EFFICIENCY IN PROCUREMENT
The power of procurement savings I
Joel Haspel, CEO of Sentient Health, providers of healthcare supply chain management solutions, discusses what can be done to make NHS procurement more efficient.
n February, the National Audit Office reported that NHS hospitals could save some £500m per year if they got their act together on procurement.
The NAO warned that some trusts weren’t getting value for money – and that some were buying too many different types of the same product from a host of different suppliers. So what can be done about it?
Secretary of State for Health, Andrew Lansley, recently insisted that the NHS must “make every penny count for patients by cutting out waste, reducing bureaucracy and simplifying NHS structures - to invest more in improving frontline care”.
Studies show that every pound saved rep- resents £25 in new revenue. That means that £10,000 of procurement savings would be the equivalent to increasing hos- pital revenues by £250,000.
My experience of working with health serv- ices here, and round the world, convinces me that there are better ways to realise sav- ings. Looking through the Government’s ‘Information Revolution’ consultation paper provides me with some cheer, as it seems that Mr Lansley has identified one of the mechanisms which really can deliver results - patient level costing (PLC).
PLC is supported by the DH as a means for benchmarking costs and making com- parisons between teams caring for similar groups of patients. What’s more, the serv- ices and IT systems are readily available and proved to work.
PLC can be a vital tool, eliminating unnec- essary spending so resources go further. If PLC is approached in the right way, it should be a plus for all. It depends on being able to track every aspect of a process or procedure and attach a price label to each of them. This allows hospitals to identify exactly what resources are used – when, where, how and by which consultants.
And while PLC is about much more than this, it offers an insight into the benefits. We see the gains that can be made once people are empowered to start asking questions about value for money – and I use that term deliberately because it can imply something very different from price alone.
Joel Haspel
When one hospital started to scrutinise the costs per patient of certain procedures it found that consultants were ordering knee replacements from three suppliers and hip joints from seven. The cost per procedure could therefore vary substantially from one consultant to another. Findings like these raise the potential for savings – but only after serious discussion has taken place about the appropriateness of ordering.
Patient level costing would become an ab- surdity if it was reduced to insisting that all hip and knee replacements came from the cheapest sources and were of the same type. Nonetheless, we have seen some fairly idiosyncratic approaches to supplies that have developed for all sorts of reasons – including that consultants sometimes order from a familiar source rather than scan the market.
The solution is dialogue, and that is only possible when hospitals are fully informed. At that point it’s possible to sit down and look at what is required on a hospital-wide basis, whether orders can be consolidated with fewer suppliers, and whether there are other ways to make things run more cost-effectively.
Another aspect of this is the efficient use of time. It’s worthwhile for managers to follow how an item is processed – why not one of those hips or knees – from stock- room, to theatre to hospital admin system. Typically each item is manually logged four times, mostly by clinicians. An electronic monitoring system which logs, tracks and reports on each item, facilitates PLC and cuts the time spent logging by 75%. The cumulative gains in time available for pa- tient care over a year can be substantial.
Electronic monitoring saves money in oth- er ways too. One is the ability to deal with problems over consignment ordering. We have just been talking to one hospital which is in a £100,000 dispute with a sup- plier. The argument is simple to state but tough to solve – the company says items were sent and must have been used, the customer claims they were not used and either never turned up or were taken by the sales rep. While the protagonists and amounts will vary, there are lots of similar wrangles in the public and the independ- ent sectors.
Clearly there’s no good moment for a disa- greement over consignments, but the end of financial year is among the worst. It’s also one of the most likely as that’s when everybody is trying to reconcile their books with their stocks.
However, by doing stock counts on a regu- lar basis, they can get ahead of the game. This is a service we provide and which can give hospitals the information they need to identify and successfully challenge dis- crepancies.
Our Evidence Based Savings assessments also offer easy wins because by accurately identifying what’s on the shelves, hospitals can often safely work through their exist- ing stocks and not re-order before the next financial year. Chances to limit outgoings through waste avoidance in the final quar- ter are normally very welcome indeed. And with cash in short supply now and in the foreseeable future, surely every little helps – as I’m sure the NAO would agree.
FOR MORE INFORMATION Visit
www.sentienthealth.co.uk
national health executive Mar/Apr 11 | 43
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