NHS procurement is in a state of flux, again. National procurement organisations have been dismantled, the effectiveness of frameworks set up by regional collaborative hubs is in question and the former NHS Logistics organisation, renamed NHS Supply Chain, is now partly privatised and with its own commercial motivation. With collaboration being the word on everyone’s lips and the numerous procurement agencies now competing against each other for business, it’s all change again. Overlay that with the Commons public accounts committee highlighting the lack of standardisation and being openly critical of a lack of efficiency, and the whole situation looks like an almighty mess.
Everyone seems to be waiting for a silver bullet solution – a panacea that will, in an instant, provide every single part of the NHS with a small number of perfect suppliers, lowest prices, best service, same day availability and access to cutting-edge innovation. And all sorted out by some central organisation, with the savings delivered on a plate.
It simply isn’t going to happen. The supply market for healthcare goods and services is global, competitive, profit-hungry, driven by complex market forces and, for many categories, subject to rapid technological change. Dynamic change is an understated description.
Faced-off against all that is NHS procurement. With this level of change there can never be a ‘one size fits all’ solution. The NHS is a hugely complex and varied organisation, which needs an enormous variety of goods and services. The supply market always will be in flux and procurement will always be in a constant state of change to accommodate this. Of course improvements are happening at all levels, but we must expect these to be incremental rather than radical. The different layers of collaboration and aggregation at national, regional and local levels will change and adapt, as the market changes and morphs. Trusts must get used to this change and work with it. After all, this is a normal part of a dynamic supply market.
We must also recognise the fundamental limitations of collaborative frameworks. There is no doubt that aggregation of volumes does provide the economy of scale to drive improved pricing. But with every collaboration comes compromise and the resultant frameworks can easily end up trying to be all things to all men. It is hard enough for a single trust to standardise products and channel their requirements to preferred suppliers, let alone trying to do this across multiple trusts. The simple fact is that for a supplier to provide its best prices, they want exclusivity and commitment. These are the two things that are missing from frameworks, the worst of which then end up simply a collection of multiple suppliers’ list prices.
So what can NHS execs do to ensure that their trust can navigate through this confusing landscape and determine effectively how to get the best value for money and get the savings they need?
Firstly, trusts must take responsibility for their own financial health. In our experience 30%-50% of a trust’s total costs is likely to be on purchased goods and services and it is this commercial interface with the supply base that fundamentally determines the financial health of the entire organisation.
Secondly, action must be taken at trust level. Each trust needs the commercial capability, skills, tools, processes and knowledge to achieve best value for itself, based on its own particular requirements and based on the commercial landscape it faces. Don’t wait for some greater entity to do it – that silver bullet simply won’t come.
Thirdly, use all the potential sourcing solutions to your advantage. National frameworks, regional collaborative frameworks and NHS Supply Chain or other distributors will be the right answer for many requirements. These should be used when each trust has defined that this is the optimum commercial solution for them, on a category-by-category basis. And when procurement at trust level is the most effective solution, the trust needs its own commercial capability to achieve this independently. Not every trust is ready for this though, and some might need help to build this capability. Close collaboration is the most effective way of coaching and preparing the team for the challenges ahead.
Finally, recognise that the money is actually spent at trust level, so this is where the savings are implemented and actioned. This is where QIPP is important, as each trust must drive its own savings programme to standardise product requirements, drive spend to the optimum suppliers and challenge clinical preference. Whether a trust is utilising national or regional frameworks or putting in place its own agreements, commitment and exclusivity in its own requirements will allow procurement to achieve the optimum costs. You can access the best frameworks in the world, but if everyone can buy anything from any of them, the net result is still poor.
Many say that procurement has not delivered the savings it should have done. But it doesn’t mean it can’t. The answer is to improve procurement at national and regional levels, and get it working properly. But it is at trust level where it can make a big impact. It is the role of NHS execs to prepare their trusts for the bumpy ride during the reforms. And procurement, if done correctly, will be an answer to their worries.