Procurement in hospitals part 2 – barriers to progress?

We covered some of the interesting work going on in the Department of Health QIPP programme the other day in terms of improving procurement in hospitals. Today we'll talk about some of the barriers to progress.

I asked my contact on the programme whether hospitals now feel they are competing with each other, and doesn't this drive them into seeing procurement as a source of competitive advantage, and therefore work against collaboration? No, was the answer; a recent meeting of hospital CEOs confirmed they didn't see things in this way. In fact, their drivers were more focused on financial  survival in the current difficult climate, so anything (like procurement collaboration) that can reduce costs without major investment is very attractive. So perhaps the competitive landscape isn't a barrier to progress.

Another issue is how hospitals are paid and incentivised. A new treatment - driven perhaps by a new piece of equipment or device - might be beneficial on a whole-life, system-wide cost/ benefit basis.  But if it costs the hospital more up front, and the savings accrue to another part of the health system; or the 'savings' the hospital makes are notional or not truly variable costs, then there is a dis-incentive for the hospital to switch.  That's way beyond a procurement issue, but shows that more attention to payment and incentivisation is probably going to be necessary if we want the health system to embrace innovation.

So how well is the QIPP procurement programme going? I came away feeling generally positive, but there is one other major issue. Hospitals spend some £20 billion a year on third party goods and services, and there are 113o hospitals in the UK.  So how many procurement people are working on QIPP full-time? Let's just say it is a very, very small number! There are also a handful of people working part-time on different aspects of the programme, and obviously the goal is to get hospitals doing as much as possible for themselves. "We need a proper Commercial Director in every Trust - probably acting as a CPO and looking at the 'sales' side of the Trust as well" said my contact.

But the procurement programme is clearly under-resourced for what it could be doing; understandable to some extent in the current climate, but you can't help feel that there is a decent business case for a bit more effort to be put into this area!

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  1. Final Furlong:

    The notion of each Trust employing its own commercial director has been around since early 2006, perhaps sooner.

    The biggest problem is that the development of commercial and procurement is generally impeded by the Finance Director who, in the vast majority of cases, owns these areas/responsibilities. Many Trusts therefore have rudimentary procurement functions, or have large transactional ‘supply’ teams. Perhaps one should take a look at Mark Ralf’s (he’s retired) former team at Bupa which could be held up as an exemplar of how Health businesses should structure their commercial and procurement functions. Ditto General Healthcare Group. NHS Trusts have a long way to go before they can even catch up to their counterparts (competitors) in the private sector.

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