Value for money – the best medicine

Friday, November 27, 2009

The NHS spends vast sums each year on goods and services. Delegates at Public Service Events' recent 'Procurement in the NHS' conference heard about the latest steps being taken to ensure the budget is properly managed. Colin Cram reports

The NHS purchase spend of £20bn per annum is roughly equivalent to that of Tesco. Effective management to secure value for money is therefore no easy task, particularly when it is of such a diverse nature as that of the NHS and so critical to the wellbeing of 61million people.

The difficulty of effective management is compounded by the devolved environment of the independent NHS trusts and the lack of close links between those who commission, ie decide what needs to be procured, and those who do the procuring. It is no wonder, therefore, that there have been so many re-organisations of NHS procurement in the past 25 years.

The latest re-structuring, called the Commercial Operating Model, has some very interesting features. First, it is trying to bridge the gap between commissioners and procurers through setting up regional commercial support units (CSUs). These would provide support, advice and guidance to commissioners. They would also provide a point of commercial contact and promote value for money, sustainable and innovative procurement practices.

Second, it is eliminating any potential overlap between the NHS Purchasing and Supply Organisation (PASA) and Buying Solutions through transferring large parts of PASA's work and personnel into Buying Solutions. This should have the additional benefit of providing Buying Solutions with a huge increase in its purchasing power that should strengthen the whole of the public sector.

Third, it is seeking to increase the size of procurement spend through its private sector partner, DHL, ie through encouraging compliance.

Fourth, it is keeping drugs procurement as a specialist procurement activity within the Department of Health. Finally, there will be oversight through the NHS Commercial Centre. The target timescales include the setting up of pilot CSUs by April 2010 and the transfer of designated PASA functions to Buying Solutions by December 2009.

Delegates to the Procurement in the NHS conference, sponsored by Buying Solutions and CBS at the Bridgewater Hall, Manchester, heard about the changes taking place from key people involved in them. Melanie Kay, deputy director of commercial operations at the Department of Health, described the new commercial arrangements. Kevin Pritchard, the director of commissioning business services, which delivers the collective commissioning strategy of the Greater Manchester PCTs, described the four key elements of commissioning and gave an indication as to how the new CSUs might work out in practice:
• Business intelligence – clinical activity data management, reporting and analysis
• Commissioning advisory – integrating the business and clinical components of service and pathway reviews
• Healthcare contracting – acquisition and contract management development
• Contract performance monitoring, including that of clinical and financial activity.

Martin Chown, executive director of business procurement at Buying Solutions, described the progress made in integration with NHS PASA. Andy Bishop described the NHS Supply Chain catalogue, a recognition that if you want people to buy into a concept, then it is a good idea to make it customer-friendly and easy to adopt. Chris Slater, chairman of the NHS E-enablement Group, described the very large stockholdings that exist in many hospitals and how e-enablement should allow these to be reduced as people find they can obtain supplies easily and promptly. Reducing stocks could free up resources to employ hundreds or possibly even thousands of front line staff.

Ruth Passman, senior policy adviser at the Department of Health, spoke about the NHS's commitment to carbon reduction and how it was to achieve the goal of 80 per cent reduction by 2050.

Successful implementation requires strong project management skills and the Prince2 2009 update, which is suitable for people who are not necessarily professional project managers, was described by its author, Andy Murray.

Few people understand how procurement savings can be achieved, which is one reason why implementation of procurement initiatives often fails to deliver objectives.

Procurement is often viewed as a haggle over profit margins or bulk discounts, in which case one might expect to achieve savings of little more than one or two percentage points.

However, joint procurement provides the opportunity to tackle the whole supply chain, using people whose expertise would otherwise not be available to most of the organisations taking part.

As conference chairman I described from experience how such an approach could frequently deliver savings of 20 per cent compared to a more traditional and fragmented approach.

The new Commercial Operating Model provides the NHS with the opportunity to achieve some significant savings and improvements compared to the approach hitherto. It is not a perfect model; the tension between local accountability and taking advantage of the total national spend inevitably leads to compromise. However, it is to be hoped that all NHS staff will do their best to make the new model work to the benefit of staff, patients and taxpayers.