Wednesday 16 July 2014

Spend Analytics and Benchmarking - Part 2

At the recent BravoConnect conference, I attended a session in which a diverse audience of procurement professionals was challenged to find ways of achieving cost savings within the NHS.

Reviewing some of the high level reports, our table immediately started proposing actions. For example, several major categories showed only a minority of spend going through top vendors, reflecting an opportunity for rationalisation. In many common categories, it was said, there was no excuse for not buying centrally. Even where a large body of small vendors is unavoidable, for example in the case of local medical consultants operating independently, our table proposed that the NHS should seek to classify services and standardise rates on a national scheme.

Another person pointed out that barely one quarter of all invoice spend was processed against a purchase order, which could create a risk of non-compliant and ineffective spend. In some categories, the figure was less than 10%.

For the majority of the audience, the figures were entirely new and quite different from what they were used to seeing in their own organisations. Yet, as Scott Pryde said, based on a background in procurement and the right information “we can spot the dynamics of inefficiency” and begin to develop strategies to combat them.

However, to really understand the shape of the problem, we left behind the macro-scale reports and took a deeper dive into a specific category, looking at data on hip prosthesis. Data supplied to the group showed a striking increase of over 50% in the average cost of a hip replacement over just 2 years. To make matters worse, the proportion of prosthetics being supplied which fall into the highest category of quality has fallen significantly over the same period.

Further reports show that;

·         There is major supplier fragmentation, even within a single trust (200 suppliers overall)
·         No correlation between cost, volume and quality between trusts
·         Some Trusts appear to be “good” and others “bad” in this area

The audience found these results shocking, one commenting that it “should be a national scandal”. Yet these figures are actually much better than in some other markets, such as the United States. In practice, surgeons have a high degree of autonomy and choice in this area. Until now it has not been possible to collate and share this information across such a large spend base. It is hoped that by sharing this at all levels, changes in local buying decisions will be made which will lead not only to lower costs for the NHS, but also to better patient outcomes across the board.

At this point I began to see what Scott had been talking about at the beginning of the session. By collecting and sharing information on a large scale, procurement functions in future will be able to have a much more compelling conversation with stakeholders. Even in highly specialised areas, the experts will be able to feel “the power of indisputable data” supplied by shared Spend Analytics.

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