• Sir David Nicholson discusses efficiency in the NHS
  • Important savings projects were ‘lost’ amid Lansley reforms
  • Expiring NHS Supply Chain model criticised for lack of transparency
  • NHS must be a ‘more intelligent customer’  

The NHS “paid the price” for the Lansley reforms by losing sight of important efficiency programmes as senior managers were left “running around applying for jobs and changing structures”, the health service’s former head has said.

Sir David Nicholson told HSJ projects to improve price transparency and data collection “dissipated”, which illustrated the “constant reorganisation problem” the NHS endures.

His comments come amid the biggest shake-up of NHS procurement since 2006, as the service’s purchasing power for common goods and equipment swings away from individual trusts towards a centralised model.

In an interview about NHS procurement and efficiency, Sir David also said:

  • He “gets the logic” of the new purchasing model, as allowing NHS trusts total control over buying common goods and equipment is a “really bad thing”;
  • A lack of price transparency allowed some trusts and suppliers to undermine the effectiveness of the previous procurement model;
  • The NHS has not always been “an intelligent customer” when hiring consultants; and
  • The increasing number of trusts setting up wholly owned subsidiary companies reflects chief executives who are “constantly challenging rules to do the best for their organisation and patients”.

Sir David was chief executive of the NHS in the Department of Health between 2006-13, and then worked as CEO of NHS England until 2014.

He returned to the NHS in May this year as chair of the troubled Worcestershire Acute Hospitals Trust, and in August he joined the board of procurement and contract management company Lifecycle Management Group (formerly known as Leaseguard) which aims to help trusts reduce asset-related spend.

Efficiency schemes ‘got lost in lots of ways’

Asked how high procurement efficiency was on his agenda during his time as CEO of the NHS, Sir David said it was a “big issue”.

“While we waved our arms about it quite a lot, the issue for us was transparency and data,” he said.

He said his teams tried to get transparency in both “price and unit of delivery”, which prompted work on an early version of what is known as the Model Hospital system today run by NHS Improvement.

Another focus was to drive the purchase of more common goods and equipment through the NHS Supply Chain, which was run by DHL Supply Chain after a huge outsourcing exercise in 2006.

But Sir David said those efficiency schemes “got lost in lots of ways” amid the changes implemented by Andrew Lansley’s health bill.

“We paid the price of the massive Lansley reorganisation, which was [that] some really important things weren’t dealt with because all of us were running around and applying for jobs and changing structures,” Sir David said.

“We created a Model Hospital and a Model Commissioner but all of that dissipated. People who were doing it left or moved on, and that’s part of the constant reorganisation problem we have.”

Procurement model failed due to lack of transparency

Sir David said the attempts to create an effective supply chain for common goods and equipment by outsourcing the service to DHL Supply Chain failed due to a lack of transparency over pricing.

“The Supply Chain model came out of the same stable as the Independent Service Treatment Centres and the National Programme for IT – it came out of the government view that you could force change on the organisation from the top,” Sir David said.

He described the model as “completely un-transparent”, as prices were distorted by margins applied to pay for the model’s operating costs. 

Sir David said the lack of transparency created a space for suppliers and some local NHS procurement chiefs to “undermine its effectiveness”.

“Procurement is a really good example where taking a much stronger line nationally will deliver a framework that will deliver big benefits if it’s used by everyone, while giving everyone the right to do whatever they want is a really bad thing,” he said. 

Sir David said he “gets the logic” of the new procurement model, which aims save more than £600m annually by doubling trusts’ spending on common goods and equipment through the new NHS Supply Chain (comprising purchasing bodies buying different categories of products) from 40 per cent to 80 per cent.

But he added the model is “not a panacea” and that it is crucial trusts retain their procurement expertise for the model to be successful.

Subsidiaries must fit trusts’ strategy

Asked if he backed the growing number of trusts which have put procurement and other non-clinical services in wholly owned subsidiary companies, Sir David said it must “fit in with the organisation’s strategy”.

“When you’re running a hospital there are rules about what you can and can’t do, and as a CEO you’re constantly challenging those rules to do the best for your organisation and patients,” he said. 

“This is an example of people challenging those rules to get value, like short term savings out of the system.

“It’s a perfectly legitimate thing to do if it fits in with your overall strategy, but as a short term way of getting a few quid of savings it doesn’t seem the right thing to do.”

Sir David said he joined Lifecycle, which cites more than half of the NHS’s acute trusts as customers during its 25 years as a business, because he wanted to play a role in helping the NHS get value for money and engage effectively with the private sector.

“The NHS has not always been an intelligent customer,” he said – addressing the NHS’s use of consultancy services.

“You have to be really clear as an organisation about what you want from them. If I look at the input we’ve had [at Worcestershire] from the big four and compare with input from relatively niche organisations, the latter have done some fantastic work.

“I don’t think getting one of the big four in to do some diagnostic work which they’ve done in 10 other places is good value.”