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Mind the gap – tackling the procurement challenge

Sentient Health : 28 March, 2011  (Special Report)
As a new financial year dawns, Joel Haspel, Chief Executive Officer of Sentient Health explains why money worries are very much on the minds of NHS managers.
A recent NHS Confederation poll found that 63 percent of its members see cost savings and finances as their biggest challenge. At the same time there have been all sorts of big claims about the scale of waste in the service. John Neilson, Chief Executive of NHS Shared Business Services, has claimed that up to 12 percent of the health service purchasing budget is wasted due to paying over the odds. The National Audit Office has also waded in with a claim that trusts could save 500 million a year if it got its act together on purchasing consumables.

All this may be true, in fact I know from my own experience as a specialist in clinical supply chains that there is a great deal of waste, but these big, bold statements can sometimes end up being pretty unhelpful. In fact, there are plenty of people within the health service who have long been aware of the issues and simply want some support in tackling them. Unfortunately morale is a considerable issue among quite a lot of excellent NHS staff who know they are working hard, but feel as if they are constantly being told they are inefficient and ineffective. So the reality is that the problems are a combination of resource, systems and technology. Frankly, many NHS Trusts are trying to handle the procurement needs of ultra-complex 21st century healthcare using paper-based systems that are hopelessly out of date. There are also practices that have built up over the years, which made sense when they were brought in, but should now be reviewed.

We often find that trusts can take some really quick and easy steps to yield quite substantial savings on their clinical supplies. And we also find that engaging with people on a positive basis usually gets them to open up more about the issues they face. One really good example is the consignment gap something health service managers are, understandably often reluctant to discuss too openly. We recently talked to one hospital which was in a 100,000 dispute with a supplier. The argument was simple to state but tough to solve the company claimed items were sent and must have been used, the customer insisted they either never turned up or were taken by the sales rep. While the protagonists and amounts will vary, there are lots of similar wrangles in the public and the independent sectors.

The problem comes down to the pros and cons of sale or return. It can make great business sense, but only if you are absolutely confident that you can properly track the products from arrival to use. It may have been less of an issue in decades gone by but for a large modern hospital it’s vital. Those that can’t do it properly suddenly find themselves in a situation where the supplier comes, does an audit, and black holes emerge. The worst case scenario is that the trust ends up paying for items because it can’t prove they were not delivered. The best case scenario, and it’s not exactly great, is that after a lot of time and effort, they manage to show that the fault lies with the company.

The problem is not just money, it is also about patient safety. Annual stock takes by suppliers are not always entirely accurate, which leaves open the possibility that items will be missed. That can be a real issue as a vital part of the process is to identify clinical supplies at risk of going out of code and getting them off the shelves. If that doesn’t happen there is a genuine chance that they could end up being used on, or implanted in, patients. The potential human consequences are clear, as are the possibilities of legal action and demands for compensation.

One of the concerning things we have found is that hospital managers sometimes assume that liability for an out of code piece item being used in a procedure lies with the supplier. With certain contracts this may be true. In other cases people confuse the supplier’s responsibility to prevent out of code items from being delivered, with a separate one under which the hospital needs to ensure that anything which slips through the net does not get anywhere near a patient. In fact, we often find that there are considerable grey areas in contracts which could result in problems at just about any time.

In plenty of cases there are managers out there worried because they are over-budget on supplies, or at imminent risk of being so. However, by doing regular stock counts enables hospitals to avoid uneccessary waste. It’s a service we offer and which can give hospitals the information they need to identify and successfully challenge discrepancies over consignments. Our Evidence Based Savings Assessments (EBSa) also offer easy wins because by accurately identifying what’s on the shelves, hospitals can often safely work through their existing stocks and not re-order before the next financial year. Chances to limit outgoings through waste avoidance in the final quarter are normally very welcome indeed.

There are many hospitals which want to find ways of managing and reducing their costs over the long term. Patient level costing (PLC) can be an excellent approach. But, like with most things, the theory is frequently simpler than the practice. Tracking and attaching a price to each aspect of every procedure and patient contact takes some pretty good IT. Fortunately there are very good systems out there, and naturally I recommend that people try out our MedTrac product which allows them to electronically log any items of clinical supplies once, then follow it right to the patient and consultant.

Regardless of the specific solution you opt for, the issue of how and when items are recorded is a significant one, so too is the ability to identify who uses what and how often. It can be a revelation to do the journey yourself and follow the record keeping for something say a pacemaker right the way through the system. You’ll typically find that it is manually logged four times. And it’s mostly nurses and doctors who are writing down the details of each item as it arrives in theatre, and later typing them into a computer. These small actions accumulate, adding up to vast amounts of staff time over a year. The good news is that electronic monitoring means they can be cut by 75 percent.

As for the cost element, I know of a hospital which began to scrutinise its spending a little more closely found that consultants were ordering knee replacements from three suppliers and hips from seven. One result was that the cost per patient could vary substantially from one consultant to another. That clearly raises the potential for savings. What might frighten any clinician reading this is that management then demand they all switch to the cheapest option without taking proper account of why consultants may need different products. What should happen is quite the opposite. Good quality information ought to enable dialogue, so any idiosyncratic elements can be eliminated from the ordering and a coherent, hospital-wide approach developed that satisfies clinical need.

From consignment problems to patient level costing, the fundamental issue is about hospitals being enabled to take control of their own processes. I know from the customers I deal with that there is a real appetite to drive costs and inefficiencies out of the system, and there is an awareness that it is one of the only available ways to find additional resources for frontline care. I also feel that the surest route to change is by giving people the tools they need to get on with jobs they are already well aware need to be done.
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