The healthcare sector had a budget deficit of £960m at the end of 2017-18, £464m above its target ©PA Images
The healthcare sector had a budget deficit of £960m at the end of 2017-18, £464m above its target ©PA Images

'NHS must improve contract management to make savings'

The NHS needs to improve its contract management to boost sustainable cost savings, the former head of procurement at NHS Shared Business Services (NHS SBS) has said.

Peter Akid, who retired as NHS SBS director of procurement earlier this year, said the health service needed to build the right mechanisms into its contracts – including continuous improvement clauses, gain share arrangements and early payment discounts – to ensure additional savings are made year after year.

His comments come off the back of a performance report published last week by NHS Improvement, which provides financial oversight of NHS trusts and other healthcare providers, that showed the sector had double the expected budget deficit at the end of 2017-18.

Speaking to SM, Akid said: “One of the key things going forward is contract management. We need to start thinking about the management of that contract over its lifetime of three to five years as we’re actually writing the contract, so that some of the ongoing savings can be realised down the track.”

NHS Improvement said the healthcare sector had a budget deficit of £960m at the end of 2017-18, £464m above the target for the year, and many of the savings that were made were “dependent on non-recurrent items” that did not help the longer term financial sustainability of providers.

Akid said the NHS and other public sector bodies were reluctant to pay for good contract management.

“If you stuck a couple of million quid in a hedge fund you’d expect that you’ve got an absolute top professional managing that money, and you would pay the [management] fee. Yet we stick millions into contractual arrangements and then put the contracts on the shelves and hope it all works out OK,” he said.

He added that the NHS did “operational” management to ensure the day-to-day running of contracts, but fails on the “commercial” management that helps drive costs down.

“There are pockets where it’s done well but I think in general terms it needs to be improved on. That’s not necessarily because of the lack of desire by a procurement practitioner, it might just be that they simply don’t have time because they’ll do one tender and, as soon as that’s done, they’re onto the next,” he said.

In practice, Akid – who is a proponent of P2P in the NHS as a way to collect data and drive compliance – said this meant taking a data-based approach and a less adversarial approach to suppliers, working with them to make sustainable savings.

“There are still savings to be had and we may need to understand the supplier’s cost base more and work with suppliers to understand how we can help them,” he said. “If you’ve got the data you can start working with suppliers rather than having this traditional adversarial type approach.”

The NHS Improvement report attributed the NHS deficit to unexpectedly large demand for healthcare services. Akid said although procurement cannot be held accountable for the totality of savings, as demand for healthcare increases the function has a legitimate role in reducing material costs.

“All procurement can do is reduce those elements of the cost that it influences,” he said.

“Demand is going up so there’ll be an increase in the number of products that are linked to that clinical demand, and if we can capture that with good data and drive compliance we should be able to reduce those cost elements that we can influence.”

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