Running a hospital is a tremendous undertaking. Beyond the daunting task of ensuring your facility provides the best possible care to patients, it’s equally important that your hospital is safe, clean, and compliant.
To accomplish any of these tasks, your hospital will need to speak with contractors, suppliers, and other vendors across the healthcare ecosystem. If you’re a hospital—or a company that sells to hospitals—you’re probably familiar with how this relationship works. Hospitals issue a solicitation when they’re trying to procure goods or services for a project, most commonly in the form of a request for proposal (RFP). Potential vendors submit their plans for completing those projects. Hospitals then evaluate each vendor to find the one that best fits its needs and budget, and work begins.
Did you know, however, that there are many kinds of RFPs? Or why RFPs are so important to both healthcare organizations and contractors? In this blog, we’ll answer those questions and explore some of the key benefits of using a healthcare RFP.
A request for proposal is a formal document that hospitals and healthcare facilities use when planning to undertake specific projects. When these organizations need to procure third-party goods and services, a healthcare or hospital RFP helps people with purchasing power collect information about potential contractors and suppliers and evaluate their capabilities.
Overseeing and writing an RFP is generally regarded as a complex, challenging, and time-consuming process. In healthcare, the average RFP takes between nine months to three years to complete, as organizations manage budget cycles, grants, and more. As a result, most RFPs are formatted as a questionnaire so vendors can be easily compared side-by-side.
The responsibility for handling RFPs can fall on many individuals or departments within a hospital, though it helps to find the best contact for hospital RFPs. Typically, larger hospitals have a dedicated vendor relations team or procure department that manages the overall hospital RFP process, such as communicating with vendors and ensuring compliance with policies and regulations.
A hospital’s IT department may weigh in for technology-related procurements. The finance team might review budget considerations. And the legal department may be involved in reviewing and finalizing the RFP document.
RFPs have an important role in how hospitals operate and improve and expand upon their facilities. But, whether it’s installing new durable medical equipment, performing renovations, or just doing routine maintenance, there are countless factors to consider.
Issuing an RFP provides an easy way to evaluate a vendor’s background, experience, capabilities, security, customer service, the quality of their products or services, and more. The Q&A-style format of most healthcare RFPs allows for easy side-by-side comparisons of multiple vendors, helping ensure the hospital finds the best possible contractor.
For vendors, RFPs create an equal playing field in an otherwise fiercely competitive market. Often, smaller contractors or suppliers have less access or opportunity to approach projects or make partnerships with hospitals when RFPs are not used.
Definitive Healthcare tracks 22 different healthcare RFP categories, covering a wide range of products and services from sourcing medical equipment to construction, transportation, food, maintenance, and more. According to our healthcare commercial intelligence, U.S. hospitals and health systems issued more than 15,000 RFPs since the beginning of 2023.
Fig. 1 RFP data is from Definitive Healthcare’s HospitalView product. The chart represents the 10 most common RFP categories issued by U.S. hospitals and health systems between January 1, 2023, and September 13, 2023.
From the pie chart, we can see that professional services are the most common healthcare RFP category, accounting for more than 40% of the RFPs issued in 2023. This category includes a wide variety of contracted services, ranging from laundry and janitorial services to employee education and training.
Medical and surgical equipment or supplies is the second most common category of healthcare RFP issued in 2023. Examples include everything from scalpels and scissors to stethoscopes and scales.
Some RFP categories aren’t represented in the chart. Some other important categories include:
If your company sells to hospitals, it’s important to note that not all these RFP categories are relevant to your business and goals. Your challenge is to understand why hospitals and healthcare facilities issue these RFPs and determine where your business fits within these categories.
Accomplishing this will help your company identify new opportunities faster and, by using the right healthcare commercial intelligence, you’ll be able to arm your salesforce with the info they need to have more effective engagements.
The RFP process can be beneficial to both healthcare organizations and the contractors and suppliers being solicited. Five of the reasons are:
In some states, hospitals are required to submit an RFP to solicit any product or service. Those requirements can change depending on the complexity, cost, or category of the request.
The Sarbanes Oxley (SOX) Act of 2002 may have impacted some regulatory changes in the healthcare RFP process. This law imposes strict recordkeeping requirements to prevent corporate fraud. In the healthcare RFP process, these requirements help protect hospitals from fraudulent service providers and guarantee the authenticity of supplier responses.
When a hospital issues an RFP, it opens the bidding process to any qualified supplier. This bidding process allows hospitals to compare every offer and weed out any unqualified or illegitimate suppliers.
But the bidding process is also advantageous for smaller suppliers. These companies may not always have access to the same opportunities as their larger competitors. The RFP bidding process provides them with an equal opportunity for success and growth.
During the RFP bidding process, suppliers are required to submit a proposed price for their product or service. Comparing these offers helps hospitals identify the most competitive offer.
Towards the end of the bidding process, suppliers may also be asked to provide a consultation or product demonstration. This helps hospitals assess the value of the product or service and decide whether further negotiations are necessary.
Issuing an RFP gives hospitals the authority to negotiate with suppliers. Knowing that other suppliers are bidding for a hospital’s business puts pressure on suppliers to offer the most competitive pricing possible. Still, hospitals can further negotiate bids that don’t fit within their budget or proposed timeline.
RFPs also create a built-in safety net for both hospitals and suppliers. If any party rescinds a promise or fails to adhere to project guidelines, there is paperwork to hold them accountable.
Submitting an RFP empowers hospital decision-makers to define exactly what they want in a product or service. With such clearly defined guidelines, suppliers know what is expected of them when they respond to that request and can customize their messaging accordingly.
The process facilitates open, honest, and legitimate negotiations that allow all stakeholders to remain educated on the status of business discussions.
In the world of sourcing and procurement, you’ll find a whole host of acronyms that sound nearly identical to each other. If you’re a company that works frequently with RFPs, you may also be familiar with another term: the RFQ.
This acronym stands for “request for quote.” As a healthcare organization’s sourcing team narrows its list of potential vendors who can meet its needs, they may ask for a price quote. This helps the team determine whether the vendor can provide the products or services the organization needs at the price the organization is able to pay.
An RFQ usually comes in the later stages of the proposal journey, but it may also be helpful to issue one early on to help vet candidates if the price is a critical factor.
Thousands of RFPs are issued every month. If you don’t know when a hospital issues a new RFP, then you might be late to bid and lose that opportunity. HospitalView helps you keep your finger on the pulse of new RFPs and dig deeper into the organizations using them.
Don’t have HospitalView? Then start a free trial today to learn more about the organizations issuing RFPs in your area of the healthcare ecosystem.
Ethan Popowitz is a Senior Content Writer at Definitive Healthcare. He writes data-driven articles about telehealth, AI, the healthcare staffing shortage, and everything in…
