Doctors and Nurses

Doctors and Nurses

Posted by Ian Burdon in Procurement Best Practices, Public Sector Procurement 22 Aug 2014

For my sins, I have been looking at the NHS Procurement Atlas of Variation – Metadata, the opening two paragraphs of which read:

The NHS Procurement Atlas of Variation has been developed to deliver greater transparency by comparing the prices paid by different trusts for the same types of products.

This will allow trusts and their suppliers to understand where better value is available and then act on this information to reduce costs (my emphasis).

Discontent with the Atlas has been well documented and I don’t need to rehearse those arguments here. What surprised me was that, even now, after all of the improvements in public procurement in recent years, the DoH could issue a procurement policy document that treated price, value and cost as synonyms and expect to be taken seriously.

This is an antediluvian notion, that procurement is about securing the best (usually lowest) price and nothing else. It is not.

Purchasing Insight logoIn the public sector, procurement is about sourcing goods and services required to deliver public service outcomes, with propriety and regularity, and delivering best value for money in the process. Value for money is not the same as lowest price: it is a qualitative measure which relates to outcomes. As my mum would say, “you get what you pay for”. And what you pay for in Health are clinical outcomes.

Just as bad is a statement by the National Health Executive that:

NHS hospitals will be put into league tables to assess how they are spending their budgets, by comparing prices and identifying where costs can be driven down [ … ] Department of Health said it was evaluating the use of the NHS Atlas of Variation as the preferred mechanism for publishing variation in procurement performance across the NHS.

Brilliant: measure procurement performance against a preferred measure which is only tangential to the actual role of procurement.

I looked at the operating expenses of three NHS Trusts in their published accounts. The big ticket items are: staff costs, property, pharmaceuticals, and clinical and general supplies. My experience is that heads of procurement have control over clinical and general supplies but not necessarily much else. In the accounts I looked at, clinical and general averaged at 14% of operating expenditure.

Since many of the items will be bought at national prices under national contracts and the rest will be subject to the natural cycle of contract renewal, many of the prices are locked in. The odds that chasing the lowest price for the items in the Atlas will lead to a significant reduction in operating costs at any individual trust are slim.

I understand that the intention is that, over time, there will be focus on the relationship between expenditure and clinical outcomes which, to me at least, seems like a much more useful approach. Procurement can and should play a significant part, but a micro-focus on unit prices isn’t the most helpful contribution it can or should make.

Ian Burdon can be found on twitter @IanBurdon

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