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With savings expected across the NHS, and budgets tightening, Laura Quirk, of the London Procurement Partnership, outlines examples of how effective procurement and maximising purchasing power can produce significant savings
The NHS is under ever increasing pressure to deliver more for less. Trusts are having to make savings every year to enable them to cope with rising demand and escalating costs. Therefore, trusts need to leverage the maximum savings from procurement to support their savings targets.
NHS London Procurement Partnership (LPP) is a member led procurement hub. Established in 2006, we currently save the NHS around £2 million a week because of the support and engagement of our members from London and beyond who want to collaborate to secure the best deals and services for patients. The work of LPP isn’t just about striving for the lowest price, but improving quality and patient outcomes as well. This requires innovation beyond the traditional procurement aims of best prices for stock items. LPP has been working to introduce Dynamic Purchasing Systems (DPS) into areas that would benefit from this approach. The DPS process has been available since 2006 but uptake has been low.
The advantage of the DPS is it can provide a large pool of suppliers as new suppliers can be added to an agreement once the framework has been let. This encourages small and medium enterprises (SMEs) to be able to join as well as providing trusts with a compliant and cost effective way of using local firms who meet the quality criteria. LPP’s first DPS was for Language Services which has 30 suppliers, the majority of which are SMEs. Savings on this framework are 20 per cent. A second DPS for Minor Building Works has more than 200 suppliers, 88 per cent of which are SMEs. Having shown that this approach can be successful, LPP is looking at other areas where it could be effective.
Although NHS procurement traditionally works in areas of non pay spend, LPP has shown that opportunities for significant savings exist in the supply of temporary staff to the NHS.
Facilitated by LPP, staff bank managers from London trusts have a history of working together to manage the market for agency workers and our previous London Regional Agency Nursing Framework generated savings of over £25 million as well as ensuring NHS pre-employment check standards.
Clinical Staffing Framework
A new national Clinical Staffing Framework, developed by LPP in conjunction with the other three NHS procurement hubs working together as NHS Collaborative Procurement Partnership (CPP), was awarded in August 2016. Work on the framework had already commenced before the introduction by Monitor (now NHS Improvement) of their price caps for NHS agency staff.
Prior to the award, LPP undertook an assessment of pay and charge rates for agency workers across London, based on several million lines of information collected from previous LPP Frameworks. This analysis, along with discussion with staff bank managers enabled trusts to be ambitious and require pay and charge rates below the NHS Improvement capped rates. After testing the proposal to ensure workability, trusts could see the benefits in agreeing pan-London rates to remove the incentive for agency workers to move to trusts or agencies willing to pay the most. Suppliers benefit through reduced compliance costs as they are less likely to lose workers to another agency.
Pan-London arrangements were put in place at the end of October 2016 and are expected to generate significant savings for London trusts. Trusts are committed to working together to get the best deal for patients and for the NHS as a whole, and are clear that the best way to ensure a sustainable and affordable service is to share information and a common approach to managing the agency market.
Creating a framework is only one part of a successful procurement process; encouraging its implementation among members is another matter. Trusts can (and often do) generate savings from a new framework by keeping things ‘as is’ – in simple terms, where the same suppliers are on the new framework, providing the same products but at a more competitive price, the trust will see savings. In clinical areas this keeps the clinicians happy and requires little input – they can continue to use the products they have always used. Two national clinical frameworks, Cardiology and Orthopaedics, have recently been developed, again via CPP.
Previous LPP Orthopaedic Frameworks had saved members £5.6 million between 2012 and 2014. Once the new national, multi lot framework was awarded, an analysis of the ‘as is’ benefits was released to trusts. This showed that far greater savings could be achieved where trusts combined their areas of spend across orthopaedic disciplines. By providing trusts with a variety of scenarios, the savings in the first year were £6.18 million, almost double the ‘as is’ savings. By November 2016 average savings were 14.5 per cent for 28 LPP member trusts. Nationally, 80 trusts are using the framework with more in the pipeline. Savings of approximately £22 million were achieved in the first year. This change was only possible by using evidence and risk analysis to reduce product variation, increase standardisation and deliver better financial and clinical outcomes; making clinicians fundamental to the decision making process which ensured that sound decisions were made on both commercial and qualitative grounds.
In cardiology, a strategic purchasing guide was created, enabling a standardised approach to market for each NHS trust. This allowed for best practice improvement, long term planning, commitment, future changes in the market, process rationalisation, cash releasing savings and value-added mechanisms. The creation of a detailed comprehensive specification removed the requirement for repetitive tender processes. As with orthopaedics, as many suppliers have products in more than one lot, cross category deals can benefit both the NHS and suppliers. The annualised cash releasing savings for 16 LPP member trusts were almost £7 million.
The multi lot approach can again encourage SME suppliers to apply for a place on the framework as they do not have to compete with major suppliers across the whole framework.
One of the major areas of cost pressure in the NHS, but equally an area with significant potential savings, is medicines. Since early 2014, the LPP Medicines Optimisation and Pharmacy Procurement team has played a key role in providing clinical, commercial and financial information to trusts and clinical commissioning groups. An area of innovation is biosimilars, where a copy of a biological medicine is substituted for the original. This is not the same as substituting a generic medicine for a branded one. The use of biosimilars has the potential to hugely reduce expenditure on treatment. One biosimilar, infliximab, costs 40 per cent less than the branded original, which the NHS in London spent £32 million on in 2015/16.
Introducing a new biosimilar into clinical practice incurs a very significant extra workload for clinical staff. It is important that decisions to start using a biosimilar are approved by trust governance mechanisms, the decision to change treatment is discussed with the patient and that they are monitored closely. As most savings on biosimilars benefit the commissioners, whereas the work to make the change is provided by the trusts, for the changes to be successful, trusts need to retain a proportion of the cost saving. Biosimilars will continue offer major savings opportunities to the NHS for the next five years at least. These are just a few examples of how effective procurement, both internally across trusts and externally through effective market management and maximising purchasing power can produce significant savings. It requires trusts to be open to new ways of working and being able to involve clinicians in decision making. Without clinical involvement, the most likely outcome for many frameworks is the status quo which will deliver minimal savings.
Although procurement can make savings by simply getting better deals on the same items or services, to truly realise the savings needed, procurement departments have to be catalysts for change and be willing to co-operate with other trusts, both locally and beyond. Combining volumes releases significant savings, but the big prizes can come from the intelligent use of data and effective market management.