02 May 2018

Less waste, more health: Procurement 101

The NHS spends £9 billion annually on procurement of general supplies and medical equipment, and following Lord Carter’s review into productivity within hospitals across England it has been tasked with identifying hundreds of millions of pounds worth of savings. Since 2000 there have been at least six different procurement strategies for the NHS which has resulted in a mixed bag of outsourced procurement providers, procurement consortia, local collaboratives and local or centralised procurement agreement, such as NHS supply chain or nationally contracted products.

Under the current system 40% of procurement is done through the NHS supply chain and the remaining 60% through local trust negotiations (20%) and hubs (40%).

The latest strategy, known as The Future Operating Model for NHS procurement, hopes to improve the current landscape by mandating the use of established agreements with single national product pricing. It also plans to reduce product variation, improve standardisation, remove duplication of procurement efforts and make significant financial savings through economies of scale. The structure of the model is made up of 11 procurement categories or ‘towers’ (medical and capital). Each tower will be responsible for clinical testing and engagement with healthcare professionals to ensure quality through clinical evaluation and product assurance. 

Medical towers 

  • ward based consumables  
  • infection control and wound care 
  • sterile intervention and equipment 
  • orthopaedics, trauma, spine and ophthalmology 
  • rehab, disabled services, women’s health and associated consumables 
  • cardio and vascular, radiology, audiology and pain management

Capital towers 

  • large diagnostic capital devices, including mobile and consumables
  • diagnostic equipment and association consumable  
  • 3 non medical towers: 
    • Office (already live) 
    • food 
    • NHS hotel services 

These towers will be supported by dedicated divisions for logistics, transactional services (ie invoice management) and ICT systems. 

You may be asking why trusts will buy into this new national system when currently only 40% of procurement is done through NHS supply chain. Well, currently trusts pay the cost of the product plus a margin for NHS Supply chain services. The latter cost will be removed so trusts will only pay the actual cost of the product, encouraging more trusts to use the centralised procurement service rather than hubs or local negotiations.

Supporting services such as logistics and IT will also be funded directly by the Department of Health and all processes will be overseen by a new NHS department called the Intelligent Client Co-ordinator (ICC). The ICC is will take over the current management and account management functions of the business services authority and NHS supply chain. This will manage the system the contracts for each ‘tower’ provider and ensure objectives are met and service delivery continually strives to improve. 

NHS Scotland have had a system of combined purchasing since 2014. Their logistics, sourcing, e-procurement and programme management teams have delivered savings of £150 million to date. More than 80,000 lines are delivered every week on a 48-hours service with a 98% on time, first time, in full supply record. Last year alone the logistics team saved the NHS £9.8 million.

This new structure is started to be phased in with the introduction of office supplies tower in October 2017. All six of the medical towers are planned to be introduced in april 2018 and full implementation be in place by September 2018, when current NHS supply chains current contracts expire.

Dr Jenny Isherwood is the RCP clinical fellow for sustainability and a ST6 breast surgeon.