Commercial awareness is increasingly seen as crucial for the functioning of the NHS. Thoreya Swage explains how the new NHS Commercial Operating Model is changing the rules of procurement - and opening doors for the medtech industry.
'Work smarter: more efficiently and effectively' has become a well-recognised mantra in the NHS. The commercial imperatives have been brought into sharp focus by the current economic crisis. The Chancellor's challenging 2009 budget has provided the impetus to make the most of the diminished resource that is public funding.
Lord Darzi's Next Stage Review placed emphasis on quality, innovation and encouraging plurality of providers, rather than on savings. Looking at a more commercial approach to working and engaging with the independent sector may help the NHS to fulfil these recommendations. But what does that mean for the huge public sector organisation that is the NHS?
Necessity - not nicety, Mark Britnall's parting gift to the NHS as Director of Commissioning and System Management at the DH before he went off to the private sector, tries to explain how the NHS can achieve a more commercial approach without losing its core values. The 'new commercial operating model for the NHS and DH' states that the aim is to improve commercial skills at all levels of healthcare in order to achieve better value for money and improved quality of care.
This exercise started with the Independent Sector Treatment Programme in 2003, overseen by the DH's Commercial Directorate, with pockets of procurement activity taking place in a sporadic fashion across the country. Throughout this time, it was obvious that NHS commercial skills were sparse and there was little understanding of how to work in such a business setting.
The new policy document tries to widen the sphere of commercial influence and skills and ensure their implementation across the whole of the healthcare sector in a systematic manner. It highlights the commercial skills that the NHS needs, including performing market analyses, shaping and nurturing innovative services, and encouraging new markets in the provision of healthcare. Commercially skilled NHS organisations also need to commission jointly with local authorities (where appropriate), conduct competitive exercises and manage contracts tightly to ensure benefits for patients.
Providers are also exhorted to develop commercial skills, so that they can recognise opportunities, deliver effective responses to tenders, perform according to contract and generate ideas that result in better value and health outcomes. Set against a background of tightening healthcare budgets, the document states that the commercial approach is an absolute requirement for the future effective functioning of the NHS.
Key elements of the model
The aim of the model is to nurture the growth of commercial expertise by focusing on the areas of greatest potential and impact, using a coherent structure and process.
Although PCTs remain accountable for the commissioning of healthcare services for their local populations and all the NHS-funded contracts within their area, they still require a wide range of commercial support and skills in order to negotiate new or redesigned services with all providers, including the independent sector.
As a consequence, regional commercial support units (CSUs), based within the Strategic Health Authorities, are being set up this year to help local commissioners 'stimulate the market' to gain better quality and value services. This is supported with an investment of about £20 million to attract entrepreneurial skills at a regional level, so that active commissioning, innovation, procurement and uptake of new technologies can become embedded locally. The CSUs are also required to work with the NHS Supply Chain to ensure value for money in the procurement of goods and services. In order to ensure a consistent approach to the NHS Supply Chain, other existing bodies called regional procurement hubs are required to work more closely with the CSUs.
Meanwhile, the traditional source of procurement expertise for the NHS, the NHS Purchasing and Supply Agency, is being closed down and its resources deployed far and wide - including the Office for Government Gateway buying solutions (to aggregate public spending power in one body) and the CSUs (to build up regional capability).
After six years in operation, the Commercial Directorate has been decommissioned; the new Procurement, Investment and Commercial Division (PICD) has been established in its place, and is now part of the NHS Performance, Finance and Operations Directorate at the DH. The function of this division is to strengthen commercial and procurement support for the DH in one location. The work of the PICD will be informed by a new National Procurement Council, which will enable commercial management to be implemented in a coherent way across the whole system.
In gestation is the Strategic Market Development Unit (SMDU), which supports commissioners in market analysis and market-making. The aim is to provide a single voice for the NHS and DH to speak to the independent sector and engage the latter in the creation of new markets in healthcare.
The Co-operation and Competition Panel will sit within the SMDU. This panel investigates potential breaches of the established principles and rules of co-operation and competition for the provision of NHS-funded healthcare. It will examine such issues as merger and conduct inquiries, procurement dispute appeals and advertising and misleading information dispute appeals.
The DH's World Class Commissioning agenda means that it is keen for PCTs to develop their competencies in market development and procurement. It sees a way forward in PCTs grouping together and combining their commercial and procurement expertise, with the CSUs supporting the process.
Some commissioners may also need help from external organisations to achieve their goals. To this end, the DH has established a commercial resource framework to provide NHS bodies with short-term commercial expertise, from commercial managers and directors to advisors in legal, commercial, clinical, workforce/HR, IMT or finance areas.
New points of contact
The Commercial Operating Model describes an almost bewildering new set of bodies with responsibilities for developing the commercial capability of the NHS.
However, the Government clearly intends the regional CSUs to be the first point of contact for the independent sector, including the medtech industry, in its quest to provide NHS-funded healthcare. The CSUs will ensure that the independent sector's contribution is maximised, and they understand that time costs money when companies are undertaking bids and tenders for services. By streamlining these pathways, they aim to increase the response and confidence of the independent sector in procurement processes.
The unique position of the CSUs means they have the potential to speed up the uptake of innovations developed by the industry through service redesign and effective procurement processes. Over time, the CSUs will be less under the auspices of the SHAs and more in the hands of local commissioners and providers.
Each SHA is developing its CSU according to local needs and requirements. As each CSU is currently drawing up the priority areas of work with the local PCTs, there is an opportunity at a regional level for medtech companies to identify and contact the key personnel within these units. Many of the staff will have come from commercial backgrounds, and will therefore be in a good position to discuss possible proposals and openings for suppliers.
The regional procurement hubs are also worth considering. Some hubs have a track record of making substantial savings for the NHS by procuring contracts for services, and are used by local PCTs. Approaches to procurement hubs may bear fruit, as these organisations often have (and are building) local databases of service providers.
At a national level, when the SMDU becomes operational it may be useful to engage the DH in discussions about creating potential new markets - emphasising the potential solutions formulated by the medtech industry.
Finally, there will still be no substitute for getting to know the local commissioners, who are ultimately responsible for deciding which services will be procured to meet the needs of communities.
Dr Thoreya Swage has several years' experience in the NHS, both as a clinician (psychiatry) and as a senior manager, including Executive Director for a Health Authority, in various NHS organisations covering acute and primary care. She has expertise in commissioning health services, most recently working with the independent sector as part of the Independent Sector Treatment Programme at the DH. She is currently working for a number of NHS organisations, including DH agencies, to develop a more commercial approach to the commissioning of healthcare.
The new policy document highlights the commercial skills that the NHS needs, including performing market analyses, shaping and nurturing innovative services, and encouraging new markets in the provision of healthcare.