Some Good News from NHS Procurement

(Editor's Note: we should have published this last week before the story about the NHSI sponsored procurement consulting programme broke.  We will have our comments on that shortly - but back to the good news for now!)

Some good news from NHS procurement. In a press release recently NHS Improvement said that “Trusts across England saved £288 million in the last financial year by securing the best deals for commonly bought items, such as syringes, disposable gloves, loo roll and shoe covers”.

The press release from NHSI says this:

“Trusts are able to compare how much their neighbours have paid for commonly purchased items and negotiate the best deals with suppliers, and some trusts club together on some orders and buy in bulk. Savings include:

  • £824,000 on couch rolls after 227 trusts joined together to buy them from one supplier
  • £106,000 on loo rolls after 184 trusts joined together to buy them from one supplier
  • £164,000 on temporary shoes after 141 trusts joined together to buy them from one supplier

A price comparison tool allows trusts to view the most expensive and cheapest options for over one million products and it sets a benchmark for each product to help trusts avoid paying more than they need to. One trust has saved £150,000 in the first month alone of using the tool. The trust was able to see that other trusts were paying less for exactly the same product - implanted cardiac defibrillators. The tool gave them the evidence they needed to renegotiate their price with their supplier”.

The simplistic view of public procurement has for many years seen aggregation as a primary driver for cost reduction.  Put all the spend on a certain item together, go to market and get a great price. But we’ve always argued that economies of scale are much over-estimated and for many products, buying bigger is not necessarily buying better.

However, price benchmarking and increasing the knowledge of buyers is another way of driving value, and one that really has no negatives at all.  Unlike aggregation, it does not run the risk of distorting the market, or lead to supplier concentration, or stifle innovation. It simply makes buyers better informed, and balances the asymmetry of information that can work against buyers. Clearly, in this case, it has proved very positive.

This does also raise some questions about the wider NHS procurement strategy, the Future Operating Model, supply chain Co-ordination Ltd. and the “category towers”, which are getting into gear now. We don’t know yet if the “towers” are seeing aggregation as their primary option to deliver value, but we do know that the new operation does not come cheap. Estimates of the one-off and set up costs run up to £100 million, and an annual cost of some £250 million is pretty eye-watering. We understand the cost of the Purchase Price Index and Benchmarking (PPIB) tool is in the six figures range rather than 7, 8 or 9 figures!

On a related but somewhat different note, I’m pleased to say I’ve been asked to chair an event titled “The Future of NHS Procurement: harnessing technology to do more with less”, on December 12th in Salford (it is linked to the University of Salford). The two key themes for the day will be the changing landscape in NHS procurement, and the use of technology. As Chair, I hope to make sure we have stimulating and useful discussion during the day, and there are some interesting people lined up to speak; attendance is free for NHS practitioners too, and you can find out more here.

Finally, back to the benchmarking - there are also training sessions going on to help Trusts learn to use the price comparison tool. Please email nhsi.procprogramme@nhs.net to sign up.

Voices (3)

  1. Charlie Middleton:

    Saving money in the NHS is nice to hear but it is also easy to get carried away with big numbers. Saving £824k on couch rolls sounds great, but a lot less impressive when you say £3,629 per trust. Or £106k on loo rolls which is actually just under £600 a year per trust – or about 3 hours of what they pay for a cost reduction consultant from a Big 4 firm!

    Not to say this isn’t good but it isn’t as amazing as they make out. And surely someone should be looking at the trusts that have been overpaying for years on commodities and asking why they were so poor at negotiating a good price when their neighbouring trust was so much better?

  2. Final Furlong:

    There isn’t anyone who can show that the £288m savings are actual and in-year. They really need to expose their methodology. measurement and acceptance criteria.

    1. Dr Jo Meehan:

      I completely agree Final Furlong.
      The reality of potential savings ever making their way to the bottom line (and even less chance that they go to the more important front line) is a far cry from the headlines…
      I don’t doubt there are benefits from standardised pricing, on some items at least, but that’s not the whole story, and savings headlined likely to be gross not net. The figure minus consultancy fees etc etc is…?
      Feeds the often false economic ideology of scale and aggregation. Dangerous tools in the wrong hands.

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