New NHS “towers” will revolutionise procurement, so suppliers need to be ready, says Oli Hudson, content director of Wilmington Healthcare
Reducing variations in prices different NHS trusts across the country pay for the same products and services is an essential element of efforts by the health service to reduce costs and improve efficiencies within its vast and complex supply chain.
Lord Carter’s report, Operational Productivity and Performance in English Acute Hospitals: Unwarranted Variations, called for an efficiency metric for NHS providers. This has resulted in a major initiative aimed at improving patient care by reducing unwarranted variation in expenditure and efficiency across NHS trusts, called Getting It Right First Time (GIRFT).
To bring about this standardisation in prices, the NHS has introduced 11 new procurement category towers which are expected eventually to manage around 80 per cent of its purchases, according to the NHS Long-term Plan. The aim is to save the NHS up to £1.4 billion a year by 2020-21. The programme has saved a cumulative £344 million so far and is on course to deliver the total £2.4 billion in savings, according to a forecast in February by government procurement expert Jin Sahota.
But what are the challenges it faces, and what new risks and opportunities does it present to suppliers? There are a number of problems to consider. One of the most significant barriers to success is that trusts work with their suppliers in a variety of different ways. Take stents, for example, some hospitals will have service contracts, some will have rebates and others might use discounts.
The implications of integration are immense, as are the opportunities for suppliers ready to engage with this new procurement landscape
Nor are trusts required to procure via the new towers, he points out, adding some have already complained that centralised NHS purchases can actually increase costs. Meanwhile, some products span a number of towers, which prevents coupled discounts. Although purchase price index and benchmarking is the principal means of reducing price variation, the new towers often have to correlate with other datasets, such as direct hospital purchasing records and HES (hospital episode statistics) procedure counts, to ensure accuracy and consistency.
Another problem is the vast range of products the NHS can choose from. There are more than 400 different stents. Reducing this range to around half a dozen main lines is very difficult. When evaluating products, clinical groups will be looking at best-practice scenarios as defined by NHS RightCare, which maps out patient pathways and measures the cost of optimal compared with sub-optimal care, while also taking into account GIRFT.
Delivered in partnership with the Royal National Orthopaedic Hospital NHS Trust, which hosted a pilot project, and NHS Improvement, GIRFT will cover at least 35 surgical and medical specialties. Given that the products it endorses will be promoted as best practice to other trusts around the country, medtech companies need to market themselves effectively to ensure their products and services end up on the GIRFT prescribed list.
Although consistency in pricing is the primary goal, the towers will be incentivised to reduce total spending within the whole NHS. To understand how this can be achieved, they must engage widely with clinicians involved in different stages of the care pathway to see, for example, how an innovative complex abdominal wall repair product might be more expensive to buy, but could achieve significant cost-savings in the long run if it required fewer medical interventions further down the care pathway. Again, those in the medtech industry need to be part of this conversation.
When a whole integrated system is involved in purchasing, it can realise the benefits of the savings for reinvestment within the NHS transformation agenda. Procurement teams and integrated care systems that look at the wider implications of using some products are only just starting to integrate with each other. However, as this process picks up momentum, the implications are immense as are the opportunities for suppliers ready to engage with this new procurement landscape.
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