Transcript NHS procurement: the challenges ahead John Warrington Deputy Director, Policy & Research [email protected].

NHS procurement: the challenges ahead
John Warrington
Deputy Director, Policy & Research
[email protected]
Current landscape….
Procurement, Investment
& Commercial Division
National
Regional
Local
Regional Commercial
Support Units
Collaborative
Procurement Hubs
x 8, and LPP
Trust procurement teams
Drug Tariff
Drugs
£17m (24%)
National spend
(FT and Non-FT)
Drugs
£3,745m
£3,745
Clinical supplies
and services
£23m (30%)
Clinical supplies
and services
£4,492m
£4,492m
Who is influencing what?
Non Clinical supplies
and services
£5m (7%)
Non Clinical supplies
and services
£1,178m
Premises
£12m (17%)
Premises
£2,450m
Transport,
establishment
£5m (7%)
Transport,
Establishment
£1,235m
Temporary/Agency
Staff/Consultancy
£7m (11%)
Temporary/Agency
Staff/Consultancy
£2,592m
Other
£3m (4%)
Other
£834m
Total £71m
Total £15,526m
Third party influencer
(and % of category covered)
DH CMU £1,200m (32% of cat)
CPHs £ minimal
NHSSC £1,000m (22% of cat)
CPHs £500m (11% of cat)
NHSSC £400m (5% of cat)
CPHs £500m (6% of cat)
l £8,289m
Typical FT (09/10 accounts)
OGC/BS £2,400m (29% of cat)
So approximately 40% of an FT’s
non-pay spend is channelled
through third party procurement
organisations – the remainder
managed by the Trust itself
A shifting landscape….
• NHS Supply Chain – 6 more years
• Buying Solutions – caught by ERG
• CPHs
– 2 served notice
– 3 formed an alliance (EoE, SC and SEC)
– 1 moving to SBS
– 1 trying to sell itself to private sector
Liberating the NHS…..
• Putting patients and the public first
• Improving healthcare outcomes
• Autonomy, accountability and democratic
legitimacy
• Cutting bureaucracy and improving
efficiency
Huge changes….
Key issues
• GP Commissioning Consortia can ‘buy in’ support
• Ambition to create the largest and most vibrant social enterprise
sector in the world – not privatisation but independence…
• DH to be more hands off
• …. in the meantime, need to release up to £20bn of efficiency
savings by 2014 to meet the current financial challenge and future
costs of demographic and technological change (QIPP)
Procurement in central
government
• Drive to save £6.2bn this financial year
• Efficiency and Reform Group
• Head of Government Procurement (John Collington)
• Sir Philip Green
• Focus on:
– Centralisation of commodity procurement (energy,
telecoms, IT commodities, professional services,
advertising/media/comms, office supplies/solutions, print services,
travel, fleet management)
– Cutting the costs of existing government contracts
– Simplified and standardised processes (lean)
– Transparency
So what does all this mean
for NHS procurement?
More questions than answers!
• How will GP Commissioning Consortia secure their procurement skills?
• Will more independent providers want to take greater control of their
own procurement?
• Will we see a market emerge for outsourced procurement and logistics
services?
• Will we see more aspects of procurement be outsourced (e.g. internal
processes and logistics)?
• Is there a danger this will lead to greater fragmentation of procurement
across the NHS, and consequently sub-optimal VFM?
• …but in meantime NHS procurement is expected to deliver £1.2bn
savings as part of QIPP
Health budget is protected but….
….. because of growing demand and pressure on staff and
running costs…….
“We should also plan on the assumption that we
will need to release unprecedented levels of
efficiency savings between 2011 and 2014 –
between £15 billion and £20 billion across the
service over the three years.”
(David Nicholson, CEO NHS, ‘The Year’, May 2009)
The Quality, Innovation, Productivity, Prevention (QIPP) Challenge
QIPP
• Continues to be endorsed by Ministers
• Emphasised in DN letter
• Regional vs national focus
• Some misalignment between regional and national plans
• Communications launch next month
• 12 National Workstreams:
•
•
•
•
•
•
Long term conditions
Urgent and emergency care
Right care
Safe care
End of life care
Digital and technology vision
•
•
•
•
•
•
Medicines use and procurement
Productive care
Procurement
Back office efficiency
Clinical support rationalisation (pathology)
Primary care commissioning and contracting
National workstream for
procurement
• PICD picked up stream in July
• A number already agreed with Treasury (£1.2bn)
• Getting alignment between national QIPP, regional QIPP,
regional activity and local buy-in will be difficult!
• Our approach has been to do what we can to create the
right environment for better procurement …..but realise
need CEO support at local level
Driving out £1.2bn is already
tough because…..
• Low priority in Trusts – not strategically managed nor does it get
Board attention
• Capacity and capability limitations
• Competing procurement partners – vested interests
• Mistrust of NHS Supply Chain
• Inability to take commitment to markets
• Inability to manage market failures
• Poor internal logistics
• No meaningful management information
• Poor appreciation of value and technology
Is procurement important enough for
Trusts to consider?
•
Typically 30-35% of Acute Trusts’ operating costs are attributable to non-pay
expenditure (i.e. spent with external suppliers)
•
How this money is spent can affect both the financial performance of the
Trust (through seeking to reduce this expenditure) and the quality and
efficiency of the services provided (through purchasing of appropriate goods
and services)
•
In some cases, products used in the delivery of healthcare represent a
significant part of the cost of National Tariffs (the bill of materials) – how
does this affect your profitability?
•
Procurement can also impact on the 65-70% that are staff costs
•
Robust supply chains and logistics are critical to healthcare delivery
•
60% of the NHS carbon footprint is believed to be in its supply chains
•
Is non-pay spend a driver for competitive advantage or not?
•
Tariffs likely to be reduced (and possibly reduced activity) from next
year putting pressure on costs
Views from FT CEOs…
• Acknowledge procurement does not get Board
attention (i.e. more than a CIP spreadsheet!)
• Procurement will be important as money gets
tighter
• Need to get a better grip of local policies
• Don’t like being taken for a ride by suppliers
• Need to tackle difficult medical areas and
engage our clinicians
• Need better information and need to be able to
compare, and market intelligence
• Non-pay spend is not a strategic driver yet – its
more about survival and therefore we should
share information to secure the best prices
• Can see landscape can be better managed to
leverage NHS collective purchasing power but
don’t have visibility of this
Views from FT CEOs (cont’d)
• Don’t know enough about the likes of NHS
Supply Chain and BS: simplify the message
• What is the role of CPHs?
• Acknowledge there is a capability gap: not
sure our HoPs have the capability
• Acknowledge it’s a leadership issue
• Be careful about language and message
• Feels cost/price driven when could be more
strategic: don’t forget innovation!
• Can we have the top 10 things to tackle
now….
• Can we find a link to governance, Monitor &
VFM audits?
What is DH doing to help?
• Developing policy/strategy
• Engaging FT CEOs/NEDs
• Engaging Ministers
• Driving key projects to support the delivery
of £1.2bn
Key PICD initiatives
•
Driving implementation of GS1 and developing catalogue solution for use by
the NHS
•
Drive better value from NHS’ relationship with Buying Solutions
•
Working with Supply Chain as preferred partner:
– Help NHS to rationalise products and suppliers (consumables to medtech)
– Improve procurement in Trusts through more control and collaboration
(electronic catalogues, brigade demand, more e-auctions, better inventory
management, better back-office functions)
– Deliver more low-cost sourcing (own brand/direct from manufacturer
products)
– Explore more intuitive internet based IT systems (e.g. Amazon)
– Expose irrational supplier pricing through greater transparency and
encourage local competition to drive value for money
•
Innovation and sustainability (iTAPP and P4CR)
Summary…
• Deficit requires procurement to play its part but…..
• …profile of procurement still very low
• …capacity/capability is still limited
• …NHS landscape is changing dramatically
• …’procurement support’ landscape also shifting
• ….Will be no top down strategy – despite move to
centralise civil Government procurement