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Better procurement can save the NHS in England £1.5bn over three years, says report

BMJ 2013; 347 doi: https://doi.org/10.1136/bmj.f4951 (Published 06 August 2013) Cite this as: BMJ 2013;347:f4951
  1. Ingrid Torjesen
  1. 1London

The Department of Health has told hospitals in England that they must save £1.5bn (€1.7bn; $2.3bn) over the next three years through better procurement of goods and services by learning from and working with other hospitals to reduce the prices they pay.

The NHS spends more than £20bn a year on goods and services, and hospitals around 30% of their operating costs. In 2011 a report by the National Audit Office estimated that £500m could be saved through better procurement.1

However, the Department of Health said that rather than falling, spending on procurement had been growing, and it believed that the NHS could save even more than the National Audit Office estimate—effectively £1.5bn by freezing non-pay spending over the next three years.

The department’s new procurement strategy,2 published on 5 August, said, “It is disappointing that non-pay expenditure in trusts increased by more than the rate of NHS activity and general inflation in 2011-12 compared to the previous year. Early indications are that this trend has continued in 2012-13. This cannot continue, we need to apply more pressure to reduce these inflationary pressures if we are to maintain a balanced budget and continue to provide a better service for patients by protecting the front line.”

The strategy said that hospitals would have to publish what they paid for goods and services and a “price index” would be created enabling hospitals to see for the first time how what they spend on certain products compared to other hospitals. More data would be made available publicly to expose poor value for money and bad contracts, and an NHS procurement champion recruited with private sector expertise to drive the initiative.

Currently, the strategy said, there was little consistency in the way the NHS procured goods and services, an over-reliance on framework agreements, and too few examples of the NHS striking radical money saving deals, such as hospitals getting together to bulk buy equipment at a discount.

Launching the strategy, health minister Dan Poulter said, “We must end the scandalous situation where one hospital spends hundreds of thousands more than another hospital just down the road on something as simple as rubber gloves or syringes, simply because they haven’t got the right systems in place to ensure value for money for local patients.”

Half of the £20bn spent on procurement goes on clinical supplies and services and drugs and pharmacy, and the price paid by different hospitals for products varies markedly. For example, the price of 100 of the market leading brand of sterile surgical gloves is £56.50, while a comparable glove is available for £34.90 per 100—a saving of 38%. The market leading sutures cost £1.34 each, compared with £0.78 (41% less) for a brand made by another manufacturer. A standard 10 cm × 10 cm polyurethane foam dressing is available for £11.74 for a pack of 10, but some hospitals purchase a brand costing £19.87—41% more.

The Department of Health plans to rationalise the procurement of high value medical devices, such as those in orthopaedics, by setting up clinical procurement review partnerships tasked with reducing the variation and cost of products available across the NHS by reviewing clinical outcome and commercial data. It estimates that this could cut costs by 10% to 15%.

Meanwhile, if all trusts reduced their percentage of non-permanent staff to at least the national of 4%, that would save £230m.

Mike Farrar, chief executive of the NHS Confederation, said, “Lots of NHS organisations are already doing great work to scrutinise the ways they can reduce the amount they spend on goods and services and plough that money back into care. But many more could be much more efficient if they fully recognised the power of strength in numbers and came together to drive down costs.”

Jim Bligh, the CBI’s head of public services reform, said, “The NHS needs a relentless focus on driving value for money. This is too often absent in the NHS, with some hospitals paying twice as much as others for common items like blankets and forceps.

“Appointing a procurement champion with private sector experience will help address this by injecting much needed commercial edge, as will introducing a new website where hospitals can compare suppliers and prices.”

Notes

Cite this as: BMJ 2013;347:f4951

References

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