Procurement – Kill or Cure
Procurement – Kill or Cure
Innovation delivers better quality at lower total cost in all walks of life. Many of the things that are freely available today and widely used were considered unaffordable luxuries for most in my youth. All this has happened because entrepreneurs and industrialists have constantly sought better ways of doing things and have changed the value equation.
The need for vigorous innovation in health delivery is plain for all to see. The number of people needing care is rising because of our success as a society at extending life yet the resources that we have to provide care are not increasing at the same rate as demand. Both dependency ratios (those working versus those not working and therefore not paying taxes) and an emerging shortage of carers are at the heart of the challenge.
Healthcare is one area where innovation has been profound and which continues to contribute to both better outcomes and better efficiency. Nonetheless, procurement systems are set up in ways that threaten to stifle those who wish to place new ideas on the market. It is a natural response to an economic situation to look to save money on all that you spend but it can be self-defeating if the process excludes those who have compelling value propositions. Most targets for procurement executives revolve around buying the same products as last year at a discount and often creating blocks to new entrants to the market who have innovations. In the long-run this is self-defeating, and leads to commoditisation of supplies and removal of incentives for investors to take a punt on new technological innovations. Speaking of which, innovation will be the key theme of our MedTech Forum on 12 & 13 October in Brussels. Do join us there to discuss what role innovation can play in sustaining European healthcare systems.
Moving to ever larger and more backward looking tendering processes may generate small savings in the short-term but runs the risk of killing the goose that laid several golden eggs. If health systems need innovation then a free and open market needs to exist. That means lots of buyers and sellers, and windows for innovative customers to develop new ways of managing patients in ever more efficient ways. Mass purchasing for huge regions or even whole countries eliminates the market and ultimately will lead to a dwindling number of suppliers and opportunities for new ideas to be tried and eventually permeate the market. The current trends of consolidation and cost-cutting in tendering will not deliver the sort of changes that health systems need in order to survive and improve quality. True innovators must be encouraged on both sides of the fence – customers and suppliers.
The problem of a one million hole in the number of health professionals needed to support rising elderly and sick (Directorate-General for Health & Consumers ,31 May 2011) will not be solved by shaving a couple of percent of the prices of goods and materials that the system uses but by stimulating and encouraging rapid innovation. This can be done by looking at the full cost of providing services against a variety of options and paying for innovations that reduce the total cost of care. Successful manufacturers in Europe are used to finding new ways to improve cost and quality but they do it by investing heavily in technology. Europe’s health systems must do the same or be doomed to slow decline. At four to five percent of total healthcare spend, discounting the technology supplier is never going to solve the problem of rising costs, even if it is tempting for managers and policymakers to lay the blame for spiralling healthcare costs at our door. The fifty percent drop in hospital stay times over the last 20 years is probably the most profound single economic achievement of health systems in Europe. This was not achieved by clever managers reorganising things, no, it was achieved by clever managers reorganising things thanks to the opportunities afforded by new technologies such as minimally-invasive surgery.
Procurement is the key that can unlock the door to innovation or slam the door in the face of the innovators both inside health systems and from the supplier side. Procurement has the potential to kill or cure and most systems around Europe are heading in a most unhelpful direction.
- John Wilkinson, Chief Executive, Eucomed
To register for the MedTech Forum on 12 & 13 October, please visit www.medtechforum.eu
This blogpost originally appeared on the MedilinkWM website