WELCOME

Session Chairman:

Helena FullerChief Operating Officer

NHS Yorkshire and the Humber Commercial Procurement Collaborative

Can the NHS afford to buy quality?

Professor Christine HarlandHCSA President,Director, CRiSPS

University of Bath School of Management

Sorry, what was the question?

What?

Can? Should?

• Right• Authority• Capability• Capacity• Resource

• Beliefs• Moral or ethical stance• Choices• Intention• Tentative suggestion

The NHS…?

• Heterogeneity of services

• Patients and public are central

• Sense of danger associated with secondary care – red, safety is positioned there

• Pivotal role of primary care trusts, directed by DH and underpinned by SHAs – commissioning care

The NHS…?

• The NHS is not an organisation but a confederation of around 600 organisations

• Strategic health authorities, trusts, foundation trusts, independent providers, primary care trusts, arms length bodies etc.

• MBA style, firm based decision making based on ROI and customer satisfaction concepts and approaches vs. managing in the NHS

“I’m living so far beyond my income that we may almost be said to be living apart”

e.e.cummings

Afford – a budget issue?

Afford – an ethical issue?

“My problem lies in reconciling my gross habits with my net income” Errol Flynn

Afford – a resource issue?

• IPS – established 1932, royal charter 1992• CIPS – 42,000 members worldwide• NIGP in the US• IFPSM – 200,000 members in 42 professional bodies• HCSA – established 1960, 800 members• Procurement higher education expanding

internationally – professions have professors• IRSPP identified international capacity and capability

shortfalls in public procurement

Afford – a productivity issue?

“However, the NHS has failed to generate the relatively modest improvements in unit cost

productivity that might have been expected and were assumed by the 2002 review”.

“Lack of data makes it impossible to draw reliable conclusions about movements in unit costs in mental

health and primary care services”

Wanless et al 2007 – Future Health Secured

To buy? Or not to buy. That is the question

Quality – the NHS’ core principles

• The provision of quality care that:

• Meets the needs of everyone• Is free at the point of need• Is based on a patient’s

clinical need, not their ability to pay

Quality – a perception issue?

Quality – an evidence issue?

“…the development of precisemeasures is hampered by a lack

of routinely collected data on changes in patients’ health

status arising from NHS interventions”

Wanless et al 2007 – Future Health Secured

Quality – a self responsibility issue?

The philosophy of the reasonable man

underpins our legal system.

Should it and does it underpin our health

system?

Challenges for procurement in health and social care

• The NHS – £107 bn, 1.33m employees, 575 organisations

• Plurality of provision• Multi-level procurement decisions – national,

regional, organisation, team, individual• Regional imbalances in capacity and capability• Huge, heterogeneous spend portfolio – infrastructure

and direct patient care• Complex network of stakeholders• Increased choice and patient/ carer involvement

NHS procurement levels

• National – NHS Purchasing and Supply Agency – Commercial Agency for Health. NHS Supply Chain

• Regional – collaborative procurement hubs• Local – trusts• Specialisms – e.g. pharmacy procurement network,

prosthetics strategic supply group• Local department budgets• Individuals – purchase cards, budget discretion

Stage

Sourcing and delivering goods and services1

Efficient use of public funds3

Compliance with legislation/ regulation2

Accountability4

Value for money5

Supporter of broader government policy objectives6

Deliverer of broader government policy objectives7

STAGES OF PUBLIC PROCUREMENT

Drivers of difference in procurement in health and social care

• Different procurement decisions need different amounts of resource

• Degree of system wide impact – individual, local, regional or national improvement

• Different procurement decisions need different types of resource

• Degree of health improvement

The future for public procurement in health and social care

• Spiralling costs and expectations – poor diets, sedentary lifestyles, alcohol abuse, obesity, hypertension, type 2 diabetes, erosion of public health

• Improved treatments and cures• Shift towards procurement of health and social care –

commissioning• Greater plurality• GPOs and private insurers• Boundary spanning, collaborative procurement• Evidence based procurement• Sustainable procurement• Productive procurement – value in vfm• Efficient procurement – money in vfm

The role of academic research

• Upholding traditions and standards of research and education

• In a modern world, changing business and society through the creation, development, application and dissemination of international knowledge

• Thinking about what the questions are…

Quality - A Welsh Perspective

Mark RoscrowDirector, Welsh Health Supplies

Reimbursement for qualityIs it possible?

Bob Dredge

What is Quality?

• “degree or standard of excellence”

• Health references to improvements in quality, but not of quality as an absolute

• Is quality…safety, outcomes, experiences, based on industry benchmarks or evidence based medicine and new technologies?

Reimbursing who?

• Primary care through Quality and Outcomes framework (QUAF)

• Secondary care through contracts

• Tariff based funding covers approximately 60% of income

• If outside of tariff are there different drivers?

REWARDS REWARDS EFFICIENCYEFFICIENCY

Surplus can be Surplus can be reinvested in patient reinvested in patient

care.care.

TRANSPARENCYTRANSPARENCY

Clear link between Clear link between funding and funding and patient carepatient care

SUPPORTS SUPPORTS PATIENT PATIENT CHOICECHOICE

Under PbR the Under PbR the money follows the money follows the

patientpatient

ENCOURAGES ENCOURAGES ACTIVITYACTIVITY

For sustainable For sustainable waiting time waiting time reductionsreductions

PAYMENT BY PAYMENT BY RESULTSRESULTS

Activity x PriceActivity x Price=Income=Income

PbR is designed to pay providers based on activity, in order to

incentivise productivity and choice. Historically, hospitals paid by block-contracts rather than on what was being delivered:

little incentive to increase throughput.

no penalty for failing to deliver.

Unable to reflect changing patterns of service provision or patient case mix.

Prospective payment began in 2003/04

phased in to avoid any destabilisation of the health economy.

sits within the wider context of health & financial reform.

Service Improvements

• Volume and waiting list achievements• Choice not possible without a fixed price• Tariff as benchmark for Independent sector and

others• Cost driven efficiency through the tariff• Restricted (further) meditech and non NICE

drugs?• Pay for Performance…see peer reviewed

papers on this and wonder how it has got there!

Efficiency

• Productivity a real issue

• 3% Efficiency requirement from Comprehensive Spending Review

• Recurring savings/cost reductions still needed to get to fundamental balance despite the headlines.

• Crude unit cost reduction welcomed but not sufficient

Service and Patient level costing

• Micro detail of cost components

• Consumable line item costs now transparent

• INSERT TABLE

Meditec/NICE

• New/replacement product entry…OK if cost reducer…possible( but difficult) if pathway cost reducer…near impossible if adds to cost( except if NICE)

• Unbundling virtually non existent, but still central policy

• Pass through not happened• Will PBC drive this...it should...but are you

engaged with it?

Normative pricing

• Price to encourage activity or service model

• Maternity and home delivery in 2008 and beyond

Pay for Performance

• PbR intended to drive Commissioning on basis of quality and access

• P4P “provide an incentive to collect information on outcomes and reward improvements in quality”

• Premier Inc model “ being considered to give financial incentive based on performance across a range of relevance indicators with a bonus performance for excellence”

P4P

• 34 (35) metrics…but 27 process measures• 5 specific clinical services, • Participants had best LOS, unit costs, mortality,

complications…but did already!• Mathematical Nov 2006 …40% joined because they thought they

would gain $, 20% to stimulate quality• NEJM Feb 2007…Quality improvement range from 2.6 to 4.1%• Bonus range $914 to 847,227, mean of $71,960, but raise issue of

transaction costs and who looses to pay gainers• How do you justify payment…absolute or relative, average or

benchmark( remember QUAF)

Is it possible?Can procurement help?

• Yes where it cuts unit costs

• Yes if NICE says so

• Yes if it cuts pathway costs

• BUT pressures of finance balance and SLC are against you!

• Look at the big picture!

'Achieving Value for Money – the cost/quality and innovation conundrum'

Jonathan Wedgbury CEO

Healthcare Purchasing Consortium

10 X152 X

148 XTrusts

NHS structure and funding flows as at March 2007

Independent Sector Treatment Centres

Private sectorProviders of services

PLURALITY OF PROVISION

National Standard Price Tariff (HRGs)

52 XFoundation Trusts

Budget for 2007-8: £92 billion of which £6 billion is Capital

Commissioning

(£22 billion of services)

Non-tariff agreements

99% of budget = Public 1% of budget = Private(10% of elective procedures)

THE NHS – Some Statistics

• 1.33 million staff

• 362 different organisations across England

• NHS spending more than doubled since 1997 to £92bn

• Drugs bill £8bn

• Medical device bill £6bn

• Buyer of £17billion worth of goods & services (£6bn medical devices)

NHS Purchasing Organisations

• National– Purchasing and Supply Agency– OGC-Office of Government Commerce – NHS Supply Chain

• Regional– Collaborative Procurement Hubs

• Local – Trust Purchasing Teams

What Do We Mean By Value?

• To The Patient:

– Improved Patient outcomes

– Reduced infection rates

– Efficient Service

– Reduced Lead Times

• To The Clinician

– Reduced Risk to staff

– Ease of use

– Consistency of delivery

• To the NHS

– Is it more effective than current procedures

– Does it result in lower overall cost

But what is ‘value’?

• OGC guideline Value for money measurement Nov 2000 describes methodologies for quantifying VFM from procurement activity in central civil government in England as “VFM gains are defined as improvements in the combination of whole life costs and quality that meet the user’s requirements – secured as a result of positive action by staff involved in commercial transactions”

• EC contract award criteria (MEAT) - most economically advantageous offer judged on price, quality, delivery performance, risk and overall cost effectiveness

OGC November 2000

NHS Procurement

Collaborative Procurement Hubs

• Deliver £270 million savings by 2007

• Improved support for clinicians and clinical networks by increasing their involvement in purchasing

• Reduced clinical risk and enhanced patient safety strategies

• Stronger partnerships with suppliers through commitment to contracts and a focused route into the health economy

• Encouragement for innovation and provision of support for R&D in emerging treatments and technologies

• Building a robust, sustainable environment for procurement specialists through improved career structure and enhanced recruitment and retention

NHS Procurement

Innovation

• NHS procurement hubs use in house clinical procurement specialists to support the evaluation of innovative products and services

• They are part of and often host clinical networks and committees that offer expertise in specialist healthcare fields

• Procurement leads have developed both commercial expertise and specialist knowledge in their areas of Category Procurement

• Purchasing teams have visibility of proposed new technologies as they are available in the market place

• Expert networks both within individual Trusts, across regions and also via national networks allow for innovative ideas to be evaluated and outcomes shared.

• Specialist evaluation tools from independent assessment teams e.g.ECRI are used to give wider specialist knowledge to support any specific evaluation

NHS Procurement

Innovation

• Clinical Trials are regularly used to establish value in terms of quality and product use

• Clinical procurement specialists liaise with suppliers and Trusts to ensure effective clinical trials are delivered.

• Best practice is shared across regions where one Trust’s experience of product usage is used to demonstrate effectiveness to other Trusts.

• Clinical networks share outcomes of clinical trials and offer advice to ensure products are used in the most effective way.

NHS ProcurementNHS Clinical Reviews take the following factors into account :

• Technical properties and performance

• Safety for patients and staff

• Effectiveness

• Economic factors

• Acceptability to patients and clinicians

• Risk

• Opportunity for standardisation

• Impact on market /competitiveness

• Impact on hospital infrastructure/processes

• Manufacturer’s reputation and training

• Supplier’s capacity to supply

Collaborative Procurement Hubs

Quality

• ISO Quality assured procurement organisations operate within the NHS with quality approved processes and procedures

• Specifications outline statutory and required product and service specifications

• Clinical experts evaluate clinical performance and technical properties.

• Clinical trials demonstrate ease of use and other practical product features

• Once Quality is established, economic factors come into play and the best value product can be selected.

Meeting The requirements For Innovation, Quality and Cost via a Procurement Hub Category Management Approach:

The Hub Approach

Quality

Statutory Requirements

Safety

Technical Innovation

Clinical evaluation and expertise

Standardisation

Suppliers given increased access

to NHS Trusts

Cost Effectiveness

Deliver best value via structured evaluation

Evaluate both product and process

cost

Deliver Economies of scale

Delivering value via a Category Management ApproachTo Procurement and Supply Chain Management:

• Market facing

– Evaluating innovative ideas from industry

• Whole life cost

– Including procedure cost, infection rates, training costs in evaluation

• Supply Chain Management

– Reducing stock levels and ensuring efficient routes to market

• Sustainability

– Evaluating sustainability impacts and delivering value to the regional economy and environment

The Hub Approach

The Hub Approach

The Category Management approach offers innovative solutions that deliver value to Trusts, Patients and the Community.

– Comprehensive evaluation of product and process– Sustainability impacts included in evaluation– Patient outcomes key to clinical categories– Broad impact assessment of corporate categories to ensure

reduced use of consumables– Energy efficiency– Transport and logistics costs– Disposal Considerations

Total Acquisition Cost Is key To Decision Making Process

The Hub Approach to Purchasing

A new integrated approach to procurement that adopts the right approach in the right circumstance…

Tactical ProcurementGeneral category work undertaken by category that utilises a range of techniques (tenders, rebates, discounts, etc) to generate savings from category areas.

Strategic SourcingLarger, more encompassing strategic projects that drives to fully understand the cost structure of key products and markets to leverage greater benefit across the full breadth of the supply chain. Undertaken by Category Leads.

Service Re-DesignActivities that are not restricted to specific categories, but range across a specific service delivery that is usually cross-functional and multi-categorised. These involve more radical process re-engineering skills and approaches, have a wider service and quality impact, and measures benefits more holistically than just cash-releasing.

Some Definitions : What do we mean by Strategic Sourcing

The Chartered Institute of Purchasing & Supply define it as “ satisfying business needs from markets via the proactive and planned analysis of supply markets and selection of suppliers with the

objective of delivering solutions to meet pre-determined and agreed business needs”

Some Definitions : What do we mean by Service Re-Design

Service Transformation

Adopting principles such as continuous improvement and lean thinking to the NHS.

Working across categories and functions to improve patient processes and eliminating waste.

National Initiatives

Defining the contribution that procurement can make to initiatives such as:• 18 week Patient Pathway• The Efficiency Map• Integrated Service Improvement Programme

Defining a role where procurement can contribute to What does this mean in practice?:

• New skills for procurement team• New objectives for the organisation – not just about cash-releasing savings• Getting the NHS to accept that procurement has a role to play• Persuading trusts that this is a valuable contribution • Driving a real high level team activity across category and clinical teams

Collaborative Procurement Hub Approach

The new approach to category management involves far greater inter-action between the central category teams and local purchasing and local operations. In collaboration, we develop single business-wide strategies for all categories that will encompass all areas of the business.

LocalContracts

Regional(Hub)

Contracts

National(PASA)

Contracts

National (PASA) Contracts are designated “National ” by:Agreed national contracting – i.e. waves 1 -3Existing favourable national contract

Regional (Hub) Contracts are designated “Hub” by:Strategic Placement – Items nominated for Hub negotiationConsortium Wide ProjectsMajor tendering activities

Local Contracts are designated “Local” by:Strategic Placement – Consortium wide arrangement is not

appropriateWhere best expertise lies locallyDevelopment of local staff

LocalContracts

Regional(Hub)

Contracts

National(PASA)

Contracts

National (PASA) Contracts are designated “National ” by:Agreed national contracting – i.e. waves 1 -3Existing favourable national contract

Regional (Hub) Contracts are designated “Hub” by:Strategic Placement – Items nominated for Hub negotiationConsortium Wide ProjectsMajor tendering activities

Local Contracts are designated “Local” by:Strategic Placement – Consortium wide arrangement is not

appropriateWhere best expertise lies locallyDevelopment of local staff

Business WideStrategy

Contracting Matrix

The Business-wide strategy sets the approach

“Contracting” is shared – market testing / tendering occurs at the most appropriate level – centrally for where value can be leveraged – locally for local needs

The structure for this is communicated on a category-by-category basis in the contracting matrix.

Operations functions support compliance and uptake

The Hub Gateway Process

MOBILISATION

1

BASELINE

2SELECT SOURCING

STRATEGY

3

SELECT SUPPLIERS

4

IMPLEMENTATION

5PERFORMANCE MANAGEMENT

6

Identify critical trusts and key stakeholders

Engage key stakeholders Select appropriate OJEU

procedure Start to identify /

understand current sourcing group baselineVolumesPricingContractsPoliciesSpecificationsForecasts

Conduct supply market analysisMarket segmentationCompetitive situationSuppliers

Assess current sourcing practices

Strategically segment the sourcing groupBusiness impactSupply market

complexity Analyse alternative

sourcing strategies Select appropriate

sourcing approaches and techniques

Calculate potential savings against established baseline

Generate potential supplier master list

Develop formal communication plan to inform suppliers of OJEU notice

Post high-level OJEU notice

Create Pre-Qualification Questionnaire (PQQ)

Issue PQQ to suppliers signed up in SID (Supplier Information Database)

Screen returned PQQs against developed evaluation criteria

Establish supplier short list

Completion of Baseline

Establish formal engagement strategy

Assess for e-auction or other tender route

Conduct pre-tender clarifications

Conduct ITT process utilising best practice frame agreement

Analyse supplier responses against developed evaluation criteria/weightings

Perform selection of supplier(s)

Finalise agreement

Create transition/ implementation plan

Begin internal hand-over process into trusts

Consider organisational implications and required changes

Create new processes and procedures

Monitor sourcing results Identify supplier issues

and carry out mitigation actions

Develop processes and procedures to track and measure savings and contract compliance

Develop processes and procedures (KPIs) to continuously benchmark supplier performance

Develop processes and procedures (KPIs) to monitor supply market conditions

Conduct on-going category management

1 2 3 4 5

Collaborative Procurement Hubs

Breakthrough Technologies

• Procurement teams generate structured business cases to outline cost/benefit analyses and risk assessments related to new technological advances

• These are used by trusts to make well informed clinical and commercial decisions in relation to new product introductions where breakthrough technologies are involved

• These may be clinical or non clinical technologies

• Service redesign or changes in supply route as well as product and commercial issues may be included in any business case assessment

Integrated Approach

The key to success lies in integrated procurement

Best outcomes are achieved within a receptive culture where appropriate stakeholders, buyer & supplier

work together.

The team sustains commitment to a co-created common purpose, goals and values for which they hold themselves mutually accountable.

Advantage West Midlands Partnership

HPC is committed to balancing the cost/quality and innovation conundrum

– Fostering a culture within the organisation which encourages innovation

– Recognising that innovation doesn’t always equal cost increases

– Investing in clinicians within procurement

– Developing partnerships to foster innovation

Advantage West Midlands Partnership

Current activity

• HPC are working in partnership with the Advantage West Midlands Medical Technologies Cluster Programme 2006-2008 (Single project)

– Promoting Midlands businesses in association with the Dept for Trade and Industry

– Aim is to improve interaction between NHS and SME’s in the region

– Long term planning and development of innovative solutions

Advantage West Midlands Partnership

To encourage innovation HPC

– Supports the development and introduction of innovative products into a healthcare environment

– Supports the introduction of more eco friendly designs in products and packaging

– Improves energy efficiency via design

– Reduces waste via design and process improvement

Advantage West Midlands Partnership

Current projects:Company Project Description Status

ST Solutions Ltd

Computerised Cognitive

Behavoural Therapy software developed by local supplier -

NICE approved.

Recommended for use with people with

Anxiety and Depression. Treatment currently delivered by face to face

therapists.

Working in partnership with CSIP to pilot this opportunity with two

commissioners

Safe Surgery Systems

Radio frequency identification

(RFID)

Tagging to improve patient safety and

theatre utilisation

North Staffs working group

initiated.Stock and asset management also being

considered

Extrion Data visualisation tool

Combines data from other electronic

systems to create a visual output

Small sample projects initiated

across HPC

Inventor - EInventory and stock control system

This system can be used as a cabinet or as a weighing system used on racks

Trials of the system being set up for RSH Theatres

E-Medix Opthalmic Knives UK manufacture of opthalmic knives

Supplier has gained sufficient NHS knowledge to tender for national

contracts

JuddOrthopaedic saw blades and burs

Currently supplies some trusts within HPC with saw blades and burs

HPC are currently reviewing

orthopaedic consumables as part of workplan.

365 Healthcare Theatre Drapes and Gowns

Have trialed products with Trusts in

liaison with HPC

Recently Included in National

Contract for drapes and gowns

Summary

NHS Procurement Processes are structured to support new technologies whilst ensuring that patients are not exposed to undue risk

– They do this by evaluating products on their merits

– They establish appropriate costs versus benefits– They use clinical expertise and best available

evidence to support decisions– They deliver best price whilst maintaining both

quality and opportunity for innovation

Summary

Discussion

Thank youfor attending