News / HFMA FT conference: Howe targets £1bn in procurement savings

Service transformation is key to meeting the financial challenges facing the NHS, but back office savings from services like procurement will continue to be needed, health minister Lord Howe told the HFMA FT conference.

Lord Howe praised the contribution of the NHS finance function. ‘I’d like to thank you all for your concerted efforts in responding to the financial challenges,’ he told the conference. ‘The continued strong performance of the foundation trust sector is testament to the talent of dedicated financial leaders.’ And he added that financial leadership will be ‘critical’ for the service’s future success.

He acknowledged the achievement of £11bn of efficiency savings – just over half of the forecast £20bn requirement for productivity improvements two years into the four year programme – as good progress. ‘But the challenge is an ongoing one and to meet it we have to think differently about delivery. We can’t simply respond with more of the same.’

This switch to greater transformation of healthcare services would need ‘radical’ changes in out-of-hospital care, greater use of technology and much better integration between health and social care. This latter point will be facilitated by the government’s newly announced £3.8bn pooled budget.

But Lord Howe also trailed more traditional approaches to improving productivity. He said that there was still huge variation in the prices paid by hospitals for the same product and lack of standardisation of products chosen. He dusted off old National Audit Office figures suggesting the NHS buys 21 different kinds of A4 paper, 652 types of clinical gloves and 1,751 different cannula as evidence of savings potential. One delegate challenged these figures – suggesting the glove figure counted different sizes and that the figures weren’t helpful.

Lord Howe promised to check the numbers, but insisted the general point was still valid. ‘We don’t think the NHS is good at procurement,’ he said. ‘It is not taken seriously enough at the board level and by shining a spotlight, we can show scope for major savings.’

A much delayed procurement strategy is due out this summer and Lord Howe said the Department would ‘set out our plans for helping to drive savings’, which he suggested could be more than £1bn. He accepted that given the freedom for foundation trusts, the Department of Health could only aim to persuade providers to alter their purchasing behaviour. ‘I like to think we are moving to an era where buyers and suppliers can have a more grown up relationship,’ he said. This would be characterised by a focus on value rather than simply buying more cheaply.