At the age of 17, I worked hard and purchased my first car. It was a green 1986 Ford Fiesta in fantastic condition, but it was badly in need of new tires. With the mindset of a broke teenager, I thumbed through the yellow pages and called every mechanic and tire shop within a 50-mile radius looking for the best price. It took 3 days, but I finally found a place that had my size tires for the low price of only $19.75 a tire.

My dad offered to go with me, but I was stubbornly independent, and off I went to a tire place two towns over. The place looked alright. It was generally clean and by all accounts it looked like a legitimate place to take my business.  The attendant was professional and I was thrilled that they were able to get me in right away. An hour later I drove away with four brand new tires on my new car. Life was good.

Heading home down a two-lane highway at 55 MPH, I heard a loud pop and my car suddenly jerked to the right. When I was stomped on the break, my car took another bound onto the shoulder and right into the metal guard rail. Shaken, but unhurt, I stumbled out of the car and found that one of my brand-new tires had just blown.

I later found out that the “brand new” tires were actually retreaded. The savings I had gained by going with the cheapest tire I could find ended up costing nearly $600 in repairs, including actual new tires.

It took retreaded tires and $600 for me to learn the hard way – you get what you pay for.

I’m guessing you can relate and most likely have your own version of my “retread tire” story; one of those “great deals” that ended up costing you more time, money or effort in the long run than if you had paid for the quality you deserve. This brings me to a trend that is becoming a major issue “where the rubber meets the road” in the healthcare industry.

Is “Lowest Price, Technically Acceptable” Really Acceptable?

Over the last several years, Signature has seen a marked increase in healthcare organizations, both commercial and federal, who are limiting their proposals to “lowest price, technically acceptable” (LPTA) instead of “best value” selection criteria.

Lowest price doesn’t always equal lower quality, but in many cases it does. Most vendors don’t bid on a project with the intention of performing poorly, but lower bids to win business often force cuts in one or more areas that lead to lower performance.

  1. Innovation. A vendor running on thin margins can’t afford to divert funds to improving processes. New best practices may be much slower to be adopted if they are adopted at all.
  2. Staff. Experienced employees expect and deserve to be paid well for their time and talents. Vendors are often forced to choose between fewer experienced employees or more employees with less experience. Either can cause problems with production.
  3. Analysis. Vendors often sacrifice “non-revenue generating” functions like auditing and analysis which can result in higher error rates, underpayments, more denials and slower payments.

With LPTA, you and the vendor are both stuck with a situation that neither of you are likely to be happy with in the long term.

Best Value is a Best Practice

Best value criteria may mean more paperwork up front, but it gives you the opportunity to receive a higher level of service by choosing a vendor you believe is best suited for the project, even if it appears to cost a little more. In the revenue cycle, a higher vendor fee will likely lead to improved accuracy, fewer denials, and fewer underpayments, all of which improve your bottom line.