Who is the decision maker? - Balance sheet versus patient care
Author: Rachel Lewington, Consultant
The conflict between achieving savings whilst providing high quality patient care is an ongoing dilemma facing all those who make purchasing decisions. A wider range of individuals, including representatives from hospital finance and purchasing departments, in addition to clinicians, is now likely to be involved in purchasing decisions. The trend towards centralised purchasing has also taken a degree of decision-making away from individual hospitals and concentrated it in larger, umbrella organisations.
Different roles, different priorities
The differing responsibilities of clinicians and hospital administration mean that each is likely to value different aspects of a product or service. Through direct experience, clinicians are likely to have a higher awareness of individual companies and products than those in hospital administration and will probably have defined views about how effective, safe and easy to use a product is. In contrast, those in hospital administration are more likely to be concerned about the cost of any product, service and maintenance tie ins and product safety. When presenting information to those working in hospital administration the following issues should be highlighted,
How influential are those at the front line ?
The views of clinicians continue to underlie purchasing decisions, since they are primarily responsible for conducting any clinical review of new products and will report their views to hospital purchasing and finance departments.
A recent example from a study conducted by HBS Consulting shows the continuing influence of surgeons in Germany over purchasing. Surgeons were asked who made the final decision about which type of surgical implant to purchase. As shown in the following table, most surgeons reported that those directly involved with patients (surgeons and head surgeons) were responsible for making the final decision about which type of implant to purchase.
With regard to purchases of capital equipment, decisions are often based on the value of the contract involved, with surgeons and physicians having greater freedom to make purchasing decisions for items falling below a particular threshold (reportedly from 40,000- 50,000 in Germany, for example). However, beyond this threshold, the hospital administration held the balance of power in decision-making. In other regions, such as the UK, the ceiling below which decisions about capital purchases can be made within a clinical department are lower, with surgeons reporting that approval for funding needed to be sought from the hospital trusts administration for purchases exceeding £5000 (~7500).
Rather less conventional methods are sometimes employed when a surgeon or physician wishes to buy a specific product for which he or she cannot get approval. One Italian surgeon reported that he had purchased a gamma probe using his own money because the hospital administration was not convinced of its usefulness.
Increased accountability implications for procurement
The spread of electronic procurement systems in hospitals throughout Europe is expected to have a considerable impact on purchasing and on the decisions that individual departments and clinicians make, as a consequence of increased transparency. E-procurement systems make it far easier for purchasing managers and finance managers to monitor hospital spending on a departmental or even individual case basis. One of the primary driving factors pushing the uptake of e-procurement systems is their potential to produce savings in hospital spending.
The growing use of e-procurement (in the UK, for example, purchasing managers anticipate that the proportion of spending conducted through e-procurement systems will increase considerably during the next 5 years) may also lead to increased uniformity with regard to the products and suppliers available on e-procurement catalogues.
Table 1: Who makes the final decision about which implant to purchase?
Source: HBS Consulting
E-procurement systems installed may include a limited number of suppliers and there are indications that it may be more difficult for smaller companies to maintain a presence through an online catalogue used by an e-procurement system. E-procurement also reflects a drive to centralise and focus purchasing, allowing purchasing departments to have greater influence over pricing. Features of e-procurement systems already include supplier performance evaluation, a useful negotiating tool for hospitals. Such features are expected to develop to incorporate facilities to monitor the cost of care of an individual patient.
Centralisation the new shift in power?
Centralisation in purchasing may also result in a shift in decision making from individual departments and trusts towards larger organisations. Examples of centralised purchasing include Health Care Enterprises in Norway, centralised purchasing in Valencia in Spain and pilot Supply Management Confederations (launched in 2003) in the UK.
Taking SMCs as an example, these organisations include a number of hospital and primary care trusts. The intention is that SMCs will form a middle tier between individual hospitals and the central NHS purchasing and supply agency (PASA). It is hoped that SMCs will yield benefits for the NHS in terms of savings made in procurement costs as a result of economies of scale and increased negotiating power. The hope is also that these initiatives will lead to improvements in procurement practice by developing centres of excellence and enhancing the professionalism of procurement staff.
For example, West Midlands NHS Procurement Alliance, one of the new SMCs, is responsible for managing procurement in 11 hospital trusts, 13 primary care trusts and the regional ambulance service trust. As such, this single entity will eventually control and manage the combined spending power of 25 individual healthcare trusts. Although individual trusts will still be able to promote their own individual purchasing requirements, contracts will be issued at the level of the SMC, with decisions about where to award contracts being made at a more senior level by executives working for the SMC as a whole, in partnership with clinicians.
The intention underlying centralised purchasing is to increase efficiency and produce savings through increased leverage in negotiations. One side effect of centralised purchasing however, is that decisions about individual suppliers are taken away from individual hospitals, encouraging uniformity of supply across a group of hospitals, giving clinicians less freedom in deciding which supplier to work with.
Exploiting developments in decision making
Surgeons and physicians continue to be key targets for sales and marketing activities. However, marketing efforts now need to address hospital administrators in finance and purchasing as well. With this in mind, it makes sense to consider the views of both clinicians and those looking at hospital costs. Traditionally, sales representatives have sold products directly to clinicians. The involvement of hospital administrators in purchasing decisions means that a more complex approach is needed. This may involve multiple presentations emphasising different aspects of a product according to the particular audience. Efforts may need to be made to convince those in hospital administration to consider a product before sales staff can gain access to the clinicians, who will evaluate a product on the basis of its clinical efficacy and safety. This could involve operating at a senior level in the case of centralised purchasing structures, as in SMCs in the UK, where purchasing and finance staff will be responsible for the combined budget of a group of hospitals and primary care facilities.
Whatever approaches are taken, medical device manufacturers need to monitor closely the changes in procurement procedures taking shape in individual countries in Europe, in order to shape their sales and marketing strategies to match the demands of the market.