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Lord Carter’s report: Operational productivity and performance in English NHS acute hospitals: Unwarranted variations

Thursday 11 February 2016

Lord Carter’s final report was published on the 5th February and is far more comprehensive than his interim report and sets out detailed recommendations. The report builds on the themes from his interim report and as well as the discussion around the savings that could be delivered from better procurement practices, there is a strong focus on the workforce issues and the Model Hospital work.

There are 15 detailed recommendations in the report for tackling unwarranted variation in the productivity and performance of trusts which could release around £5bn in efficiency savings.

Lord Carter has already developed the first iterations of a Model Hospital with metrics and benchmarks for measuring productivity and efficiency across a whole range of costs. He also proposes a single integrated performance framework for hospitals – one version of the truth – that will help trusts set baselines for improvement and provide them with the tools to manage their resources.  He recommends NHS Improvement should become the organisation to host performance management and to provide the skills and expertise to help trusts improve.

In a written statement to Parliament on the day of the publication of the report, Health Secretary Jeremy Hunt announced that “we will act upon all his recommendations and I have asked Lord Carter to report back on progress with implementation by spring 2017.”

Chapter three ‘Optimising non-clinical resources’ discusses efficiency savings and builds on the points that Lord Carter made in his interim report.  It states that out of the £9bn spent by NHS trusts on the procurement of goods and services, £6bn is spent by the acute sector and around a third of this is spent on common goods and services (transport, stationery etc…), a third on medical consumables (dressings, syringes, gloves etc…) and a third on high-cost medical devices (hip joints, cardio devices etc…).  The report concludes that at the highest level there appears to be considerable variation between trusts on the value they extract from this non-pay spend and equally with some exceptions, there is a lack of understanding of the hidden costs and inefficiency caused by weak compliance to purchase-to-pay systems, under investment in inventory control and poor engagement with industry on cost containment.  It refers back to June’s interim report and the estimate that £1bn could be saved through better procurement, however it states that following the receipt of better data, they believe that the £1bn is achievable for trusts but “very much as a stretch target”, with £700 million more likely.  This has been calculated on the basis of a 9.5% reduction on the £6.5 billion clinical and general supplies/services spend plus small additional savings related to agency and estates and facilities spends. 

Recommendation five focuses on procurement and recommends that trusts align with NHS Supply Chain on category strategies.  It also recommends that trusts accelerate collaboration with other trusts to develop aggregated sourcing work plans to reduce variety including with NHS Supply Chain for their categories for 2016-17 and 2017-18 as well as contributing to clinically driven product testing and evaluation, and adopting the outcome of these processes, switching products where appropriate, unless a clinically agreed exception exists.

Recommendation five states:

  • Trusts report their procurement information monthly to NHS Improvement to create a NHS Purchasing Price Index commencing April 2016, collaborate with other trusts and NHS Supply Chain with immediate effect, and commit to the Department of Health’s NHS Procurement Transformation Programme, (PTP), so that there is an increase in transparency and a reduction of at least 10% in non-pay costs is delivered across the NHS by 2018.

Delivered by:

    a) Developing PTP plans at a local level with each trust board nominating a Director to work with their procurement lead to implement the changes identified, overseen by NHS Improvement and in collaboration with professional colleagues locally, regionally and nationally.

    b) NHS Improvement providing a national spend analysis and benchmarking solution from high quality trust spend data to be fully operational by April 2017. This will include a purchasing price index starting with an initial basket of 100 products with immediate effect.  NHS Improvement will hold trust boards to account in performance against the index from October 2016.

    c) All trusts to prioritise the role of procurement on ensuring effective system control and compliance, building supply chain capability in terms of both inventory management systems and people.  Trusts to aim to work in collaboration both with national procurement strategies and other trusts to explore common systems adoption e.g. efficient electronic catalogues using retail system standards, enhancing current purchase to pay systems, adopting (GS1) and Pan European Public Procurement Online (PEPPOL) standards detailed in the eProcurement Strategy, and to align with NHS Supply Chain on category initiatives.

    d) Trusts focussing on the measure of key procurement metrics and being responsible for driving compliance to the following targets by September 2017: 80% addressable spend transaction volume on catalogue, 90% addressable spend transaction volume with a purchase order, 90% addressable spend by value under contract.

    e) Trusts accelerating collaboration with other trusts to develop aggregated sourcing work plans to reduce variety (including with NHS Supply Chain for their categories) for 2016-17 and 2017-18 including contributing to clinically driven product testing and evaluation, and adopting the outcome of these processes, switching products where appropriate, unless a clinically agreed exception exists.

    f) Trusts embracing the adoption and promotion of the NHS Standards of Procurement with the support of the new Skills Development Networks, with those that have already achieved Level 1 achieving Level 2 of the standards by October 2018; and those trusts that are yet to attain Level 1 achieving that level by October 2017. All trusts to produce a self-improvement plan to meet their target standard by March 2017.

NHS Supply Chain welcomes Lord Carter’s report and in particular recommendation five which focuses on delivering the savings required from NHS procurement activities.  We are continuing to collaborate with NHS trusts on the category initiatives and our savings programmes such as Core List and Compare and Save, Top Proven Switches, to deliver cash-releasing savings to help them achieve their cost improvement targets. NHS Supply Chain has achieved £134 million of its £300 million cash releasing savings target which needs to be delivered by September 2018 through working with NHS trusts and its suppliers.

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