NHS can save £500m on procurement, says NAO report

A National Audit Office report has called on the Department of Health to work with NHS Supply Chain, which is operated by DHL, to develop services which will encourage more effective usage by trusts, such as running more electronic auctions in which suppliers bid to supply multiple trusts’ requirements.

The report, “The procurement of consumables by NHS acute and Foundation trusts”, says that a combination of inadequate information and fragmented purchasing means that NHS hospitals’ procurement of consumables is poor value for money.

“We estimate at least ten per cent or around £500 million of £4.6 billion total NHS consumables expenditure could be saved, and potentially much more for some products. For example, recent work by a procurement hub has indicated that savings of ten to 30 per cent may be possible in areas such as cardiac and orthopaedic products.”

Amyas Morse, head of the National Audit Office, said: “In the new NHS of constrained budgets, trust chief executives should consider procurement as a strategic priority. Given the scale of the potential savings which the NHS is currently failing to capture, we believe it is important to find effective ways to hold trusts directly to account to Parliament for their procurement practices.”

The report argues that NHS Supply Chain represents a means by which trusts’ aggregated requirements “can be articulated to the supplier market and this needs to be much more frequently used”.

The NAO points out that the Department of Health has no direct control over Foundation Trusts and so cannot require them to collaborate in ways which would secure better value in procurement.

However, it argues that the department should take forward and publish its procurement strategy for the NHS, which currently in draft, to include specific, time-bound commitments and performance measures under the three general themes (product bar-coding, use of Buying Solutions and work with NHS Supply Chain) of its strategy.

“There is a need for much greater transparency on prices being paid to suppliers by individual trusts. Price comparisons within and across trusts are difficult because of the lack of a standard coding system for products purchased. As proposed in its strategy, the department should require the NHS to adopt standard product bar-coding, to improve procurement data and enable price comparisons.”

The report also calls for more collaboration among procurement hubs to establish common measurements of their performance, which would provide clear measures of the results they are delivering for members and improve trusts’ ability to choose the Hub or Hubs with which they would like to work.

Surprisingly enough, the report says that few trusts know what they are spending on specific supplies and whether they are securing a good price.

“Trust chief executives need to consider procurement as a strategic priority, in the new NHS environment of limited budgets. Each trust should review its current consumables purchasing strategy and prices paid, identifying in particular any weaknesses in information, and the scope for collaboration and volume commitment deals. It should consider how key stakeholders such as clinicians can be involved more effectively in the procurement strategy.

“Trusts’ in-house procurement capabilities vary widely and more collaboration f is likely to reduce the need for in-house specialists. Each trust should review its procurement capability and consider options for more effective operation, including whether merging the procurement function with those of other trusts, or outsourcing it, would be appropriate.”

The NAO sasys that each trust’s procurement strategy should include:

* an analysis of its current purchasing practices, including its use of direct purchasing, NHS Supply Chain and collaborative procurement hubs

* an assessment of the trust’s current use of e-commerce systems and the scope that e-commerce could offer for improved information on procurement, to support product standardisation and compliance with agreed contracts

* proposals for product standardisation in key categories, with the intention of reducing the range of products purchased and suppliers used

* proposals to improve control over purchasing and ensure that purchases are made using agreed contracts, rather than as ‘spot’ transactions

* an assessment of stock control and its effect on procurement costs, for example the number of small, short-notice orders being placed and whether these tend to be at higher prices.

NHS Supply Chain manages the procurement and delivery of over 620,000 products for more than 1,000 trusts and healthcare organisations. It stated aim is to provide more than £1 billion of savings to the NHS by 2016 so that resources are released for customer to focus on quality frontline patient care, managing costs and achieving sustainable value.

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