Why lifetime costs need to be considered in NHS purchasing
How much will it cost? It’s the key question for any procurement manager, but a particularly pertinent one for those working in the healthcare sector. The NHS is under inordinate pressure to do more with less and to position itself as strategically as possible in order to cope with the challenges of a growing and ageing population.
As such, when a hospital, NHS Trust or commissioning group needs to invest in new technology, whether hardware or software, it is hardly surprising that cost tends to top the list of factors considered when making a purchasing decision. Individual pieces of equipment such as sophisticated scanning machines can be among the most expensive single purchases made within the NHS, whilst even smaller pieces of kit, like touchscreens and mobile carts, quickly rack up because so many are required. Headline prices might vary by hundreds or thousands of pounds, and the obvious procurement move is to go to the lowest end of the scale.
The trouble, however, is that cost can be measured in multiple different ways. Relying on the headline price alone can quickly prove to be a costly mistake.
First, there may be additional costs layered on top of the headline price that have not been considered. Think about an online shopper making their way through a website’s checkout, only to be presented with an unexpectedly high shipping cost at the end.
In the case of healthcare technology deployments, such additional costs can be diverse – and hefty. Often, they relate to installation. Both hardware and software need to be carefully integrated with existing technology, sometimes using separate interoperability platforms or specialist third parties. Additional costs may also be layered on for staff training, particularly when a new operating system or vendor has been selected. Or, in the instance of software, there may be a need for additional modules which are not part of the core, basic deployment.
Predicting these costs accurately can be difficult, but healthcare organisations can go a long way by asking their supplier to talk them through every stage of deployment, from preparation, through installation to ongoing operation.
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All in one
Consumers purchasing a new home are rightly reminded to consider the overall cost as a whole set of smaller costs. The cost of the mortgage itself consists of both upfront fees and an ongoing interest rate, whilst additional costs are required for stamp duty, legal fees, surveys and insurance. Then there are the costs of actually moving from one property to the next, and any essential maintenance or repair work that has to take place at the outset.
Technology can work similarly. Software, for example, may incorporate ongoing subscription or licensing charges for a certain number of users. Hardware may be tied to very specific ongoing maintenance, tests and upgrade charges in order to remain compliant.
Whilst these costs should, of course, be clarified as part of the initial proposal, they can all too easily be hidden away in the small print, or not accurately modelled as part of the organisation’s ongoing growth plan. A software platform with a high cost per user license, for example, might quickly become cost-prohibitive if the organisation knows that the relevant team is going to double in size over the coming year. A piece of hardware that requires routine maintenance after performing a certain number of operations might be cost-effective at current levels of demand, but if the hospital’s catchment area is set to grow dramatically, it might quickly become a drain.
Buying to last
This draws us directly to the importance of considering the expected lifespan of each proposed technology deployment, and comparing what might be a higher upfront cost with the saving of replacing it further down the line.
For example, many pieces of hospital equipment, including mobile screens and carts, rely on an internal battery in order to operate. The useful lifespan of the equipment relates directly to the battery life. A higher-grade piece of equipment, like those produced by Howard Medical might be more expensive upfront, but if it lasts for years longer than a cheaper alternative, then ultimately it is likely to prove a cheaper choice. Just as consumers are advised to invest in one or two top-quality, long-lasting investment pieces of clothing, so healthcare organisations are advised to remember that short-term purchases may rapidly become costlier in the long-term.
A day or a lifetime?
All of these different cost models are a reminder that the price of something today is very different from the cost of something over a lifetime. In the world of healthcare technology, the contrast between the two can be particularly striking, because there are so many additional considerations beyond the standalone price of a piece of equipment. Installation and integration costs, required upgrades, repairs and maintenance, subscriptions or licenses and predicted lifespan are all essential pieces of the overall procurement puzzle.