership, strategy, service delivery and the process of innovation.

Joe Wivoda: Thank you Angie. Don’t get confused because there are two Joe’s on the call. I’m Joe Wivoda and I’d like to introduce Joe Kalaidis, who is an HIT consultant with REACH and also director of Health Information Services at the Neighborhood Healthcare Network. He has worked 10+ years in electronic health record and practice management sales with some of the major vendors, which is interesting.

He has also done successful selection and contract negotiation from the providers side, so he has an interesting background and has worked on both sides of the provider vendor “divide”. Now we’ll turn it over to Joe for his presentation.

Joe Kalaidis: Thanks Joe. I’ll use that metaphor and carry it forward a little bit. Some of you may remember a song made popular by Judy Collins called ‘Both Sides Now’, and that’s where I’m coming from. As Joe pointed out, I’ve been on both sides of the vendor/client relationship, having sold for three different vendors, electronic health records and practice management systems, as well as most recently having been part of the selection process as Information Technology Director at the Neighborhood Healthcare Network.

So, I’ll draw on both of those experiences on our webinar today. Here’s the agenda for today. We’ll start with a simple message and then build on that. We’ll walk through the selection process, starting with planning and going all the way through contracting. We won’t be talking about implementation. Our context here is communicating with vendors, building a relationship and getting through the contracting stage.

What’s the simple message? A couple things.

First, think partner not vendor, but I’ll use the term vendor because that’s our frame of reference. In the spirit of things about the organization being someone who will help

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contribute to your success and not just take your money. The more you can do that the better off you’ll be, because that will be to develop a relationship of mutual respect, respecting each other’s confidentiality to produce what in negotiating terms is commonly called the win-win. The relationship has to work for both sides or else it won’t work.

Having said that I don’t mean you need to put blind faith in a vendor organization. President Reagan used the term, regarding nuclear weapons treaties, trust but verify and I think that’s a good lesson for us to learn as well. A good way to do that verification is to be an educated consumer. The more educated you are the more credibility you’ll have and the better you’ll be able to manage the dialogue with your vendor partners.

As you do that though, keep in mind that it’s not a perfect world. No product, no vendor you consider is perfect, so you need to have a sense of reasonableness in any sort of relationship, so that’s the first rule. The second rule that goes with that is that there are no exceptions to rule number one. We will deal with an imperfect world and make the best of it as we go.

Finally, our message is that we at REACH can help you. I will actually have used 14 specific REACH tools in putting this webinar together. They won’t all be apparent from the slides that you’ll see, but the point is that there is a wealth of tools that are available and your REACH consultant will help navigate through all that’s available for you.

When we think about vendors we think in a selling context, the vendors are selling to us. That’s certainly true but it goes beyond that. Yes the vendor is selling products and services but you’re selling too. What you’re selling is credibility. The environment now as it focuses on EHR meaningful use and the large cash incentives that go with that, means that vendors are very busy.

We often hear the term feeding frenzy, because organizations that wouldn’t otherwise be in the market right now are scrambling to select and implement electronic health record technology, so the vendors are very much in demand. You can make sure they take you seriously so they want to do business with you and you can do that by building your credibility by being a savvy consumer.

It starts right from the beginning. The better you plan this the better you’re going to be. The old saying says plan your work and work your plan. We can certainly help you as part of REACH consultants in defining and laying out that process, but a good plan doesn’t mean anything if you don’t execute it. So keep to the timeline you set and be sure to carve out time for your staff, particularly the project leader as well as the whole team so they can do their work. If you don’t that will only lead to problems later on.

Now, as we look to the relationship, it really revolves around communications. How do we communicate effectively with our vendors? The first thing we suggest is that you have a formal code of conduct. This will help ensure that you can manage and control that process and that you have a fair and unbias process with a level playing field.

A good code of conduct will prevent leaks, because one thing you don’t want is someone from your organization sharing one vendor’s confidential information, especially pricing with another and the code of conduct can help you manage that.

Part of that control is usually a single point of contact. This is typically going to be the project leader for your organization and having a single point of contact ensure that the same message comes across with every vendor you’re working with.


A couple of other things to keep in mind may be obvious but I don’t want to overlook them. Please don’t accept vendor gifts. The code of conduct should be very clear on that, that you are trying to have an unbias process so make sure you respect the vendor’s confidentiality as you expect them to respect yours and make sure that conflicts of interest are addressed. If anyone in your organization has a relationship with a vendor, maybe their brother-in-law works for vendor A then they shouldn’t be part of the process here, so they need to step down from the selection process.

I have a sample of a real code of conduct. We’re not going to read through this, but I wanted to point out that it addresses some of the things we’ve already talked about. It outlines the vendors selection process and says no person, including EHR work group members, may reveal the names or other information about vendors under consideration at any time.

This means you can’t even tell anyone outside the organization who you’re even considering if you use this particular code of conduct. Communication specifies that there’s a single point of contact and actually identifies that person by name, specifying that no gifts over $25 can be accepted. We can help you put that together in its entirety as part of the REACH program.

So we’ve set the context here. You have a solid code of conduct to start with so let’s dive in and go through that process. As I mentioned we’ll go through the selection process from the front end, starting with your goal setting all the way through the contracting process.

Goal setting – this is important in your relationship with a vendor because it really enhances your credibility and allows the vendor to work more effectively with you. If you don’t know where you’re going than you really are going nowhere and what you run the risk of doing is becoming overwhelmed, because the market has gotten sophisticated, products have gotten more robust so if you try to drink in everything that the vendor can talk to you about regarding their products, it’s going to be like drinking water from a fire hose.

Yes it’s valuable. Yes you need it. However, it’s coming at you so fast and hard that most of what’s coming across is going to get missed. Having clear goals will allow you to focus that dialogue much better. At REACH we use the concept of SMART goals. SMART is an acronym for specific measurable attainable realistic and time specific. These really become the foundation for your RFP and everything should be in support of those goals.

Related to that is your needs assessment process and what we call process mapping which is also known as workflow analysis. It’s important for you, on the front end, to document your current processes because they highlight two things.

What works well for you? If there are things that work particular well then you want to keep those so make sure that your new health information technologies to acquire, allows you to do that. Build that in to the selection process. Conversely, things that don’t work well you should look at fixing in your new system and they too should be part of your selection process as well.

To get going you can start with our REACH template request for proposal or use anyone else’s. The point is that you shouldn’t have to start from scratch as you build a request for proposal and consider the marketplace. Key elements here that you want to build in and personalize are SMART goals, anything that we identified in the process mapping as well as what we call key differentiators, which should be a relatively limited number of attributes that are absolutely the most important to you.

What you’ll find as you consider the market is that with robust products, they can all start looking alike after a while. Having focused key differentiators will help you navigate through all that noise and clutter.


The better you can articulate this the better a vendor can personalize their solutions for you.

As you consider the marketplace, you likely have perceptions going into that and they may be some of what you’ll see here they may not, but we’d like to do a little bit of a sanity check at this point and talk about a couple perceptions here.

First is that the best product equals the best success.

That makes sense so why wouldn’t you go with the best product.

Second says the clinic next door or another that I’m aware of had a bad experience with this vendor, so I better avoid that vendor because I’ll have a bad experience too.

Third is the role of consultants, as you engage us at REACH or other consultants you may feel like you’re hiring experts so they should just tell you what you need to do.

That’s not an uncommon perception either.

Fourth says the product is certified so it must be good.

Let’s talk about a little bit of a reality check. First, studies suggest that it’s not the best product but the best implementation that will derive the best success. What that means is that a lower echelon product maybe one that’s not as rich or robust in features and functions but implemented well, will lead to more satisfaction for your providers and staff, as well as your patients than will a premium product that’s poorly implemented.

Regarding point number two, yes they may have had a bad experience but you know what? It may have been their fault. Again, we’re talking about a partnership and a win-win relationship and the organization certainly has at least as much to say as the vendor in the success of that implementation. So don’t disregard a negative experience but you may need to filter it or understand it in that context.

The third point, regardless of who you have you have to do your own homework and we’ll talk about some of that as we go through the rest of the presentation.

Finally the fourth point, yes certification is important but it’s not sufficient. You have to dig deeper and we’ll show exactly how you can do that.

As you consider the marketplace, take into account word of mouth and what others are saying. As I mentioned previously, you need to be careful just because someone had a bad experience, but if you keep hearing the same message repeated over and over that certainly builds a case for more concern.

As you belong to organizations, family practice pedes, OBGYN and so on, those organizations will typically have list serves, message boards and maybe even preferred vendors, so that will help you narrow the field of consideration.

Contact vendors directly. In the Internet age it’s never been easier to do that, so you can reach out to vendors directly and as you have personal contact with them, please keep in mind your code of conduct and do that right from the start.

You need to make sure that the electronic health record is certified by the office of the national coordinator, partly because that’s required if you’re going to get incentive payments through the meaningful use program, but even if you aren’t sure of if or when you’re going to apply for that, this is clearly where the state of the art is, so you want to be at the leading edge.


Certification by itself may not be enough and the reason is because the products are certified in three broad areas…

1. General criteria2. Ambulatory criteria or in the case of inpatient solutions Inpatient criteria3. Ambulatory clinic quality measures or inpatient clinical quality measures,

depending on the product

They’re all going to be certified in all the ambulatory and general criteria, so you can take that as a, for granted if they are certified. However, you need to dig down into the ambulatory clinical quality measures, because products only have to be certified in three core measures, three alternate core measures and only three of the remaining 38 additional measures.

So, depending on how a product is certified should be important to you, because if you’re focusing on a certain type of chronic disease management in your practice and if the vendor products aren’t certified to provide that information than you’ll run into problems later on. Make sure the products match your plans, and you can use this information to let the vendors know that you know.

Vendors will routinely point out very confidently that our product is certified through ONC and you can come back and say yes, but… and the yes but will be how they’re certified in the additional clinical quality measures. That’s part of being an informed consumer.

When you go to the website link, towards the bottom of the landing page you’ll either click on ambulatory if that’s the product you’re looking for or inpatient and from there you can do an easy search to see the exact certification status of the products you might be considering.

Before going to Market be careful to confirm how you want the health information technology deployed. We’ll simplify into two environments here.

1. Client server

This is where the technology resides on one or more server computers located at either your organization or somewhere else and you connect to those servers through work stations that are called clients.

2. Application service provider (ASP) or software as a service (SAS)

In this environment the vendor is totally responsible for providing the infrastructure and you’ll see that in addition to the platform infrastructure itself, there can be considerable differences in other important aspects of your relationship with that organization. The payment stream, the ability to customize or personalize the product, the level of control you have over the product and how security is handled to product the data, and the fundamental ownership of the data itself.

Once again we at REACH can help you navigate through these different options, but as you go to market, the clearer the idea you have of how you want it deployed, the better you’ll be at assessing the marketplace.

Now at this point we’ve looked at an initial assessment of the market and we think we’re ready to go out and find out what the vendors can do for us. There are two ways we can typically proceed at this point.

Request for information (RFI)


Request for proposal (RFP)

I suggest you forget about the RFI. In this day and age, with all that’s available on the Internet through websites, Google and other search capabilities you can do far more effective due diligence on your own and do it relatively easy, because the RFI is a high level look at vendors and organizations, and you can do that more effectively yourself.

When you are ready to get more detailed, that’s where the RFP comes in. I would suggest doing that to no more than 4-5 vendors because if you do it to many more than that the task of working with them, evaluating them and making a decision will become very difficult and time consuming. Based on the due diligence you’ve done thus far, the planning you’ve done, you ought to be able to narrow it down to a manageable subset at this point.

As part of that clearly defining that technology environment, so if you really want a hosted ASP or SAS solution, by all means specify that clearly in the RFP. As I said earlier start with ours or any other one and personalize it, but you shouldn’t have to build it from the ground up, there is a big body of knowledge available to start with. Our REACH template interestingly includes all the meaningful use requirements, so that’s a good starting point for you.

Make it easy on yourself as well as on the vendors. Everything should be electronic, particularly the vendor’s ability to respond easily to questions about functionality. Use tables and worksheets so they can easily go from one question to the next easily. Specify a consistent pricing format, because this can be a big challenge. Different products can likely be priced in different ways and comparing them can be a challenge for you, so as much as possible try to specify the format that you want that responds so you can more easily compare the two.

In the questionnaire, the functionality portion, and you’ll likely have a lot of questions saying we needed to do this and that and so on, rather than specify or ask the vendor to say does it do it or does it not do it, consider a numeric rating scale. This is an example use whatever makes sense for you. This one would start at one that says it’s not available it’s not going to be there, all the way up to six that says yes it’s installed and working in the real world.

You can tell that there are levels of gradation within that. Doing this will allow you to better compare one vendor to another as opposed to just relying on the simple yes it does it types of response.

When you get those RFPs back you’ll need to evaluate them and a good way to do that is to have a checklist. As much as possible, try to come up with quantitative ratings. Any decisions that you make has to make sense at a qualitative, intuitive gut feeling level, but it’s helpful if you can start by looking at them quantitatively and part of that was reflected previously where we asked the vendor to quantify their responses.

Where appropriate, considerate waiting the responses because some will be more important than others and this is where the key differentiators fits in. If possible try to get it down to 10-15-20 of those, but you definitely don’t want many dozen because then it becomes difficult to manage. If you’ve done a good job of articulating your vision you should be able to get it to a manageable subset. Try to touch on the main areas that you’re looking at.

Certainly, functionality is going to be the most important but the technology itself, the implementation support and other attributes like that are also important.

Have your staff rate them individually using their own individual worksheet and then bring the team together to share assessments. At that point you’ll get different


interpretations and then you should follow up with the vendors for clarification. This is where the code of conduct really comes into play because your single point of contact will get back to the vendors to get exact clarifications on the issues that may still need further information.

At that point, hopefully you’re in a position to cut to semi finalist or even finalist based on the results. Then you can typically eliminate one or two and get it from the 4-5 that you started with, to 2-3. You may not be able to, because at that point you still may be looking at all 4-5 and if that’s how it shakes out it’s okay because at that point you can keep moving forward.

The next step will likely be a demonstration. Before that this is an example of a real evaluation worksheet and again this is a small snapshot, so the intent isn’t to read all the cells but this is one that we use in my work at the Neighborhood Healthcare Network. Hopefully you can tell where it says key differentiators. These were the things that were important in the selection process, so they were listed here. This worksheet is for a particular vendor product. In this case we weighted them a 1-2 or 3 based on importance and I have a sample of the evaluations based on the RFP for this vendor.

The worksheet also has the ability to be used for a demonstration review, as well as other aspects of due diligence as well.

Next you’re ready for product demonstrations and there are two ways to approach this. First, before you’ve even gotten to this point you may well have done informational demos to learn about the products as part of your marketplace assessment. Some vendors have the ability to do demos right from their website, typically self contained mini demo types of things that may focus on a couple scenarios, whereas others will do live demos on a regular scheduled basis. They make it easy to register and participate in those.

At this point in the process since we’ve gone through the RFP, anyone that we’re still considering we’re talking about doing a detailed demonstration which should look something like, provide time for the vendor to show off. They’ll want to be able to highlight the things they do well and that they think differentiates themselves in the marketplace.

Just like key differentiators are important to you, vendors ideally have key differentiators that they’ll point to, so you need to give them some time to show what they can do. Clearly, the majority of the time should be spent focusing on your needs and your interest. Be as specific as possible as you build that agenda with the vendor putting in a certain amount of time for this and a certain amount of time for that as you craft out a scenario that may take the better part of a business date.

Ideally, building one or more patient or visit scenarios that are relevant for your particular practice in our REACH template RFP there’s a chronic disease management scenario that you can certainly use if it’s relevant for you and tailored to your particular needs. More importantly, it’s just an example of the level of detail and the type of information that you want to specify.

If you have a relevant real world scenario then you have an ideal venue for the vendor to show how their solution will meet those exact needs that you’ve identified.

If possible, consider recording the demos in the same way that Angie turned on the recording for this webinar. Technology has gotten very affordable so what you might consider if you’re embarking on a selection process is acquiring web conferencing, which can be very affordable these days at less than $100 a month, and with that it allows you to be in control to record the demo.That way you could have the conference setup based on your system, the vendor would login and do the demonstration and you would be recording it. This can be


valuable for debriefing and follow up for your team and for getting back to the vendor to confirm that you said it did this and showed that and also for other staff, because not everyone may have been able to attend the demo and this is a way to be able to have them do it in virtual mode.

If possible, schedule your competitors on consecutive days. This needs to be a concentrated intense process, so you need to build in enough lead time so you can clear calendars accordingly and in addition to that, evaluate the demos on the same dates, because if you do schedule them on consecutive days, maybe you have three and you don’t start evaluating until the end, that stuff you did two days ago will be fuzzy in your memory. Go through at least an initial evaluation right on the spot and build that into your demo scenario.

Next is a sample of one of the tools off our REACH toolkit that you can use. In this one, did the vendor follow the script that we provided? Do you believe your benefits will be met based on what was demonstrated in that script at demo? You get pretty precise here in terms of the feedback that you look for and then this becomes a nice checklist to use during the demo itself.

Having gone through that you may be ready for site visits as we go through the due diligence process. Ideally this should only be done for your top two vendors; because there’s a fair amount of work involved here and you need to keep funneling down the universe that you’re working with. You really have two purposes here.

One is to continue measuring the vendor against those key differentiators

Keep in mind those key differentiators are yours, not necessarily any other sites, so at best you may only touch on a portion of those.

So really, what it comes down to is validating that that solution really does work in the real world. Obviously the site needs to be as similar to yours as possible, so if you’re a pediatric practice than you need to be seeing a pede’s practice.

A visitor should cover all disciplines. Your team may have a physician, mid-level provider, a nurse, an MA, ancillary staff, administrative staff, front desk, business office or some combination of that and it may not be practical for everyone to go on a site visit, so if you only have a few people, make sure that they cover all the disciplines, in addition to the ones they specialize in.

Choose the single best site you can but keep in mind that you can fill in the gaps through reference checks because again it’s not a perfect world.

The vendors certainly want to coordinate and kickoff that visit, but at that point you kick them out. The rest of the time needs to be on your own with the host site so you can talk openly and frankly. I have another sample of a REACH tool with very specific questions.

For example, how long did the average nursing staff take to feel comfortably using the system? How long did physicians take to learn and use the system? What training methods did you use?

You can get very specific here. The point is to have some list of questions, don’t just walk in, open it and say how’s it going? Probably the most important single question is with that wonderful gift of hindsight, if you had to do it over again what would you do differently?

Reference checks are very similar to site visit checks. As I said, no site visit is going to be perfect so you may wind up using the telephone to fill in some of the gaps. Vendors certainly will offer reference checks but of course they will only offer


references to those that are going to say good things about them. If you know of other organizations with that vendor product, try to contact them. All they can say is no, in terms of talking with you but if you have contacts there than it increases the probability that they will talk openly and honest with you.

Ideal formula here is probably a single conference call with all the stakeholders involved, that way you can have a concentrated single session and make sure all the high points are covered. It works most effectively if you have the other side representing those disciplines as well, so you’ll need to orchestrate this with the vendor and/or other reference site you’re using.

Same basic questions, the idea of using the key differentiators as the main driver. We may be able to help you here as well. Now we have many REACH clients and the ones with health information technology have many different systems, so if you’re interested in specific systems, we may be able to put you in touch with organizations that have the ones you’re interested in.

A final bit of due diligence is sometimes a corporate visit. This day and age I’m seeing less of that, partly because so much is available in the Internet world. Google is a wonderful tool. If you want to know what sort of things people are saying about vendors just Google them, you’ll see a lot, probably more than you’ll actually have time to go through.

Other tools would be the local Better Business Bureau where the vendors headquartered local media. For example, if I’m working with a vendor in Milwaukee, I’ll be looking at the Milwaukee Journal Sentinel, the main newspaper there. You can certainly do a physical visit, but they can be expensive. They can also be worthwhile if a vendor isn’t particular large, because at that point you’re looking for reassurance that they have the sufficient staff and capabilities to meet your needs and they aren’t likely to go out of business.

Having done all of this you’re likely in a position to select the vendor of choice and move forward, but not necessarily. This can be a difficult step, but take heart in the process that you’ve had. If you’ve followed that, you can really avoid the analysis paralysis that sometimes plagues organizations at this step.

Certainly, rely on those key differentiators, the quantitative worksheets, ratings, totals and all that numeric stuff. Guess what? You still have to do what some people call the ‘sniff test’. Does it smell and feel right, because if not than you have a disconnect there? Psychologists would call it cognitive dissonance and you need to reconcile that.

If you used weighting, for example, maybe you didn’t really weight those correctly. Maybe stuff is more important than you realized, so you may need to go back through that quantitative review process, because ultimately this is an emotional decision. You’re looking to build a long-term relationship so it has to feel right.

If two vendors have similar ratings, then come back to that slide that says implementation, it is more important than product. Implementation always trumps product.

Once you’re ready to communicate that vendor of choice make sure you have internal consensus and whatever approvals you need to go ahead and make that a declaration. But, do you really declare that? Do you let the vendor know that they are vendor of choice? Two schools of thought on this.

One that says yes would say this lays the groundwork for contracting, signals the vendor to get the approvals, discounts and everything else they need to be ready to move ahead, that they take you seriously. The down side of this potentially is that the


vendor might become a little complacent. You’ve already declared that you plan to do business with them they may feel they can be more hard nosed in contract negotiations and won’t have to give as many concessions as if they were insured.

The second school of thought says you don’t let them know they are the vendor of choice. This one maximizes your leverage, keeps the vendors on their toes and in this approach, if what’s really your first vendor of choice falls by the wayside because you aren’t able to move forward with them, you already have things in process with your second choice.

If you use this make sure you stick with it and don’t give anything away along the process. You have to be consistent here.

Unless your second choice is totally unacceptable, let them know they’re still under consideration. You definitely want to keep them engaged. Doing that will allow you to have an easy fall back position, and depending on how engaged you have them, what you learn from that process you may be able to apply against your main vendor of choice.

If there aren’t other vendors still in consideration, by all means let them know they’re no longer being considered, because they don’t need to waste their time or yours. Some organizations are reluctant to do this because the vendor is going to push back, so you need to be able to articulate this. It could be as simple as, we had a fair objective process that we achieved consensus on and we appreciate what you’ve done for us. We’ve made our decision, thank you very much. Cut it off at that point.

Most importantly, don’t look back. You’ve gone through the process and made the decision so keep moving forward, because now you’re in contracting and this is going to be a time consuming step. Keep a few things in mind.

Everything is negotiable, but pick your battles.

You don’t want every point in the contract to be such a point of contention that you turn this into an adversarial relationship. Remember the win-win we’re trying to build. There may be things that you’re looking for the vendor to provide and in exchange for that you may have to get a little bit on your end as well.

Make sure you’re clear on who’s authorized to negotiate what approval process there is.

At the point that you think you have an agreement you need to be able to carry through on that.

Vendors do this much more often than you do, so by all means get help.

You should have your legal counsel, contract attorney to review the contract and grab other staff in the organization as well.

You need to decide whether you’re going to do this only with your vendor of choice or your second choice.

Doing it with both can be a big time consumer. The upside being that as you work through issues. What you learn from one you may be able to apply to the other, but this is sometimes not for the faint of heart, because it can take a lot of time. If you don’t use this approach you can always come back to the second vendor of choice later on.

Remember one other important thing. The most leverage you have is before you sign the contract.


After that things are in place and the wheels will turn, in some cases, automatically. So, make sure you get everything in writing.

Don’t be pressured by vendor deadlines.

Gosh, this pricing we gave you, I can only hold that through the quarter and I can’t commit to it beyond that. If it’s really important to them than they will extend those incentives.

You may hear, as you bring up an objection, gosh no one has ever objected to that before. Well, at that point you can feel good that you have been a savvy consumer, because if that really is the case and if you’re being reasonable in the objection than good for you. Or, the vendor could just be posturing there. Either way, if it’s important enough to you again, remember to pick your battles and hold firm on that.

Probably the best way to do this after you’ve gone through an initial read of the contract is to get all the issues down in writing in a letter or document to the vendor.

Do this up front. What you don’t want to do is piecemeal things. Let’s say you’ve gone through the contract and you go back to the vendor and say we need you to do this, that and the other thing. What if the vendor does those things and then you come back and say oh we need you now to do this? You can get in an endless loop at that point. You really want to get all the cards on the table, because what you’ll find is that your issues are going to be in either of two broad categories.

1. One they’ll be cost

2. Two they’ll be terms

Under terms I define that as product, functionality, services and those two are really interrelated and often one gets traded off for another. For example, if you’re looking for the vendor to come up with more aggressive pricing discounts than they have provided to you. If they grant those than they may want to push back with you on other areas in terms of when those payments would be do.

Therefore, having all the issues on the table together allows you to clearly identify those tradeoffs and see them.

Use an Excel worksheet or some other electronic means to easily track issue resolution, because the number of issues can add up quickly and you’ll be surprised if you haven’t gone through this before. What can be a big help, and attorneys love this, is using a red line Word version of a contract.

You’ll typically get an initial contract from the vendors in an Adobe PDF format, but if you’re negotiating with them get it in a Word format with red lining so that any changes can clearly be identified and you have a clear audit trail of the dialogue of issue resolutions as it relates to the contract in any related documents.

You definitely want to incorporate the vendor RFP response as part of the contract. Physically if possible, certainly by reference, because if the vendor is willing to commit to it in the RFP than they have to be willing to commit to it in the contract itself. Likewise, any other commitments or clarifications they’ve made during the process, including in demonstration. Again, make sure they are in writing.

At the risk of being too obvious, identify exactly what you’re buying because this can be a complex acquisition.

If you’re buying hardware there could be many different types of hardware. In terms of software, there could be many different types of software. You may have a core product from the vendor but that may require or be optimized with third-party or


related software optional modules, all of which need to be broken out very clearly. Likewise, you need to know exactly what services you’re contracting for and support as well.

Regarding ongoing fees, with Stoffler you’ll typically have ongoing maintenances and support feeds, if you’re licensing the software. If you’re in an ASP deployment or software as a service than you likely have a subscription with monthly fees or other periodic fees. Make sure you’re clear as to what those fears are, when they begin and how they change over time.

As much as possible you want to build in price protections. It’s pretty common in vendor contracts for their maintenance and support to be specified in terms like, it will automatically renew based on whatever the anniversary date is and at renewal the vendor has the prerogative to increase fees by up to the consumer price index percentage change for that you’re plus 2-3-4%. Push back on all that stuff as much as possible.

You want the fees to be as flat as possible for as long as possible, so building those price protections is good. Likewise, if you negotiated discounts on one time license fees you may have acquired 20 licenses. Now, build in the provision what if you need to add more in the next one, two, three years and so on. Try to build in those price protections as well.

Payment terms is another area that you’ll need to pay special attention to. These can be related to what we started saying… get all the issues on the table together, because again if you’re looking for the vendor to give you major concessions in some areas, they may want tighter payment terms in exchange for that. So you may need to be very careful how you balance those issues.

Talking about payment terms. Vendors are typically going to want to frontload. That means they want to get as much cash as possible up front and you can see some pretty ridiculous payment terms where they’re going to look for the majority of fees up front. You, on the other hand, you’re going to want to backload or defer as many of those as possible.

In general, try not to have your down payment and installation fee exceed more than 20-25%. The contract may say for example, 25% down and another 25% on installation. Be careful of that because installation is almost a bogus term. What that means is that the software is going to be loaded from a CD onto the server and this can often happen literally the day after the contract is signed. So, rather than thinking of these as two distinct events that are separated in time, they will likely be treated almost like a single event.

If possible, tie the payments to milestones not dates. This is part of the idea of back loading it. Give 20-25% down and maybe another portion when you’ve started testing and the system is certified for that and the testing is completed. When training is completed. When any data conversion or migration is completed and so on, as you carve out those milestones as part of your project plan. Try to split that up.

Keep in mind you have to hold up your end of the deal. Again, this is a partnership. If you specify that a payment isn’t going to be made until a certain milestone and if it’s you that’s the reason for that delay then expect the vendor to push back pretty hard on that. Chances are there will be some provision in the contract for that. A common way to do that then is to specify a milestone payment as the payment being required at that milestone or X days after a contract signing whichever comes first.

That way if the milestone is delayed there is some type of cap or end date on when the payment is due.


If possible hold back some payments, 10-20% anyway, until after the go live date. Just because you’ve got a lot on the product doesn’t mean you’re there yet. Typically, there’s fine tuning and things that come up in the real world that haven’t come up in spite of testing that you might have done. You want to have the vendor fully engaged so that the issues are resolved because you complete the payment stream to them.

Now, we’ve gone through the process here to recap that simple message. Again, think partner. This relationship has to work for you both. The more you can build that in the more constructive, can be the give and take that you have with your vendors, the more likely they will be accommodating to you when unforeseen things come up.

Be as educated and savvy as you can be, because that’s your best protection from being taken for granted. It’s not a perfect world, but if you build the relationship of trust and confidentiality than as things come up that you haven’t anticipated you’ll be able to work through that with the vendor.

Again, as I mentioned earlier, REACH goals can help you a lot. Engage your REACH consultants as I mentioned. I use 14 of them just in this webinar today, so there is a wealth of knowledge that’s there for you.

I have a couple final notes on resources and Angie will say some more as we conclude today. You now know what the REACH website is. For those who have REACH clients should already be familiar with that. We make extensive use of the Stratis Health toolkit in partnership with REACH so there’s the link for that. The one you already saw is the link to the office of the national coordinator for EHR certification.

With that I’ll turn it back over for questions. Joe, anything from the gang?

Joe Wivoda: Thank you Joe. The question just came in from Sarah that says… how do you get info about how much a vendor dedicates to RND, is that an important differentiator when considering vendors?

Joe Kalaidis: That’s a good question and you should be able to ask for that. I think our REACH template RFP probably does include that. Early on in the RFP it talks about vendor profile type information, number of employees, revenue and if that’s not a question that’s in the template than it’s one that should be asked, because it is important.

Obviously, the more a vendor is putting into RND, the more comfort you have that this is going to be a product, moving forward. Even though you’re contracting for the product at a single point in time, obviously you want to make sure that this is going to continue to meet your needs and continue to be enhanced, going forward. I would definitely build that in.

Certainly, ask about that in the informal due diligence as well. You don’t have to wait until you get to the RFP for that.

Joe Wivoda: If I can ask a follow up question. Is there a benchmark that you like to see and how much does it depend on company size in terms of how much is spent on RND?

Joe Kalaidis: I don’t know that there is any benchmark. There can be such a variety of size with vendors. Very large vendors that are diversified can set a… we spend $100-$200 million dollars on RND… in the context of what? Certainly, rather than deal with absolutes just try to get an idea of the overall amount. I don’t have a specific one.

On the vendor side of that, when I was there, I was fortunate to have been a part of large organizations. I worked for GE Healthcare and for All Scripts, so I had at my disposal very competent and dedicated teams. Most of the major vendors are like


that, certainly the smaller ones don’t have the resources so the information is a little harder to get. All I can say is to keep asking and keep draw the dialogue out from the vendor.

I haven’t thought to Google that but that would be a good question. Google is an amazing tool, so you might craft some queries in Google to see what the market says about that.

Joe Wivoda: Any other questions? I have a question. Joe, do you recommend making the RFP part of the contract itself so they have to sign off on the RFP and agree to everything they said they could do in the RFP?

Joe Kalaidis: Yes, I tried to touch on that. Absolutely! You would, as part of the contract, either include that as an exhibit or addendum or by reference, but physically put it in there because any time you’ve put it in by reference there’s always the potential that that reference link may not be either maintained or interpreted in the same way.

For example, in the selection process, a major one we did a few years ago, we didn’t put the entire RFP in. I think we put in the functionality and there were many questions about that. I think we got push back from the vendor, I can’t even recall the specifics on that. The main thing we were looking for was all those representations on functionality. Yes it does this and that, and the other stuff was less critical, so we literally pasted in that portion of the RFP and it became a physical part of the contract.

Joe Wivoda: Thank you. We’re working with an LIS vendor and they will not negotiate on price or maintenance costs, any suggestions?

Joe Kalaidis: Again, the idea in negotiating is to try to put all the cards on the table. Are there other things you’re looking for from that LIS vendor? If so, is it possible to get the vendors agreement on those at the same price? I have never heard of anyone never negotiating on price, so without more details it’s a little harder to react.

I think the main context is to have all the issues on the table and ideally there are others beyond price that you can use to balance one against the other.

Joe Wivoda: Thank you, Joe. I think I’ll turn it back over to Angie.

Angie LaFlamme: I want to thank everyone for their attendance to this webinar.

This material was prepared by Stratis Health, the Quality Improvement Organization for Minnesota, under a contract with the Centers for Medicare & Medicaid Services (CMS), an agency of the US Department of Health and Human

Services. The contents presented do not necessarily reflect CMS policy.


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