Value vs Cost in the NHS

Value vs Cost in the NHS

The unprecedented difficulty that healthcare organisations experienced in maintaining essential equipment supplies during the Covid-19 pandemic instantly shone a spotlight on the value of health technology, as well as the need for agile specialist suppliers with the ability to rapidly adjust to meet this demand.

For those of us who are closer to the medical technology sector, the desire to move to more value-based selection of products and suppliers is a mature refrain. Demographic drivers push healthcare costs ever upwards. The World Health Organisation notes that between 2015 and 2050, the proportion of the world’s population over 60 years old will nearly double from 12 per cent to 22 per cent. This will increase demands on healthcare systems. Common conditions in older age include hearing loss, deteriorating eyesight, back and neck pain, osteoarthritis, heart disease, type 2 diabetes, depression and dementia. Meanwhile obesity, an underlying cause or contributing factor for many diseases, has nearly tripled since 1975. These drivers go some way to explaining why total current healthcare expenditure in the UK accounts for 10 per cent of gross domestic product, compared with just 6.9 per cent in 1997.

Conversely, healthcare also has the ability to drive economic growth. The UK life science sector sector, comprising of medical technology, diagnostics, pharmaceuticals and digital health, generates over £80bn in annual turnover for the UK and employs over a quarter of a million people. The UK has a long-established world-leading role in medical research, and the NHS is a trusted healthcare brand recognised across the globe.

To meet the demands of our changing population, to address the challenge of rising healthcare costs, and to grasp the opportunities presented by new research and technology advances, a whole system approach is needed. Reduction in product costs (which typically represent just 10-15 per cent of procedure costs) will not address the big challenges that society is facing. A whole system approach

Value-Based Healthcare is defined by the Centre for Evidence-Based Medicine at the University of Oxford as “the equitable, sustainable and transparent use of available resources to achieve better outcomes and experiences for every person”. Value-Based Healthcare addresses the wider definition of value of a procedure, rather than focusing simply on the cost.

An essential part of realising Value-Based Healthcare is Value-Based Procurement. The Value in Health team at NHS Wales defines Value-Based Procurement as “assessing the value and measuring what matters, using outcome divided by cost, and placing clinical and patient reported outcomes at the heart of the procurement decision making process”.

NHS Supply Chain, who manage the sourcing, delivery and supply of healthcare products, services for healthcare organisations across England and Wales, explain that “Value-Based Procurement is an approach that delivers tangible, measurable financial benefit to the health system over and above a reduction in purchase price; and/or a tangible and measurable, improved patient outcome derived through the process of procurement.”

Expressed as an equation, value looks simple to define. The problem, however, is understanding which outcomes are most important to us as a society and how we measure these outcomes. Also, what costs should be considered – product cost, procedure cost, whole life cost? And cost to whom – to the patient, to the healthcare provider, or to the economy and society as whole?

To take full advantage of a value-based approach, we might factor in efficiency savings like reduced theatre time, length of hospital stay, after care costs, repeat appointments, waiting times and administrative costs, the effects of improved outcomes on repeat appointments and procedures, and ongoing chronic disease management costs. Supplier selection criteria might include engagement with innovation and collaborative R&D projects, or willingness to support clinical trials and evaluations. At a society level, the environmental impact of production, transportation, use and disposal of a product are important. Highlighted by the effects of the Covid-19 pandemic, supply chain resilience may also be an important criteria in procurement choices, favouring closer suppliers who can guarantee reliable supply if transportation links are disrupted.

For purchasers, the challenge is that while price is easy to use as a selection criteria, most of these value-based criteria are difficult to quantify, difficult to rank, and difficult to predict at the beginning of a relationship with a new supplier.

For the manufacturer, the challenge is providing the evidence to meet these criteria. Many medical products won’t generate the returns needed to fund extensive evidence gathering, and often the health economics case is not easy to demonstrate at any cost. Track record, post market data and customer experience are often relied upon, but this route is not open to the new, disruptive solutions that may deliver the innovative products required.

Bridging the gap between the need for evidence and the challenge in defining what evidence to gather and collecting it at a reasonable cost requires commitment from both sides. Healthcare purchasers need to be clear about value-based selection criteria and they need to reward suppliers who meet these criteria. Manufacturers need to provide robust evidence that new products and processes will deliver outcomes that address valuebased criteria.

Deciding which outcomes we value most as a society will be a much wider debate, but even small steps towards a more value-based healthcare procurement process should deliver a positive impact on healthcare, society and the economy.

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