Transcript Healthcare Procurement and Market Development

Healthcare Procurement
Procurement and Market
Development
Scoping third sector engagement 23rd November 2009
Peter Hawkins - Associate Director of Healthcare Procurement
Context
NHS reform over the last 18 months with the advent of WCC, PRCC, PCT Procurement
Guide, the framework for managing choice and competition led PCTs to drive more effective
procurement of healthcare services.
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Provider driven
Increased patient choice
Competing Providers
Commercial drivers
Input and target driven
Commissioner led
Market place stimulus
Improved service and quality
Patient and taxpayer value
Outcome/quality driven
It was and is recognised that implementing such changes would require a significant
change in the way the PCT sourced, selected, contracted, and managed its provider
base, with PCTs needing to develop new skills and expertise to deliver this level of change.
What did this mean?
Complimenting commissioning skills with commercial procurement
What is a market
• The term “market” refers to the interaction between the demand for and supply of services.
• When markets work, the processes of choice and competition drive efficiency in how goods and
services are produced and in the mix of services provided
• Translating this to the health context implies that markets have the potential to encourage providers
to improve the quality of care delivered for a given cost
• However, for markets to work effectively, a number of conditions must be satisfied:
- well-informed purchasers/consumers
- purchasers/consumers have the ability to observe price and quality of different suppliers, and
respond accordingly
- competing suppliers, or a credible threat of market entry
- Low or mitigated barriers to entry for new suppliers
What factors influence future choice of market
structure?
Examples of demand side factors
• Volume of demand
Examples of supply-side factors
• Economies of scale
• Geographic distribution of demand
• Economies of scope
• Urgent/non-urgent
• Barriers to entry and exit
• Priority for patient choice
• Willingness of patients to travel
• Dependency on other services
• Uniformity of costs
Creating the opportunity for stimulus commissioners
Commissioning-led service cannot look to acute care for all the answer:-
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New market reforms offer an opportunity for purchasers and providers to impose themselves by
reducing the strength of local monopolies,
The focus on community services is in part a reflection of the need to move services away from
the acute sector
Consider using the potential separation of provider services as an opportunity to stimulate the
market by introducing new entrants
Identify areas of supplier capability that will impact the achievement of key commissioning
objectives in community services
Set out the key steps and activities needed to introduce a new provider into the health economy
Key performance monitoring metrics will be used or developed to incentivise the achievement of
the health outcomes and reductions in inequalities required
Shaping the structure of supply
– develop the future requirement
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Developing the correct organisational capacity and potential solutions to allow market shaping
Commissioners intentions – the likely view of work plans and therefore care markets
Not just about volume related care contracts – more about wider diversity of providers to allow
choice
Easing of market entry – financial risk share if entry costs are prohibitive eg. capital investment
Redesigning care pathways – dialogue with providers
Potential monopolies due to market immaturity and PCTs need proactive policies to guide the
market
Policy objectives of economic growth (SME encouragement and development) and social welfare
(social enterprises and third sector)
Competition in purchased healthcare – the players
Local authorities
Private Sector
Foundation Trusts
GPs
Third Sector
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direct say via OSCs, but will this influence diminish?
Unitary Authorities will add complexity and ….. Potential
Will they take on risk, TUPE issues, can they attract patient referrals
Local Authority social care example
Can support integrated care models but medium DGH style could be at risk
same as any other supplier/provider
Smaller GP consortia have tremendous potential in short term to extend
existing services
- PBC and the more entrepreneurial GPs can have real influence
- COI issues
- Bureaucracy still a entry barrier but they do have extensive networks
- Where commercial skills exist could be a goldmine (Age Concern)
Patient focus group professionals and social enterprises influenced by patient needs could flourish as
they take control of services themselves
Seizing the opportunity - providers
“All organisations have a fundamental need to sell their services, satisfy their customers and create
the means to satisfy customers in the future”
(Source Operations Management 4th edition Slack N, Chambers S and Johnston R 2004)
Know your business
Market and demand analysis
Capacity and Ability
Vision, leadership, acumen, skills
Values and Culture
Responsive, customer led, value driven
Develop your business - providers
Do you really know and understand….
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What you want to provide and what you don’t
Where does your income come from
The commissioning intentions…. and the small print
How are you going to manage the implications of potential business losses
How are you going to use your experience and your intelligence to win business
And perhaps most importantly….
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What is going on in your organisation – patient experience
Never underestimate it’s power and influence
The PCT procurement landscape –
Providers and Commissioners
Providers
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Provider capability/willingness to change ?
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Bid support
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Lead times on change
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Asset / equipment inflexibility
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Understanding the market
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Conflicts of Interest
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Too many / too few providers
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Sector “Silos” constrain providers’ solutions
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Co-ordinated / Managed Care
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Be more commercial and business minded!
balanced with a service culture
Commissioners
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Tender or not to tender? Contract
extensions
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Mergers and vertical integration
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Engagement and workforce issues
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Planning capacity
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Developing the market
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Contract management
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Conflicts of Interest
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Be more commercial and business
minded! balanced with a service culture
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NHS as preferred provider
Challenges or opportunities
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Financial challenges may mean a changed focus – especially on contracting
Assist in the redesign of care pathways and services to eradicate inefficiencies and highlight
efficiencies
Creating a strategic improvement framework – health market analysis and service reviews will
inform service prioritisation, business planning and therefore contestability/non contestability
decisions. Co-operation versus competition
Identifying (and harvesting) the harder to reach fruit. Getting more from what we already have –
provider relationship management in the context of the wider Manchester health economy.
Improving the dialogue with existing providers
Redesign or develop new services – opportunity for providers to shape outcomes
Additional capacity – service review to validate capability of provider
Emerging policy agenda
- preferred provider
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Preferred provider may mean some changes in PCT procurement strategy….but not it’s
underlying principles
New PRCC rules and strategy will align more to co-operation (that can stand up to scrutiny) than
competition
A need to improve our understanding of health provider economics and the interaction with
commissioned services
Accuracy of data sets and information will become key to contract monitoring and relationship
building
A more integrated model approach to the wider health economy
The drive will still be the same around improving healthcare quality, financial robustness and
providing best value
Securing our shared future
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We are all committed to improving health in Manchester
We face an unsustainable financial position across all parts of the Health Economy
‘Securing our Shared Future’ aims to re-design care pathways and bring about transformational
change – delivering long-term financial viability
We are working jointly to take decisive and coordinated action based on common goals
Patients and the public have an important role to play
Will involve all major service providers and commissioners
Solution is city wide and system wide including social care so must be co-produced
This challenge is a shared challenge across the Health Economy