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VBP: The road from unwanted necessity to high impact strategic partner

Public procurement was established as a way of purchasing products that hospitals need. However, this one-dimensional view of procurement is changing very quickly. From humble beginnings as an obscure back-office function, I am pleased to say procurement is fast becoming a high-impact strategic partner for hospitals. 

What’s behind this shift? Traditionally, product price has been the key feature of a successful procurement process. A good price is important, but there are other elements to consider. The use of the most economically advantageous tender (MEAT) criteria offers scope to include quality and functionality of products and services.   

Of course, using criteria other than price increases the complexity of the tender, both for the customer as well as the supplier. So, is it worth it? At European Health Public Procurement Alliance (EHPPA), we believe the answer is ‘yes’. 

In my opinion focusing on price alone can obscure important value drivers. For instance, if you buy surgical gloves, and the focus is solely on price, you will get the lowest cost gloves. But is that a good deal for the hospital? It is not unreasonable to suggest that lower price means lower quality. If that means having to throw away gloves because they cannot be used, the cost of this should be part of the calculation. Using the MEAT criteria, quality can be calculated and incorporated into the decision on which glove to choose. 

Value-based procurement (VBP) goes one step further than MEAT. VBP is based on the idea that tenders should be evaluated based on what matters to patients. The introduction of VBP is a key priority of the EHPPA alliance.  We would argue that this is also what matters to hospitals. 

This approach is rather difficult to apply if the starting point focuses on a particular product. VBP only works if the focus is broadened. Instead of thinking about products, we should think about treatment processes into which a product or service will be introduced. This allows greater scrutiny of the value drivers for the patient and the hospital. These drivers can then be used to establish criteria in the tenders. 

Returning to the glove example, what are the drivers of value? Perhaps high-quality gloves reduce the chance of patient infections? Or reduce the risk of healthcare professionals being infected and consequently having to go on sick leave? 

The impact of these answers will often translate into a better decision for the hospital when it comes to choosing the products and services that help provide the best health care.  The beauty with this approach is that, very often, it translates into sound economy for the hospital and more desirable outcomes for patients. 

Kjetil Istad - Director Sykehusinnkjøp HF, Norway & EHPPA Vice-President in charge of Value Based Procurement