Lord Carter’s Review: Procurement Transformation Across NHS England is Finally Getting Closer Part 2 of 3

Posted 12/02/2016

Defining the Opportunities and Change Levers:

Our Summary of Lord Carter’s Other 14 Recommendations for Saving £5bn a Year by 2020

Further to part 1 where we summarised Lord Carter’s recent main report Operational productivity and performance in English NHS acute hospitals: Unwarranted variations  published on Friday, 5th February, this second part continues our own summary of Carter’s 15 recommendations which, if implemented systematically, will save £5bn a year by 2020. We have also made an assessment of the likely impact that these recommendations could have on procurement, particularly from a leadership, structural, process and capability perspective.

In Future Purchasing we have been arguing for a number of years that NHS procurement transformation remains one of the most important requirements across the whole of the public sector. We have been following the work of Lord Carter closely, made inputs from a strategic and change management perspective and summarised the interim outputs of his team in our blog. The first part of this 3 part series focussed on one of the 15 recommendations (#5) which specifically focused on procurement. This 2nd part looks at the rest of the recommendations and their impact on Procurement:

1. NHS Improvement to Develop a National People Strategy & Implementation Plan.
By October 2016

Emphasised as central to the required transformational changes:  a need to simplify systems structures, significantly improve leadership capability “from ward to board”, raise people management capacity and drive down high levels of sickness absence and staff bullying / harassment.

Impact on Procurement: This argues for a broad and comprehensive assessment of the required procurement leadership skills, proposals for structural simplification (locally, regionally, nationally) and much greater engagement of stakeholders. A critical part of the planning and delivery of procurement transformational change.
2. NHS Improvement to Develop and Implement Measures for Analysing Worker Deployment.
Spend: £18.8bn
Saving: £800m
During 2016
Problems include variations on staffing use, considerable unproductive time and recruitment difficulties. A new metric, Care Hours per Patient Day, to be deployed. All about “the right teams to be in the right place at the right time, collaborating to deliver high quality, efficient patient care”.
Impact on Procurement: Apply the same principles and develop good practice guidelines and dashboards on utilising procurement staff in a way that adds the greatest value.
3. Trusts to Ensure Hospital Pharmacies Achieve Agreed Benchmarks via a Transformation Programme.
Spend: £7.3bn
Saving: £800m
Plans by April 2017
Large variations in medicine costs exist, and spend is increasing 15% p.a. 16,000 staff involved, but 55% of the time is spent not on medicines optimisation but infrastructure and supply chain issues. Great variation in stockholding and poor use of e-ordering and e-invoicing. A national listing of top ten medicines with savings opportunities to be published.

Impact on Procurement: Considerable scope for improving and consolidating the medicines supply chain with full use of e-ordering, aggregation, delivery rationalisation, stockholding reduction, benchmarking of drug prices, developing alternative supply routes, regional models for pharmacy procurement including shared services. Classic task reallocation with a sharper separation of pharmacy activity from its supply chain.
4. Trusts to Ensure Pathology and Imaging Departments Achieve Benchmarks Agreed with NHS Improvement.
Spend: £2.5-3bn
Saving: £200m
By April 2017
Develop a more consistent approach to quality and cost of diagnostic services through trust dashboards and productivity metrics. If these are unlikely to be achieved, then trusts to produce plans for consolidated pathology operations, including outsourcing to other providers.

Impact on Procurement: NHS Improvement will produce guidelines on forming collaborative joint ventures. Commercial frameworks will be needed for consolidation and outsourcing.

6. Trusts to Achieve Targets Agreed with NHS Improvement for Estates Management.
Spend: £8bn
Saving: £1bn
Plan by April 2017
While cost drivers vary widely across the NHS 1,200+ hospitals and 3,000+ treatment facilities, the most expensive spend 3.8 times more on running costs than the least expensive. All trusts to operate with a maximum of 35% of non-clinical floor space and 2.5% of unoccupied or under-used space. Achieving the median position saves £1bn.

Impact on Procurement: Actively involved in collaboration with estates teams. Central to the sustainability agenda, reducing the carbon footprint and sourcing local organic produce for food.
7. Trusts to Rationalise Corporate and Administrative Functions so Costs are Below 7% of Income (by April 2018) and 6% (by 2020).
Spend: £4.3bn
Saving: 8-10%
This is classic back-office consolidation across units with 137,000 FTEs. The goal is to ensure that costs do not exceed 7% of trust income, reduced to 6% by 2020. Where that cannot be achieved, then plans for shared service consolidation with, or outsourcing to, other providers need to be in place.

Impact on Procurement: There is a need for explicit shared service models with less optionality than in the past, and trust executives having to commit to testing services against national solutions, with greater systems integration. Greater commercial and analytical expertise required.
8. NHS Improvement and NHS England to Set Best Practice Standards for All Specialties.
Spend / Saving: not stated
New Governance to be Established by April 2016
Joint clinical governance will be set up with national bodies, followed by deeper assessment of the unwarranted clinical variation that exists in the quality of healthcare. It will draw together quality, productivity and efficiency performance metrics. A more holistic and systems approach to be adopted, bringing all clinical programmes into one governance model.

Impact on Procurement: Clinical specialties are frequently unaware of the purchasing and cost profiles of their treatments. Over-ordering is common, with inadequate “track and trace”. Argues for more active collaboration between procurement and clinicians.
9. All Trusts to Have Key Digital Systems in Place, Fully Integrated and In Use.
By October 2018
NHS Improvement to ensure that investment takes place in systems underpinning the collection of performance data so that good performance can be highlighted and poor performance addressed properly. The intention is that trusts will make “meaningful use” of performance data and new key systems such as e-rostering, e-prescribing, patient level costing, e-catalogues and inventory management, RFID systems and electronic health records.
Impact on Procurement: The NHS has a very poor track record in such implementation. It needs standards, incentives and investment, not least in the application of procurement and supply chain systems.
10. Strategies for Trusts to Ensure Patient Care is Focused Equally on Recovery and How Patients Leave Acute Hospital Beds.
Costs the NHS £900m p.a.
Every day, 8,500 beds in acute trusts are “blocked” by patients who are well enough to be transferred elsewhere. It is a huge issue and the Department of Health, NHS England, NHS Improvement and local government are tasked with providing a strategy to address the problem properly.

Impact on Procurement: “Bed blocking” has a knock-on effect in the cancellation of elective operations, with work then going out to the independent sector. Addressing the root problem reduces that cost.
11. Identify Opportunities for Better Collaboration and Co-ordination of Clinical Services Across Local Health Economies. As with many of the recommendations, economy of scale is a major NHS system-wide issue. There is a systematic failure to capture the benefits of scale, particularly in the delivery of clinical services. Trusts need to identify where they can deliver services using different configurations across geographical areas, as well as creating new care models.

Impact on Procurement: Work streams will be established, not just for clinical services but also capital and estates, back office and procurement, leading to team consolidation, hubs and shared services.
12. NHS Improvement to Develop the “Model Hospital” and its Underlying Metrics.
First phase by April 2017
There is considerable emphasis on “identifying what good looks like”, so that there is “only one version of the truth”, i.e. one source of data, benchmarks and codes of good practice. The “model hospital” will contain clearly defined performance metrics encompassing patient outcomes, people productivity and financial sustainability. It will be the source of actual and comparative performance dashboards. The use of WAU (weighted activity unit) and ATC (adjusted treatment cost) will be mandated. Total cost per WAU will be tracked for all 136 non-specialist acute trusts quarterly.

Impact on Procurement: The purchase price index will be mandated. Carter emphasises that comparative metrics need to be supported by definitions of good performance, detailed guidelines and knowledge sharing by top performers, and best practice case studies together with readily accessible toolkits to build competence, capability and sustainability.
13. NHS Improvement to Develop a Single, Integrated Performance Framework.
By July 2016
The intention is to ensure that there is one unified set of metrics and a consistent approach for reporting while at the same time reducing and rationalising the overall reporting burden. There will be a quarterly reporting cycle designed to be sharply focused, rigorous and reliable. It will also include the introduction of lean daily management.

Impact on Procurement: As metrics alone don’t deliver improvement, there is a considerable emphasis on a cultural change whereby knowledge-building and collaboration occur nationally, regionally and locally. NHS Improvement will need to create guidelines and toolkits to build that level of understanding from executive boards down.
14. All Acute Trusts to Prepare to Implement These Recommendations to Timetable. All the recommendations are to be implemented in line with the stated dates, so that “productivity and efficiency improvement plans for each year until 2020/21 can be expeditiously achieved”. Successful implementation needs to be facilitated through nine management practices addressing culture, organisational design enablers and NHS structural shortcomings.

Impact on Procurement: Each of the nine management practices can be woven into the designated NHS Improvement Procurement Transformation Programme. This positions it as cultural change as much as functional change, thereby increasing the probability of success.
15. National Bodies to Engage with Trusts to Develop Their Efficiency and Productivity Improvement Timetables.
Mobilisation Events from Q2, 2016.
As mentioned in 13 above, there will be greater emphasis on national bodies engaging with trusts, not just stating “what good looks like” but explaining how good can be achieved and sustained. Engagement resources will need to be established, probably regionally, to work with trust executives and non-executives. A series of mandated change implementation mobilisation events for chairs, NEDs, CEOs and executive team members will commence in Q2, 2016. There will be “professional leads” for each component of the “model hospital”.

Impact on Procurement: Central roles need to operate differently and as well as providing comparative analysis, there will be a much greater emphasis on working with trusts to help them overcome the barriers to productive collaboration. That calls for the development of collaborative methodologies and practical assistance at trust level.

The next and final part of this 3 part series in response to Lord Carter’s report focusses on how “Procurement Transformation Across NHS England is Finally Getting Closer” and will provide our view on the ten enablers to achieve it. You can read it here .

Tagged by topic: NHS , Procurement Transformation

  by Jon Hughes

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