“In good supply? Managing supplies in the NHS in Scotland”
We move to item 3. I make the usual announcement about turning off mobile phones and pagers.
A copy of the Auditor General's report, "In good supply? Managing supplies in the NHS in Scotland" has been given to all members. Barbara Hurst, who is the director of performance audit at Audit Scotland, will brief the committee on the report.
Barbara Hurst (Audit Scotland):
The report, which we published earlier this month, covers an important and pretty large area of health service expenditure that is estimated at around £600 million per annum. Supplies management covers a wide range of goods from uniforms, surgical gloves and stationery through to a wide range of services such as catering and repairs to medical equipment. Although supplies in the health service do not have the same public profile as clinical services, they are pretty important: it would be difficult to support patient care without them. That is the background on why we considered this area.
"In good supply? Managing supplies in the NHS in Scotland" is probably one of the most critical baseline reports that we have published to date. A succession of reports have been published over the past decade or so. All of them have really said the same thing and not much has happened. We probably endorse most of what those reports have said. We believe that there is significant room for making savings in the management of supplies in the health service, but without good information it is difficult to put a figure on how much those savings would be.
In essence, the report has four key messages. First, basic management information on supplies management is poor. That means that it is difficult to monitor supplies management performance. In particular, it is difficult to put a confident figure on what supplies are costing and monitor the performance in terms of how supplies are actually being used. If the health service is to proceed with performance monitoring in an active way, it must tackle the availability of information.
The second key message covers issues around national contracts. National contracts are in operation for supplies, but there is little consensus about what should be contracted for at national, regional or local level. That leads on to the third point, which is that although there are national contracts they are not considered mandatory, so quite a few trusts use them as a starting point for their own negotiations with suppliers.
I want to make clear that we are not recommending centralisation of all supplies procurement. One model will not fit all. Just in time purchasing is an example of that: it is great for trusts in the central belt, where there are good transport links, but it would not be such a good option for a trust that serves a rural area. I want to make that point clear to the committee.
The national health service has significant purchasing power so, where it is appropriate, national contracts would be a way of getting better value for money.
Finally, one of the ways forward is for much more to be done using information technology, specifically using e-commerce for the purchasing function and using IT to support the management of supplies within the trust.
Having said that those are the key messages, I want to pre-empt a question about whether this is going to be another supplies report that sits on a shelf somewhere and gathers dust. We are fairly confident that that will not be the case, for two reasons. First, Audit Scotland is working with a group called the strategic alliance partnership, which is a group of procurement managers in the NHS. We are working with it to develop performance indicators on supplies management, which we will use to monitor progress in this area and bring back to this committee. Secondly, we will report back to the committee. That will provide a major impetus for driving change in supplies management in the health service.
Thank you very much for that comprehensive introduction. Do members have any comments?
I was involved in some issues in relation to previous reports, the impetus of which was centralisation of procurement. We seem to have moved away from that again. We are swinging one way then the other. Your report shows that for the past 20 years detailed work has been undertaken, yet no one seems to have taken ownership of it.
There is a lack of trust that individuals are procuring at the best price, hence trusts taking the national contract price as a starting point and negotiating downwards. That suggests that we have a problem, as it has shown that people can save pence, pounds and even hundreds of thousands of pounds in some cases. How can we tackle that to ensure that there is trust within the trusts?
You have put your finger right on it. There is tension between national agreement making and being able to get a better price. Our suspicion is that a trust can get a better price if it is one of the bigger trusts with its own purchasing power. We think that there should be much more of a national lead, to get some better prices up-front nationally, rather than attempts to get those prices in pockets around Scotland.
We want to see change at a local level, which I think we will do if we can get performance indicators in and trusts realise that we are reporting back on that to this committee. We must also see change at a national level in national contracting.
In the past—I have no connection with it now—I was involved with a pharmaceuticals distribution company that also did sundries and so on. We were in the vanguard of purchasing systems with the NHS in that sector, which you report on favourably, although it was not necessarily the bee's knees. One of the biggest impacts of that work was the provision of an invoice with goods, which is a huge on-cost. I wonder why that was not a stronger recommendation—although you commented on it—as, at a stroke, it would speed up the administration. One of the bogeys in any large organisation is having a piece of paper with goods at one end of a system and somebody else having to look at another piece of paper that they have to match up. I thought that invoicing goods would have been standard practice throughout the hospital service by now. I am surprised that more attention is not being paid to that.
Through work in pharmacy, I have experience of the way in which local deals are made. Often, several companies are able to meet the contract price but some may offer local incentives and be able to deliver something locally that they could not deliver nationally. That needs to be teased out. If you are going to do more work on that, you should gather some evidence to discuss with those who are involved.
However, what leaped out of the paper at me were the passing comments about the management executive. I was under the impression that it had a responsibility in this area and offered leadership. You seem not quite to have passed it by, but to have been very gentle with it. What did you get from the management executive and why did you pay so little attention to that aspect at this stage of the report?
I shall address your questions one at a time, beginning with the invoice with goods. We will certainly pick that up in the follow-up work that we are doing. I take your point and will not come back with a defence explaining why we have not put enough emphasis on that. We will follow that up.
Your point about local incentives in pharmacy raises an interesting issue. We are pursuing some work on hospital prescribing, which we are kicking off just now. In some ways, it would be better for us to pick up those specific pharmaceutical concerns in that context.
The most difficult issue concerns the management executive. In part, that difficulty is historical. When we kicked off this work, we did not have a locus in auditing the management executive. We brought that aspect in towards the end of the reporting stage. We did not want to duck the issue, as we think that there has not been a national lead or a drive in supplies management. We wanted to make that point, but we did not feel able to make it strongly because we were not auditing the management executive at that point. Nonetheless, we wanted the point to be made in this report so that we could follow it up and ensure that the management executive is taking a national lead in this area. It is astute of you to pick that up in the report.
It helps if one has a little knowledge, even if it is out of date. It is important that the management executive plays a key role. It is a bit like some of the work that we discussed previously regarding the roles of the relevant Government agencies, the advisory board and whatever else in the chain. We are considering what you have come up with across a major part of public life and public expenditure in Scotland, and it is important that you delve into all the nooks and crannies. I accept totally what you have said and I look forward to the outcomes of your further deliberations.
There are no more questions or comments.
This is a very important report and the statistics are quite impressive. It details the second largest expenditure heading in the NHS: £600 million a year for a massive range of services and items—more than 100,000 items worth £250 million and involving 800 suppliers—but there is poor data and information. What you have presented is a baseline report. A follow-up report will be published. We can wait until we hear more detail before we decide whether to call for evidence. I wish you success in your investigations and we look forward to receiving the follow-on reports. Is that agreed?
Members indicated agreement.