Value Based Procurement in the NHS Speaker... · 2018-08-23 · sense, supplier relationship...
Transcript of Value Based Procurement in the NHS Speaker... · 2018-08-23 · sense, supplier relationship...
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
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
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
National
&
Professional
NWPD
NHS Trusts
‘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)
Background to value based procurement
• Value-based procurement is acknowledged internationally as a method to deliver whole-life 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
NHS Procurement journey…
Profile
Impact
• Paper based • Transactional • E-Procurement
• Strategic
“..Lord Carter
concluded there were
“stark variations” in the
quality of care and
finances, which were
costing the NHS
billions”
2004 2013-15 2017+
. “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….
The challenge
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.
A solution…
Aim to find ways to develop procurement approaches that identify, quantify and
reward, tangible(£) efficiencies in the patient pathway and patient care
Price focus….
0
200
400
600
800
1000
1200
1400
1600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Primary knees example
Will suppliers leave the market?
Price £
Time (yrs)
Current practice
Savings projects
53%
22%
8%
6%
9%
<£10k
£10k+
£25k+
£50K+
£100k+
Value of savings forecast by procurement project
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”
There is another way…
Value based procurement Opportunities for extending the life for savings and improved efficiency
5000 Procedures per annum
Total procedure costs: £4000
10% saving 10% Saving total
procedures (p/a)
Implant costs £1000 £100 £500,000
Pathway costs £3000 £300 £1,500,000
Total potential savings £2,000,000
Strong case for VBP…..
• More difficult to measure
• Price
• Quality, quantity, maintenance, disposal
• MEAT
Total Cost of Ownership
Lifecycle costing
– 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
• Total cost of ownership includes not just the price of the items being purchased, but also:
The price-cost iceberg
Value based procurement
“Procuring for pathways
- a practical guide”
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.
Framework for value based supplier relationship management
• Data analysis to produce supplier reports
• Initial meeting with supplier at the appropriate level
• SRM project proposals
Project plan
Work overdue
Year
Mo
nth
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
2017 2017
Cook Medical & NWPD SRM Project - workplan
Work to be done
Work Completed
2018
January
2017
August September October November
2017
December
2017
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 £1,097.08
Income from outpatient management after HRG income (in
surplus)
£531.02
Total Benefit (per procedure) £1,628.10
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
WWL RIC’s case study
RICs rather than ear moulds (940 patients) results in a total saving of £40495.20 over three years
Spending an extra £3,760 on the RICs product results in a saving of £44,255.20 in staff costs over three years
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
»The results…
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
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
Stages 1-4
1. Product identification
2. Mapping the value chain
3. Quantifying the value chain
4. Validating the value chain
Stages 5-8
• Tender design
• Invitation to tender
• Evaluating tenders
• Contract award
Example bid scoring and weighting model
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 1 £950 £25 0 0 1
Bid 2 £1,000 £425 1 0 1
Bid 3 £1,100 £950 1 0.5 2
Std procedures *250 VBP procedures * 750 TCA TCA = Total cost of acquisition
Bid 1 £237,500 £693,750 £931,250
Bid 2 £250,000 £431,250 £681,250
Bid 3 £275,000 £112,500 £387,500
EG rationale – Stage 1 getting procurement to think past price.
Stage 2 – total care pathways and clinical outcomes
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.