WELCOME

2. WELCOME

4. Session Chairman: Helena FullerChief Operating Officer NHS Yorkshire and the Humber Commercial Procurement Collaborative

6. Can the NHS afford to buy quality? Professor Christine Harland HCSA President, Director, CRiSPS University of Bath School of Management

7. What? Sorry, what was the question?

8. Right Authority Capability Capacity Resource Beliefs Moral or ethical stance Choices Intention Tentative suggestion Can? Should?

9. The NHS…? • Heterogeneity of services • Patients and public are central • Sense of danger associated with secondary care – red, safety is positioned there • Pivotal role of primary care trusts, directed by DH and underpinned by SHAs – commissioning care

10. The NHS…? • The NHS is not an organisation but a confederation of around 600 organisations • Strategic health authorities, trusts, foundation trusts, independent providers, primary care trusts, arms length bodies etc. • MBA style, firm based decision making based on ROI and customer satisfaction concepts and approaches vs. managing in the NHS

11. Afford – a budget issue? £107bn “I’m living so far beyond my income that we may almost be said to be living apart” e.e.cummings

12. Afford – an ethical issue? “My problem lies in reconciling my gross habits with my net income” Errol Flynn

13. Afford – a resource issue? • IPS – established 1932, royal charter 1992 • CIPS – 42,000 members worldwide • NIGP in the US • IFPSM – 200,000 members in 42 professional bodies • HCSA – established 1960, 800 members • Procurement higher education expanding internationally – professions have professors • IRSPP identified international capacity and capability shortfalls in public procurement

14. Afford – a productivity issue? “However, the NHS has failed to generate the relatively modest improvements in unit cost productivity that might have been expected and were assumed by the 2002 review”. “Lack of data makes it impossible to draw reliable conclusions about movements in unit costs in mental health and primary care services” Wanless et al 2007 – Future Health Secured

15. To buy? Or not to buy. That is the question Goods and services spend Commissioning Large capital projects

16. Quality – the NHS’ core principles • The provision of quality care that: • Meets the needs of everyone • Is free at the point of need • Is based on a patient’s clinical need, not their ability to pay

17. Quality – a perception issue?

18. Quality – an evidence issue? “…the development of precise measures is hampered by a lack of routinely collected data on changes in patients’ health status arising from NHS interventions” Wanless et al 2007 – Future Health Secured

19. Quality – a self responsibility issue? The philosophy of the reasonable man underpins our legal system. Should it and does it underpin our health system?

20. Challenges for procurement in health and social care • The NHS – £107 bn, 1.33m employees, 575 organisations • Plurality of provision • Multi-level procurement decisions – national, regional, organisation, team, individual • Regional imbalances in capacity and capability • Huge, heterogeneous spend portfolio – infrastructure and direct patient care • Complex network of stakeholders • Increased choice and patient/ carer involvement

21. NHS procurement levels • National – NHS Purchasing and Supply Agency – Commercial Agency for Health. NHS Supply Chain • Regional – collaborative procurement hubs • Local – trusts • Specialisms – e.g. pharmacy procurement network, prosthetics strategic supply group • Local department budgets • Individuals – purchase cards, budget discretion

22. STAGES OF PUBLIC PROCUREMENT 7 Deliverer of broader government policy objectives 6 Supporter of broader government policy objectives 5 Value for money 4 Accountability 3 Efficient use of public funds 2 Compliance with legislation/ regulation 1 Sourcing and delivering goods and services Stage

23. Drivers of difference in procurement in health and social care • Different procurement decisions need different amounts of resource • Degree of system wide impact – individual, local, regional or national improvement • Different procurement decisions need different types of resource • Degree of health improvement

24. The future for public procurement in health and social care • Spiralling costs and expectations – poor diets, sedentary lifestyles, alcohol abuse, obesity, hypertension, type 2 diabetes, erosion of public health • Improved treatments and cures • Shift towards procurement of health and social care – commissioning • Greater plurality • GPOs and private insurers • Boundary spanning, collaborative procurement • Evidence based procurement • Sustainable procurement • Productive procurement – value in vfm • Efficient procurement – money in vfm

25. The role of academic research • Upholding traditions and standards of research and education • In a modern world, changing business and society through the creation, development, application and dissemination of international knowledge • Thinking about what the questions are…

27. Quality - A Welsh Perspective Mark RoscrowDirector, Welsh Health Supplies

29. Reimbursement for qualityIs it possible? Bob Dredge

30. What is Quality? • “degree or standard of excellence” • Health references to improvements in quality, but not of quality as an absolute • Is quality…safety, outcomes, experiences, based on industry benchmarks or evidence based medicine and new technologies?

31. Reimbursing who? • Primary care through Quality and Outcomes framework (QUAF) • Secondary care through contracts • Tariff based funding covers approximately 60% of income • If outside of tariff are there different drivers?

32. SUPPORTS PATIENT CHOICE Under PbR the money follows the patient TRANSPARENCY Clear link between funding and patient care REWARDS EFFICIENCY Surplus can be reinvested in patient care. PAYMENT BY RESULTS Activity x Price =Income ENCOURAGES ACTIVITY For sustainable waiting time reductions PbR is designed to pay providers based on activity, in order to incentivise productivity and choice. • Historically, hospitals paid by block-contracts rather than on what was being delivered: • little incentive to increase throughput. • no penalty for failing to deliver. • Unable to reflect changing patterns of service provision or patient case mix. • Prospective payment began in 2003/04 • phased in to avoid any destabilisation of the health economy. • sits within the wider context of health & financial reform.

33. Service Improvements • Volume and waiting list achievements • Choice not possible without a fixed price • Tariff as benchmark for Independent sector and others • Cost driven efficiency through the tariff • Restricted (further) meditech and non NICE drugs? • Pay for Performance…see peer reviewed papers on this and wonder how it has got there!

34. Efficiency • Productivity a real issue • 3% Efficiency requirement from Comprehensive Spending Review • Recurring savings/cost reductions still needed to get to fundamental balance despite the headlines. • Crude unit cost reduction welcomed but not sufficient

35. Service and Patient level costing • Micro detail of cost components • Consumable line item costs now transparent • INSERT TABLE

36. Meditec/NICE • New/replacement product entry…OK if cost reducer…possible( but difficult) if pathway cost reducer…near impossible if adds to cost( except if NICE) • Unbundling virtually non existent, but still central policy • Pass through not happened • Will PBC drive this...it should...but are you engaged with it?

37. Normative pricing • Price to encourage activity or service model • Maternity and home delivery in 2008 and beyond

38. Pay for Performance • PbR intended to drive Commissioning on basis of quality and access • P4P “provide an incentive to collect information on outcomes and reward improvements in quality” • Premier Inc model “ being considered to give financial incentive based on performance across a range of relevance indicators with a bonus performance for excellence”

39. P4P • 34 (35) metrics…but 27 process measures • 5 specific clinical services, • Participants had best LOS, unit costs, mortality, complications…but did already! • Mathematical Nov 2006 …40% joined because they thought they would gain $, 20% to stimulate quality • NEJM Feb 2007…Quality improvement range from 2.6 to 4.1% • Bonus range $914 to 847,227, mean of $71,960, but raise issue of transaction costs and who looses to pay gainers • How do you justify payment…absolute or relative, average or benchmark( remember QUAF)

40. Is it possible?Can procurement help? • Yes where it cuts unit costs • Yes if NICE says so • Yes if it cuts pathway costs • BUT pressures of finance balance and SLC are against you! • Look at the big picture!

42. 'Achieving Value for Money – the cost/quality and innovation conundrum' Jonathan Wedgbury CEO Healthcare Purchasing Consortium

43. 10 X 152 X Budgetfor 2007-8: £92 billion of which £6 billion is Capital NHS structure and funding flows as at March 2007 Commissioning National Standard Price Tariff (HRGs) Non-tariff agreements (£22 billion of services) PLURALITY OF PROVISION 148 X Trusts 52 X Foundation Trusts Independent Sector Treatment Centres Private sector Providers of services 1% of budget = Private (10% of elective procedures) 99% of budget = Public

44. THE NHS – Some Statistics • 1.33 million staff • 362 different organisations across England • NHS spending more than doubled since 1997 to £92bn • Drugs bill £8bn • Medical device bill £6bn • Buyer of £17billion worth of goods & services (£6bn medical devices)

45. NHS Purchasing Organisations • National • Purchasing and Supply Agency • OGC-Office of Government Commerce • NHS Supply Chain • Regional • Collaborative Procurement Hubs • Local • Trust Purchasing Teams

46. What Do We Mean By Value? • To The Patient: • Improved Patient outcomes • Reduced infection rates • Efficient Service • Reduced Lead Times • To The Clinician • Reduced Risk to staff • Ease of use • Consistency of delivery • To the NHS • Is it more effective than current procedures • Does it result in lower overall cost

47. But what is ‘value’? • OGC guideline Value for money measurement Nov 2000 describes methodologies for quantifying VFM from procurement activity in central civil government in England as “VFM gains are defined as improvements in the combination of whole life costs and quality that meet the user’s requirements – secured as a result of positive action by staff involved in commercial transactions” • EC contract award criteria (MEAT) - most economically advantageous offer judged on price, quality, delivery performance, risk and overall cost effectiveness OGC November 2000

48. NHS Procurement Collaborative Procurement Hubs • Deliver £270 million savings by 2007 • Improved support for clinicians and clinical networks by increasing their involvement in purchasing • Reduced clinical risk and enhanced patient safety strategies • Stronger partnerships with suppliers through commitment to contracts and a focused route into the health economy • Encouragement for innovation and provision of support for R&D in emerging treatments and technologies • Building a robust, sustainable environment for procurement specialists through improved career structure and enhanced recruitment and retention

49. NHS Procurement Innovation • NHS procurement hubs use in house clinical procurement specialists to support the evaluation of innovative products and services • They are part of and often host clinical networks and committees that offer expertise in specialist healthcare fields • Procurement leads have developed both commercial expertise and specialist knowledge in their areas of Category Procurement • Purchasing teams have visibility of proposed new technologies as they are available in the market place • Expert networks both within individual Trusts, across regions and also via national networks allow for innovative ideas to be evaluated and outcomes shared. • Specialist evaluation tools from independent assessment teams e.g.ECRI are used to give wider specialist knowledge to support any specific evaluation

50. NHS Procurement Innovation • Clinical Trials are regularly used to establish value in terms of quality and product use • Clinical procurement specialists liaise with suppliers and Trusts to ensure effective clinical trials are delivered. • Best practice is shared across regions where one Trust’s experience of product usage is used to demonstrate effectiveness to other Trusts. • Clinical networks share outcomes of clinical trials and offer advice to ensure products are used in the most effective way.