Parliamentary Committees and Public Enquiries
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NHS Trust procurement report

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, recently said:

"The Department of Health needs to be clear how, when trusts are independent of its control, it will achieve the essential savings it should enjoy from the joint, bulk buying of medical supplies and other consumables in NHS hospitals.

When resources are so tight it is simply unacceptable that money is being wasted by paying more than necessary on everyday products, from paper to surgical gloves.

The Department should specifically spell out how, in the new NHS landscape in which Foundation Trusts act independently, trusts will be motivated to deliver collectively the £1.2 billion savings which could be secured - and who will be accountable.

The Department wants a three-tiered structure – with local, regional and national organizations involved in procurement, as appropriate. This does not reflect the current complex reality, in which a profusion of different bodies is involved in procuring consumables and where, in around a half of cases, prices of products available through NHS Supply Chain can be higher than through other routes.

At the individual trust level there is also room for much more economic purchasing. In a sample of 61 trusts we found they had bought 652 different types of surgical glove and 1,751 different types of cannula. One Trust buys 177 different types of glove."

Margaret Hodge was speaking as the Committee published its 35th  Report of this Session which, on the basis of evidence from the Department of Health and from Howard Rolfe, Procurement Director of the East of England Collaborative Procurement Hub, examined the national and regional procurement systems in the NHS and on trusts’ individual procurement practices.

The 165 NHS acute and Foundation hospital trusts in England spend over £4.6 billion a year on the procurement of medical supplies and other types of consumable goods, dealing with thousands of supplier companies ranging from large multinational corporations to smaller specialist firms. Each trust controls its own purchasing, in line with the Government's strategy to give NHS organisations increasing freedom to operate independently.

Foundation Trusts, which now account for more than half of hospital trusts, are independent of the Department of Health’s control and all trusts are intended to become Foundation Trusts by 2014. Trusts can purchase consumables in various ways: dealing direct with suppliers; through the national supplies organisation, NHS Supply Chain, operated by the private distribution company DHL under a 10-year contract to the NHS Business Services Authority; or via the regional Collaborative Procurement Hubs. They can also choose to join other trusts in collaborative purchasing arrangements for particular localities or types of supplies.

The Department is clearly engaged in improving its procurement systems, and sees the future for NHS procurement as a ‘pyramid’ structure with national, regional and local procurement of different types of goods, as appropriate to the products and the supplier markets. However, this theoretical model does not reflect the current complex reality, with a profusion of bodies involved in the procurement process. Its effectiveness is open to question in the emerging landscape where Foundation Trusts act independently with no explicit incentive to co-operate. Getting this system right is critical to improving procurement performance in the future. The Department acknowledges that it is accountable for NHS procurement across the system, but it has no control over the actions of the individual trusts who could deliver improvements.

The fragmented system of procurement has produced a great deal of waste, with trusts being charged different prices for the same goods, ordering in inefficient ways and failing to control the range of products which they purchase; for example, the National Audit Office (NAO) found that trusts buy 652 different types of surgical and examination gloves. The NAO has estimated that trusts could save around £500 million annually, 10% of their consumables expenditure, by amalgamating small orders into larger, less frequent ones, rationalising and standardising product choices and striking committed volume deals across multiple trusts. The Department has set a target to achieve procurement savings of £1.2 billion under the Quality, Innovation, Productivity and Prevention (QIPP) programme.

A lack of data has limited progress towards more efficient procurement, and the Department must now address this. The Department plans to require all products sold to the NHS to have standard bar-coding. Bar-coding of products would help trusts to rationalise the range of products they buy and compare prices, providing the data they need to benchmark their performance.

There has not been a culture of efficient procurement in the NHS. The lack of data makes it difficult for trust boards to challenge managers on the efficiency of procurement and there has not been sufficient control over procurement practices. At a time when all trusts are required to make efficiency savings - 4% in 2011-12 alone - they should seek to achieve as much of these as possible from improvements in procurement. Without such improvements, there is a risk that trusts will make cuts elsewhere, while at the same time continuing to waste money on inefficient procurement.



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