Key takeaways
Medtech procurement to focus on value
Demonstrate outcomes and move away from predominant focus on price.
New methodology supports value-based decision making
Structured domains help assess wider benefits effectively.
Early planning supports success
Stakeholder engagement and robust data underpin delivery.
New DHSC guidance on value-based procurement gives contracting authorities a structured way to evaluate medical technology procurements on the outcomes and value they deliver, rather than focusing predominantly on price.
The guidance provides a framework for contracting authorities to help identify, assess and realise wider benefits across patient care, efficiency and social value. For bidders, it offers an opportunity to demonstrate the full impact of their products and services and compete on more than cost alone.
This article explores the key features of the methodology, its place within the wider procurement and healthcare reform agenda, and the practical steps both buyers and suppliers should consider as value-based approaches become increasingly important.
Earlier this year we wrote about how recent procurement legislation is enabling a pivot towards a genuine focus on outcomes-based value rather than reliance on pure ‘price only’ awards. At the end of that piece, we flagged an element of this pivot – the DHSC’s plans to release guidance for medtech procurements on how to implement value-based procurement practices.
This guidance, developed in conjunction with NHS Supply Chain and following extensive consultation with industry and the NHS, has now been released. This article summarises the key elements of that guidance, discusses the benefits of using it, and summarises how we can help both NHS and industry to take best advantage of the opportunity to progress the pivot to value above cost, where appropriate.
What is the DHSC’s guidance on value-based procurement?
The methodology is guidance, so is not currently mandated for use. However, it does align with moves towards value in other pieces of healthcare relevant legislation, including the Procurement Act 2023 and Provider Selection Regime Regulations 2023. It is also referenced specifically in the Government’s health policy - both the NHS 10 Year Health Plan and Life Sciences Sector Plan,
As such, it is a key element of current health policy focussing on transformation of the NHS towards a greater focus on outcomes and efficiency, supporting all three of the central shifts and enabling a cost-effective approach to healthcare and prevention of ill-health.
While the ultimate decision has been to proceed with guidance-only, there were discussions during the development of the methodology about whether it was necessary to make it compulsory, so that approach should not be ruled out totally for future.
As such, it is essential that all stakeholders involved in medtech procurements and the procurement of services which use medtech, familiarise themselves with the guidance and engage fully with the potential benefits it could bring.
When does the guidance apply?
The methodology is to be used when buying medical technology, in procurements ‘for medical devices including services that use medical devices, in primary and secondary care’. The guidance makes clear that the definition of medical devices is broad, to include:
consumables
implantables
general medical devices
medical equipment
capital equipment
in vitro diagnostics and point of care testing
imaging products
digital products
artificial intelligence (AI) products
It should not be used for end-to-end procurement processes but should be applied at quality assessment stage. For framework providers, there is discretion to vary the standard questions to make these appropriate in call-offs.
How does it work?
The guidance defines five value domains and then provides explanations and standard questions within each of those domains for buyers to use in their procurement process. The guidance also includes a procurement checklist at Annex B to help apply the guidance at every stage.
The five value domains are:
Social value – aligning with the previous social value requirements
Efficiency – improving the patient pathway
Patient and staff – supports patient experience and safety
Supply chain – has a resilient supply chain
Purpose – meets the specification
In the assessment, the domains are to have a minimum sum weighting combined of 60% with whole life cost, a maximum of 40%. Save for social value which must be included for at least 10%, the buyer can make a choice in terms of which domains and questions to use and the split between them of the 60% weighting.
The guidance flags that the choice to use the VBP approach, and of which domains and questions to ask, must be made so as to be proportionate to the cost, nature and complexity of the procurement and the level of effort required from bidders. Buyers should particularly consider SMEs and their capacity to respond. They should consult relevant stakeholders – including legal, commercial, finance, clinical and operational in the planning process for the procurement.
Annex B is a fairly detailed explanation of steps at key stages of the procurement to ensure that the approach is effective and used appropriately. This includes:
testing the supplier base to ensure that it can respond to this kind of process
putting in place pre-market engagement to make it clear that the approach is being considered
involving clinicians, patients, carers and service users in the decision on how to use the approach (and recording that this has happened)
preparing the data required carefully including establishing baseline data for bidders to respond against
making sure that evaluators are fully prepared and have the expertise to assess responses including planning how evidence will be validated and
planning for implementation and ensuring that value can be realistically realised in the buyer’s operating environment and resource constraints.
How effective will the guidance be?
The release of this guidance following many months/years of DHSC engagement and consideration is undoubtedly a positive step. It is a further tool in the box for buyers and bidders seeking to communicate the real-world value that can be achieved when the overwhelming focus on pure financial cost is removed. Combined with the focus on value flagged in other recent policy and legislation, the guidance is a further enabler to move in that direction. For those of us interested in the move even further towards value-based healthcare approaches more generally, this methodology is an underpinning element and a way of further socialising stakeholders with the concept.
That the guidance is only that, and not compulsory, may be a risk. Buyers will need to be confident and innovative enough to want to use it, and to get wider stakeholders in their organisations motivated to clearly support it and make it work. This includes key players including finance, with clinicians clearly briefed on how they can play their part to make the approach work and produce benefits. The data is also key, so involving teams in NHS organisations who can produce and evaluate relevant datasets accurately and effectively is crucial.
There are some elements of the domains which may not be quite as value-focussed, in terms of an overall patient-centric, value-based approach, for example supply chain resilience and response to the specification. But they are nonetheless important elements of any effective procurement, and undoubtedly there will be room, especially with this being guidance rather than legislation, for the question banks to develop and grow.
How can we help?
As the guidance makes clear, it is still essential to ensure that any procurement process complies with all the other relevant legislation when using it. We can help to validate that this is the case, both in the planning and, should any challenges arise, in responding to those.
We have been interested in progressing value-based procurement approaches for many years and have been involved in discussions with DHSC which have led to the release of this guidance, so we really do understand the drivers behind the approach and many of the challenges which may be faced in putting it into practice.
We can offer your teams training on using the guidance, both ourselves, and in conjunction with procurement experts who have been involved in the practicalities of delivering VBP approaches.
Likewise, this guidance is not the only way to apply a value-based approach to any procurement. We can help you to design legally compliant value-based procurement and contracting processes to encompass full pathway redesign.
For more information about our Procurement expertise, contact us today to find out more.
