Making total hip replacement more financially viable – without reducing care quality - is a tough but totally achievable aim. Simon Sethi and colleagues outline the steps towards success.
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For many managers in the NHS, financial areas unconnected to staff salaries are a mysterious place, where savings are unknown and it is unclear how to deliver them. But recent experiences at North Bristol Trust provide some vital lessons for other leaders striving to reduce costs while maintaining, and indeed improving, quality.
The Avon Orthopaedic Centre is a regional centre of excellence for orthopaedic surgery, hosting 36 consultants from three trusts across the area and performing more than 7,000 elective operations a year.
Before the review of non-pay costs for total hip replacements, the centre was supplied with hip implants by five companies. An income and expenditure review of the business indicated that each hip replacement operation was losing around 22 per cent or £1,252 per hip. It was clear that this had to be turned into a profit making business to ensure its long term viability.
A vital factor in the success of the process was the recognition displayed by all of the hip consultants that it was a key case for change. It was a matter of pride that hips should be profitable for the trust. Since implants constituted 30 per cent of the total cost, this seemed like a logical place to focus efforts.
The process followed seven steps:
Nominate lead consultant The service line review of hip surgery profitability had been done in partnership with finance, the directorate manager and the lead consultant for hips. From initiation, therefore, there was clinical buy-in and leadership around the process. The process would have gone nowhere without the leadership of the lead consultant and, through them, the hip department as a whole.
Informal conversations Discussions that were informally led by the lead consultant ensured that there was awareness of what was going on in the department, which in turn fostered some consensus and commitment to the process. These conversations enabled the manager and lead consultant to get a realistic understanding of the parameters within which negotiations could take place.
Gain a detailed understanding of current costs All too often, a lack of managerial understanding of the systems and costs involved in a tender will lead to a loss of negotiating strength and the possibility of being out-manoeuvred during the contractual process. As such, a very detailed review was undertaken of all system combinations in use before the tender, and their costs. This revealed 17 configurations in use at the centre with a cost range from £761 per hip to the highest of £3,669.
Who does what?
- Leading process
- Understanding systems
- Providing legitimacy
- Advise on process and legality
- Receive and evaluate bids
- Manage and own the process
- Establish case for change
- Define process goals
- Provide assurance to clinicians that no “mad” decisions will be made
Make clear process goals: A key aspect of the tendering exercise was establishing the commitment of the departmental management team and the consultant body. Savings had to be made, but high quality systems also had to be procured. Trust on both sides was pivotal. Historically, there had been a level of mistrust that management would procure poor quality systems since they were the cheapest.
It was agreed that as long as 15 per cent was saved on the tender, the consultant body could choose whichever systems best allowed them to deliver high quality surgery. Such commitment and clear criteria allowed the tender to be clinically led, and it was this that allowed it to deliver positive results.
Indicative offers: Indicative offers were requested from eligible companies. This allowed informal discussions to take place with companies around the savings that would be required to remain in the game, and for surgeons to understand the clinical data behind previously unused systems. The indicative offer process also allowed an opportunity to ensure suppliers understood the significance of the process: there was managerial and clinical agreement that suppliers who didn’t meet the cost envelope would be required to leave the department.
Meeting suppliers: After receiving indicative offers, meetings were arranged with all suppliers to review their offers. These meetings would have been meaningless without the intra-departmental consensus established by the consultant body and the detailed work on costings. They provided a powerful opportunity for the consultant and managerial lead to question suppliers again on clinical evidence and pricing. It was at these meetings that it was fundamentally confirmed that those who failed to deliver the required 15 per cent saving would exclude themselves from the process regardless of historic commitment.
Formal offers: Finally, a formal competitive tender was undertaken. Suppliers had understood the financial position of the trust as the need for savings had been specified, but were free to put in whatever offers they preferred. Offers were summarised by the NHS Supply Chain lead into an easy to understand format. Those companies passing the criteria for price were assessed on the basis of clinical criteria decided by the clinical lead.
Three systems were chosen which met the clinical needs of the department and that had been shown to have a good clinical evidence base. A reduction of 20 per cent was achieved against previous spending, resulting in savings of £277,000.
The most significant outcome from the process is that, in conjunction with other significant work on cost reduction, the profitability of hip replacement surgery at the centre has been transformed from making a loss of 22 per cent per primary hip replacement to a profit of 8 per cent – a remarkable turnaround within 12 months.
There were three key elements and roles that led to the success of the process.
Clinical leadership and buy-in meant that the tender wasn’t a managerial exercise that was at best irrelevant and, at worst, threatening to the provision of a high quality service. Instead, it ensured that the exercise met both clinical and financial imperatives and established the credibility of the exercise with the companies involved.
Directorate management ownership of the problem and the process meant it was operationally and clinically grounded. It enabled a clear understanding of the current position and what was realistic to change to.
Procurement support ensured that the process followed correct procedures, NHS Supply Chain analysis of bids enabled easy comparison and a simpler procurement process.