The NHS spends more than £20bn a year on goods and services © 123RF
The NHS spends more than £20bn a year on goods and services © 123RF

Trusts can save £350m in a year, says NHS England

10 April 2017

NHS trusts can save £350m by collaborating with their supply chains to eliminate price variations when buying similar products, according to a new report.

The chief executive of NHS England, Simon Stevens, said that implementing recommendations made by Lord Carter in his NHS spending review would be key to making savings. He made the comments as he unveiled his progress report on the health service, Next Steps on the NHS Five Year Forward View.

According to Lord Carter’s 2016 review, most NHS trusts “did not know what they buy, how much they buy and what they pay” for goods and services, leading to wild disparities in prices paid for the same products.

The review also found that the NHS spends more than £20bn a year on goods and services, which accounts for around 30% of the operating costs of each hospital. 

Ian White, NHS Improvement’s procurement lead for implementing the Carter recommendations, told SM a new pricing index showed the NHS was currently spending £6bn on goods with just 500 suppliers.

“We’ve taken stock of where we are and how we can help trusts to coordinate their supply chains and we’ve set a target for the year which is £350m by April 2018, which we believe is very achievable for the trusts,” he said. 

In July 2017 NHS Improvement awarded a contract to business management consultants AdviseInc to build a national procurement spend analytics tool, the Product Price Index Benchmark, to gather NHS trusts’ procurement data. 

White said after using the tool to collect monthly procurement data from 136 NHS hospitals, the results had made visible spending patterns and variations in price.

“We have something like 50m order lines in the dataset, covering around £12bn worth of spend that goes into the tool,” he said. 

“We’ve taken one item across different trusts and we can see they are paying different prices for exactly the same product.

“So even just by using the same products [across trusts] we think there is easily £200m worth of savings but we also recognise that on top of that, they can change products and save even more.”

White added that although implementing the changes would be complex, procurement departments would be working closely with suppliers to make sure the NHS was getting the best deals.

“The five-year view is seeking to replace the current NHS supply contract arrangement with a standardised commitment programme called the Nationally Contracted Products Programme,” he said.

“The products will be evaluated by an independent group of clinical staff, who run tests on products and give them star rating. Once we have a list of products we can go out to the market and ask [suppliers] to give us their best possible price in exchange for a commitment to buy from them.”

He added that these negotiations should bring further savings for the NHS.

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