In the past 10 years the government has tried four strategies and failed. Colin Cram explains how to get it right this time
The fourth NHS procurement strategy in 10 years was due to be launched at the end of March in line with a commitment made to the public accounts committee. However, Sir David Nicholson, NHS chief executive, has decided that the NHS needs something more radical.
Beth Loudon, procurement programme Lead at the Department of Health, described the latest developments at the recent Public Service Events conference, 'A New Strategy for NHS Procurement'. That the NHS has had so many procurement strategies, the last one being launched little more than two years ago, illustrates how difficult it is to create one that delivers what is required.
None of them worked because they failed to force the issue of joint and disciplined procurement. This matters because, from an annual procurement spend of £20bn, the NHS is expected to deliver savings of £1.2bn – though arguably the figure should be nearer £3.5bn if NHS procurement is going to bear its share of the pain.
It must be faced that the current undisciplined approach to NHS procurement by its 358 hospitals prevents its purchasing power being used on behalf of all and inhibits the use of good procurement practice, including taking cost out of supply chains. This means less patient care. Big procurement savings require big changes – no fudging. Here is my 10-point plan:
• The NHS needs to understand its procurement spend – how much, by whom, with whom and on what. This could be done for 2011/12 by using raw transactional data from hospitals' finance systems. Commonalities, local and regional variations and trends would be identified.
• One could sample prices paid for many significant spend items to assess the variations and identify savings opportunities.
• The NHS needs to ensure that it maximises its purchasing power for commonly purchased items and categories. This could be achieved by requiring each hospital and trust to declare whether it will make full use of available collaborative procurement agreements – fully 'in' or fully 'out'.
• Item price isn't everything and one needs to identify the cost of clinical pathways in different hospitals and set standard costs and standards against which each hospital can be measured.
• As Chris Tulloch, an orthopaedic consultant, pointed out at the conference, the procurement of major equipment needs to be tackled on a joint basis, but savings must be significant enough to justify costs of change, including re-training.
• For major common suppliers (eg PFI contractors) the NHS should, through a single team operating on behalf of all, duplicate the Cabinet Office negotiations which delivered £800m of one-off savings.
• It will be expensive for each hospital/trust to employ first class contracting expertise and there never will be enough to go round. The NHS should set up a joint contracting organisation that can deal with significant contracts, major suppliers and major markets on behalf of all. Albeit through a phased implementation, it would be in a position to work with them to take out cost and ensure consistent quality. This could operate both regionally and nationally, but only for those hospitals that choose to opt in.
• The above team would need to find effective ways of engaging with stakeholders – user groups, service level agreements and involving key representatives in the contracting.
• ICT can help, such as a single e-procurement approach. However, quick and cheap fixes using innovative products already created by SMEs should be preferred to big systems.
• There has to be a stick as well as carrots. It took budget cuts before most local councils focused seriously on efficiency and the same seems likely to be true of the NHS. Those hospitals that refused to work with the new approach should have their budgets reduced and the funding generated used elsewhere in the NHS.
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Apr 24 2012, 06:09 AM
Healthcare Network | guardian.co.uk