Deloitte: introducing Value-based procurement in healthcare

What is the future of procurement in the healthcare industry? Let’s find out

Procurement will play a major role in the future of the healthcare industry. With the sector in a period of transition as a result of rapid digital transformation, embracing the latest technologies to increase efficiency and drive cost savings is essential. Healthcare Global explores Deloitte’s report, “How to eat the Value-based Procurement elephant?” and looks at the digital transformation journey healthcare procurement is on.

The sector is moving away from ‘traditional’ lowest price procurement strategies and product buying. Instead, there has been a noticeable shift towards quality, services and solutions. One of the biggest challenges that the industry faces is juggling the balance of costs and quality. This is where Value-based Healthcare (VBH) comes in. 

VBH is a healthcare delivery model in which providers, such as hospitals and physicians, are paid based on patient health outcomes. Under the value-based care agreements, providers are financially rewarded if the health of their patients improve and they live healthier lives in an evidence-based way. By the same reasoning comes Value-based procurement (VBP). VBP is regarded as a way to deliver whole-life cost savings and service improvements across product pathways beyond traditional, narrow price-based measures. True VBP remains in its initial stages of practical implementation as the level of understanding differs amongst stakeholders, while healthcare providers continue to struggle with the challenges of practical implementation.

In Deloitte’s survey, there were four main drivers identified:

1. Cost reduction

Respondents confirmed that sourcing services and integrated solutions are considered an opportunity to simplify and reduce the supplier base. Sourcing solutions enables devices, consumables and related services to be combined in one contract which will optimise the total cost of ownership inherently. 

2. Risk reduction

Services and solutions allocates risks to the supplier side. Compatibility risks are reduced when the device and the related services are sourced from the same supplier under the same solution. 

3. Improved solution offering from the supplier side

Price transparency and visibility is important to increase and accelerate the implementation of solutions by healthcare providers. It provides the industry with a clear understanding of the different components included in the solution or service. The key benefits of this are:

• Allowing trust to be built up in the supplier. This is because solutions are often perceived or effectively used as a strategy for being intransparent and generating pricing markets. 

• For the healthcare provider, price transparency is considered a necessity for practical implementation and financing a solution.

• A discussion to be held with both suppliers and healthcare providers to create tailor-made solutions to the specific needs and financial capabilities of the healthcare provider.

4. Stricter quality and safety requirements from regulators and for accreditation purposes. A range of regulatory requirements and changes encourages hospitals to move towards services and solutions to place ownership and follow-up of compliance with the supplier. 

How to make Value-based procurement a success

Deloitte’s survey found that over half of survey respondents have had little to no experience of using VBP. This showcases that VBP isn’t fully on their radar… yet. However, this could be because many have a different understanding of exactly what it was, with some interviewees considering qualitative criteria already as a form of VBP. The report highlights two key areas that distinguish VBP:

1. The exclusive focus on patient impact in the evaluation methodology and definition of specifications.

2. A financial analysis that goes further than solely cost of ownership of the goods, services or solutions purchased.

Value-based procurement requires a systematic approach and strategy for implementation, which includes the necessary organisational buy-in and clear focus. To make it a success, Deloitte recommends:

• Using a user-focused approach

VBP isn’t relevant for all purchases. It’s important to determine the most appropriate categories to introduce Value-based procurement as well as make the necessary resources available for implementation. These aspects should be taken into account: 

• The potential impact or benefits that can be achieved.

• The readiness of stakeholders to embrace change.

• The complexity and number of stakeholders involved.

• Implement Value-based procurement step-by-step

A successful VBP rollout requires a multidisciplinary approach and a high level of involvement of internal stakeholders that are open to change. Active stakeholders must be introduced on both a management and operational level. The procurement organisation should have enough maturity to drive change to a Value-based procurement model.

• Obtain cross-function support within the organisation

A successful VBP rollout requires a multidisciplinary approach and a high level of involvement of internal stakeholders that are open to change. Active stakeholders must be introduced on both a management and operational level. The procurement organisation should have enough maturity to drive change to a Value-based procurement model.

Procurement in the healthcare sector is moving towards a more value-orientated approach. Deloitte’s survey shows that healthcare providers must formulate a clear plan to drive this strategy forward in a bid to successfully embed Value-based procurement into their supply chain ecosystems.

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