Value based procurement an alternative approach to cost reduction in the NHS

Transcription

1 Value based procurement an alternative approach to cost reduction in the NHS Mike Ludbrook Project Manager - NHS NW Procurement Development CIPS Trainer Neil Fuller Associates Owner Value Time Consulting Ltd Presentation for CIPS Leeds Branch April 2018

2 Areas covered Introduction to the concept of VBP Relevance of VBP to the NHS and the Health sector Wider relevance and links to total cost of ownership VBP guide overview and discussion

3 Background to NWPD 35 provider hospitals 7m population 3bn annual spend on goods and services Create a community Raising the profile of procurement Improve transparency & co-ordination Promote organisational development Develop supplier relationship management Assist Trusts supporting the National NHS procurement agenda and savings challenge NWPD NHS Trusts National & Professional

4 Value Value as a net concept Health outcomes achieved per pound spent Shifting the focus from volume and processes delivered to value of outcomes is a central challenge in healthcare (Michael Porter)

5 Background to value based procurement Value-based procurement is acknowledged internationally as a method to deliver wholelife cost savings and service improvements across product pathways beyond traditional, narrow price-based measures. By focusing on pathways, VBP (or Procurement for Pathways ) delivers far higher financial savings than traditional procurement approaches

6 NHS Procurement journey Profile..Lord Carter concluded there were stark variations in the quality of care and finances, which were costing the NHS billions Paper based Transactional E-Procurement Strategic Impact

7 The challenge. Mr Homa has been required to make savings of more than 40m in each of the last four years, and the trust is on course to cut another 40m this year, taking the total to more than 200m in five years. More with less.

8 Rationale for change NHS procurement is focused on price and doesn t account for total acquisition costs. Relationships with suppliers are based on traditional, adversarial; win-lose strategies. This approach will not deliver the required level of cost savings for the NHS. Supplier relationship management principles see engagement with suppliers as a key to the solution, rather than a cause of the problem. To become more strategic, both NHS procurement and NHS suppliers must embrace behavioural change.

9 A solution Aim to find ways to develop procurement approaches that identify, quantify and reward, tangible( ) efficiencies in the patient pathway and patient care

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11 Price focus. Primary knees example Price Will suppliers leave the market? Time (yrs)

12 Current practice

13 Savings projects Value of savings forecast by procurement project 6% 9% 8% 22% 53% < 10k 10k+ 25k+ 50K+ 100k+

14 UK National position The National Agenda driven by the Carter Review in 2016 The new structure to replace NHS Supply Chain (Future Operating Model - FOM) GS1 Scan4Safety

15 There is another way

16 Value based procurement Opportunities for extending the life for savings and improved efficiency 5000 Procedures per annum Total procedure costs: % saving 10% Saving total procedures (p/a) Implant costs ,000 Pathway costs ,500,000 Total potential savings 2,000,000 Strong case for VBP..

17 Total Cost of Ownership More difficult to measure Price Quality, quantity, maintenance, disposal MEAT

18 Lifecycle costing Total cost of ownership includes not just the price of the items being purchased, but also: Various transaction costs Finance costs Acquisition costs Operating costs Costs of storage and other handling, assembly or finishing required Costs of quality End of life costs

19 The price-cost iceberg

20 Value based procurement Procuring for pathways - a practical guide

21 Framework for value based supplier relationship management One day workshop with relevant stakeholders from the pilot Trust Each strand will form sub-groups to complete their tasks agreed at the workshop Outcomes need to be tangible benefits Roll-out to the wider region Project manager facilitates the roll-out and maintains the high level relationship with the supplier.

22 Framework for value based supplier relationship management Data analysis to produce supplier reports Initial meeting with supplier at the appropriate level SRM project proposals

23 Month Year Project plan Cook Medical & NWPD SRM Project - workplan Work to be done Work Completed Work overdue Stage Task Owner 1 Project scope 1.1 Initial review of data PM 1.2 Initial meeting with supplier PM 1.3 Summary report PM 1.4 Identify areas for savings & benefits Supplier lead 1.5 Engage with relevant Trust(s) and identify pilot PM 1.6 Agree scope for mini-project PM/SL/TL 2 Stakeholder engagement 2.1 Workshop for all key stakeholders PM/SL/TL 2.2 Agree aims and measures for commercial Finance lead 2.3 Agree aims and measures for clinical Medical lead 2.4 Agree aims and measures for 'supply chain' Procurement lead 3 Pilot actions 3.1 Commercial Finance lead 3.2 Clinical Medical lead 3.3 Supply chain Procurement lead 4 Produce 'framework' for regional SRM 4.1 Lessons learnt & project report PM/SL/TL 5 General support for project 5.1 Ongoing feedback and support PM/SL/TL August September October November December January

24 SRM benefits Example data from 2018 project work with Cook Medical - a supplier of Pneumothorax treatment devices: Benefit Summary Saving of inpatient management costs after HRG income 1, Income from outpatient management after HRG income (in surplus) Total Benefit (per procedure) 1,628.10

25 Baxter Evolving Health Programme Partner with the NHS to deliver the quality and efficiency agenda Enhanced Recovery - NWPD and Bolton NHS FT Improvement in the Day Care unit HES Period April 15 March 16 Unwarranted variation

26 WWL RIC s case study

27 »The results Opting for RICs saves 2.25 hours of clinical staff time and 2.2 hours of admin staff time per patient Choosing RICs rather than Ear Moulds saves the patient 6.5 hours over a three year period- 4 clinic trips rather than 8 Spending an extra 3,760 on the RICs product results in a saving of 44, in staff costs over three years RICs rather than ear moulds (940 patients) results in a total saving of over three years

28 Tendering...challenges TRUST Can VBP be used as a ploy by suppliers to avoid lowering prices? The OUTCOME Will savings be realised? TIME Impact on BAU

29 VBP tender process 1) Product ID 2) Clinical stakeholder engagement to map value chain 3) Finance stakeholder engagement to quantify value chain 4) Supplier engagement to validate value chain & establish risk sharing/value commitment mechanism 5) Tender design Product/output specification Evaluation criteria Contract terms 6) Invitation to tender 7) Evaluate tenders 8) Contract award 9) Contract management

30 Stages Product identification 2. Mapping the value chain 3. Quantifying the value chain 4. Validating the value chain

31 Tender design Invitation to tender Evaluating tenders Contract award Stages 5-8

32 Example bid scoring and weighting model

33 Evaluating tenders Total knee replacement (TKR) 1000 knees implanted per year - 3 year contract Probability that value based proposals will apply to 75% of procedures Pre market engagement to determine value drivers and confidence levels Unit price total VBP reduction LOS < 1 day = 400 Theatre time < 1hr = 1000 Instrumentation trays < 1 tray 25 Bid Bid 2 1, Bid 3 1, Std procedures *250 VBP procedures * 750 TCA TCA = Total cost of acquisition Bid 1 237, , ,250 Bid 2 250, , ,250 Bid 3 275, , ,500 EG rationale Stage 1 getting procurement to think past price. Stage 2 total care pathways and clinical outcomes

34 Stage 9 contract management and supplier relationship management Downstream contract management, and in a wider sense, supplier relationship management (SRM), presents more opportunities for value based procurement. Developing supplier relationships through effective contract management facilitates the collection of market intelligence and ensures savings actually reach the bottom line. When Trusts are already in contract with a supplier, or at least have a compliant route to market readily available, they can engage in value based activities without the need for a new, full tender process.

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