Shift to value-based procurement must come from the top

  • Posted on 02.03.2016

Shift to value-based procurement must come from the top


Gunnar Goblirsch

Head of a Unit, Stockholm County Council


This blog is part 4 of a series on the MEAT value-based procurement project, an initiative that advocates towards a shift from price-based procurement towards value-based procurement. It does so by defining a Most Economically Advantageous Tendering (MEAT) framework that includes the value of medical technologies, services and solutions in procurement processes across Europe. Read part 1, part 2 and part 3.

Procurement officials can play an important role in delivering better value for hospitals and healthcare systems. They can do this by doing what is most economically advantageous while simultaneously fostering innovations that benefits patients. However, they need a clear signal from management and policymakers encouraging them to think strategically.

If procurement departments are tasked solely with ensuring that hospitals are supplied with products at the lowest price, that is what they will do – and they will do it very efficiently. But that is not really what the hospital wants. Hospitals want to reduce overall costs. Somebody needs to go to the procurement department and tell them this!

Procurement specialists need a new mandate; they need to transition from being a service department to being a strategic department. Modern procurement professionals need to understand workflow and how products fit into the healthcare ecosystem.

They cannot do this alone. They need a clear signal from management and a willingness from all parties, including doctors, to engage early and often on how best to serve the hospital.

Value for hospitals

Applying the principle of the Most Economically Advantageous Tender (MEAT) is an effective way to use procurement as a tool for getting value for hospitals. In Sweden, we have been using this approach in 95% of tenders since 2006.

Based on my 10 years of experience, I have seen how MEAT can be a win-win: good for the purchaser and good for innovative companies producing medical technologies. To give one example, in 2014 the Karolinska University Hospital issued a large 14-year tender for imaging services – including MRI, ultrasound and CT scanners.

The tender criteria stated that the hospital sought to procure imaging services – not just pieces of equipment. This is a profound shift in mind-set: it opens the door to maintaining technical standards as well as upgrading and replacing scanners with the latest technology.

In that instance, three of the tender participants met the basic requirements and were invited to enter a competitive dialogue process. The winning bid was successful due to a combination of attractive pricing and high quality. The company gained a high score under the R&D and innovation heading by offering to establish a local innovation hub for research and education focusing on improving outcomes in ten high-priority therapeutic areas.

I understand that for many organisations in Europe this is still uncharted territory. And I also know that there can be a natural hesitation about going in a new direction. But let me assure you that this is an approach we have tried and tested.

In our experience, using MEAT criteria is by far the best way to see the full impact of the options available before making an informed decision. Not only is it the best way to go, it is also one of the easiest. It is not about complicated formula or inventing subjective criteria: the maths is simple and it has been done in all areas of public sector procurement for many years – whether it is a hospital purchasing stents or a local authority tendering for a subway system.

To unleash the full power of procurement officials, healthcare organisations must openly embrace the MEAT approach. Such a fundamental shift requires a willingness at all levels to adopt something new – and this demands leadership from the top. 

Value in MEAT procurement

Healthcare procurement often focuses only on the purchase price. 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 value-based procurement framework places at its core the outcomes that matter to patients, quality and further benefits for providers, health systems and society.

By choosing MEAT value based procurement instead of selecting the product with the lowest up-front cost, procurement authorities can factor the real value of a product into their decision-making and obtain the most economically advantageous solution.

‘Value’ in European law

The new EU directive on public procurement encourages this smarter, more holistic approach to procurement and innovation.

The MEAT value-based procurement approach can help to break down organisational silos within healthcare institutions, reduce inefficiencies and spur innovation-driven investments.

For more on this topic, read Procurement – the Unexpected Driver of Value-based Healthcare published by MedTech Europe and the Boston Consulting Group.


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