A fair deal for the NHS

3 January 2013
We recently published a brief report into price variation with Peto, the product and price comparison website for the NHS. The results showed trusts across England are paying over the odds for everyday products, costing the taxpayer an unnecessary £500 million each year. The conclusion we drew was that for long-term efficiency the NHS needs to be assured of 'fair prices' (among other things). Why? Suppliers need fair prices to sustain themselves and their product development, and the NHS represents a key market for many UK firms. Equally, now more than ever before, the NHS needs fair pricing to avoid hospitals failing or patients not receiving the right treatment. Our analysis raised serious concerns about price variation and spending in the procurement of NHS supplies. At the root of this problem lies the lack of transparency in the market, which leaves trusts unable to make cost-efficient decisions about purchasing supplies. There is a widespread misconception that price disparity is the inevitable consequence of policy decisions to encourage competition between NHS providers. With the NHS facing sustained pressure to contain rising costs and demand within a flat budget, transparency must be introduced across the board. The consequences of inaction in the back office will only be felt more acutely in frontline care. If suppliers and buyers are to foster trusting relationships, both parties must feel the deal is fair. The current absence of transparency undermines this. This is then only reinforced by the unavoidably devolved nature of purchasing across the service. There are bright examples of suppliers and buyers adopting new 'transparent' channels. These are to be applauded, but there is also much more to be done. Since the publication of our report, many trusts have contacted us to demonstrate they are actually paying higher prices than those published in the study. Unfortunately, as with all stories on the NHS, most of the subsequent coverage centered on the perceived criticism of NHS procurement teams around the country, and less on the need for investment in those teams, the need for greater board-level accountability for 30 per cent of the NHS budget, and most of all, the responsibility suppliers have to play in this issue. By raising these issues we hope to change minds and help the NHS reduce its costs while those suppliers with genuinely good-value products get greater prominence. ☛ Paul Bakstad is advisory director at Ernst & Young
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