01.02.15
Embracing innovation and eliminating waste in NHS procurement
Source: National Health Executive Jan/Feb 2015
Jenny Powell, director of JDP Procurement Services Ltd, discusses the need to embrace innovation and eliminate waste in NHS procurement, in response to the Autumn Statement and Five Year Forward View.
Following the 2014 Autumn Statement announcement outlining the government’s implementation plans for its ‘Five Year Forward View’, the NHS faces increased pressure and a lack of resources – adding strain to an already overstretched service. However, with government promises to try to close the £30bn funding gap over the next five years, including added bonuses for hospitals that prove to be the most efficient, the healthcare system could be fully revived by 2020, it claims.
This revival vision comprises four main pillars:
- Strong economy – ensuring the economy can pay for the growing costs of the NHS and Social Care
- New models of care – changing to models of care that are more suited to an ageing population, with a focus on prevention as much as cure
- Innovation and efficiency – the need to embrace innovation and eliminate waste
- Culture – nurturing dignity, respect and compassionate care for every patient
Though all the pillars hold significant weight, the importance of improved innovation and efficiency should not be underestimated.
In fact, the implementation of an effective spend management strategy will not only be key to assisting hospitals in achieving additional bonuses, but could secure significant savings and fund development for the NHS as a whole.
With this in mind, procurement teams across the health sector should focus on six key areas.
- Measurable procurement targeting
Analysing existing procurement practices and implementing measurable targets, based on opportunities and risks, will quickly establish improved operational, quality and value efficiencies.
For example, consider standardising and streamlining the existing contract management process to relieve those staff who have to undertake such duties in addition to their day job. This will improve operations and cost management, particularly if existing contracts are renegotiated prior to expiry. In this instance, measuring the revised terms against the new ROI will not only show increased value but will also effectively support the efficiency goal.
- Needs analysis
A focus on the initial needs and deliverables of all direct and indirect services contracts allows healthcare providers to take a step back and analyse what services are required in comparison to what is currently being delivered.
Analysis provides the opportunity to source and benchmark alternative supply routes and options, which can result in a significant bottom-line saving. For example, a hospital may be loyal to a historical janitorial supplier that could be delivering the same quality of service for a higher cost than a competitor.
- Supplier rationalisation
Throughout the NHS, consultant preferences drive a huge range of buying decisions for medical consumables and devices. In agreeing rationalised lists of approved products and suppliers, procurement teams will harness greater purchasing power, improve supplier risk management and cut supplier transactional management. Therefore, with improved supplier rationalisation, hospitals will have more control over what they spend, and can proactively support effective spend management.
- Improving stock management and liability
Effective stock management and liability reduction is significant for eliminating waste and improving product holding.
This can be achieved by implementing efficient ‘just in time’ processes, which drive efficiency through every stage of the supply chain. For example, the NHS could save millions of pounds if the right consumables arrived at theatre just in time for the operation to start – eliminating the need to hold stock or take up store room.
As a result, hospitals will see improvements in optimal stock holding, a reduction in ‘out of date’ and obsolete stock and more effective utilisation of large stock space. For increased stock performance, gain-share agreements can also be negotiated for supplier-owned stock holding.
- Improved supplier relationships and gain-share agreements
Improving supplier relationships is significant for developing partnerships and enhancing effective spend management. This can be achieved through the negotiation of supplier agreements, to include mutually beneficial operational and transactional changes and efficiencies.
Examples of such mutual benefits could be cross-range opportunities to bring greater consolidation, innovative incentives and value-add schemes – and, where possible, the implementation of new technologies to allow suppliers to reach target audiences within hospitals.
- Effective project management
Effective project management is vital for the implementation of all procurement processes and changes.
Once all changes have been made, the measurement strategy needs to come into play to demonstrate the impact of each milestone change and highlight how the procurement plan has improved efficiency, innovation and effective spend management.
If all suggested key areas are considered and actioned, NHS hospitals will improve their innovation and efficiency, but also achieve:
- Improved contractual controls and pricing
- More efficient processes and operations
- Reduced, but more manageable supply base and product holding
- Strategic and effective supplier relations
- Engaged stakeholders
- Increased public satisfaction
Though many hospitals are facing extremely challenging times, new government funding should be seen as an excellent opportunity to revive spend management strategies, streamline processes and increase savings.
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