interviews

‘We’ll never get £22bn savings by driving Down the Cost of Rubber Gloves’

Lord Carter of Coles, chair of the NHS Procurement Development Delivery Board, tells NHE’s David Stevenson that delivering efficiencies through procurement will come down to a variety of metrics, including having good specification and an effective cataloguing system.

Last year when the Department of Health’s ‘Better Procurement, Better Value and Better Care’ report was published, health minister Dr Dan Poulter said: “Trusts need to find over £1.5bn of procurement efficiencies over the next three years.” 

Shortly afterwards the Department named Lord Carter of Coles as its ‘procurement champion’ who would lead the charge on this work through the NHS Procurement Development Delivery Board (NHS PDDB). 

When NHE spoke to Lord Carter for our November/December 2014 edition, he said he didn’t want to put a number on the savings until he’d finished the first phase of his work. 

Fast forward a few months, to a new interview with us at the Palace of Westminster, and he told us: “I’ve consistently said I don’t recognise any number that we haven’t produced from the bottom-up.” 

Although the procurement tsar wouldn’t give any specific figures, he was confident that the work, which is analysing data from a cohort of 22 trusts (ranging from leading hospitals in the Shelford Group to district general hospitals up and down the country), will produce some. 

“What we did in getting the cohort together was take a range of hospitals in terms of status, complexity and geography,” said Lord Carter. “Last time I described where the money went in the NHS. So in the hierarchy it goes: workforce costs, pharmaceutical costs, medical devices, general supplies and property costs. They are the big ones. We are trying to understand where the money is spent.” 

Agency staff and rotas 

Lord Carter identified a big issue with temporary labour, but he noted that roughly 35% of the wage bill goes on nurses and care assistants on the frontline, another 25% goes on doctors, about 14% goes on management, the rest on technicians and others. 

“With the help of the cohort, we’ve been looking at the productivity of staff across those areas, and of course there are differences,” he said. “Some are explicable and some aren’t. It is a complicated system, and what I don’t have is the international comparators. So I don’t know, for example, what is reasonable in terms of management elsewhere, and that includes everyone – the Department of Health, the lot.” 

However, throughout February the procurement efficiency team worked with the cohort to collect nurse rostering data. During the month, the team visited six trusts to understand the process in more detail. The visits included trips to trusts with an e-rostering solution and those without to identify and share good practice. 

“The minute we asked for staffing details, we noticed a great improvement in the tightness of rotas, and that is because people knew we were looking at them,” said Lord Carter. 

“People think if it is inspected you’ll value it. But the data we’re getting, and we’ve been clear about this from the start, is not being used to micro-manage the trusts.” 

Conversation not criticism 

The information will be shared back to trusts in April. “Then, with them, we’ll be having one more big data pull and we will be expanding the cohort from 22 to 32,” he said. 

NHE was told that the NHS PDDB will then have a discussion with trusts about the findings; as no two trusts are the same. 

“If you have a single-site, new-build hospital without a PFI and a multi-site Victorian hospital with a PFI, the real estate costs are going to be completely different,” Lord Carter noted. “It is no good saying your property costs are too high. However, if you have two identical hospitals and one of them is burning 40% more power than the other, then you might reasonably say to them maybe that doesn’t look so good, and efficiencies could be made and we should have a look at it.” 

Lord Carter, who is the UK head of US-owned healthcare firm McKesson, added that on a recent hospital visit he was shown an antiquated boiler. He said: “Approximately 10% of their non-pay cost was on oil, and it had always been there, but no-one had ever gone back to the basic question: why is this so high, compared with something else? The minute somebody said this, they said ‘of course we’ll do something about it’.” 

Although the Labour peer says there have been variances found across trusts, the help and feedback his team have been receiving is outstanding.

Trusts central to the process 

The key to how the work is progressing is down to the relationship with the trusts, he said. “We’re not here to tell the trusts what to do. My philosophy is that there are many good people in the trusts. We have some extraordinarily run hospitals, as good as anywhere in the world; the challenge is, why can’t most of the hospitals be like that?” 

He added that all the NHS PDDB is trying to do, in a detailed manner, is identify where some efficiencies can be made. 

“I’m clear that I don’t want to use this information and it be locked in a chamber, I want people to look at it and reflect,” he said. 

e-cataloguing 

When NHE discussed Lord Carter’s work back in late 2014, he stated that e-cataloguing would help drive forward efficiencies and this has not changed. 

“One of the things we’ve failed to do is aggregate demand. You’ve actually got to get people to comply to do it. In many areas we’re duplicating what is being done and it is an absolute field-day for consultants to go from one trust to another selling cost-improvement programmes that often don’t get actioned,” he said. 

Lord Carter added that e-catalogues are central. “Otherwise how do you drive compliance if you can’t control how people order? How do you reconcile delivery notes and part orders?” 

He also believes the NHS needs to be much clearer in specifying what it buys and having a product code for it to which manufacturers respond. There is a big exercise around this, he noted, but admitted this work will be gradual. 

Asked how the government’s eProcurement strategy will help drive efficiencies and standardisation, Lord Carter said it is “years away”. However, when it comes off it will be very good. 

“But in the meantime we’ve got to live and we’ve got to get compliance around what we’ve got and settle for something a little imperfect that actually saves us money,” said the peer, who has always been matter of fact about these issues. 

Pressed further on this and asked if his work had identified a potential bridge, he said: “Not yet. But we have choices. And, hopefully, when you come and see me in June, I’ll be able to tell you more then.” 

Back in November, Lord Carter said the Atlas of Variation was useful as it help give people access to what good prices look like. “But I think all of this only works, in the end, if you build it into an e-catalogue that stops people doing it for reasons which may or may not lead to people buying things cheaper or not. Buying is a complex business, but my own sense is that some people are doing this well and others aren’t.”

EU changes 

On 26 February, the Public Contracts Regulations 2015 came into force, which should broaden the possibilities for NHS bodies to negotiate with bidders during the procurement process and clarify how to conduct market consultations before going out to tender. 

Lord Carter said: “I haven’t really got to the interaction with suppliers yet. What I’m keen to do is understand the quantities and price variations because it is only if we arm our procurement people with these that they have a meaningful debate. 

“I often say, if only I had a pound for every procurement person who told me they had the cheapest price from some of the major producers. They can’t all be right!” 

When it comes to prices, he added that there is always a differential rising from quantity and where it is delivered. “For example, if you have a pen you can go to Ryman and get it for price X, but if you want it delivered to the ward it is a different price. 

“Like-for-like first of all in the specification is really important,” he added.

Lord Carter noted that there are Framework Agreements used in the tender process, but he is more of an advocate of running big bids for long-term contracts, which often have in them a caveat for technological change. 

“So, I might say I’ll buy all my X devices from you for three or five years, I’ll pay this price and you can expect these volumes,” he said. “However, if someone comes out with something that is technologically much better then I’m afraid I won’t buy them. And I think that is really fair, people understand that because you want your incumbent vendor to keep on innovating. 

“But the question is how do you organise that? Do you want a vibrant market? What are the role of hubs? What I would say is that we need to be much clearer on a national specification and we need to carry clinicians with us to support these things. We need a more limited list.” 

Simple metrics 

Lord Carter noted that there has always been a problem for generating any metric to get a valid comparison between different hospitals, especially with different levels of acuity and geographies. However, he added that where the NHS is leading is with case-mix adjusted benchmarking. 

But he wants to simplify areas such as specification, price-stability and a very important issue that has come out of the research: materials management.

“I was somewhere the other day where they had one of the lower prices for gloves, but they appear to use twice as many as the same cohort,” he said. “So, how do you manage things at the ward level? What is right? Are staff cost conscious? Are packs arranged properly? Does stuff go out of date? 

“A major problem: outdated stock. So are you running your inventory correctly? Is it turning over, are you using it? Are you making sure it is used? One has to look at this overtime.” 

Five Year Forward View 

The NHS PDDB brings together relevant stakeholder groups, including the NHS Confederation, NHS Providers, the Cabinet Office, Monitor, the NHS Trust Development Authority and Public Health England, along with the DH and NHS England. 

Lord Carter noted: “The board is wonderful because it brings a range of practical experience.” 

Asked how his work fits in with the Simon Stevens’ Five Year Forward View, which aims to deliver £22bn of efficiency savings by 2020, he said: “We have to start on the process and say we can do this much now, and in 2016-17 we can do this, and if we all do it we might reasonably expect this in 2018-19. 

“[Stevens’] challenge calls for a 2-3% productivity increase. Well if you have £120bn of revenue, 2% is £2.5bn a year, but that is the first year. You then have to find the same, which is larger than your base, the following year. By the end of the fourth year you should be saving £10bn compared to year one. That is why it is hard. No-one can turn around and say we can take £10bn out of here, part of our culture is tremendous but part of it needs to change when it comes to how we spend money. 

“We need to prove to trusts that the efficiencies are achievable. But we’ll never get £22bn by driving down the cost of rubber gloves.” 

NHE was told that there are some “easier areas” where trusts can make savings. He highlighted the government’s recent NHS Energy Efficiency Fund, for example.

“We all know that if you put LED lighting in and build combined heat and power plants, you can substantially reduce your operating costs,” he said. “Those are things we might be able to help people do straight away. You can only do that once, but later on you can go into stuff which is more complex. You can go into workflow, for example, and whether trusts are organised correctly.” 

Collective buying

Another area where Lord Carter feels some traction could be made is through collective buying, but he realises this is not an easy challenge to overcome.

“Because we have a relatively high degree of autonomy, the only way people are going to buy collectively is if there’s good specification, lower price and good delivery,” he said.  

“That is like a vicious circle, but you have to start somewhere. What we have to do is work hard at finding out how to aggregate demand to drive the price down to ensure it is the best proposition for all the bodies – and why would you do it any other way.” 

Although the work of NHS PDDB has been done somewhat under-the-radar, Lord Carter gave an update talk recently at the ‘NHS procurement: better, simpler, smarter’ event, and addressed the London Procurement Partnership community. 

He said: “I didn’t want to say anything before that, because why would you say anything until you know what you’re talking about?” 

However, by June, he is confident that the work he is carrying out, with the help of the cohort, should “allow us to get some sense of the prize”.

The cohort of 22 trusts are:

 Leeds Teaching Hospitals NHS Trust

• Imperial College Healthcare NHS Trust
• Central Manchester University Hospitals NHS FT
• University College London Hospitals NHS FT
• Cambridge University Hospitals NHS FT
• Royal Free London NHS FT
• Mid Yorkshire Hospitals NHS Trust
• Portsmouth Hospitals NHS Trust
• Northumbria Healthcare NHS FT
• Plymouth Hospitals NHS Trust
• East Sussex Healthcare NHS Trust
• Buckinghamshire Healthcare NHS Trust
• Bolton NHS Foundation Trust
• Mid Essex Hospital Services NHS Trust
• University Hospitals of Morecambe Bay NHS FT
• Ipswich Hospital NHS Trust
• Salisbury NHS FT
• North Cumbria University Hospitals NHS Trust
• Hinchingbrooke Healthcare NHS Trust
• University Hospitals Birmingham NHS FT
• Salford Royal NHS FT
• Countess of Chester Hospital NHS FT

Tell us what you think – have your say below or email [email protected]