NHS PROCUREMENT Evolution or Revolution?

Colin M Cram FCIPSChief Executive Open Forum Events

Managing Director Marc1 LtdColin.cram@marc1ltd.comTel: +44 (0) 1457 239894

Mob: +44 (0)75251 49611www.marc1ltd.com © C M Cram FCIPS

FINANCIAL IMPERATIVE• 66 of 245 provider trusts predict a deficit for 2013-14• 32 FTs predict a deficit for 2013-14. • Provider sector is predicting an overall deficit when it had planned for a

£350m surplus. • 28 CCGs also predicting a deficit when last year it was 1.

• Financial sustainability should not be at the expense of frontline services.

• Savings opportunities must be taken

• Savings from NHS procurement must be £2bn by 2015-16.

• Expect local freedoms to be reduced

• Further savings planned for 2016-18

2010-11 (£18.56bn) 2011-12 (£20.61bn) 2012-13 (£22.7bn)

2010-11 (£18.56bn)

2011-12 (£20.61bn)

2012-13 (£22.7bn)

SAVINGS WILL NOT BE SUSTAINED UNLESS WE FIX

• Lack of leadership

• Poor data and systems

• Multiple orders and invoices

• Variation in prices paid and products used

• Variable capability and capacity

• Fragmented system and culture of ‘no sharing’

• Inefficient logistics in trusts

• Competing procurement landscape confusing and costly

• No mechanism for sharing information and knowledge

• No joined up category strategies or supplier management

STRATEGY LAUNCHED AUGUST 2013A balance between the need to improve local capability, data and leadership for the longer term, and the need to drive savings…

Longer term:

•Create a new national ‘enabling’ function (NHS Centre of Procurement Efficiency) to be the home of professional development, data, analytics, diagnostics, benchmarking, best practice, and networking; and

•E-Procurement strategy (inc GS1)

Immediate term:

•Develop a proposition to help NHS trusts deliver £1.5-2bn efficiency savings

•Increase transparency

EFFICIENCY PROGRAMME NOW IN PLACE

Ministerial Oversight Board(3 Ministers, 4 Non-Execs, NHSE, DH)

Procurement Efficiency Delivery Board

(DH, CO, TDA, Monitor, HCSA, Shelford Trust representatives)

National Initiatives to deliver £2bn savings

1.Key supplier programme2.NHS Supply Chain3.CG&S/CCS footprint4.National Category Strategies (Temporary staff, Property, Clinical, Pharma)5.NHS ‘Core List’ (derived from above)

Enabling Initiatives to sustain savings

•E-procurement strategy (Data warehouse, Dashboard, Price benchmarking etc)•Transparency and GS1•Centre of Procurement Efficiency and Academy•Combating inflation•Support for NEDs and Executive lead on Procurement•Guidance on procurement in local CIP plans

NHS engagement

• Appropriate levers/incentives

HMT/Cabinet Office

oversight and support

GMPPMPA

DH-MPP

NATIONAL DELIVERY

CategoriesSpend 2012-13

(£m)Savings target

(£m)Pharma/Inventories Consumed £6,510 400Clinical £4,953 530Property £4,017 150Common Goods & Services £3,529 227Temporary Staffing £3,471 450Totals £22,480 £1,757

Initiative Savings target (£m)Key Supplier Management £200-300mNHS Supply Chain £150-400mCommon Goods & Services £227mNational Category Strategies £1,130mCommercial Medicines Unit £400mNote that initiatives cut across categories, so element of double-counting

NATIONAL DELIVERY (1)

1. Key Supplier Management Programme

• Extending the existing Crown Representative programme into the NHS (non-clinical suppliers)

• Develop a new scheme for health specific suppliers

• Appoint Crown Representatives for Health

Crown Representative programme:

Wave 1: •BT •ISS •G4S •Serco•MITIE•Johnson & Johnson•Medtronic

Wave 2:•Vodafone, •Rentokil Initial, •Olympus Keymed, •3M, •Molnlycke, •Baxter, •Covidien, •Becton Dickinson, •Boston Scientific,•Roche Diagnostics, •Oracle •Microsoft

Identifying wave 3:Agency and pharma

Savings target: at least £250m

NATIONAL DELIVERY (2)

2. NHS Supply Chain

• Target to save £150m on existing £1.45bn business

• Target further savings (up to £400m) if business was increased

• Expectation that savings are trust level

• Intention is to reduce variation of range and drive competitive tension into the supply base (consumables vs clinically sensitive vs PPIs)

• Core list: ‘Procurement Tsar’

• Key issue: Trusts will need to commit and change behaviours

• Intend to put in place appropriate levers and incentives

Savings target: £150m - £400m

NATIONAL DELIVERY (3)

3. Common Goods & Services through CCS

• CCS developing a proposition to save £227m by 2015-16

• Core list: ‘Procurement Tsar’

• Expectation that savings are at trust level and base-lined against 2012-13

• Aiming to channel more spend through CCS

• Purchase spend analysis of 11 trusts confirms potential

• Primary focus will be on ICT expenditure

• Levers/incentives to achieve compliance

Savings target: £227m

NATIONAL DELIVERY (4)

4. National Category Strategies (Complex, high-spend, multi-stakeholder categories requiring co-ordinated national approach)•Temporary Staffing (spend £450m)

1. Agency contracts (spend £2,100m: Savings target £170m). Better use of CCS

2. Workforce management (spend £1,400m: Savings target £280m)

•Property (estates and operational contracting spend £4,000m)

•Clinical 1. Orthopaedics (spend c£400m)2. Cardiovascular (spend c£500m)3. Renal (spend c£400m)

• Pharma

Savings target: £1,430m

ENABLERS• E-Procurement strategy due to be launched imminently

• Transparency:

• Letter sent to trusts (3 February)

• Price benchmarking

• Clause in NHS Standard Contract

• Combating inflation (guidance toolkit)

• Atlas of Variation

• Capability:

• Centre of Procurement Efficiency progressing, host now likely to be a Shelford trust

• Academy for Procurement Excellence (APEX)

NHS ENGAGEMENT

Trusts engagement…

Update:

• Discussions with Shelford Group CEOs and their HoPs

• Test interventions within 1 or 2 major trusts (Imperial)

• Gathering data – all sources

• Role of TDA and Monitor (e.g. mandation and/or guidance for local CIPs plans)

• Target trusts receiving financial support from DH (40 NHS Providers)

• Financial incentives e.g. dividend payments

• NHS Provider nominated NED to champion procurement locally

• ‘Support pack’ for NEDs and FDs

KEY RISKS AND ISSUES

• Trusts’ engagement with the programme – what is an appropriate mix of incentives, levers and leadership? Are they different for FTs, non-FTs and those receiving financial support/special measures

• Do trusts accept transparency and sharing of data? (Atlas of Variation)

• Need to ensure landscape works in harmony (one united front to suppliers)

• £2bn is a stretch target. Need more confidence it is achievable

• The complex nature of the programme could result in double-counting of savings

• But we need to collect NHS Provider level information (spend and savings)

• How do we ensure savings are ‘cash releasing’ for trusts?

• £500m of the savings are in the clinical area, which will need strong clinical support for such initiatives as reducing variation

ISSUES• Fighting shy of fundamental reform. The strategy will not

deliver the further savings required after 2016.• May require big increase in number of procurement

personnel. Assumes each trust can afford expert procurement teams.

• Training programme will be extremely – possibly prohibitively - expensive if it attempts to train people in every trust in what is needed. ‘Forth bridge’.

• Some of the tools, designed to facilitate collaboration could be expensive.

• Significant duplication would appear to remain• Limited mandation. • Very complex landscape remains.

THE 2016 STRATEGY?

Increasing savings have to be delivered• Mandation • Integrated contracting and procurement organisation

(with national and regional/geographical hubs)• Very limited local contracting and procurement• The influence of the Crown Commercial Service will

increase. NHS procurement may become part of it• Central and regional/geographical hubs may serve all

public sector bodies• Much reduced number of procurement staff• Some collaborative tools prove unnecessary• Where will NHS SBS or HTE fit in?

THANKS FOR LISTENING

Colin M Cram FCIPSTel: +44(0)1457 868107Mob: +44(0)075251 49611colin.cram@marc1ltd.comwww.marc1ltd.com

© C M Cram FCIPS