Bridging the divide - commercial procurement and supply chain management: are there lessons for health care commissioning in england?
| DOI | https://doi.org/10.1108/JOPP-09-01-2009-B003 |
| Published date | 01 March 2009 |
| Pages | 79-108 |
| Date | 01 March 2009 |
| Author | Barbara Ann Allen,Elizabeth Wade,Helen Dickinson |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 9, ISSUE 1, 79-108 2009
BRIDGING THE DIVIDE – COMMERCIAL PROCUREMENT AND
SUPPLY CHAIN MANAGEMENT: ARE THERE LESSONS FOR HEALTH
CARE COMMISSIONING IN ENGLAND?
Barbara Ann Allen, Elizabeth Wade and Helen Dickinson*
ABSTRACT. Current English health policy is focused on strengthening the
‘demand-side’ of the health care system. Recent reforms are designed to
significantly enhance the capability and status of the organisations
responsible for commissioning health care services and, in so doing, to
address some of the perceived problems of a historically provider/supplier-
led health system. In this context, commissioning organisations are being
encouraged to draw on concepts and processes derived from commercial
procurement and supply chain management (SCM) as they develop their
expertise. While the application of such principles in the health sector is not
new, existing work in the UK has not often considered the role of health care
purchasers in the management of health service supply-chains. This paper
describes the status of commissioning in the NHS, briefly reviews the
procurement and SCM literature and begins to explore the links between
them. It lays the foundations for further work which will test the extent to
which lessons can be extracted in principle from the procurement literature
and applied in practice by health care commissioners.
INTRODUCTION
The English1 National Health Service (NHS) provides universal
access to comprehensive health care that is funded through general
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* Barbara Ann Allen, Ph.D., Elizabeth Wade, and Helen Dickinson, are a
Lecturer, a Senior Fellow, and a Lecturer, respectively, School of Public
Policy, University of Birmingham, England. Barbara Ann Allen’s research
interests include new models of public service delivery and new institutional
theory as it applies to procurement and commissioning. Elizabeth Wade’s
research interests include commissioning and health service reform. Helen
Dickinson’s current interests include partnerships and the integration of
health and social care models of service delivery.
Copyright © 2009 by PrAcademics Press
80 ALLEN, WADE & DICKINSON
taxation and free at the point of delivery. The NHS is an important
national institution both symbolically, as a representation of ‘British’
values, and economically, as the employer of around 1.3 million
people (Department of Health, 2005a). As such, it is often portrayed
and understood as a single, bureaucratically managed organisation,
responsible for directly providing healthcare services via facilities
managed locally, but ultimately owned, operated and staffed by the
state. However, this common image simplifies what is in reality a
more complex, and significantly less integrated entity. One particular
feature of the NHS that is often overlooked as a result, is the fact that
it is a purchaser, as well as a direct provider, of health care services.
At one level the purchasing role of the NHS is obvious. Given that
NHS organisations do not manufacture their own drugs, medical
devices, IT equipment, cleaning products or stationary, it is clear that
these and other commodities must be procured from external
suppliers. What is sometimes less well understood, however, is that
in England NHS services are themselves ‘purchased’ and not simply
administered through a devolved hierarchy. That is, although funding
for health care is raised centrally, it does not then flow directly from
the Treasury out to hospitals, health centres and other providers.
Instead, it is allocated to intermediary NHS bodies (in England
currently known as Primary Care Trusts, or PCTs), which act as third
party payers. These organisations are responsible for assessing local
health needs and prioritising the allocation of resources accordingly.
PCTs secure the services required to meet those needs and priorities
by agreeing and managing contracts with a range of healthcare
providers. This strategic planning, procurement and monitoring role
is referred to as ‘commissioning’ (Woodin, 2006).
This internal separation of purchasing and providing roles within
the healthcare system was first introduced in the UK in the early
1990s, but the NHS had been dealing with external markets long
before that (Ovretveit, 1995). This is because a significant proportion
of the services available ‘under the NHS’ are not, and never have
been, directly provided by NHS bodies at all. Almost all NHS funded
primary care services (e.g., those provided by General Practitioners,
dentists and community pharmacists), for example, are delivered by
small businesses operating as contractors to, not employees of, the
NHS. Therefore, far from being a monolithic provider of healthcare,
he NHS is perhaps better understood as a network of multiple,
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