Plymouth Hospitals NHS Trust — Procurement Initiative in Health and Social Care Organisations

Here is another in our series of reports covering some of the entries from the recent GO Excellence in Public Procurement Awards. These short-listed entries are chosen from the categories for which Peter Smith was a judge, so they were studied very carefully, and each one is featured here based on how interesting we felt it would be for our readers, regardless of whether it won the award.

Plymouth Hospitals NHS Trust is a tertiary teaching hospital with an annual turnover of £400 million, 950 beds and 6,500 staff, and a catchment population of 700,000, making it one of the largest in the country. Its non-pay spend (NPS) accounts for 35 percent of all Trust expenditure, which amounted to £146 million in 2012/13, a rise of 5.85 percent (£7.5 million) from 2011/2012. Owing to the built-in national tariff deflator, trust income for 2013/14 was forecast to fall by 1.1 percent. As the entry states: “an impossible context was set of costs rising faster than income.” The Chief Procurement Officer was asked to define a Trust strategy to limit rising costs. Following internal stakeholder involvement with the Trust Board, clinical colleagues, Finance and Procurement teams, suppliers and key business leaders, a trust Non Pay Strategy was published and six themes for action identified to limit non pay spend inflation growth.

We asked CPO Andrew McMinn why they decided to enter the awards:

Coming originally from the private sector where procurement sat squarely at the heart of the organisation, it struck me how procurement in the public sector is viewed very differently, sitting on the periphery. Our overriding aim was to place procurement closer to the centre and broaden non-pay spend responsibility and accountability beyond finance. Our CEO believed that this project was creative and successful enough to be shared with the public procurement community, which gave us the confidence to enter.

A series of initiatives involving, supply chain transformation, contract governance, and locum agency spend were put into place, among others. Trust expenditure is apportioned to 11 different non pay work groups, led by a functional expert, which were set up to meet regularly, analyse spend data and agree schedules of work to limit inflation for their apportioned spend.  A multi-faceted spend dashboard tracks spend by the thousands of Finance subjective codes that exist and identifies inflation “Hot Spots” This guides the individual groups on where to focus, further drill and analyse. The dashboard automatically links to invoices, PO and Non PO data, so NPWGs can quickly undertake forensic analysis.

LEAN approaches and collaboration were the strategic imperatives used to reduce supply chain waste and improve inefficiency. Procurement set out to demonstrate what good group work could achieve.

The NPP was responsible for implementing a ground-breaking, innovation-led change programme that has redesigned  its internal supply chain and this has delivered improved efficiency and reduced waste that has redistributed vital capital to frontline care. One example of the programme’s work was a “Supply Chain Initiative” which identified the top 200 products by volume, and costs were negotiated down on these products for purchasing in larger economic order quantities. These products were housed and managed in a Strategic Consolidation Centre (SCC), releasing valuable hospital storage space back to clinical areas. A warehouse facility of 10,000 sq. ft. was secured for this project, located within one mile of the Hospital. Van deliveries are now made to the hospital four times a day, ensuring that products are available on a JIT basis, shrinking inventory levels in clinical areas from on average ten days to only one day. Trust inventory was reduced by £1 million and has realised to date £836,000 cash savings.

Agency labour is a known pressure point for all NHS Trusts and at Plymouth spend was being engaged by the Medical Staffing team directly with suppliers on out-of-contracted terms, there was no adherence to best value. The Procurement team has now appointed a Master Vendor, effectively  tiering its supply chain through a regional tender with stakeholder involvement from eight other separate South West NHS Trusts for a total collaborative spend of £16 million. This project will move all spend from a paper-based non PO process to a fully compliant PO process. It will provide access to the very best value hourly rates for the end-user benefit through economies of scale.

We asked Andrew what had been the biggest the challenge:

The whole programme was inextricably linked to change and there was some resistance to the initiatives. Key to this project’s success was the multi-disciplinary teams coming together collaboratively to achieve the same end result. The hardest part for us was sourcing the resource from other departments and getting them involved -- a difficult task when the frontline clinicians are already very time poor. We convinced them by displaying comparisons, providing ‘towards’ drivers for change and giving them the responsibility for reporting delivered value.”

In the first year 2013/14, the non pay spend limitation target set by Finance was 2.8 percent (£3.39 million) of the 2012/13 non pay spend of £121.21 million (excluding drugs). It was successfully achieved under this target level at 2.58 percent (£3.12 million). In 2014/15 the spend limitation target is 2.1 percent (£2.61 million) of the 2013/14 non pay spend (£124.33 million). The current position suggests there is no particular spiked increase in the final part of the financial and the Trust believes it will better the first year’s performance.

Plymouth Hospitals NHS Trust has received visits from other regional NHS Trusts including Devon Partnership Trust and Royal Cornwall NHS Trust to understand their approach. Its zero inflation policy and approach was shared with the Department of Health and other trusts have or are implementing similar initiatives based on their thinking. We asked what they had learned and what advice they would offer to other Trusts:

“Ambition is a good thing. This was a significant programme with relationships at its core. It’s important to create a compelling reason for change. Identify your change agents – those people who understand what you are doing and why it’s important. Talk passionately about what you want to achieve, and let them start to deliver it.  Above all, they are your enablers of change, they will help to influence others.”

First Voice

  1. Sam Unkim:

    Funny how ideas go round n round in the NHS
    Back in the nineties we had ” Strategic Consolidation Centres” doted all over the country.
    Each Regional Health Authority would be running at least one for its local health economy.
    Course we hadn’t heard of “Lean” then & having 600 (rather than 360,000) fast moving items purchased in bulk and the broken down to smaller usable qtys just made sense.

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