Proving competence in procurement is going to be core business for clinical commissioning group (CCGs). Using quality as the main currency, and with a focus on quality, innovation, productivity and prevention (QIPP), CCGs will need all their wiles to leverage extra value out of secondary care.
As part of authorisation development plans, CCGs need to get up to speed fast with best practice in procurement. So how can you use procurement to improve outcomes?
A common definition of procurement is: 'A critical commissioning process that enables an organisation to secure a wide range of externally provided resource and value efficiently and effectively from need through to disposal'.
The important words here - not often associated with procurement in clinicians' minds - are 'secure', 'resource' and 'value'.
Procurement must also deliver peace of mind for CCGs and providers that services are sustainable on both sides. This means agreeing a cost base that 'secures' a valued service and drives innovation and efficiency. This is especially important in the NHS where patients need services to be there - now and in the future.
To procure well, CCGs must be crystal clear about the 'value' and the nature of the 'resource' they are securing - in both specific and broad terms simultaneously. For example, when securing an audiology resource, as well as thinking about value in terms of the cost of different service elements and hearing aids, you need to understand that you are in fact securing an improvement in individuals'
capacity to hear. If half the people put their hearing aid in a drawer and never use it, that is poor procurement and a waste of NHS monies.
This seven-step model is a proven way to deliver sustainable cost reductions. We hope it will help you improve your procurement practice and that your negotiations with acute providers lead to sustainable cost reduction.
Steps one to four are internal. At step five you start negotiating with your providers.
STEP 1. Spend management and compliance
You need to define and understand exactly what you are procuring (the outcome), and who is spending now and how.
This means looking at whole system costs. Programme budgeting can help. The NHS Atlas of Variation (www.rightcare.nhs.uk/atlas) lets CCGs look at whole systems costs of conditions, such as COPD, and might fast track these conditions up the ladder as top priorities for cost reduction.
Compliance with standards reduces costs. Ensuring compliance across the CCG with formularies and referral protocols and addressing variation in clinical practice will all be key elements of effective CCG procurement and cost reduction.
STEP 2. Identify cost drivers
A consistently accurate rule of thumb is that 20% of the 'resource' accounts for 80% of the cost. CCGs need to understand and focus on that 20%.
In most cases, it will be a small cohort of patients; secondary care and staff costs. Then CCGs can use procurement to reward innovation in skill mix, technology and providers who keep people safe at home.
STEP 3. Value analysis
Be clear about added value. For instance, holding clinics in hospitals may not add value and travel time for district nurses is dead time.
Strip back services to their essential elements (clinical efficacy and patient experience) and redefine what you need to procure.
Ask yourself, what can my providers do for me that will add value and costs them nothing? And vice versa. Value the use of your logo and product endorsement. They are a valuable asset in the market.
STEP 4. Standardising, collaboration and aggregation
It is self-evident. These three increase your buying power. It will pay to collaborate with fellow commissioners. Think laterally. What could you and local authorities jointly procure from home care providers to reduce costs?
STEP 5. Supply market analysis
Make sure your CCG understands the economics of the national tariff and clinically appropriate care inside out.
You need to be equal partners in negotiations.
The better you understand the economics of the provider business, the more successful you will be. Welcome in non-traditional providers. Get them to shake things up.
STEP 6. Leverage spend and relationships
Now the going is tough, it is time to call in favours.
Leverage your relationships with providers as well as your current spend to drive cost reduction. Your QIPP targets are their problem. Ask for co-operation and expect innovation as standard.
STEP 7. Measure value
Savings must be greater than the cost of delivering them (including procurement management resource). Recruit and work with procurement specialists on a 'no win, no fee' basis; apply this to your providers too.
Remember to count the value 'adds' you have secured as well as cashable savings.
- Georgina Craig is a member of the NHS Alliance's executive and an associate at DPSS, a supply chain management consultancy, and Ray Carter is director of DPSS - www.dpss.co.uk