How to Strengthen the NHS Procurement Strategy

Posted 22/12/2014

Policy imperatives: “Invest in healthcare; improve outcomes; reduce costs.”

“More with less ….. and differently: through competition and collaboration.”

You can download our entire report here.


1. Pessimism about the Future

Considerable financial and clinical pressures are building within the NHS and the care system >>

• UK becoming an older nation at a faster rate than ever before. 80% NHS budget going on chronic conditions.
• King’s Fund analysis predicts £30bn black hole by 2020. 65 trusts already in default, e.g. North Cumbria £47m.
• Increasingly difficult to balance books while delivering high quality services, yet rising public expectations.
• Deterioration in waiting times and four-hour A&E targets, while increases in patient referrals to hospitals.
• Wasteful and inefficient supply chain, not helped by legacy of PFI contracts, now being “flipped”

2. Addressing Public Concerns

Making improvement, innovation, sustainability, funding and user experience big political issues >>

• Huge spending boost: £57bn, 2002/03 to £108bn by 2012/13, but with minimal improvement in performance.
• Public concern on overcrowding, infection rates, decline in quality of care, poor co-ordination NHS : social services.
• Gammon’s Law: “In a bureaucratic system, increased expenditure is only matched by a fall in production.”
• There is little evidence that increased funding alone (while popular) will bring about the deep changes required.
• A balanced approach is required: “Targeted investment : hospital reconfiguration : more with less, but differently”

3. Declaring Plans in Manifestos

Amid calls for explicit “acknowledgement of the problem” and “manifesto-specific policy solutions” >>

• Labour are already proclaiming a “big offer” on the NHS with “pledges” on increased funding and staffing.
• A “care charter” is being floated to raise standards and drive a tougher inspection regime.
• None of this has been costed. Possibility of an NHS protected tax increase via NI. “Brown bonanza #2”.
• CEO, Simon Stevens, is calling for “creative solutions”. Others have suggested “reimagining healthcare”.
• NHS cannot be “saved” by efficiencies alone. It needs a credible plan for its future sustainability

4. A Focus on Total Expenditure

Procurement and the healthcare supply chain remain an untapped opportunity for transformation >>

• Few aware of the total spend portfolio: £68bn in 211 CCGs; £35bn in conventional procurement; £65bn in PFI.
• Massive scope for productivity improvement; better quality patient outcomes; rationalisation and efficiencies.
• Central to job creation (1.6m jobs to be created in health-care, IPPR) and growth (e.g. Sinophi & Circle in China).
• Traditionally a low priority for CEOs and CFOs; highly fragmented spend; wasteful, inefficient and ignored.
• Proposals for change are emerging, “Better procurement, better value, better care”, but with relatively low aspiration

5. Applying the Value Levers

With one third of required NHS investment capable of being unlocked in the supply chain by 2020 >>

• Procurement is not just about letting contracts quickly and efficiently, or tactically manipulating competition.
• Competition is a driver for innovation within markets, but equally collaboration is required across specialties.
• Introduce a “£10bn challenge” to unlock savings of that quantum and fill one third of the £30bn black hole.
• Ensure price transparency; push for value beyond aggregation; apply the latest procurement toolkits.
• Claw back PFI benefits; buy back contracts; unpick unitary charges on services; cut excessive profits

6. Leadership at the Local Level

But that calls for a different change model to engender engagement of executives and clinicians >>

• Change must be led through the line at local trust and CCG level. It cannot be centralised into Whitehall.
• Focus on clinical outcomes as well as cost efficiencies. Vision and ambition must resonate with clinicians.
• This is a fundamental shift from piecemeal and tactical aggregation to deeper transformation in the supply chain.
• Develop and test the governance and operating models capable of driving and sustaining the necessary changes.
• It starts at board level in trusts and CCGs. Focus on CEOs, CFOs, NEDOs and clinical procurement partnerships

The current NHS Procurement Strategy outlines a number of initiatives to drive change, however there are a number of areas that may need strengthening.  To read more please download our paper here.

Tagged by topic: NHS , Procurement Transformation , Public Sector Procurement

  by Allison Ford-Langstaff

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