Monday 8 December 2014

‘Gloves Off’ – Benchmarking NHS Procurement

We met in a beautifully renovated farm courtyard just outside the quiet village of Ilminster for the first of the Southern Procurements Partnerships Buyers events. The sunny, calm surroundings blended seamlessly into the spacious and professionally equipped  presentation room, the service and technology flawless proving once again that low cost can mean high value when you’re willing to search for it.

Andy McMinn ( CPO – Plymouth NHS Hospitals Trust) was characteristically relaxed and professional as he led the event framing the exercise against the Situation, Target, Proposal (STP) framework. There were 25 procurement professionals from around the region. The topic, a new analytics and benchmarking platform which now contained two years of their regional data, and implementation planning for some early savings opportunities that the platform underpins. One of those opportunities was medical exam and surgical gloves and an opportunity of between £500-£900K savings on a spend of £3.4M PA.

There were few surprises in the analysis of the supply base fundamentals. It would be the same across most of NHS England. The supply chain has one significant intermediary (NHS Supply Chain) which is beyond the influence of any individual trust and lacks open book costing style transparency. There are price variances driven mainly by the intermediary and their variable volume price break and rebate deals. There remain many secondary intermediaries and manufacturers in the supply chain which is fragmented and fiercely competitive.  The benefits of this competition are not being realised in lower pricing or supply chain efficiency at a trust level. Conclusions, if the region aggregated its spend and influence, dis-intermediated the supply chain or provided a credible threat to the intermediary, and at the same time harnessed the natural competitiveness of the market, then significant price reductions, transactional efficiencies and savings would follow.

It helped that before the meeting Andy had already pre-qualified with the key suppliers that the opportunity was not only real but probably conservative. It also helped that there was accurate data set of all spend to base the conclusions and planning upon, as well as to enable a sense of collaboration and control.  The group discussed rebates and special considerations as well as clinical co-operation and ensuring quality.  My colleagues commented after the meeting that they’d never witnessed such a spirit of co-operation, openness and proactive wiliness to take ownership across a group of NHS procurement professionals. It was one of the most positive meetings that I’ve experienced in the NHS.

‘Profligate waste’?
This meeting happened against the backdrop of the NHS Atlas for Procurement variation being published by the Department showing price variances existed across the NHS. That these were from only NHS Supply Chain , the aforementioned intermediary and were only a sample of their product offering, didn’t seem to make any difference ... the headlines were grand. ‘At last we can keep track of how the NHS spends our cash’ it reads, ’The Government is putting an end to the unacceptable situation where hospitals pay wildly different amounts for the same medical products’.  The second reads;‘First NHS efficiency tables expose 'profligate' waste’ - League tables reveal eight-fold difference in what NHS trusts pay for the same medical item’.

That all that the tables provided was a price, and for gloves even then, there was no clarity on if it was a pack of gloves and what size the pack was or what the total spend or volume of the organisations were, no mention of rebates or volume price breaks, all important you may think to make a fair comparison of a trusts actual category performance.  The published prices were also inaccurate for every one of the participating SPP trusts, by significant percentages. If you’d like to know what the actual SPP trust volumes, spend and pricing by SKU are, and be a part of the supplier submissions on a forthcoming regional initiative, then sign-up here.

Groups of  ‘likeminded trusts’
New collaboration paradigms are beginning to emerging as we meet with the SPP and with our wider cohort. Cooperation between ‘like minded trusts’ regardless of their location, and ‘virtual Procurement’ – a term first mentioned to me by Dave Coley from Heart of England, hint at an emerging new order for NHS trust collaboration, one where those who are willing to share the openness and cooperation described in the SPP example and will work with anyone who agree to the same principals and approach.  Enabled by technology, co-operating trusts can not only share prices and data but, strategies and intelligence as well as savings pipelines; forecasted and delivered. They can work in focussed groups sharing expertise and experience regardless of their geographic location.  It is for this reason that the SPP and a growing wider group of ‘like minded trusts’ are using our technologies as a foundation  for co-operation and savings identification, both those that we all know are already there if we co-operate more,  and some new ones.

Disrupting NHS Supply chains
In the coming months, the exceptional demands that are being placed on the NHS are going to drive more immediate and pragmatic choices by hospital directorates and procurement executives who need to deliver savings and efficiency now.  Like the SPP , the reaction in the most advanced trusts has already been to become more open to collaboration (in all its forms), sharing knowledge and capability as well as investing in enabling technologies.  Conversely, the tolerance for solutions that don’t deliver, from whatever source, has plummeted. The largest and most active trusts now don’t seem to have the luxury of waiting for central solutions (although they remain open to it when it delivers value and critical when it’s not).  Unlike previous years, financial circumstances dictate that there will be an increasing polarisation in the coming month between trusts and procurement teams that are performing, and those that are not.

The indication from the SPP and others that we are working with is that the most secure and best performers will be those who proactively collaborate with other trusts and groups of trusts to ensure that they have the leverage, competencies and enabling technologies that they need to deliver disruptive change and savings.

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