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Over the past few years, procurement has been a hot topic within the NHS. The global economic downturn and drive for austerity across the public sector marked a turning point for trust purchasing behaviour. In 2011, the National Audit Office (NAO) and Public Accounts Committee (PAC) reports highlighted deep inefficiencies in the way NHS trusts purchased the products they needed to meet the growing demands of patient care. Things needed to change. But the NHS seemed to be faced with an impossible challenge; improving care standards on the one hand, whilst in effect reducing the amount of money spent on healthcare procurement on the other.
The launch of the Department of Health’s procurement strategy in August is the government’s view on how this seemingly impossible challenge can be achieved. The strategy highlights the blockers to change that exist within the NHS: the lack of collaboration between NHS trusts when making purchasing decisions that don’t maximise the huge purchasing power of the NHS; vast price differentiations paid by trusts for identical products; poor management of supplier relationships; and inconsistent use of procurement intermediaries, such as NHS Supply Chain.
Making it right
The strategies starting point for combatting these challenges is to push procurement to the top of the NHS agenda, encouraging NHS trust boards to play an active role in developing procurement solutions that deliver both savings and improved patient care. The strategy also calls for greater transparency to drive improved behaviours across NHS procurement by enabling increased information sharing between trusts. And it places a degree of responsibility on suppliers to work with trusts to reduce costs and prices whilst encouraging innovation and growth.
The mainstay of the Procurement Strategy is the new Procurement Development Programme, with a focus on delivering procurement capability that is aligned to world-class standards. This includes the establishment of two new Boards: The NHS Procurement Development Oversight Board to support programme delivery and the NHS Procurement Development Delivery Board to drive forward change. Their joint focus will be to unite all organisations working towards a common strategy and draw on private sector expertise and best practice for the benefit of the NHS.
Stepping stone for the future
But what does this all mean to the future of the NHS? Nick Gerrard, Chief Executive Officer at NHS Supply Chain, is optimistic that the new strategy offers a real opportunity for trusts to excel. “At NHS Supply Chain, we are committed to working with trusts to achieve cost efficiencies that support the delivery of first-class patient care. We welcome the new procurement strategy and the opportunities it provides for procurement intermediaries such as ourselves to work alongside the NHS to drive efficiencies. It’s by no means a simple task – but I believe that, through collaboration and the instillation of procurement best practice across the NHS, we can succeed.”
NHS Supply Chain’s commitment to developing effective procurement processes is evident in the organisation’s recent achievement of certification by the Chartered Institute of Purchasing and Supply (CIPS) and Nick’s personal recognition as Procurement CEO of the Year at the CIPS Awards in September. “My aim has always been for NHS Supply Chain to become a world-class procurement partner for our customers across the NHS, and I’m delighted that we are one of the first NHS procurement organisations to achieve CIPS certification,” explains Nick. “I have an excellent team behind me and with their support, that goal is getting closer.”
However, what does the holy grail of ‘best practice procurement’ actually look like?
Remarkably straight forward, according to Nick. “Procurement within the NHS has never really been given the focus it deserves. When you’re working hard to deliver the highest possible standards of patient care on the frontline every day, driving efficiencies behind the scenes in areas such as procurement potentially take a back seat. A combination of aggregating demand and maximising the purchasing power of the NHS, reducing waste and bureaucracy, strengthening supplier relationships and utilising the expertise of procurement intermediaries are crucial steps that the new strategy highlights along the road to world class procurement.”
Best procurement in practice – capital equipment
A recent example of the importance of procurement intermediaries has been the development of the Department of Health’s capital equipment fund. The fund, managed by NHS Supply Chain, initially provided £300 million for NHS trusts to use to purchase capital equipment and maximise the cost efficiencies achieved through bulk purchasing deals with suppliers. The capital fund currently covers 13 equipment categories, including anaesthesia, angiography, CT scanners, mammography and ultrasound. So far, 186 NHS trusts have purchased £124 million of equipment through the capital fund, generating savings of £14.2 million. This represents an average incremental saving to the NHS or more than 11.5 per cent.
Barnsley Hospital NHS Foundation Trust was one of the first NHS organisations to benefit from the capital fund through the purchase of a new CT scanner. The fund enables NHS Supply Chain to aggregate national demand for equipment and make a number of commercial bulk deals with suppliers. As a result, the trust was able to benefit from the savings available and purchase a CT scanner that met both budget and clinical choice.
Talking about the challenges currently facing NHS procurement, Neil McConville, Supplies Manager at Barnsley Hospital NHS Foundation Trust, says: “We simply cannot get the best prices if we’ve got a highly devolved environment in which individual trusts are doing their own thing and not sharing information.”
“NHS Supply Chain is able to draw from frameworks which are informed by a wide number of stakeholders so we’ve confidence that the resulting contracts are robust. It also gives our clinical staff access to a choice of equipment which they can duly evaluate in a fairly crisp process. It’s delivering value for money.”
A key element of the procurement strategy is the importance of ‘quick wins’ in terms of delivering immediate efficiency savings to the NHS. Increased usage of the capital fund by NHS trusts will continue to be a crucial weapon in this armoury.
With customer and clinical engagement at the heart of the procurement strategy, NHS Supply Chain’s Customer and Supplier Boards will be fundamental in endorsing best procurement behaviours and championing change across the NHS. The Customer Board, independently chaired and with representation from the chief executive, non-executive, senior finance, procurement and clinical communities, was established in 2011. Its focus is on developing a greater understanding of the needs of the NHS and optimising the use of NHS Supply Chain’s scale and expertise in driving value for money across NHS procurement. Likewise, the Supplier Board is an opportunity for engagement with key suppliers, trade and industry bodies under the governance of the National Procurement Council. The Supplier Board shares vision, best practice and sets standards in terms of working processes to deliver greater value to the NHS.
“The Customer Board is a route for NHS customers to influence the future strategy of NHS Supply Chain and ensure the service continues to meet the needs of the NHS” explains Gill McCann, Stakeholder Director at NHS Supply Chain. “It is a vital tool allowing NHS Supply Chain to listen to developments from the ground and ensure that we’re getting it right, as well as providing transparency of opportunities to NHS trusts and showcasing best practice procurement through the activities of the Customer Board members and their trusts. Similarly, the Supplier Board enables us to engage with suppliers to drive the delivery of sustainable value, accelerate savings for the NHS and support innovative products being accessible to the NHS. It all comes back to collaboration; the NHS, suppliers and procurement intermediaries need to work together to deliver on this challenge, and the Customer and Supplier Boards are two vital avenues to achieving this.”
The launch of the Procurement Strategy is just the beginning. Over the coming months, the Alternative Product Opportunities programme will be developed to help trusts reduce cost without compromising on quality, and a review of procedure pack standardisation will be carried out across trusts and departments to increase value. The business will also be improving data transparency and stock visibility through enhanced technology and reporting mechanisms such as eDC Gold and the launch of a suite of trust specific savings reports and management tools allowing for improved evidence-based decisions to ensure best value purchasing.
“We’re proud to be a key part of the NHS and to have the opportunity to support them through this challenging, but also exciting programme of development,” concludes Nick Gerrard. “The wheels are all set. It’s now time to get them moving and start delivering the changes that will help the NHS not only save money and deliver the best patient care, but also be a shining example of world-class procurement in practice.”