Soccer Cleats and At-Risk Contracts
My fifteen-year-old has been playing soccer since he was four. I’m happy to financially support him in this because he loves the sport, he’s good at it, he helps around the house, he’s a great kid and he gets good grades. Sounds like a good ROI, right?
But now that my son is playing competitive club soccer in out-of-state tournaments, the $29 Walmart cleats of his early years no longer cut it. His most recently purchased cleats are the Nike Mercurial Superfly FGs—which retail for $275.
These new kicks are undoubtedly ten times cooler, lighter, and more durable, but they’re nearly ten times the cost as well. At what point can the family soccer budget no longer sustain the rising cost of cleats? All this reminds me of a recent conversation I had with a CIO who is frustrated by the rising costs of healthcare products and services. He shared,
“I’m looking at what we have to do to struggle to make a 3% margin, and I look around at the people, like the vendors who supply us with products and services, who are knocking down margins of 15%–20% or more. When we push back on price, their response to me is ‘pay it or you don’t get it.’ It seems like these people have no concern or regard for what’s going on in this industry. Everybody around the providers is making a margin except the people delivering healthcare. I get the fact that we have been inefficient. There is no question that we have got opportunities to improve. But at the end of the day when we fix all that, we are still not going to be making more than 3% or 4%.”
Sounds like a similar dilemma. How do providers, who don’t have oodles of cash lying around, and vendors, who continue to invest in new healthcare IT that they then want to sell, reconcile a situation that seems to put them perpetually at odds with one another? At some point, something has to change.
Luckily, something has. KLAS has begun to validate vendors who are starting to enter into at-risk agreements with providers on specific outcomes. In these agreements, vendors essentially promise to help providers get desired outcomes and to only charge if those outcomes are realized. Those outcomes could be low AR days for patient accounting, clinical outcomes like sepsis prevention, etc. The ROI in these situations is secure, and providers tell us they feel like their vendor is partnering with them instead of gouging them. As another CIO recently shared,
“Our vendor isn’t just dropping an application on us and expecting us to make it work. They’re in it with us. Contractually, they’re obligated to make us successful and to not get paid until we are. Next time I have to go to the board for funding for this vendor’s next application, with this successful outcome in my pocket, funding will be a breeze.”
If only I could get Nike to agree to a similar arrangement. I’d feel a lot better about laying out $275 for cleats if they could guarantee my son a college soccer scholarship or a lucrative professional soccer contract… If it works for providers and vendors, why not for me and Nike?