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Driving Savings through equipment aggregation
Emma Dunn, head of Capital Planning at NHS Supply Chain, looks at how trusts can increase their diagnostic capacity, replace old equipment and continue to make savings
The NHS is encouraged to work collaboratively, drive efficiencies in procurement and aggregate requirements to improve costs. The introduction of Sustainability and Transformation Partnerships (STPs) provides an increased focus on joined up working whilst addressing factors that influence health and improve patient care such as earlier diagnosis and cancer screening. But with capital expenditure significantly constrained, how can trusts increase their diagnostic capacity, replace old equipment and continue to make savings?
This difficult task was answered by NHS Supply Chain, working with the Department of Health and the NHS Business Services Authority (NHSBSA) to deliver significant savings back to the NHS.
The NHS faced criticism from the Public Accounts Committee and the National Audit Office about the way it buys capital equipment, in particular, the way that it plans and purchases equipment in a fragmented and uncoordinated fashion. With ‘no explicit incentive to adopt best practice or work together to achieve economies of scale’ trusts are acting independently with concerns growing that the NHS is ‘failing to optimise its purchasing power’ resulting in savings opportunities being missed.
In response to these criticisms, the Department of Health, the NHS Business Services Authority (NHSBSA) and NHS Supply Chain set themselves the objective of developing an aggregated purchasing process for NHS Capital equipment.
Department of Health Capital Equipment Fund
The Department of Health Capital Equipment Fund is a £300 million fund set aside for the NHS in March 2012 to support the replacement of equipment by aggregating requirements to reduce costs and make equipment more affordable. The fund is managed on a day-to-day basis by NHS Supply Chain, with the Department of Health and NHSBSA responsible for its strict governance. The aims of the fund are simple, to improve patient care by replacing outdated capital equipment and to make savings by reducing the cost of the equipment to the NHS.
Whilst significant savings, circa £73 million, have been delivered via the fund on large scale diagnostic and cancer screening equipment, it was recognised that NHS buying power was being underutilised for other equipment areas that support patient pathways.
Multi-Trust Aggregation initiative
In order to capitalise on savings outside of large scale equipment the Multi-Trust Aggregation (MTA) initiative was developed. The initiative uses the same methodology as the Department of Health Fund, to deliver savings on capital equipment, and has the support of the Department of Health and the NHSBSA.
It aims to: deliver savings back to the NHS; create a mechanism to maximise NHS buying power on capital equipment in conjunction with the Department of Health Fund; improve patient care by replacing outdated capital equipment; engage trusts in the savings process; and design a procurement process that can be replicated across NHS trusts.
NHS Supply Chain’s Capital Planning team worked with trusts to gain insight into short term national demand to facilitate the creation of the MTA initiative in November 2014. MTA is a mechanism which combines the requirements for a particular device (that may not have an active deal in place) across multiple trusts. The initiative aligns procurement so trusts can take advantage of saving opportunities, which may otherwise be unavailable to them as a single procurement unit.
The MTA initiative enables NHS Supply Chain to place orders on behalf of multiple trusts by utilising the Department of Health Fund. Through collaborative working with the NHS to aggregate requirements, NHS Supply Chain can reduce costs by accessing volume associated discounts that trusts would not receive when purchasing independently. Since November 2014, incremental savings of £2.7 million have been delivered via this process which has enabled further investment in new and replacement equipment to improve health services across the UK.
Andrew Hawkins, category manager at University Hospitals of Leicester NHS Trust, said: “To date we have been involved in 8 MTA’s, however, this has the potential to increase as we look to the wider collaborative sharing their plans.”
The increasing success of MTA can be largely attributed to the introduction of the Regional Savings and Improvement Workshops. Hosted by the Capital Planning team at NHS Supply Chain, these workshops include stakeholders from Procurement, EBME (electrical and biomedical engineering) and Finance who take a visionary approach to procurement by meeting to discuss purchasing requirements and aggregation opportunities in order to generate savings back to their trust.
Adam Booth, a buyer at East Kent Hospitals NHS Foundation Trust, said: “I am very happy with the service provided and the proactive approach that NHS Supply Chain has adopted for the MTA and DH deals. It has helped us to achieve savings that otherwise would have alluded us.”
As the success of the programme is reliant on aligning the procurement of multiple trusts it is vital that trusts not only engage with the process but can meet other trusts, share ideas and work together to plan their procurement of capital equipment.
Simon Walsh, procurement director for Central Manchester University Hospitals NHS Foundation Trust, commented: “It is really positive to see that the NHS Supply Chain Capital team are taking the time to engage with their customers, encouraging dialogue and joint ways of working to support the delivery of the savings agenda.”
Following discussions with trusts at the regional workshops, it was agreed that the savings achieved via MTA could be increased by providing timescales that all trusts could work towards in order to increase the volume of equipment. From this an MTA calendar was produced in February 2017.
The MTA calendar provides visible timescales which enables trusts to plan their purchases in advance and combine requirements on a larger scale to maximise savings. The calendar is a new approach to equipment procurement and has been developed with input from customers and stakeholders to drive increased engagement.
Kathyrn Potts, contracts development lead at Derby Hospitals NHS Foundation Trust, said: “By attending quarterly collaborative meetings, along with other member trusts, we can draw on a wealth of experience and gain a better understanding of Multi-Trust Aggregation enabling us to plan around them.”
Although MTA is still in its infancy, the savings achieved to date demonstrates that the potential for growth will only increase the more trusts, and other public sector organisations, utilise the initiative. Continuing to drive NHS engagement is a key focus for NHS Supply Chain with plans for 2018/ 2019 involving the introduction of a new, and improved, MTA calendar and the next round of Regional Savings and Improvement Workshops.
Since the first MTA deal, participation has grown to include 30 suppliers who have supported the delivery of procurement aggregation across 24 different equipment areas. In total, an incremental saving of £2.7 million has been delivered back to the NHS.
Jason Lavery, vice president Capital Solutions, NHS Supply Chain, states: “The initiative has encouraged collaboration between trusts which has led to aggregation and increased savings by procuring as one NHS.”
But it’s not just financial savings that the initiative has brought. The introduction of the MTA calendar, has also helped trusts to align their Capital equipment purchases, and combined with the Savings and Improvement Workshops, has got trusts working together, talking about aggregated purchasing and sharing best practice.
Multi-Trust aggregation is the best way for trusts to get the best possible prices whilst accessing the latest technology. It also creates reinvestment opportunities to buy additional equipment to help improve patient safety. This type of collaboration and aggregation can be transferred to other public sector organisations that are also experiencing the same financial restraints. Cooperation and aggregated purchasing is the future of procurement.