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NAO report reveals NHS could be more efficiently saving money in purchasing medical equipment

A new report from the National Audit Office (NAO), the UK’s independent public spending watchdog, has revealed that the NHS is not making the most of its spending power to save money in purchasing medical equipment and consumables.

Entitled ‘NHS Supply Chain and efficiencies in procurement’, the report has found that the NHS has continued to spend more than £3 billion outside NHS Supply Chain, its purpose-built procurement route.

The NAO examined how effectively NHS Supply Chain is making efficiencies across NHS procurement and whether it has achieved its objectives of saving money and increasing its share of products (medical equipment and consumables) bought through it by the NHS.

For 2023-24, NHS Supply Chain estimates that annual NHS spending on products is around £8 billion.

At its inception in 2019, the Department of Health and Social Care (DHSC) set NHS Supply Chain a target to deliver £2.4 billion savings by 2023-24. As of 2022-23, it told the NAO that it had exceeded its £2.4 billion savings target – but although NHS Supply Chain reported progress against this target to NHS England (NHSE) on a quarterly basis, neither NHSE nor the DHSC has validated or checked these savings, the report underlines.

Importantly, the report states that NHS trusts spend approximately £3.4 billion outside of NHS Supply Chain’s function. Trusts are largely free to purchase goods outside Supply Chain, but in order to achieve its objective – to harness the NHS’s spending power – NHS Supply Chain needs to persuade them to use it to purchase goods.

There is a still lot of variation in the prices trusts pay. For example, for each hip replacement stem part purchased by the NHS in 2022-23, individual trusts paid up to £490, with a median price of £333. Supply Chain’s price for the same product was £258, which was the lowest price for that product.

NHS image

In addition, the report outlines that customers’ overall levels of satisfaction with NHS Supply Chain are below target and in long-term decline. In its latest customer satisfaction survey, 71.8 percent of respondents noted that they use other supply routes because the products they wanted were not available through Supply Chain.

NAO further states that NHS Supply Chain needs to improve the performance of eDirect, a procurement route accounting for around £1.5 billion of orders via Supply Chain in 2022-23. Orders via this route were delivered on average 22 days late between June 2022 and March 2023.

Supply Chain recognises that its systems and processes do not work well for all its customers and that it needs to do more to become, and demonstrate that it is, the best-value option for NHS procurement. To do this, it needs to optimise prices for customers, make ordering as straightforward as possible, and deliver reliably on orders placed, the NAO suggests.

Gareth Davies, Head of the NAO, commented: “Delivering the right products for the NHS, on time and at the best available price is essential to make every pound count for patients. The NHS has enormous buying power, but it is not yet making the most of it.

“Supply Chain needs to do more to deliver, and to show that it is delivering, for the NHS. In response, trusts need to make use of the NHS’s buying power to secure the lower costs Supply Chain can bring, with support and clear direction from NHSE.”

In light of the report’s findings, the NAO recommends that NHSE should use its data on trusts’ spending to understand and challenge why trusts are not using NHS Supply Chain and incentivise and encourage greater use of NHS Supply Chain.

It also states that NHS Supply Chain should improve its understanding of why some customers are unsatisfied with its services and develop a targeted action plan to make substantial improvements in satisfaction.

Read the full report here.