08 May 2008

The decision to outsource NHS Logistics and much of NHS Pasa was met with controversy. Twenty months on, Helen Gilbert finds out how the new organisation has fared

It's early in the morning and Roger West is listening to Radio 4. His ears prick up. New figures have revealed that incidents of NHS staff being abused by patients are increasing and the Department of Health (DH) plans to invest in alarm systems for employees to combat the problem.

West is procurement director of NHS Supply Chain, the organisation formed in October 2006 when the NHS Logistics Authority and parts of the NHS Purchasing and Supply Agency (Pasa) were outsourced to DHL in a 10-year deal (see box opposite). Within minutes he is on the phone to his team, instructing them to find out more details. What type of alarm is required, how many, and what can NHS Supply Chain be doing to support this initiative?

West joined the body in March 2007. His mission is to help deliver £1 billion of savings by 2016 by offering a wider range of goods to NHS Trusts at lower prices. And, so far, his organisation looks on course to do so.

In the first year of the new contract around £9 million in savings were delivered back to frontline NHS services - £8 million above the initial target. According to West, this has been achieved through a combination of effective contracting - "working with customers to bring contracts to market quickly" - investing in the right people, buyers and, in time, clinicians, and developing an extensive online catalogue (see box on page 33).

However, he admits the original target was low. "Transferring an organisation that has long been run on a not-for-profit mindset to a with-profit cap and looking at how we grow the scale of the organisation is the biggest challenge. In 2007 our work plan covered about 90 contracts with a spend value of £250 million. This year we are looking to do 150 contracts, covering £2 billion. That's nearly a tenfold growth in value."

Meanwhile, West has been investing in people. Last year he recruited 30 buyers and the procurement department has grown to 130 staff in 12 months. Back in 2006, he says, procurement would have been made up entirely of NHS Pasa staff, but by the end of 2008 it will be 50 per cent former NHS staff and 50 per cent new recruits. "We are bringing in people with backgrounds in Tesco and Asda as it's important for us to increase the commerciality of procurement. I've got three training directors who report to me that are managing the buying and selling of products.

"This is one of the differences about us. We are buying but also responsible for selling as well. The end-to-end responsibility for pricing and profitability is embedded in procurement."

Last year, NHS Supply Chain sales grew by 7 per cent and it is investing in a new warehouse to meet increased demand for 2008 (see box on page 33).

framework agreements

Over the next eight months there are plans to generate more value from the contracts inherited from NHS Logistics and Pasa, and branch out into new areas including capital, joint replacement and pathology.

Identifying new opportunities is essential. A new national framework agreement for medical imaging was launched towards the end of November 2007. It enables trusts to buy equipment, such as MRI and CT scanners and flexible endoscopes, and supports government strategies to expand digital mammography in a bid to improve cancer diagnosis and treatment.

According to West, the health service spends approximately £200 million each year on medical imaging. His plan is for NHS Supply Chain to service half of that in the first contract year. And in only four months, more than £40 million of sales had been generated through the framework, resulting in significant savings for trusts.

"It's a rapid means for them to access supplier contracts and suppliers are not inundated with lots of different OJEUs. This has been positively welcomed by customers and suppliers alike."

Andy Harris, head of procurement at the University Hospital Birmingham NHS Trust, which requires some £25 million of diagnostic imaging equipment for its new hospital project, has used the framework.

Previously, he says, major diagnostic imaging equipment would have been purchased either by individual trusts, as and when required, or co-ordinated by Pasa if included as part of a national initiative to take advantage of economies of scale.

"For a trust procurement team to have the detailed market knowledge and technical expertise to procure an MRI scanner, as an example, is rare.

"The creation of the framework agreement allows trusts to tap into expertise. NHS Supply Chain has provided a dedicated resource to this project, which is working directly with our clinicians and project management team."

shared information

Elsewhere, "product councils" have been established where clinicians can talk about the type of products they require. At present, NHS Supply Chain has created three councils for nursing, theatres and, more recently, rehabilitation, which was launched in April. It invites a number of specialists in the field to take part in these forums. Meanwhile, buyers can share information about the latest innovations on the market.

Clinicians also feed into product taskforces, which help NHS Supply Chain with tender processes. "They [the clinicians] tell us what products they want, help us to find the specification and evaluation criteria and work with us to do the non-price evaluation," West explains. "There might be a workshop in a hotel, the products are laid out and they say what is best for the patient. We also ask clinicians to trial products in hospitals to ensure they fully meet the need. It is critical we have this input as procurement people can't effectively determine what a clinician needs and how a product is used."

council representatives

But not everyone is convinced. Mario Varela, director of procurement and e-commerce at Barts and The London NHS Trust, describes himself as a "supporter" of NHS Supply Chain, but says the answer is not only to get "half a dozen people round a table". He fears not enough views are taken into account and questions how well represented the councils and taskforces are.

"A cardiologist from Manchester can't speak on behalf of other leading cardiology centres," he says. "The people they [the councils and taskforces] might attract might not be the leading lights. A professor in cardiology's main purpose is to look after the patient. He might only be around at 7am or 7pm. These are not the people NHS Supply Chain is going to attract for an away day in Manchester."

Varela is also concerned that NHS Supply Chain and the regional procurement hubs - which enable trusts to collaborate and buy items in bulk - are fighting against each other in some respects, and need to identify how they can work together in the future. He says NHS Supply Chain needs to win the commitment of trusts. Procurement hubs continue to be popular because trusts feel their local requirements will be listened to, whereas their views on a national basis might not be.

Varela also warns NHS Supply Chain may lack the relevant experience to tackle highly complex areas. "The major challenge is in areas where NHS Logistics were never involved. Cardiology and orthopaedics were traditionally managed at local level by individual hospitals or where hospitals have collaborated in a geographical area. To aggregate that on a national basis is difficult.

"In many of those areas it [NHS Supply Chain] hasn't delivered anything… Some of these people [NHS Supply Chain staff] have never tackled these complex areas or these commodities because they have always been tackled at local level."

national collaboration

So what's the solution? Varela believes NHS Supply Chain should be working more closely with collaborative outfits. He heads a medical and surgical work stream for an organisation, which bears the collaborative hallmarks of a hub. This negotiates on behalf of all cardiology centres in London on items such as pacemakers and defibrillators.

"I have said [to NHS Supply Chain], 'Why don't you become part of my programme team and support how we might deliver this in London? Then you stand a better chance to use that as a learning process, a lever to negotiate on a national basis.' It [NHS Supply Chain] can then engage with hubs and the rest of the NHS to get the commitment to negotiate from a position of strength with suppliers." His request has not been answered.

Meanwhile, there has been a drive to support other DH initiatives. In September 2007 prime minister Gordon Brown announced all hospitals would undergo a deep clean programme to tackle healthcare-associated infections such as MRSA and C difficile. Earlier this year, NHS Supply Chain launched a contract for steam cleaning products, to enable trusts to buy items on a national basis and help them to achieve cost savings. In addition, a new national contract for MRSA screening products will go live in May.

West's strategy is clear. "It's [about] making the procurement team more effective, growing what we do, bringing those things through to market quickly, being more efficient, and how we can use data and knowledge and connections with the DH to get good practice procurement."

Helen Gilbert is a freelance business journalist

more info

NHS Supply Chain at a glance

On 1 October 2006 NHS Logistics, part of NHS Pasa and DHL joined together to become NHS Supply Chain.

DHL runs NHS Supply Chain on behalf of the NHS Business Services Authority (responsible for managing core public sector support services).

NHS Supply Chain has a core customer base of 450 NHS trusts in England and also supports a number of private healthcare organisations.

NHS Supply Chain employs around 1,600 people in eight locations, who include a combination of staff from the former NHS Logistics, Pasa and DHL Logistics.

NHS Supply Chain provides services in procurement, logistics and e-commerce across the following product category areas: theatre and surgical services, medical, food, facilities (including office supplies), clinical markets and capital equipment.

The deal is expected to save £1 billion over its 10-year lifetime by offering a wider range of goods to NHS trusts at lower prices.

nhs-cat the new online catalogue

In October 2007 a new online catalogue called NHS-CAT was launched. Some 500,000 items are listed, compared with 50,000 products previously under NHS Logistics.

Products ranging from medical supplies to food and stationery items can be purchased online using a shopping basket facility linked to NHS Supply Chain's ordering systems and trusts' own purchase order systems.

A new e-sourcing and supplier management tool called Intenda is expected to go live shortly. It will be the primary business software in procurement for managing the tender process and will do all the sourcing. Suppliers will also post tenders to it. A new regional distribution centre is opening in Rugby in July as a stockholding hub for food and other products. It will also cater for increased sales and help to provide an efficient service to customers.

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