Pursuing value could be the right step towards transforming the NHS, rather than simply heading towards whatever is cheapest.

Jim Easton, national director for improvement and efficiency at the Department of Health, is correct. The NHS in England “saved” a heroic amount of money last year - £5.8bn, if primary care trusts’ Q3 forecasts prove correct. Yet progress towards genuine efficiency is slower. Especially towards the whole system: getting the entire machine to work more slickly, rather than setting its individual cogs spinning a bit faster.

Whole system efficiency isn’t simply about providing more care outside hospitals. An enduring myth surrounding the Nicholson challenge is that primary and community care are more efficient than hospitals, so shifting the location of care is the route to nirvana. Evidence of this is thin. Looking at cost alone, with average GP remuneration in England now approaching £110,000, doctor-led primary care is unlikely to be cheaper. Each shift from “choose and book” to weekend opening comes with an immense groan and a price tag.

Everyone wants care in the most appropriate place, just as everyone favours “integration”, but NHS structures connive against it. GP-dominated commissioning unsurprisingly sees primary care as the solution. That implies fewer hospitals. Yet, even without the resulting political angst, a competitive market sets trusts scrapping for “market share” and survival. That’s reinforced by the tariff, designed for more affluent times, that encourages hospitals to do more, not less.

Other industries have shown that science, not reorganisation, drives genuine transformation. Computers and the internet have rendered banking, then retail, unrecognisable within a generation. The greatest change in healthcare in the past 50 years is arguably in mental health. Closing the institutions became possible not by service redesign or commissioning, but by sophisticated medicines.

Shifting the location of healthcare is made possible by scientific advances: in diagnostics, imaging, surgical technique and many other fields. Yes, saving £5bn per year means spending less on people, buildings and materials, but making those savings while improving quality depends on technology and pharmacology. 

Crucially it also depends on reinvestment. One of three continuing costs supposedly funded via the “Nicholson challenge” is £2bn a year to keep up with scientific advances. Investment was one of the key pledges of last December’s Innovation, Health and Wealth report from Sir Ian Carruthers. So how does that £5.8bn quality, innovation, productivity and prevention “saving” return to the NHS? Reporting an NHS “surplus” of £1.6bn for 2011/12 hardly seems to merit praise.

This contradicts assumptions that in the future the NHS will be all about commissioning, with provision left to a market dominated by commerce and the third sector, and minimal central interference in the workings of foundation trusts. Provision is still where the big money is spent. Better and more strategic procurement appears more likely to yield serious results than smarter commissioning.

So it’s timely that the DH’s review of procurement is now rolling, following the launch in May of NHS Procurement: Raising our Game. Waste from fragmented procurement was roundly condemned last year by the National Audit Office, then the Public Accounts Committee.

Better procurement is not just about economies of scale and smarter stock control. Raising our Game makes it plain: it’s about “outcomes, not just cost, and must be responsive to creative ideas from suppliers, procurement specialists, clinicians and managers”.

Especially the manufacturers of advanced technology and drugs. EU procurement law encourages public bodies to pursue the most economically advantageous tender, or MEAT. Serious suppliers are used to preparing return on investment calculations on this basis. Yet they find the NHS bedevilled by tortuous procurement routes, and preoccupied with in-year cash savings. It’s a poor place to innovate.

Pursuing value rather than cheapness might not be a bad step towards transformation. Moving away from a 90 per cent weighting on price would send a powerful message that QIPP isn’t just a fancy way of describing cost-cutting.

Noel Plumridge is an independent consultant and former NHS finance director.