- Savings through new NHS procurement model not expected to kick in before 2019-20
- Department of Health says funding operational costs of model centrally at expense of trusts will improve price transparency
- Programme deputy director acknowledges trusts will be tempted by suppliers undercutting nationally agreed prices
NHS trusts should not start planning for savings through the new national procurement model until 2019-20, a senior Department of Health official has said.
The “future operating model” will be fully rolled out in October 2018 but trusts are unlikely to see benefits until 2019-20 and 2020-21, DH procurement deputy director Jim Craig said.
He said trusts should not be “overly worried” about missing out on funding that will instead be used to pay for the model from the centre, and added that all money saved through the model will remain with trusts.
These providers will aim to purchase up to 80 per cent of all common goods and consumables used by the health service, compared to the current 40 per cent spend on such items through NHS Supply Chain.
The DH believes this will bring real term savings to the NHS every year, culminating in annual savings worth £615m from 2022-23 onwards.
HSJ revealed the providers of the six medical towers in October, who are now planning their procurement strategies prior to the model going live next year.
Speaking at the Health Care Supply Association annual conference, Mr Craig said: “Realistically, I think, in terms of 2018-19, the very most we can expect to see is some of those savings starting to flow through at the very back end of that year.
“I think for planning purposes trusts should be thinking 2019-20 and 2020-21 is where the action is really going to be at in terms of [cost improvement plans] flowing through this model into trusts.”
Mr Craig said the money saved could be used by trusts for various purposes such as offsetting deficits or investing in services.
The new model will not be mandated but it will be funded differently from NHS Supply Chain in a bid to incentivise trusts to use it.
Instead of trusts paying extra operational costs to NHS Supply Chain on top of the product’s price, a portion of NHS England’s budget – which would otherwise have gone to trusts via the tariff – will be allocated directly to funding the new model. This comes into effect in April 2019.
This means trusts will pay the same price for a product through the towers as that paid by the towers to suppliers, which increases price transparency, Mr Craig said.
HSJ later asked how much the model is estimated to cost annually and what this would equate to per trust, but the DH said it could not confirm details due to commercial sensitivity as procurements are ongoing to establish the model.
Mr Craig said in his presentation: “The impact on trusts in terms of flow through from NHS England and how it will flow out is likely to be quite small, so I don’t think it’s something we should be overly worried about.”
Asked what would happen if suppliers approached trusts in urgent need of cash releasing savings with better deals than those provided through the towers, Mr Craig said he “wouldn’t expect trust procurement teams and finance directors not to take advantage of opportunities that present themselves”.
“But I have a few caveats and pleas around that,” he added.
“Help us understand the deals you’re being offered so we can use that to have that discussion about whether there’s value to be had for everyone.”
He said trusts should ensure they include the right exit clauses on contracts “in case something better comes on the table”.
The medical towers providers have committed to saving £480m in the first three years of the scheme, and Mr Craig said each tower’s individual savings target would be published by the DH shortly.
Documents obtained by HSJ through the Freedom of Information Act reveal two more companies that considered bidding for the six medical towers.
Both NHS Shared Business Services and procurement consultancy firm Akeso & Company attended a presentation day run by the DH in March for “shortlisted potential providers” of the towers.
HSJ understands Akeso submitted a bid, but NHS SBS – a joint venture between the DH and Sopra Steria – is not believed to have submitted a bid.
The DH said it could not comment when asked how many bids it had received for the six medical towers overall, however this information will be released “shortly”, according to its FOI response.
Winners of the four remaining towers are expected to be announced in the first few months of 2018.