By Scott Pryde
Around 70% of the NHS budget is dictated by commissioning decisions and around 35% on non-pay goods and services contracts.
Despite what outsiders may think (that procurement have a responsibility or influence in the efficiency of these 'value chains' ),the procurement professionals at the HCSA conference represent a cross-section of those who for years have endured a lack of executive influence unique to NHS supply chain management, as well as continued under-investment in capability and enabling technologies.
Would this year's conference signal that this is going to change?
The calibre of presentation and discussion was good, with emerging and international healthcare system topics overlapping the more UK NHS specific ones.
Key themes (paraphrased and in order of potential impact) were:
Integrated healthcare 'value chains' - Aligning incentives and measurement of both outcomes and costs in new contractual models between different primary and secondary care settings.
Measuring outcomes, value and efficiency - Adopting new comparative measures of efficiency as well as considering value and outcomes.
Getting on with best practice now - Driving: Collaboration, aggregation, competition, commitment and compliance across as many categories as we can.
In the next few days, I'll discuss the first two, but today I'd like to discuss the last, most imminent and most achievable one.
Getting on with best practice now
"We all know what to do: compare, aggregate and commit..."
One of the messages that emerged from the conference is that both the DH and trusts know exactly what to do in the short term to drive a wave of savings and efficiency. Collaborate, aggregate demand, drive competition, commit and manage compliance. Can these strategies work? What is the role of the DH and the Trusts in making them happen? What is holding things up?
The following NHS total trust spend estimates show the biggest areas of spend and in 2013-14 these were their areas of growth (cost pressure), namely Pharmaceutical, Agency Staff and Medical Technologies.
In our presentation we asked who had responsibility for the commercial governance of these categories, already knowing that in most, procurement are rarely engaged in board level decisions, demand planning or commercial reviews, never mind given full category responsibility. This is not restricted to clinical categories but categories like ICT, estates and facilities management.
The first thing that must happen is a step change in the board level recognition of the role and responsibility of procurement to deliver better value in these big ticket categories.
That few could explain or compare why acute hospital drug expenditure had increased in the past year, or break down the circumstances that had driven agency staff spend increases, clearly points to an urgent requirement for better commercial governance in these categories.
The second thing that must happen is that trusts must overcome the fragmented nature of the NHS to drive collaborative strategies like demand aggregation or increasing supply chain transparency.
Can these strategies work ?The NHS is not a single organisation and challenges vary significantly across the system. There are around 200 hospital trusts all driven by the diversity and complexities of local epidemiology and resource constraints and who suffer the effect of funding constraints to varying degrees.
The resulting fragmentation and complexity are the key barriers to healthcare supply chain efficiency and leaves significant value on the table not only for the NHS but ultimately the patient who would benefit from better integrated and more efficient resource allocation.
Another driver of inefficiency is the reluctance of powerful clinical and financial executives to seriously co-operate with a procurement led commercial agenda.
The front line management of these organisations is a harsh environment where scarce resource allocation meets an urgent need to treat and care for an individual regardless of cost. Power is consolidated towards the two groups; clinicians and financial executives and conflict between competing priorities is often high.
Specification decisions being made purely on short-term price deals, or regardless of price, often reflects the bottom line of finance and clinicians respectively and leads to volatility, inefficiency and instability in the supply chain where commitment and stability leads to the best deal.
It is surely time to overcome these obvious weaknesses and drive efficiency and better value.
The fundamentals that justify integration, collaboration and demand aggregation in the supply chain are clear. The NHS spend is big business and if companies truly believe that they can either win or loose significant, committed and predictable market share, then they will compete for the business and drive efficiency in the form of improved supply chain models, lower pricing and ultimately lower total cost of acquisition.
The example that we gave at the conference was in Medical Exam Gloves, where, as can be seen from the Southern Procurement Partnership (SPP) figures below, a saving of 30% on £3m of business was achieved, resulting in an average price reduction from around 2.5p to of 1.42p by aggregating demand and driving commitment across the participating trusts.
Whether you are a small trust who will benefit from increased group leverage, or a large trust with already low pricing but who needs to break through the price floor, you can benefit from demand aggregation.
The role of the DH?Despite Lord Carter being unable to attend for whatever reason, and the soft target of the Atlas of variation which comes perilously close to being a running gag, I think that these perhaps even helped establish a sense of realism of what both was possible from the centre in a devolved system, and what should be expected as we head towards an election period.
"Those in the room must mobilise to meet the growing challenges"...was the mantra from both the trusts represented and the DH, who cautioned that if they don't, then ..
"...the system will find someone that will."Despite this caution though, it does seem pointless to look to anyone but the NHS' current procurement community for capability, innovation and leadership.
What is holding things up?Healthcare procurement is one of the toughest procurement roles and I suspect we can all come up with a list of things that undermine collaboration, transparency and aggregation. Here are some to get started with...
- Inter-organisational tension and regional competition
- Short-term reactionary responses to cost constraint or imminent clinical need
- Need to engage all clinicians all on every decision
- Close relationships between industry and key decision makers
- Intermediary and group purchasing
- Reimbursement system conflicts
That said, there are a few groups of trusts trying new models.
One emerging idea, for example, is that of virtual collaboration between like-minded trusts who can work together and with the centre regardless of geography. They are using technology to share information, capability and even resources to expedite common initiatives. After all if technology can disrupt society and eCommerce, why not NHS procurement?
If things are going to change, and for NHS procurement to drive efficiency, influence and investment in their speciality, then I suspect that it will be in these emerging collaborative models that we will find the answer.
Stay tuned for the next article on measuring outcomes, value and efficiency.
It's our privilege to work with some of these trusts as they face the challenges ahead. If you would like to discuss, please feel free to get in touch or click below for some of our recent case studies.