NHS Procurement report – making the diagnosis

Starting to dig into the new National Health Service procurement report issued this week, let’s look at the first couple of sections of “Better Procurement, Better Value, Better Care: a Procurement Development Programme for the NHS”,  where the authors lay out the initial diagnosis of the issues.

The starting point is the pressure on health budgets. Even with its protected status, efficiencies must be made over the next few years, or the NHS will be in trouble. And this is interesting –

“Non-pay expenditure in trusts increased by more than the rate of NHS activity and general inflation in 2011-12 compared to the previous year. Early indications are that this trend has continued in 2012-13. In the current economic climate this is extraordinary and cannot be allowed to continue”.

So whilst there may be mitigating reasons for this, it looks like procurement spend is not being controlled and managed as it needs to be. The report sets the goal that non-pay expenditure should be flat (inflation free) until at least the end of 2015/16. There’s also the first mention of a theme that recurs – the need to look at the “contribution to economic growth” that the £20 billion a year health spend makes  as well as manage costs.

We then get some case studies around opportunities in areas such as medical gloves and sutures, where a combination of benchmarking between Trusts and substituting lower cost products have demonstrated savings opportunities.  There’s also mention of the  “Capital Equipment Fund” which we’ve covered previously and has generated savings of £12M.

The report then covers new analysis around use of non-permanent staff.  This illustrates the power of sharing data and indeed of publicising success and – let’s call it “less success”!  The trusts who use the least non-permanent staff and the most are listed, with the biggest users up at around 10% of their staff being non-permanent, whilst the lowest are below 1%.   Most of the big users – but not all – are in the London area, so perhaps there is more excuse there because of a more buoyant labour market, but this sort of comparison is useful  and the report talks about getting non-executive directors for instance more involved in using data to drive improvements.

The next section – “making procurement more efficient and productive” – is a highlight of the report, as we said yesterday, laying out very clearly as it does the issues around the current situation.  Lack of consistency, capability and capacity issues, complexity,  the landscape – there may be nothing totally new here but it is very well described. And there is a reminder of what we lost when PASA was closed down.

“Health was once recognised across government for driving thought leadership in procurement and supply chain, particularly research into global and international healthcare markets in conjunction with academia and in engaging healthcare industries to encourage supplier innovation. These strategic, centre-led activities no longer exist”.

There’s also a section about the procurement partners (Supply Chain, the Hubs etc.) which points out that Trusts tend to cherry-pick frameworks from these different providers, which is “not world-class procurement”.  The solution – “We need to find a way for the NHS to use these organisations more intelligently, with commitment and effectively de-clutter the landscape”.

I wouldn’t disagree, but this is one area where the report doesn’t present any definite plan or even idea. This de-cluttering has been talked about before, but there still isn’t a route-map to achieving it.

But in other areas, the report is stronger in terms of tangible plans and progress. We’ll look tomorrow at the ”Delivering Improvement” section and some of those key points.

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Voices (7)

  1. Andrew Butcher:

    I do wish people would stop banging on about surgeons gloves. In the great scheme of things they are the bit between the surgeon and the patient. I want my surgeons to be happy with the feel they have from their gloves and not even think about them. Spend on medical locums has much more potential to deliver savings in some trusts.

    1. Sam.Unkim:

      I completely agree than no one wants surgeons doing brain surgery in washing up gloves………………… but the present market leader ticks most the boxes as a luxury product ( The Definition of Luxury Products by Dubois, Laurent, and Czellar)

      As a staple product of all acute Trusts it’s an accurate indicator of achievement. The actual purchase is also wholly under the control of a hospital supplies dept, with very accurate reporting available through PO systems.

      Locum spend (as you mention) will often run to several £millions, in a fair size Trust, but it’ s usually driven by the HR dept (who are often completely incapable of analytical thought) and budget holders of individual depts.

      1. Bill Atthetill:

        Now, that’s much more positive Sam! Couldn’t agree with you more.

        Why is that consultants in some trusts have successfully switched from one manufacturer of gloves to another – securing savings of 40% while maintaining patient outcomes in the process – while others cling on to their favourite brand as if their own lives depended upon it. I’ve been told that some trusts have implemented ‘blind trials’ (where they remove all branding) and consultants who couldn’t tell the difference, selected an alternative.

        As you say Sam, this is one of the prime indicators of efficiency and agnosticism. In organisations and markets were margins and budgets are tight, choice and variation are rare.

  2. Beerstalker:

    A good few years ago now I was part of a Procurement Turnaround team and we faced the “slippy” issue of surgical gloves – eventually we managed to get the majority of the Trust onto the preferred type of glove (following trials and endless rounds of negotiation with the clinicians) apart from one group being the Orthopods – apparently the Synovial fluid made the gloves too slippy and they couldn’t grip correctly.

    Standardisation however does have a potentially serious consequence – if we bulk up all the NHS requirement we will end up with either a monopoly market or a least an oligopoly and where we once had a very competitive market we will be faced with escalating costs over time as the competition is slowly strangled. If the market is working effectively then commodity items are best bought from a competitive market – however clinical preference tends to skew the relationship to the market.

    1. Final Furlong:

      Dear Beerstalker, a good point, but if there’s a 40% difference in price (for absolutely no difference in patient outcomes) and the incumbent won’t play ball (because it is a dominant position) then you need to effectively ‘reset’ the market. I doubt very much there will ever be a stagnant market in gloves.

    2. Sam.Unkim:

      Of course lessons need to be learnt from the shortages created by the Italian Emilia Romagna earthquake (regarding the risk of putting all of the NHS’s eggs in one basket),

      but with the truly international markets in more generic products, the NHS should push as hard as possible towards a core of competitive suppliers and let the rest of market look after itself. imho

  3. Gordon Murray:

    Hi Pete, I remember 10 years ago there was a discussion on clinical preference for surgical gloves – it’s the NHS equivalent of shirts for police – to me if the NHS can’t crack the surgical gloves issue they will be merely moving the deck chairs. I certainly agree that at one time NHS was an exemplar in working with academia and to me that delivered real innovation, benefits and transferable knowledge – now we see little evidence of academic input being drawn upon at all in public procurement.

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