The NHS is under increasing pressure to achieve greater efficiencies, with tighter resources, in the face of budget constraints and the rising dependencies of an ageing population.

Add to that the revelation in the Five Year Forward View that there is an identified £22bn annual funding gap. To continue offering the same level of service — free at the point of care — in 2021, NHS leaders must deliver hugely significant efficiency and productivity improvements.

In a recent attack on NHS procurement by former UK health minister Dan Poulter, in a column for the Mail on Sunday, he stated that the NHS was being ‘ripped off’ and could save £2bn a year if buyers were more diligent when cutting deals with suppliers. “Unfortunately, the sad fact is, too often NHS buyers haven’t got a clue if they are overpaying, because firms are doing all they can to keep their prices secret. In short, our hospitals are getting ripped off left, right and centre. And with £18 in every £100 you pay in tax being spent on the NHS, it means we’re all getting ripped off.”

Since the Five Year Forward View was published, the United Kingdom has voted to leave the European Union. While the full effects of this decision are unclear, the pound’s devaluation presents both significant challenges and potential risks for a system already grappling with a huge funding gap.

What impact could Brexit have on the NHS?

A weakened pound may lessen the attractiveness of the UK for overseas healthcare and social care workers, potentially exacerbating already high vacancy rates for NHS roles (5 to 7%). It could also increase costs for healthcare providers purchasing goods from overseas suppliers. With an alleged lack of knowledge on pricing in the supply chain from NHS buyers, an alleged culture of secrecy around pricing from suppliers and the looming impact of Brexit and its associated projected shortfall in funding, how is the National Procurement Transformation Programme going to address unwarranted variation in product cost and usage across the NHS?

Front-line NHS staff often have a range of ways in which to purchase a single, patient-critical product. This fragmentation leads to a wide variation in both the products used on patients and their cost, as well as in the overall efficiency of the NHS supply chain. In an independent report by Lord Carter of Coles entitled “Operational productivity and performance in English NHS acute hospitals: Unwarranted variations”, evidence from a sample of 22 Trusts showed that they purchased “20,000 different product brands, [and] more than 400,000 manufacturer product codes” in just one year.

This ease of access to multiple purchasing channels is a significant barrier to maximising value across the NHS. At ERA we know the value that can be achieved in terms of both cost and efficiency by simplifying these types of options and reducing product variation and all the admin that goes with it. Consultants, often responsible for being finicky about which brands they use when the specs are identical, must be made to be more flexible and adhere to limitations where no risk to patients exist.

While a targeted, innovative transformation in the supply chain at a national level would present a unique opportunity, helping to reduce price variation, deliver savings and help improve capabilities, something needs to be done at a local level to help improve the lack of knowledge and develop high-performing procurement teams.

The expertise found in an independent procurement consultant such as ERA can help drive these efficiencies, assist with supplier knowledge and afford a greater transparency to the supply chain. At times like these, the NHS cannot afford to lock innovative and able suppliers out of the supply chain by binding their hands with red tape.

Key vehicles to offset the potential risks of Brexit in the healthcare market include consolidating purchasing channels and driving faster innovation. The NHS should therefore seek to:

  • Reduce product variation: through sustained rationalisation and standardisation exercises that are not subject to product creep.
  • Streamline Trust purchasing: freeing up capacity for procurement teams to maximise value elsewhere through strategic, rather than tactical, procurement initiatives.
  • De-fragment the supply chain: by driving consolidation in purchasing channels, leaders can remove unwarranted variation in both the products used on patients, and their costs, from the system.
  • Streamline innovation: driving and scaling innovation in the NHS is not easy. Consolidating purchasing channels makes it easier for innovators to do business with the NHS, providing them with easier market access and increased visibility and exposure.
  • Enable continuous improvement: true efficiency is not achieved overnight, nor by a single programme. Whilst consolidating purchasing channels and streamlining access to innovation will help, these should be combined with a rigorous and disciplined continuous improvement plan.In an age of uncertainty, the NHS will find it harder to fulfil many of its strategic initiatives that have been identified in the Five Year Forward View. Bed shortages, potential junior doctor strikes and prolonged waiting times will provide serious distractions from implementing innovative transformation opportunities that will drive improvements.

So, what is possible in the short to medium term? Savvy organisations are realising that smart procurement can help. But how? Imagine if every NHS procurement department could, as the charity Sue Ryder has done in collaboration with ERA, wipe more than 20% off much of their indirect cost base.

Those kinds of savings could make an incremental difference. Recognising the strategic value of procurement can offer more than cost savings; it can deliver added efficiencies that could indirectly drive better patient outcomes. 63% of respondents to a recent survey indicated that they believe they would benefit from using external resources to help in their procurement department by delivering the expertise and depth of market knowledge that their teams simply do not enjoy.

The long-term effects of Brexit are still unknown. But taking concrete steps to offset a weakened pound and increased pressure on public finances, and to improve your procurement function, the NHS can begin to limit the potential risks. Teaming up with ERA could help you to stop getting “ripped off” and instead ensure you are committing to improving purchasing practises, and maximising value in the NHS.

For more information, contact us.

Article by: Glenn Kenworthy