The Times moves on to Health procurement

Having done a pretty thorough hatchet job on UK Defence procurement, The Times is moving onto the health sector now.  It's behind their paywall (I'm a subscriber), but you can get a flavour of it from this opening quote;

More than £1 billion a year of taxpayers’ money is being wasted as health service managers spend wildly different amounts on the same supplies, the head of a government-backed efficiency drive has told The Times.

The piece is based around an interview with John Neilson, MD of  NHS Shared Business Services, who run back office accounting for over 100 NHS Trusts (including hospitals).  This gives them access to sets of spend data, which show variations in price for similar or identical items between Trusts or even within the same Trust in the same period!

Neilson also advocates a lot more outsourcing of NHS call centre type work to India, where SBS already have 700 staff.  'Significant' savings could be made, he says.  That won't enamour him to the unions and many others worried about the state of the UK employment market.

We're focusing this week on UK Defence procurement at Spend Matters, but we'll come back to this story shortly, and look at the issues raised by Mr Neilson - and maybe also why he's raising them now.

Voices (9)

  1. Nate:

    The best way to avoid things being dropped into the “miscellaneous” basket by people to busy to worry about the finer points of procurement management that give them no tangible benefits is to make it easier by giving them a walled garden with the majority product they buy where each is already mapped to a structure that can be reported on. It’s then easier for them to pick one of the ready to use reportable items then go out side the process.

    This will also mean less leakage from preferred suppliers with the dual benefits of with one-off small invoices and so getting a deal from a supplier because you direct your users to them.

  2. Rob:

    A few years ago, the analysis of spend across all Trusts (in the English NHS), pulled from the TFR (Trust Financial Return) process identified a spend of circa £2 billion, out of circa £18 billion, (or, to put it another way, over half of the entire, annual, third party spend of the DWP, the largest spending central civil government department) on a very complex commodity called ‘miscellaneous’. Ironically, it’s one of the most difficult commodities that procurement practitioners face in any organisation.

    It’s one of the most difficult commodities because, as most practitioners know, unless you go back and analyse the original, physical invoice (if it contains any details of course, such as what you actually ordered and whom you paid) you don’t have a clue what your organisation purchased.

    Just in case you’re still rubbing your eyes – that’s £2 billion allocated to ‘miscellaneous’, somehow, somewhere, by somebody, during the purchase-to-pay process. It seems that there were many products and services purchased in the NHS that couldn’t be allocated to any of the known spend categories (or sub-categories) that one might find in a world-class system such as Oracle, SAP etc

    I do wonder how much the NHS continues to spend on this ‘complex commodity’.

    So, “£1 billion is wasted”? Why don’t we simply ‘double’ that headline to “£2 billion is lost”.

  3. Daniel Ball:

    A health procurement pandemic can only be stopped if the government seeks full visibility of spend across the sector to understand and analyse the savings potential, gives the NHS’s proven procurement full accountability and makes the process of buying on contract easy, intuitive and personal across hundreds of thousands of buyers. See my blog post at http://www.wax.co.uk/blog/post/The-Procurement-Pandemic.aspx
    Daniel Ball, Wax Digital

  4. bitter and twisted:

    No doubt there are many inefficiences in NHS purchasing. But the idea that price differences for same/similar items is automatically a Bad Thing is naive at best.

  5. Jonathan Betts:

    An interesting point from bitter and twisted as the Times article itself was heavily reliant on data from a single provider. But this also highlights the value providers can bring; often having had the privilege of working across different sectors and with many years’ specialised experience in the procurement space.

    Articles like the Times piece and the Green ‘report’ before it identify market inefficiencies that theoretically can be easily eradicated to achieve savings nirvana. But they create the impression that this is easy and somehow procurement isn’t doing its job; a point that might be countered more forcefully outside the profession.

  6. bitter and twisted:

    …healthcare businessman claims NHS will save money giving him more business shock horror claim…

  7. Jonathan Betts:

    NHS could save £1 billion each year on procurement

    I read with interest the article regarding the ‘NHS could save £1 billion each year on procurement’ from The Times. The article suggests that such savings can be instantly realised, however I feel that it is somewhat short sighted.

    Busy staff in a clinical environment don’t have time to devote solely to purchasing, so to deliver savings they need an active spend management solution that does the work for them. Web-based procurement solutions offer functionality on a par with the best B2C sites, are easy to use and ensure everyone involved in the purchasing process has access to the same contract information with the best pricing options available to them.

    Accurate spend data is also key to identifying price differentials and therefore potential savings for the NHS – a standard classification structure operating effectively at the product category level together with an integrated system to collect the data efficiently is required to readily identify some of the disparities seen within the article.

    Some departments do require specialist products but the vast majority of purchases are on items that could be standardised across the NHS. Product standardisation and shared services need to be addressed, if savings are to be implemented effectively.

    Whilst much of this is common sense and standard practice for many procurement organisations; the challenge in the NHS is how to drive standardisation across a vast and fragmented environment and is something that is likely to become harder with the current reorganisation and challenging economic times.

    Jonathan Betts, Science Warehouse, e-procurement

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