PROCUREMENT
Healthy buying – getting value out of NHS procurement
I
n the 2008 Procurement Capability Review of the Department of Health carried out by the Office of Government Commerce, the procurement spend of the health system was estimated at £30 billion per year. “Major elements include drugs, temporary staff, research projects, medical equipment and supplies”, according to the review.
That sounds straightforward but when we look at the total costs of the National Health Service, we come up against some complications. For instance, general practitioners are in effect independent contractors yet we tend to consider them as public servants / employees rather than ‘suppliers’.
Recent discussions around GP commissioning have seen figures around £80 billion a year quoted as the ‘procurement’ scope of these new bodies, although much of that will go to foundation trusts.
And procurement in total covers a vast range of activities. It includes central and local purchase of pharmaceuticals; medical equipment and supplies, commissioning of services from the private sector; property and facilities services, IT systems and software and more run of the mill goods and services from furniture to legal services, vehicles to catering.
So whatever the precise numbers, procurement (and commissioning) of goods and services, is critically important to the NHS from a value for money standpoint and in terms of making sure the system delivers what is required by patients.
Jul/Aug 10
threatening the budget. Can the NHS ensure it is a smart negotiator, getting a good deal whilst recognising that Pharma firms need to make a fair profit to invest further?
And in a time of budgetary pressure, what are the particular issues that need to be faced in NHS procurement over the next few years? Top of the list at the moment is GP commissioning.
We have been covering this on our blog (http://blog.
procurement-excellence.com/) and while the concept has much that is potentially good, the practical procurement issues are considerable.
Do GPs have the skills needed to carry out effective commissioning and procurement?
Where and how will EU procurement rules apply and how will the private sector be involved?
What happens if a GP commissioning unit runs out of money 9 months through the year? Or spends money inappropriately?
How can 500 commissioning units be run for half the cost of 150 PCTs (the ministerial assumption)?
How much extra cash are the GPs going to demand for carrying out these services?
Outside GP commissioning, determining where procurement should be centralised and where it would be better done locally is another major issue.
There is still a plethora of collaborative procurement bodies in the health system, which can complicate matters for buyers at the front line. Procurement ‘hubs’ and agencies; Buying Solutions (who took over much of the work of PASA), commercial support units; NHS Supply Chain and others.
Trusts need to collaborate to drive better procurement; yet they are potential competitors and there is a desire to see them operating as independent entities. How will that resolve itself?
Pharmaceutical procurement is another challenge with more advanced (and expensive) drugs
FOR MORE INFORMATION
Peter Smith is an ex-president of the Chartered Institute of Purchasing and Supply, the MD of the consulting firm Procurement Excellence, a leading blogger and co-author with Fiona Czerniawska of “Buying Professional Services” published now by the Economist Books.
E:
psmith@procurementexcelllence.com nhe 51
As well as these issues around the sourcing and contracting side of procurement, the transactional aspects – the ‘purchase to pay’ process - is just as important. Recent examples of fraud in hospital trusts through staff creating fake invoices showed the result of poor controls.
Transactional processes must be efficient as well as controlled so we may see more focus on slicker ordering and payment systems and processes; automating the purchase to pay process in ways that also provide the management information needed for further value- releasing procurement activity.
Faced with these significant challenges, the key question is whether the health sector has the commercial capabilities and experience to achieve what is needed? If not, it will have to be developed quickly or bought in.
And, of course, even the procurement of that support must be well managed, or we will see more negative headlines about the ‘waste of NHS money on consultants!’
This article was commissioned by American Express
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