Department of Health report reveals NHS value for money failures

Department of Health report reveals NHS value for money failures


On 5 August 2013, the Department of Health (DoH) announced an ambitious programme to deliver cost reductions of £1.5bn by 2015-16 and to install a framework for world-class procurement. To put the statement in context, £1.5bn is equivalent to about 20,000 nurses – a valuable prize.


The report addresses procurement by NHS trusts (essentially hospitals). For the first time, we have a reasonable idea of where the £20.6bn expenditure goes. About half is spent on medical supplies and services, including drugs. Only £300m goes on outsourced medical care; £2.7bn goes on agency staff and consultants; £3.3bn is premises related, and £2.3bn is spent on non-medical supplies and services.


Where's the value?


So why has the NHS failed to secure value for money? Firstly, inadequate collaboration between trusts is to blame. Secondly, a reluctance to standardise clinical products. Finally, many trusts have only limited procurement capability and capacity, and the procurement staff may have insufficient authority. The DoH has tried various approaches to resolve these issues and collaboration is increasing through the use of procurement partners, collaborative hubs, the government procurement service and the DoH commercial medicines unit. Together, about £6bn of expenditure is channelled through them.


This leaves some £14bn of procurement spending where trusts are often fishing in the same supply pond and competing with each other for the attention of suppliers. The department has plenty of evidence that this disjointed approach results in trusts frequently paying too much for products and services.


What's the answer?


The report sets out several remedies. Poor data remains a problem, so the DoH will mandate a common coding system to ensure good quality data is available to take strategic procurement decisions and identify areas for savings. There will be a programme for managing key suppliers. The initial focus will be to release cash quickly, but then work together to take waste out of the system and smooth the pathway for innovation. There will also be a price comparison database and the NHS will work with NHS Supply Chain.

Longer-term improvement will be monitored by a "procurement development oversight board", chaired by a minister for procurement, and a delivery board to be chaired by a "procurement champion" from the private sector. Additionally, procurement networks will be developed at regional and trust level, and the NHS will invest heavily in a centre for procurement development in order to create a community of world-class professionals.


How will it be measured?


Procurement savings can be difficult to measure and are often subjective. An alternative measure is the number of additional NHS personnel that can be employed without increasing NHS costs. Though any increase in staffing will also stem from other efficiency initiatives, if the rise is large enough there can be no doubt that better procurement will have contributed to the result. (There may, however, be a financial windfall for the NHS in the next few years as patents end and common drugs become cheaper.) I would have liked to see greater emphasis on hospitals teaming up with each other and with other public sector organisations, to create joint very powerful procurement teams for places such as Manchester. This should be of benefit to smaller trusts.


A national centre of expertise for major and complex contracts and management of certain markets could provide much benefit. The risk – ever present in the public sector – of investment in personnel resulting in a shift from delivering value to job preservation must be avoided. Overall, however, the new strategy should provide the foundation for the transformation that is needed and deserves strong support.

The Guardian, 23rd August, 2013

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