Oli Hudson, content director at Wilmington Healthcare, looks at value-based procurement and its place in procurement in the emerging NHS landscape.
The NHS is increasingly requesting that medical technology companies work with them in a closer partnership. With focus shifting purely from unit price to measures of performance, safety and patient outcomes, how can industry demonstrate the short, medium and long-term value it brings to the NHS?
There’s much talk in the NHS at the moment of value-based procurement, which even has an official definition designated by the NHS Supply Chain:
“Value-based procurement is an approach that delivers tangible, measurable financial benefit to the health system over and above a reduction in purchase price; and/or a tangible and measurable, improved patient outcome derived through the process of procurement (tendering, contracting, clinical engagement and supplier relationship management).”
Brian Mangan has been in post since April 2019 as the Value Based Procurement project lead at the NHS Supply Chain.
He says that value-based procurement is about looking at procurement from a different angle, to maximise savings opportunities across the patient pathway, and improve patient outcomes.
“Value Based Procurement is all about whole life costing. This involves facilitating a paradigm shift from traditional buyer supplier relationships, to a position where healthcare and industry operate in an environment based on trust, aligned objectives, mutual benefits and success.”
It’s a nice sentiment, but is there more to it than an honourable mission statement? NHS Supply Chain has certainly given some thought to the type of thing they mean here, and Mangan gives an example from orthopaedics.
“If we assume that the current price of a knee implant is £1,000, if procurement saves 10% that’s a saving of £100. However, if they save 10% on the pathway costs, through improved theatre efficiency or reduced length of stay for example, and this equates to 10% of the pathway cost (perhaps £5,000) then procurement have the potential to quadruple the savings opportunity to £500.”
So here are at least two product hooks that go ‘beyond unit price’ – theatre efficiency and reduced length of stay.
Drilling down into what value-based procurement could entail
A team at North West Procurement Development has attempted to give more structure to this, and says that such value propositions have four basic categories – quality, innovation, financial and productivity/efficiency.
Quality is an obvious one and could mean product quality, such as a low percentage of returns and defects, or service quality, such as a high response speed for patients or clinicians.
Innovation can cover new products but also new ways of engagement with process, such as during trials and evaluations, and participation in improvement activities such as category panels. Financial could be a reduction of whole life costs or even simply improving invoice accuracy; and productivity offers a whole array of levers that can have a direct improvement effect on the pathway, like Mangan’s examples above, but also including reducing waiting times, improving sustainability or reducing waste.
However, historically, it has been difficult to find an evidence base for such product claims. It is therefore welcome news that NHS Supply Chain is engaging with a number of NHS suppliers and clinical, financial, commercial and industry stakeholders on about a dozen pilot projects.
The aim here is to look at overall system benefits which will ultimately lead to sustainable procurement and savings efficiencies, focusing on areas which can quickly demonstrate a direct relationship between the adoption of the product and the tangible and measurable benefits that can be achieved across the pathway.
A project to deliver a total bed management contract at a North West NHS Trust used value-based thinking to mark a step change in procuring pressure care mattresses and all associated products and services. The outcome reduced costs but it also reduced incidents of pressure ulcers for patients, with significant knock on savings, not to mention the potential for meeting hospital targets and incentives on this.
Conclusion
NHS Supply Chain, in its new contracting process – which governs the work of the category towers and framework agreements – is trying to move from “a tightly managed, highly specified input contract into what should be a looser outputs – and outcomes – driven environment”.
This is a step change from the situation we have had for decades – effectively ‘micro-commissioning’, where the payers define the services/product and the exact nature and location of delivery – which has proved an inflexible, organisation-based approach – to prescribing “outputs and core metrics”, which need to be met, measured and understood with flexibility as to how these are achieved.
Some companies more comfortable with the traditional model perceive a risk in the change in contracting away from fee for service or goods to more nebulous notions of outcome and value. In some cases it has resulted in legal challenges or referrals to national regulators from suppliers.
However, engagement is key, and there seems to be a growing movement within national and regional procurement teams to make procurement more agile, smart, and responsive to patient, system and pathway needs.
Data and analytics to provide a true picture of whole-life and pathway costs, as well as engagement with clinicians, will be crucial.
But one of the other principal ideas in the NHS Supply Chain’s definition is ‘supplier relationship management’ – a sign that it sees success here as involving a partnership with industry, and that value-based procurement will only succeed with industry buy-in.