Delivering reduced costs in orthopaedics

The Government believes procurement can play a valuable role in dealing with the deficit and stimulating growth in the economy. It also believes there is scope for the NHS to save £1.2 billion through improved procurement. In the Department of Health (DH) best practice guidance, NHS Procurement: Raising our Game, NHS Chief Executive, Sir David Nicholson, commented: “Procurement accounts for over £18 bn of the NHS’ annual expenditure; how we use that resource should become a priority for all NHS Boards and chief executives. Anything less would fail the NHS, our patients and the public.” An earlier report by the National Audit Office, published in 2011, concluded: “At least 10% of hospitals spending on consumables, amounting to some £500 m per year, could be saved if Trusts got together to buy products in a more collaborative way.” It also found that the price Trusts pay for the same items varies widely. The average variation between the highest and lowest unit price paid was 10%, although for more than 5,000 items the variation was above 50%. The report concluded that some Trusts are not getting value for money because they are buying many different types of the same product, while others are incurring unnecessary administrative costs because they are making multiple small purchase orders. Taking just four items bought in high volumes, the report found that around £7 m in administration costs could be saved each year if the number of orders were reduced to the level achieved by the best performing 25% of Trusts. Health Minister, Simon Burns called on Trusts to ‘buy smarter’ in order to save money that can be reinvested in patient care. However, as Sir David Nicholson acknowledged, there is no panacea to delivering these efficiencies; it will require leadership and cultural change across the service – including boards, clinicians and the procurement profession. Two Trusts that are making significant inroads in delivering efficiencies, in the area of orthopaedics procurement, include the Mid Essex Hospital Services NHS Trust and Rotherham NHS Foundation Trust. By reviewing procurement practices, the Trusts have been able to achieve impressive cost savings.

Case study: Mid Essex Hospital Services NHS Trust

Significant savings at Mid Essex Hospital Services NHS Trust were made possible by clinical and non-clinical teams working together to reduce procurement costs in the areas of reconstructive and trauma orthopaedics. Over £300,000 was saved within three months on hip products alone, with the final savings delivery across all categories including upper and lower limb, trauma and pulse lavage forecast to be up to £500,000, representing a 28% saving. With 12 orthopaedic and trauma consultants, Mid Essex Hospital Service NHS Trust undertakes 800 procedures a year, split between hips and knees, spending around £2.9 m with suppliers in this category. Working in partnership with Inverto (a management consultancy specialising in cost reduction), a crossfunctional commercial and clinical team was formed which reported directly to the clinical director, chief financial officer and chief operating officer. A detailed review of the Trust’s procurement in orthopaedics was then undertaken. “Mid Essex Hospital Services NHS Trust had already conducted a procurement exercise, 12 months previously, and saved over £100,000. However, on further examination, we were able to identify the potential for even greater savings,” said Daniel Williams, project manager, Inverto. “We knew what other hospitals were paying, as a benchmark, and it was apparent that they were still not getting the best possible price – there were opportunities to negotiate further.” Daniel Williams explained: “It is often difficult for individual Trusts to access accurate pricing information. Orthopaedic prices vary across regions and may be affected by where there has been good procurement in the past or recent attention to pricing – rather than there being a standardised price offered by orthopaedics companies. “However, there were around three or four products that were being used during an operation and we were able to establish the cost per procedure – this is extremely useful information for the surgeons. As suppliers in orthopaedics frequently deal directly with the surgeons, it is important that surgeons are given the information they need to influence procurement, in order to reduce pricing. “We did not need to change the products being used, or clinical practice, yet were able to facilitate a 28% saving. It is about creating an atmosphere for change – by getting the clinicians onside and giving them the information they need to tackle suppliers on price.” Bill Martin, consultant orthopaedic surgeon at Mid Essex Hospital Services NHS Trust and the lead clinician on the Mid Essex orthopaedic procurement project said: “The initial worry that financial pressures would lead us towards accepting substandard implants or major inventory changes has not been borne out, and it was reassuring to be involved in the process as a surgeon.” “When surgeons are provided with evidence that the products they are using cost £500 more than those being used by their colleagues, they become interested in participating in the process and want to help the hospital. For some procedures, the hospital found the Tariff did not cover the cost. This is no longer the case,” Daniel Williams continued. Richard McIntosh, UK managing director of Inverto, explained that the negotiation of new contracts was a rigorous process – the Trust held supplier days, which were attended by the clinical director and lead surgeon, enabling them to question suppliers, while the suppliers were able to see that other companies were interested – encouraging an atmosphere of competition. They were given an hour to present, then were asked to submit their new pricing. A final round involved the chief operating officer and chief financial officer, along with the other stakeholders, to negotiate further on price; then a decision was made to award to the suppliers. Richard McIntosh commented: “Using our product and market knowledge, we were able to supply accurate cost modelling and scenarios to the clinicians for them to base their decisions on. The results clearly demonstrate the power of clinical engagement and what can be achieved when you combine specialist procurement expertise, clinical and commercial expertise, and the backing of the Trust board.”