“Vision, Aspiration, Direction & Action”: Why the NHS Still Needs to Raise its Game Dramatically in the Search for £22bn of Efficiency Savings by 2020

Posted 23/10/2015

Prime Minister Cameron received a clear mandate from the UK electorate to reform and modernise the NHS.  The public wants open access to healthcare seven days a week.  There is pride in the service but dissatisfaction with the systems of delivery.  It is time to put consumer interests (patients) ahead of producer interests (doctors).  There doesn’t need to be a head-on battle, but it certainly requires an appropriate balance between competition and collaboration in the medical market-place. 

The overall vision, aspiration and strategic direction from the politicians and Simon Stevens, Chief Executive of NHS England, is clear.  The NHS Five Year Forward View is now a year old.  It emphasised “unleashing system efficiencies”, “eight new care models” and “joint commissioning between NHS and local government”, while addressing a £30bn deficit that builds over this decade.  Cameron promised an additional £8bn, and Stevens requires £22bn of efficiency savings by 2020, the equivalent of 3% year-on-year.  Although that is an unprecedented challenge for the NHS, it doesn’t mean it cannot be achieved, even though the default position of clinicians and functional leadership across the service is to argue that there is “no chance whatsoever” of doing so. 

And indeed the rest of the public sector may feel that the NHS is getting off lightly.  The broader Whitehall Spending Review (due to be published on 25 th November) will reflect the challenge from Chancellor Osborne to “re-imagine, reshape and re-evaluate” ways of delivering services.  Departments were instructed to “model” cuts of between 25-40% by the 2019/20 financial year.  This clearly goes way beyond job cuts and efficiencies. 

Lord Carter, Chair of the NHS Procurement & Efficiency Board, and dubbed the “Procurement Tsar” by the media, was tasked with identifying major efficiencies across the NHS England £100bn+ expenditure.  His interim report came out in June, proposing a series of “productivity collaboratives, learning workshops and model hospitals” to identify the savings and produce guidelines on best productivity practice.  His second report, on how to achieve £5bn of efficiency savings by 2020, came out this week.  So far, savings are due from smarter procurement of hospital supplies, better management of staff rosters and standardisation of hospital surgical procedures.  All very good on their own, but way below the step change needed in NHS-wide efficiency and effectiveness.  We support a lot of the Carter approach, particularly to do with local engagement, but it is now time to raise the game dramatically.  Non-pay spend in the NHS is c.35%, so over a third of the £22bn of savings should come from that area.  At the moment only £2bn has been identified, so there is at least a further £5bn gap to address and then close.  Raise the five-year aspiration in line with that goal, and create the change model and delivery plan to achieve it.  

Procurement and supply chain in the NHS has always been narrowly defined and, unfortunately, still remains poorly led and under-resourced.  Back in 2013, an NHS procurement transformation development plan was produced with four general goals:  achieving efficiencies and productivity gains, improving data information and transparency, improving outcomes at a reduced cost through reviews of major clinical areas, and improving leadership and capability in NHS procurement.  There is an urgent need now to revamp that plan in a far more targeted way through multi-disciplinary working groups at the local level and across networks or clusters of hospital trusts.  The Future Purchasing challenge is to identify and harness the best procurement practice that definitely exists and produce a concrete change plan to unlock over £5bn of additional efficiency savings across non-pay spend .

Back in 2011 we produced our own blueprint for public sector procurement reform.  Our recommendations remain highly relevant, particularly for the NHS.  It is vital that cross-functional, cross-medical collaborative groups bring our £5bn challenge to life so that politicians and top leadership genuinely believe that the required quantum of delivery can be achieved.  A series of forums, working groups and on-site task forces should be formed as a matter of urgency to demonstrate that the savings pipeline is there to be unlocked.  A key constraint at the moment is that “vision, aspiration, direction and action” are based on a completely inadequate understanding of the scope that exists across the whole of procurement, supply chain and non-pay spend.  In our original report we argued that the “big wins” come from impacting cost drivers, business models and commercial structures.  Across the NHS, of course, we would extend that to clinical structures.  We would challenge all the proposed working groups to use the framework below to identify the changes that need to be made across the full spectrum of tactical / quick wins through to major transformational changes.  Indeed, we would willingly work with Lord Carter and his team to support a critical mass of procurement and supply chain leaders capable of addressing our challenge.  In turn that could become Lord Carter’s third report .  Will the NHS accept our challenge and offer?

Tell us your opinion on Lord Carter's report in the comments below.

Tagged by topic: NHS , Procurement Leadership , Procurement Transformation

  by Jon Hughes

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