FINANCE & LEASING SERVICES
Julian Rose, head of asset fi nance at the Finance & Leasing Association, discusses the need for more effi ciency in specialist procurement.
V
alue for money is not being achieved across all Trusts in the planning, pro- curement and use of high value equipment, the National Audit Offi ce (NAO) concluded in its review, ‘Managing high value capi- tal equipment in the NHS in England’, in March.
Trusts are not collaborating to purchase equipment such as such as CT, MRI scan- ners and Linear Accelerator Machines and they are not getting the best prices for the machines or their maintenance, the NAO found.
The NAO’s conclusion shouldn’t come as a huge surprise. Trusts are understandably wary of committing to expenditure before it is needed, which makes it hard for the op- erator of the framework agreement used by most Trusts, NHS Supply Chain, to group together requirements for new machines.
Given the independence of individual Foundation Trusts, isn’t this an inevitable and unavoidable problem?
Managed equipment services (MES) might be a partial solution. If a number of Foun- dation Trusts were to contract with a single MES provider, that provider could start to group together the requirements to in- crease their buying power.
However this is likely to require a long- term commitment to MES from the Trusts involved and outsourcing at least part of the team involved in operating the equipment.
So MES can help but it’s unlikely to be the route to delivering the sorts of discounts that the NHS could achieve by grouping together a sizeable proportion of its equip- ment needs.
The solution might instead come through leasing. Similar to an MES, leasing intro- duces a third party, the asset fi nance com- pany, into the arrangements. However the arrangements are typically much shorter than for MES. They are also unlikely to in- volve substantial outsourcing of the opera- tion of the equipment to the private sector.
Over time the fi nance company should de- velop a good understanding of what equip- ment Trusts have and when it is likely to need to be replaced or upgraded. Could this knowledge be used to group together equipment needs from multiple Trusts to achieve better prices?
In principle the answer is yes. It already happens in other markets such as for con- tract hire of business fl eet cars and com- mercial vehicles, where businesses enjoy substantial discounts on the prices they could obtain individually. Whilst there are big differences between the hire of busi- ness cars and leasing of high value medical equipment, we believe fi nance companies could have a role in helping to group to- gether the requirements of Trusts for some types of equipment.
But before going too far down this route, it’s important to be confi dent that Trusts
will often save money by leasing compared to paying cash for equipment. It was good to see the NAO recommend that clinical and fi nance teams within Trusts should as- sess the costs and benefi ts of leasing along- side purchasing and outsourcing options when replacing machines.
It’s important however that any such as- sessment is well-informed. There’s a par- ticular need to improve the guidance issued to Trusts on the use of leasing to overcome a common misconception that when Trusts lease equipment they might have to pay the Government’s 3.5% capital charge. In fact the charge, where relevant at all, is only levied on the net value of the leased equip- ment, which means it is usually very small.
The rules on when Trusts have to pay VAT on equipment also need to be clarifi ed. Cur- rently HM Revenue and Custom’s Guid- ance suggests that MES attracts a more favourable VAT-treatment than leasing.
The NAO has raised important issues around how Trusts buy and maintain capi- tal equipment.
The leasing industry is keen to play its part in helping Trusts to achieve best value in meeting their equip- ment needs.
Julian Rose
FOR MORE INFORMATION Visit www.fl
a.org.uk
national health executive Sep/Oct 11 | 43
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