Procurement is on a journey to a ‘value-based’ future
Procurement is on a journey to a ‘value-based’ future
The essence of travelling, either by foot, train or plane, is replacing one's existing location for another more desired or needed one. But why do we do it? Sometimes it's the appeal of a new destination – perhaps a ski resort or a tropical island. On other occasions, the decision to move away is driven by a realisation that the current location is no longer sustainable.
In healthcare, there is an emerging sense of urgency that it's time to move. You'll be familiar with the reasons: increasing demand for health care services, rising healthcare expenditure and unwanted outcome variations among healthcare provider organisations have put most European healthcare systems under pressure.
I've been exploring the potential role of procurement in accelerating our journey to a better place. Traditionally, the focus of procurement was buying those products and services needed at the lowest price possible. Indeed, in some EU member states this is still common practise.
However, with the transposition of the 2014 European public procurement directive into national law by all 28 EU member states, we now observe a trend of procurement slowly, but surely, selecting medtech products based on a consideration of both price and (product-) quality.
Price as the sole factor influencing the buying process is a thing of the past; quality is taking its place. On average, 42% of medtech procurement processes included quality criteria in 2016. France, UK, Ireland and the Netherlands are leading the way with more than 80% of their awarded tenders based on quality versus cost. In addition, this value for money equation is legally the preferred awarding criterion in a limited number of EU member states already, such as the Netherlands and Finland.
I see an even more encouraging trend: the application of pre-tender consultations, the use of competitive dialogue tender procedure and innovation partnership procedure have increased steadily - up 60% in the period 2016-2019. We are increasingly seeing medtech suppliers' knowledge incorporated into healthcare providers' tender processes.
However, while this is progress, it is just an intermediate station on our journey – we still have a long way to go before reaching our final destination.
Provider organisations want to reduce the cost of each patient procedure while improving patient outcomes. Medtech companies are exploring how they can contribute to this. That's why I believe the next step for procurement is to buy products and services offering the highest contribution to increasing patient outcomes, given some minimum quality levels and available financial budgets or willingness to pay.
While it is still early days, we have seen a substantial increase in the number of value based procurement (VBP) cases since 2014 covering at least 12 EU member states. A recent small scale survey by BCG among 65 medtech suppliers and 25 procurers showed almost 80% of both groups viewed VBP as highly important to their organizational success. We can take inspiration from leaders in the field, such as NHS Wales's commitment to have a VBP strategy across their entire care delivery chain and the Capital Region of Denmark considering VBP as the key organizing logic for a centralized medtech procurement organization.
As VBP provides clear benefits to all stakeholder groups, I strongly believe VBP will be rapidly picked up by both procurers and medtech suppliers. Both parties are stepping up their capabilities to overcome practical hurdles to implementation, while medtech suppliers are rethinking their business model to ensure they keep serving the healthcare sector.
We are on a journey to an appealing destination. Let's focus on the destination, but also enjoy the trip we're taking together.
What is MEAT VBP?
Healthcare procurement often focuses only on upfront purchasing costs. This fails to address the needs of other stakeholders such as patients, providers, health systems and society as a whole. It also clouds the true cost of care and does not account for the economic value of health and care.
The MEAT (Most Economically Advantageous Tendering) Value-Based Procurement initiative places at its core the outcomes that matter to patients, quality and further benefits for providers, health systems and society. Instead of selecting the product with the lowest upfront cost, procurement authorities can factor the real value of a product into their decision making and obtain the most economically advantageous solution. The MEAT value-based procurement approach is aimed at overcoming organisational silos within healthcare institutions, reduce inefficiencies and spur innovation-driven investments.
The EU directive on public procurement encourages this smarter, more holistic approach to procurement and innovation.
The 1st European Value-Based Procurement Conference A new paradigm in Health Care
The 1st European Value-Based Procurement Conference A new paradigm in Health Care will be held on 12 December 2019 in Brussels. Organised by the Value-Based Procurement Community of Practice (VBP CoP) and supported by EHPPA, EUREGHA and MedTech Europe, this conference will highlight the latest developments to incorporate “value” in decision making and the role of value-based procurement to integrate the value from the perspectives of the different healthcare stakeholders. Learn more here!