An in-depth look into our Value Based Procurement Project

18 October 2019

Value Based Procurement Concept Image

Why Value Based Procurement?

With increasing demand for healthcare set against a backdrop of limited financial resources, there remains ongoing need for procurement to deliver increased year on year savings across the NHS.

As a means of addressing this challenge, NHS Supply Chain is considering various complimentary approaches to support its existing procurement strategy and have funded a project designed to consider the potential benefits and practical application of Value Based Procurement (VBP).

Here, there is a shift in emphasis from reduction in product costs (which typically account for between 10-15% of procedure costs), to working with industry to consider technologies that can influence a reduction in total costs within the patient pathway.

The view is that should the proof of concept be positive, this would provide an additional methodology which could be adopted by Category Tower Service Providers (CTSPs) as a means of driving sustainable increased savings and improving patient outcomes.

We also believe this approach could offer potential for expanding the scope of influence for procurement and industry working in partnership with NHS stakeholders to meet the needs of the health service in the 21st century.

What is Value Based procurement?

It has been said that ‘value is in the eye of the beholder’. With multiple stakeholders across healthcare and industry and the potential scope for interpretation, the first stage for this project has been to set out clearly its definition of VBP, which has been created with input from industry, academia and other healthcare systems.

VBP is an approach that delivers tangible, measurable financial benefit to the health system over and above a reduction in purchase price; and/or a tangible and measurable, improved patient outcome derived through the process of procurement (tendering, contracting, clinical engagement and supplier relationship management).
How are we approaching the project?

Accepting that VBP is a leap of faith for both buyers and suppliers, the approach we have adopted is to work with industry, trusts, the Clinical and Product Assurance (CaPA) team and CTSPs to identify several potential pilot projects, with a view to creating a safe environment whereby stakeholders can explore and determine the potential challenges and opportunities in adopting a VBP methodology. The key principles for the pilots are:

  • Starting small by selecting pilot projects that clearly have a 1:1 relationship between adoption of the supplier proposal and a tangible benefit for the health system.
  • Ensuring stakeholders have all ‘bought in’ – clinical, finance and commercial – to the project objectives and measures.
  • Providing support through the use of basic tools such as process mapping to establish current and desired state and cost of each stage.
  • Working with suppliers to ensure they are aware of need to demonstrate how they will provide assurance to trusts that their cost-saving proposals will be delivered.
  • Focus on a small number of readily available key measures to demonstrate benefits achieved.
  • ‘Prove and move’ quickly onto the next project, building on learning from the experience.
What have we learned to date?

Interest in VBP is growing across the health sector both nationally and internationally and the project team have been encouraged by the enthusiasm and willingness of NHS and industry stakeholders to engage.

The key challenge is that whilst the NHS wants to buy “value”, a better understanding of how to translate their offerings to meet customer needs is required. Successful proposals need to meet the following characteristics:

  • Be relevant to customer needs
  • Include realistic claims supported by robust evidence
  • Convey project benefits measurable and with clear outcomes
  • Demonstrate support and early engagement with Clinical, Financial and Commercial stakeholders – this is essential
  • Communicate a partnership approach to delivery of solution rather than traditional sales pitch
  • Provide assurance that claims will be delivered.

Additional understanding is required as we look to move towards true partnership working with shared objectives and incentives. This is integral to the adoption of VBP, yet currently buyers and suppliers are incentivised to achieve short term savings and sales targets respectively.

Value Based Procurement Diagram

The project team are actively working across healthcare stakeholders to review how this could be addressed, but consideration is required by industry to demonstrate how they can incentivise and organise representatives differently to deliver value.

What are the next steps?

The project team is working with a range of trusts and suppliers to establish, monitor and learn from the various pilot projects. Work has commenced in parallel exploring contracting for value and developing a framework/toolkit for delivery.

Pilot Project Progression Diagram

Work will continue over the coming months progressing the project and engaging with NHS and industry stakeholders.

NHS Supply Chain aspires to deliver world class procurement for the NHS and a key strand in achieving this goal is supplier relationship management:

  • Harnessing and maximising the potential that exists within the supply chain
  • Developing productive and progressive relationships with suppliers based on trust, openness, equity and transparency.

We believe that through the exploration of VBP, NHS Supply Chain is making a commitment to this objective and demonstrating that we are very much a progressive commercial organisation that is ‘open for business’.