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NHS procurement strategy promotes greater transparency on hospitals' supplier expenditure

Out-Law News | 07 Aug 2013 | 11:10 am | 2 min. read

Hospitals in England will be forced to disclose details of what they pay for goods and services in an attempt to make procurement in the NHS more efficient.

The Department of Health (DoH) has outlined a new procurement strategy for the NHS (37-page / 991KB PDF) which it hopes will result in £1.5 billion in "procurement efficiencies" in the next three years. The NHS currently spends £4.5 billion annually on clinical supplies and services, according to the strategy.

Under the new strategy, hospitals would be required to be more transparent in how they spend their budgets. Hospital Trusts in England would be required to participate in 'price benchmarking' in a bid to reduce costs.

"We recognise there is an urgent need to encourage transparency and benchmarking," the DoH's strategy said. "We will therefore explore opportunities to: increase transparency by requiring all providers of NHS healthcare – through the NHS Standard Contract – to publish all procurement data, including opportunities, expenditure and contracts on their websites and Contracts Finder."

"[We will also] develop, procure and implement a single, best-in-class NHS Spend Analysis and Price Benchmarking Service to streamline the data collection and benchmarking process, and enable trusts to frequently and cost effectively compare prices across a wide range of goods and services," it said.

Quarterly price comparisons on "a rolling basket of 15 products" will be issued based on data disclosed by hospitals.

"The more transparent we can make procurement performance, the more it will drive behaviours to improve," Parliamentary Under-Secretary of State for Health Dr Dan Poulter said. "More procurement information needs to be in the public domain."

Under the strategy new Clinical Procurement Review Partnerships will be formed to test products bought within the NHS, better understand the market and supplier capabilities and weigh up the "medical benefit" of products with their "value for money". This will enable "cost effective solution[s]" to be found and for best practices to be outlined across the NHS, it said.

In addition, a private sector procurement champion is to be appointed to help "drive the modernisation of procurement across the NHS and to drive greater accountability of NHS procurement" in line with the targeted actions outlined in the strategy.

Initiatives will also be undertaken to "maximise the purchasing leverage of the NHS".

NHS England chief executive Sir David Nicholson conceded that savings could be made through procurement efficiencies.

"Across the NHS there are far too many examples of different solutions to the same problem, far too many instances when organisations do not act collectively and fail to secure the best possible deal," Sir David said. "This is simply not good business sense and needs to change if the NHS is to improve quality of care and maximise value for money."

"The potential to achieve economies of scale is enormous. Where there is a clear and compelling case, NHS England will encourage every part of the NHS to consider how they can realise efficiencies through centralised procurement and greater aggregation," he added.

Procurement law expert Jennifer Robinson of Pinsent Masons, the law firm behind Out-Law.com, said that the drive towards greater NHS procurement efficiencies mirrors similar efforts to reduce procurement costs in central Government.

"NHS procurement is being driven in the same direction as the Cabinet Office’s Efficiency Reform Group (ERG) has been driving central government procurement since 2010," Robinson said. "The programme document supports the same key ERG messages of looking at procurement as part of a much bigger picture, including how the NHS can contribute to economic growth by making procurement more accessible to SMEs."

"The Procurement Development Programme recognises that the cure for spending inefficiencies begins with more and better data. This should help Trusts find the best value supplier in the case of new contracts and could even assist with renegotiation of existing arrangements, albeit with the relevant procurement parameters. The Coalition Government’s transparency agenda, which requires the publication of all central government contracts above £10,000, has already improved departments’ buying position," she said.