interviews

Procurement champion: NHS trusts should know what good prices look like

Lord Carter of Coles talks to NHE’s David Stevenson on his first few months as chair of the new NHS Procurement Development Delivery Board, and his ambitions for the future.

In June, the Department of Health named Lord Carter of Coles as its ‘procurement champion’, calling on his expertise to help save money on the buying side to reinvest in patient care.

Prior to appointing the Labour peer, the department set out how it intends to take through a new ‘Procurement Development Programme’ that is “aligned to world-class standards”.

In the report – ‘Better Procurement, Better Value and Better Care’ – the DH announced the creation of the NHS Procurement Development Oversight Board.

The DH said it wanted as its procurement champion a ‘private-sector figurehead’ and in Lord Carter it has one. Having served as chairman of the NHS Co-operation and Competition Panel, the UK head of US-owned healthcare firm McKesson and currently a member of the government’s Efficiency and Reform Group, Lord Carter’s wide-ranging experience was one of the reasons behind his appointment.

At the time, health minister Dr Dan Poulter said: “He will bring a wealth of experience to the NHS Procurement and Efficiency programme, which will help hospitals to cut waste, save money and drive efficiencies which can then be spent on frontline patient care.”

Quantifying issues

Catching up with Lord Carter, the founder of nursing home company Westminster Health Care, NHE asked him how the first few months of his chairmanship have been and what challenges he has identified.

“The first few months have been very interesting: there is no shortage of people identifying issues, as you see in the press,” he said. “The challenge is how to quantify those so they cease to be assertions, but are actually based on fact, and then to try to get a hierarchy of issues – so that we can tackle them one by one.

“Instead of responding to the latest ‘X can buy this cheaper than Y’ example, it should be about building a robust system, which will be very important for the health service.”

Lord Carter, who as part of his role chairs a new NHS Procurement Development Delivery Board (PDDB) to support the Oversight Board, noted that this will take time and currently the team is working through a ‘diagnostic phase’ and is seeing what structures work to help deliver the anticipated savings and results.

The NHS PDDB will steer and deliver the efficiency programme. It also brings together relevant stakeholder groups, including the NHS Confederation, the Foundation Trust Network, the Cabinet Office, Monitor, the NHS Trust Development Authority and Public Health England, along with the DH and NHS England.

The NHS acute sector spends more than £22bn every year on goods and services, which typically accounts for about 30% of operating costs. Drugs and pharmaceuticals (£5.5bn), clinical supplies and services (£4.5bn) and premises (£3.3bn) make up the sector’s largest proportions of non-pay expenditure.

The DH thinks £1.5bn can be shaved off the £22bn spend by 2016.

However, when asked about what savings could be delivered, Lord Carter told us: “The idea is to drive improvement and efficiencies, and it is encouraging. However, I wouldn’t want to put a number on the savings until I’ve finished the first phase of work. It is very easy to pull down a number, leading to a case of ‘speak in haste, repent at leisure’. Instead I’d rather try to get it right.”

Degree of market choice

Lord Carter says that irrespective of the precise changes implemented, it is important that there is a degree of choice in the market. “The idea we’re going to brigade people into one thing is not there, but I certainly think – as you see with the Atlas of Variation – that people should have access to what good prices look like.”

The DH report also outlines initiatives that could help deliver NHS supply chain ‘quick wins’. These include maximising the purchasing leverage of the NHS; identifying how providing long-term buying commitments can deliver savings and working collaboratively to aggregate requirement; and identifying opportunities for product substitution.

Lord Carter said: “There are, across the NHS, some real examples of excellence. I’ve been in hospitals throughout the world, and our best hospitals do things extremely well; the challenge is how we produce a system that lets people learn from that – by using resources in the best way we can.

“That’s what we’re doing, we’re collecting data and going through NHS hospitals – pulling all that information together – and seeing what ‘good’ looks like.”

Past initiatives have looked at specific areas through “sporadic interventions” without delivering any change, he suggested. “Having said that, of course, the DH have been on this for a year and with ‘Better Procurement, Better Value, Better Care’, the issue has been highlighted. I was lucky enough to come into an already moving situation where people in the DH have done quite a lot of good things,” said Lord Carter.

Efficiencies – local and national

He continued: “There are certain things that are highly local, in a sense. For instance, how people manage their workforce – constructing good rotas and ensuring there are the right number of people on wards to deliver patient care, without using agency staff. And there are good examples of that,” he said.

“On a wider national scale you’ve got all the issues around pharmaceuticals, which require a different solution and people are working on that.”

He suggested there are two classes of medical supplier – those that are patent-protected, which have not become commoditised, and those that are relatively commoditised.

“It is about how we, in the latter case, organise ourselves to aggregate demand. And, of course, the very structure of the NHS, with foundation trusts particularly, means there is a higher degree of autonomy. We have to work within that and incentivise people to come together to get a better price.”

The perils of autonomy

Several pilot projects have shown significant savings when organisations come together to procure.

“The critical thing is, how do we aggregate people? Given my comment about foundation trusts, there is no mandation and people have to come together.”

Some have been doing it voluntarily and proactively, of course – the self-selected Shelford Group of 10 leading hospital trusts uses its collective power not only for knowledge-sharing and Whitehall influence, but also for collective buying.

Lord Carter said the Group has been getting “impressive results” already in that regard.

“The issue for us is, how do you push information down locally? One of the issues is specification. How many times do you hear people say: ‘I can buy a rubber glove or pencil cheaper’? But you have to understand what the specification is. Is that pencil delivered to the loading dock or the ward? Do you have to process an invoice to buy it? There is quite a lot of cost in it.

“I don’t want to complicate it, but until we get equal specifications for everything, you can see that there will always be the opportunity for people to make assertions about being able to buy items cheaper.”

Electronic age

Asked about the department’s eProcurement strategy and how support is being provided to trusts, Lord Carter said that it is trying to move towards giving hospitals data in the firm belief that if people know what can be done, improvements will be made.

Some trusts have already started using e-catalogues: “There are a lot of electronic catalogues out there, and I think the question is: do you work around them? Do you displace them? And can you write an interface to let people use their existing catalogues but put some more back-end on it? Those are questions the team are working on and trying to answer.”

‘Collaborations’, whether local or regional, will be vital in driving procurement savings.

“The Shelford Group cuts across regions, and they see coming together as being important partly because they’re buying things other people aren’t buying because of the care they provide,” he said.

Once Lord Carter has carried out the first phase of his work, he said he would be more comfortable to talk about potential savings and figures.

But during his tenure as chair of the NHS PDDB he would like to see the lesser performing hospitals moving towards the performance of the best.

“That would be a great achievement,” said Lord Carter. “The NHS knows how to do it, we just need more of it doing it the best and most efficient way.”

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