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A comment on If you imagine a business making surgical facemasks is working 24/7, guess again. Parent comment

Re:If you imagine a business making surgical facemasks is wo... by mrosett on Sunday April 05, 2020 @09:39PM (#22790231)
Note that getting hospitals to agree to long term contracts at prices that are higher than they'd normally pay is basically a backdoor form of raising prices. From a financial perspective, there's not a huge difference between a) a hospital paying $0.80/mask for the next year and $0.02/mask for the following decade or b) $0.10/mask with a decade long contract.
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Re:If you imagine a business making surgical facemasks is wo... by pdonis on Sunday April 05, 2020 @11:34PM (#22790709)
> From a financial perspective, there's not a huge difference between a) a hospital paying $0.80/mask for the next year and $0.02/mask for the following decade or b) $0.10/mask with a decade long contract.

Yes, there is: the cash flow for the two cases is very, very different. Case b) is doable for a reasonable cash flow. Case a) is impossible unless someone else besides the hospital provides the huge up front amount of cash required to pay $0.80/mask for the first year.

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Re:If you imagine a business making surgical facemasks is wo... by gpm on Monday April 06, 2020 @01:07AM (#22791039)
Masks aren't a large enough portion of a hospitals budget for cashflow to be a major concern. Besides which loans exist (though we are neglecting to properly account for the future value of money in our napkin math).
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Re:If you imagine a business making surgical facemasks is wo... by pdonis on Monday April 06, 2020 @11:41AM (#22794674)
> Masks aren't a large enough portion of a hospitals budget for cashflow to be a major concern.

Maybe not under normal circumstances, but these are not normal circumstances. Also, we're talking N95 masks, not ordinary surgical masks.

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Re:If you imagine a business making surgical facemasks is wo... by gpm on Monday April 06, 2020 @11:49AM (#22794745)
Compare the cost of masks to the cost of the salary of the people using them. Under no circumstance is the cost of masks a major cashflow concern.

Nothing in the article says these are N95 masks, I don't believe you are correct. But also, what does that have to do with my comment?

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Re:If you imagine a business making surgical facemasks is wo... by gpm on Sunday April 05, 2020 @10:26PM (#22790422)
Exactly! Financially the word for this is regulatory arbitrage. Since he was selling the masks at the same price before the crisis though I suspect that long term contracts would not fall afoul of whatever price gouging laws there are. It's also what it sounds like he is already doing, and maybe more socially acceptable.
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Re:If you imagine a business making surgical facemasks is wo... by lugged on Sunday April 05, 2020 @10:03PM (#22790314)
If you can make masks for 10c its not price gouging to sell it at a normal markup from those costs. Its not even "basically a backdoor form of raising prices" It's literally just what it costs.

Also, I highly doubt this guy is using 10 year contracts.

If I was him I would only be selling to those hospitals that sign 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply.

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Re:If you imagine a business making surgical facemasks is wo... by rch on Monday April 06, 2020 @12:49AM (#22790981)
> 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply.

Exactly. IIRC Sysco negotiates 50-99 year contracts with e.g. universities to supply on campus dining. It seems that firms in the healthcare supply chain would do the same.

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Re:If you imagine a business making surgical facemasks is wo... by michaelt on Monday April 06, 2020 @09:50AM (#22793661)
Interesting. What does a customer do, in a 50-year contract, if the level of service drops or the product becomes obsolete?
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Re:If you imagine a business making surgical facemasks is wo... by djyaz1200 on Sunday April 05, 2020 @11:15PM (#22790653)
Totally agree, he should accept orders from any org willing to sign a long term deal at his usual prices and run the factory 24/7.
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Re:If you imagine a business making surgical facemasks is wo... by londons_explore on Monday April 06, 2020 @12:05AM (#22790827)
Most companies go bankrupt in a lot less than 100 years... In most cases, the full value of the contract would never be paid.
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Re:If you imagine a business making surgical facemasks is wo... by Sabinus on Monday April 06, 2020 @04:22AM (#22791804)
It would still solve the problem of companies not purchasing while they're solvent but not urgently needing masks.
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Re:If you imagine a business making surgical facemasks is wo... by bluGill on Monday April 06, 2020 @11:16AM (#22794465)
If a hospital agrees to purchase so much over time I'd give them a discount. Cash flow works much better if you get it, one time purchases are the most expensive because you have to pay for all of your costs now.
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