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Innovative public procurement can lower pressure on health budgets

Innovative public procurement can lower pressure on health budgets
Published on: 28/09/2016

Most EU countries struggle with increasing healthcare costs. At the same time, patients are dealing with increasing contributions to health insurance systems. More efficient procurement of medical devices, medicines, medical equipment and IT solutions by public hospitals can lower the pressure on health budgets significantly while facilitating better value for money.

This was revealed at a workshop for experts in health public procurement organised by the European Commission on 19 September 2016. It looked at new opportunities for more effective procurement opened up by new EU public procurement legislation, such as the option to purchase innovative solutions, to centralise purchasing, and to do joint cross-border and joint EU-wide procurement. Several interesting procurement success stories in the health sector were presented:

Better comfort in hospital through innovative procurement

The main objective of the innovative procurement project Ecoquip, organised by the Polish hospital of Sucha Beskidzka, was to improve the thermal comfort of patients (shades reducing excessive sunlight in a building facing South). In the procurement procedure, a solution was found in the installation of fixed outward stores covered with solar panels which also led to energy self-sufficiency with zero exploitation costs. The project was co-funded by the European Commission.

Better value for money through the most advantageous tender

A new free tool enables an approach favouring the use of the most economically advantageous tender (MEAT) rather than lowest price only. It encourages contracting authorities to more thoroughly consider and prepare any public procurement procedure. By using this tool, they can review the list of award criteria that go above lowest price. These include costs and outcomes including calculation of life-cycle, maintenance, and end of life costs (collection and recycling) of purchases to favour better value for money.

Bringing innovation to hospitals

Medical imaging for the optimisation of care flows organised by the Karolinska Hospital in Stockholm is enabling better output specifications of tenders, incentives for innovations and a payment mechanism with incentives over time.

Central Purchasing Bodies

Central purchasing bodies either negotiate with providers of medicinal goods and services to save public money through mass orders or bundle procurement for a series of hospitals to increase the efficiency of public procurement and achieve better value. Examples include:

France Innovation Partnership: Resah, a central purchasing body in France procuring on behalf of a number of 150 member hospitals and nursing homes, presented an example where they made use of the innovation partnership procedure to procure an IS system for telemedicine. It was stressed by Resah that the supply part of the contract should not have an overly long duration due to the fast advance of technological progress in innovative devices at reasonable cost.

European procurement: Under the procurement platform HAPPI, coordinated by Resah and financially supported by the European Commission, 20 European healthcare organisations participate in the joint purchase of innovative products and services. So far, the partners developed and purchased over 150 innovative medical solutions with the help of their procurement strategy. It comprises of early market studies and communication of the tender to a multitude of companies including small and medium-sized enterprises (SMEs). The use of functional instead of technical specifications in the tender notices were crucial in this project.

Germany: The German Purchasing Association EKK consisting of 75 municipal hospitals set up a professionalised procurement system which included defining common procurement needs, market analysis and defining quality criteria. Through the subsequent joint purchase of medical devices, the system enabled considerable savings for hospitals.

Finland: In a similar way, the Finnish government plans to replace the individual procurement of medicines and medicinal products by hospitals with 18 new centralised regional purchasing bodies to achieve economies of scale.

Slovenia: In Slovenia, the needs of hospitals are procured by a centralised purchasing body in the Ministry of Public Administration. It concludes two-year framework agreements for all hospitals with several bidders who comply with the selection criteria.

German–Dutch-Austrian–cooperation: Faced with ever increasing costs in the healthcare sector, further European cooperation in procurement is needed to reduce costs by pooling expertise and resources. Notwithstanding existing differences in the legal and juridical implementation of health related procurement, the EKK (see above) has extended its range and now includes public hospitals in Austria and university hospitals in the Netherlands. The aim is to achieve further economies of scale for all participating bodies and enhance European cooperation in health procurement.

Joint Procurement Instrument: So far, 24 EU countries participate in this joint procurement facility. Coordinated by the European Commission, the Joint Procurement Instrument facilitates the mass purchase of vaccines in cases of serious cross-border threats to health. The scheme allows more equitable access to pandemic vaccines, improves the security of supply, and offers more balanced and constant prices.

Difficult procurement in the European health sector

At an average of 9% of GDP, healthcare represents a significant part of our economy. Procurement practices in the sector are still diverse with some countries using procurement extensively and others less so. The degree in which centralisation and innovative procurement are used also varies widely among countries.

Many different contracting authorities make general purchases (maintenance, catering, waste management, IT infrastructure) as well as specific purchases (medicinal products, medical devices, medical equipment, specific software programmes). Due to a different regulatory framework, the market dynamics are different for medical devices (where there is a real internal market established) and for medicinal products (where there is not yet a real internal market). This has a huge impact on how public procurement procedures are organised in rather immature markets.

The good practice examples presented at the hearing in Brussels underline that public procurement has the potential to contribute to purchases with better value for money, not only in financial terms but also in terms of quality and innovation. It can also lead to better healthcare treatments.

Background

Since April 2016, new European public procurement rules have profoundly changed the way public authorities spend a large part of the €1.9 trillion used on European public procurement every year. Central to the new approach is higher efficiency and the modernisation of procurement authorities.

Authorities that have already made the transition to eProcurement report savings of between 5% and 20%. Given the size of the total procurement market in the EU, each 5% saved could return around € 100 billion to the public purse.

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