NHS missing out on tens of millions in procurement savings, PAC report warns

NHS Supply Chain failing to demonstrate it is the answer the NHS needs on procurement savings

The NHS is missing out on savings amounting to tens of millions of pounds. In a report published today, the Public Accounts Committee (PAC) warns that NHS Supply Chain, which was created to save the NHS money through pooling hospitals’ purchasing power, has failed to persuade NHS trusts to use it to make billions in purchases.

NHS Supply Chain was created to solve the known problem that the NHS was not making the most of its collective buying power to get the lowest prices for its purchases. The PAC’s report finds that the organisation has so far failed to demonstrate that it is the answer the NHS needs. Of the £7.9billion spent by NHS trusts on medical equipment and consumables, £3.4billion is outside of NHS Supply Chain. This means that it is only achieving around 57% of market share to a target of 62% (a target revised down from an original 80% by 2023-24).

Trusts’ satisfaction with NHS Supply Chain is low and in steady decline (down to 54% in 2023-24 from a peak of 67% in 2021-22). Over two-thirds of trusts say they shop elsewhere because of limited availability through NHS Supply Chain. The report further raises concerns that a focus on costs may impact on the quality of outcomes for patients. The report, which finds that clinicians are not convinced that NHS England (NHSE) and NHS Supply Chain value quality over price, calls for clinicians to be involved in purchasing choices to ensure that better patient care is considered alongside value and cost.

The report also questions the level of savings NHS Supply Chain reports it has made for the NHS. NHSE shared the organisation’s reported savings with it, but using two different methods which generated two very different figures - £3.3billion from 2016-17 to 2022-23, and £1.7 billion for the same period, risking confusion over how much NHS Supply Chain has actually saved. Trusts do not always recognise the savings that NHS Supply Chain reports, causing frustration and mistrust.

The PAC’s confidence in savings claimed by NHS Supply Chain is further undermined by the fact that the cumulative £3.3billion claimed has not been validated by either the Government or NHSE, with the organisation effectively marking its own homework.

Dame Meg Hillier MP, Chair of the Committee, said: “The problem NHS Supply Chain was created to address is well-established. Given the scale of the NHS’ collective billions of pounds worth of collective spend on procurement, ensuring the best value for money for the taxpayer is essential. But our report finds that trusts do not have the requisite confidence in NHS Supply Chain to utilise its services, leaving it at risk of being an answer to a question no-one is asking.

“Cost is of course only one factor when making high-stakes decisions around which equipment to use for patients, and it is essential that clinicians are given a seat at the table so that better patient care is considered alongside best value. All agree that high-quality equipment must be readily available to NHS trusts at the best possible price. The hard yards must now be put in to build trust in the systems that are there to deliver these outcomes.” 

Conclusions and recommendations

1. NHS Supply Chain has failed to persuade trusts to use it, meaning trusts are missing out on opportunities for savings. NHS Supply Chain was created as a national body through which trusts could make use of their collective purchasing power to secure better deals. This is not yet happening. Trusts spend approximately £7.9 billion on medical equipment and consumables, but £3.4 billion a year of this spend is outside of NHS Supply Chain. This means that NHS Supply Chain is only achieving around 57% of market share against a target of 62% (its original target was 80% by 2023-24). NHS Supply Chain estimates that, if trusts made greater use of NHS Supply chain using the existing contracts that are currently in place, they could save a further £60 million to £90 million by 2026. However, it considers that its capacity constraints as well as other operational reasons mean it would be difficult for it to grow more quickly and it needs to improve its infrastructure and modernise technology. NHS Supply Chain now expects it to take at least three years before it can reach 80% market share. It also needs to gain trusts’ confidence as their overall net satisfaction with NHS Supply Chain is in steady decline; from its peak of 67% in quarter two 2021-22 to 54% in quarter two 2023-24. This is a shockingly low level of customer satisfaction.

Recommendation 1: NHS Supply Chain should set out how, and by when, it will get the NHS to use NHS Supply Chain for the original goal of 80% of its spending on consumables and medical equipment.

2. NHSE has been weak in its oversight and support of NHS Supply Chain. Both the Department and NHSE failed to validate the cumulative £3.3 billion savings claimed by NHS Supply Chain, instead, they relied on NHS Supply Chain to make these checks – effectively marking its own homework. This undermines the confidence we can have in these reported savings. NHSE has not given NHS Supply Chain the full financial support NHS Supply Chain considers it needs to transform and modernise its business. For 2023-24, NHS Supply Chain requested a £252 million revenue budget to operate the organisation and implement its transformation projects for the year. NHSE provided just £240 million. NHSE acknowledges that this shortfall would delay a new IT system but explains there are many other calls on NHS funding and that it must get the balance right between other competing priorities and NHS Supply Chain. We were surprised at the decision to reduce NHS Supply Chains request for an extra £12 million investment in IT when it is expected to save £500 million by 2026-27.

Recommendation 2: NHSE should set out how it will provide adequate challenge of and support for NHS Supply Chain, particularly regarding NHS Supply Chain’s plans to modernise and transform its business.

3. NHSE does not challenge trusts as to why they do not buy more products through NHS Supply Chain. Trusts submit data to NHSE on how much they spend on medical equipment and consumables, and through which suppliers (including NHS Supply Chain). NHSE makes this procurement data available to all trusts but relies on them to analyse the data and change their practices in response. Despite NHSE’s central role, it does not use this data to identify and generally challenge trusts as to why they do not purchase more using NHS Supply Chain. Instead, it told us it that, given its resources, it only challenges the trusts that are struggling most financially. In addition, NHSE does not analyse the data to identify what NHS Supply Chain could do differently to persuade trusts to use it more. It is disappointing that the information NHSE collects is also incomplete, as 55 trusts (out of more than 200) do not routinely provide this data. NHSE should work with trusts to improve the data available to it.

Recommendation 3: NHSE needs to use procurement data more systematically to challenge trusts to buy more consumables and medical equipment through NHS Supply Chain.

4. The way NHS Supply Chain has calculated and reported its savings has caused confusion and mistrust. NHS Supply Chain has used several different methods for calculating savings depending on the audience, for example, to government, trusts and suppliers. Each method gives a different result, risking clarity over how much NHS Supply Chain has actually saved. NHSE has shared with us NHS Supply Chain’s reported savings through two different methods. For the first, using the original method set by the Department, NHSE shared with us NHS Supply Chain’s reported savings of £3.3 billion from 2016-17 to 2022-23. For the second, using a method, which is more in line with trusts and does not re-count savings, NHSE shared reported savings of £1.7 billion over the same period. Trusts do not always recognise the savings that NHS Supply Chain reports, causing mistrust and frustration. NHS Supply Chain and NHSE have developed a new, more consistent, method for calculating savings, which is being rolled out across the NHS.

Recommendation 4: A year after implementing the new savings method, NHSE should assess whether trusts accept the savings that NHS Supply Chain reports. The new method for calculating savings should be used in all cases to ensure consistency.

5. It will be several years before the NHS sees the benefits from NHS Supply Chain’s efforts to improve its business. NHS Supply Chain’s main vehicle for improvement is a transformation programme which is expected to run from 2022-30. We are concerned that the risk to this transformation programme was rated red/amber in August 2023. NHS Supply Chain acknowledges the difficulties it faces in transforming its business. It told us that the seven projects it is running in 2023-24 to modernise the way it works are ‘exceptionally challenging’. NHS Supply Chain is also trying to improve its procurement route known as eDirect, which has had well-known problems since 2018. Most recently, between June 2022 and March 2023, NHS Supply Chain reported that on average more than one quarter (26.9%) of orders made through eDirect were delivered late, by an average of 22 days. It reports an improving picture with 8% of orders now 8 days late. However, NHS Supply Chain acknowledges that there will not be any further progress with eDirect in the next 12 months and estimates that improvements will take 18 months to appear once it has started the enhancement work. We were disappointed that no positive action appeared to be being taken to rectify the lack of warehousing in the South of England as a constraint on the business.

Recommendation 5: Alongside its Treasury Minute response, NHS Supply Chain should provide a clear and realistic road map setting out the timetable for transformation and modernisation and when benefits will materialise. In carrying out this exercise NHS Supply Chain should also examine whether the eight-year timetable should be reduced.

6. NHSE and NHS Supply Chain have not convinced clinicians that they value the quality of products above price. We are concerned that a focus on costs may impact on the quality of outcomes for patients. We can see the value in reducing unnecessary variation in the range of products that clinicians can choose, but this needs clinicians to be involved in those purchasing choices to make sure patient care is part of the value and cost considerations. Both NHS Supply Chain and NHSE consider that trusts and clinicians need to be free to make decisions about which products to buy in some instances and NHS Supply Chain contends that it offers an appropriate choice of products to trusts. While we find it reassuring that trusts have the freedom of choice over which products to buy, we are disappointed that there is no national leadership or analysis on which products lead to the best outcomes, other than for highly specialised equipment.

Recommendation 6: NHSE and NHS Supply Chain should set out how they will involve clinicians in purchasing choices to ensure that better patient care is considered alongside value and cost.