Originally published on www.healthcaremanagementforum.org
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Value-based procurement: The tip of the iceberg
Dear Editor-In-Chief,We applaud Prada’s investigation of value-based procurement, and her advocacy for improving health sector procurement practices.1 Indeed, the Canadian health sector’s enormous size translates into significant purchasing power. For example, in 2014/15, Ontario hospitals purchased over $5.45 billion worth of goods and services.2 Yet, while there may be opportunities to improve the sector’s ability to access innovative treatments, we encourage Prada and the Conference Board’s Council for Innovation Procurement in Health Care to broaden their understanding of the issues and opportunities arising in health sector procurement. In their pursuit of “value” there is no mention of the opportunities for procurement to promote health, rather than just treat illness and injury. Nor is value-based healthcare framed in terms sufficiently broad enough to encompass the influence the sector’s buying practices have on social, environmental and economic sustainability. We argue the health sector can, and should, take a leadership role in addressing these issues and embracing these opportunities.
From a local perspective, there is a growing body of literature on the role of healthcare providers as “anchor institutions” in their communities.3 Anchor institutions are large public or non-profit organizations rooted in a specific place, such as hospitals, universities or municipal governments. Since anchor institutions are often large employers and purchasers, and have significant real estate holdings, these institutions can use “social purchasing” approaches to influence the upstream determinants of health by such means as increasing diversity in the supply chain, or supporting social enterprises and other businesses that advance training and employment among members of poorly represented or marginalized communities.4-6
From a global perspective, child labour, slavery and dangerous working conditions have been documented within the production of many routinely-used healthcare products, such as surgical instruments, medical gloves and uniforms.7, 8 Several European countries have taken bold steps to successfully redress the extensive and iniquitous labour rights concerns within their medical goods supply chains.9, 10 The collaborative and coordinated approach by Swedish national and regional public procurement authorities, including the implementation of a mandatory supplier code of conduct, represents an international model of good practice.10 Such initiatives make clear that procuring healthcare supplies for those of us in developed countries need not come at the expense of the health and safety of persons elsewhere. This pressing issue requires immediate attention in Canada.
Further, the health sector has a significant environmental footprint, through both pollution and the emission of greenhouse gasses. The UK National Health Service (NHS) calculated that the embedded carbon in the goods and services procured by the NHS is the biggest single contributor to the system’s carbon footprint.11 In addition, medical products and services are a significant source of complex and hazardous waste.12 In the US, leading healthcare organizations have launched a new group purchasing organization devoted to environmentally preferable purchasing, intending to use their buying power to drive the market forward.13 Despite pockets of leadership in Canada, the vision to use Canadian health sector procurement to drive environmental innovation is lacking.
The economic policy implications of responsible health sector purchasing should not be ignored. Buying products and services from environmentally and socially responsible businesses, including local enterprises, provides a more level playing field for companies that pay fair wages and act as environmental stewards. Without consideration of ethical criteria, the health sector puts responsible corporations at a disadvantage.
While the anecdotes Prada reports are intriguing, we look forward to seeing the results of her interviews, round tables and literature review (ideally in a publication accessible to those outside the Conference Board’s Council). A paramount issue with health sector procurement in Canada is how little we know about it. This is particularly true regarding whether or not its purchasing power is being used for sustainable development and health promotion. This knowledge gap is critical because what we do have are examples where pursuit of “value” for hospitals has come at the expense of the health of Canadians.14
Canadian health sector procurement practices have significant untapped potential to improve our health, not just give us more healthcare. We’re pleased to see that procurement is a priority for Prada and the Conference Board. Other Canadian health policy and health research agencies would be wise to direct attention to this important area.
Sincerely,
Ross Graham MSc CHE
Project Manager, Vancouver Island Health Authority
Affiliate, Centre for Health Services & Policy Research, University of British Columbia (ross.graham@viha.ca)
Fiona A. Miller PhD
Associate Professor, Health Policy, Institute of Health Policy, Management & Evaluation
Director, Division of Health Policy & Ethics, Toronto Health Economics and Technology Assessment Collaborative, University of Toronto
(fiona.miller@utoronto.ca)
Katherine Moloney MIPH DMin (cand.)
Chair, Healthy Supply Chains Initiative
Doctoral Candidate, Acadia University
(katherine.p.moloney@gmail.com)
References
- Prada G. Value-based procurement: Canada’s healthcare imperative. Healthcare Management Forum.2016;29(4):162-164. http://hmf.sagepub.com/content/29/4/162
- Ontario Ministry of Health and Long Term Care. Health Indicator Tool: Hospitals – Global Indicators. 2016. https://hsimi.on.ca/hdbportal/. Accessed June 13, 2016.
- Dragicevic N. Anchor Institutions. The Mowat Centre, University of Toronto & The Atkinson Foundation. Toronto, ON. 2015.
- Furneaux C, Barraket J. Purchasing social good(s): a definition and typology of social procurement.Public Money & Manage. 2014;34(4):265-272.
- United Nations Department of Economic and Social Affairs. Transforming our world: The 2030 Agenda for Sustainable Development. 2015.
- Norris T, Howard T. Can hospitals heal America’s communities? “All in for mission” is the emerging model for impact. Democracy Collaborative. 2015.
- Bhutta MF. Fair trade for surgical instruments. BMJ. 2006;333:297-299.
- Bhutta M, Santhakumar A. In good hands: Tackling labour rights concerns in the manufacture of medical gloves. British Medical Association Medical Fair and Ethical Trade Group. London, UK. 2016.
- British Medical Association. Fair medical trade. 2016. https://www.bma.org.uk/collective-voice/influence/international-work/fair-medical-trade. Accessed August 24, 2016.
- Jaekel T, Santhakumar A. Healthier Procurement: Improvements to working conditions for surgical instruments manufacture in Pakistan. Swedwatch. Stockholm, SE. 2015.
Value-based procurement can help identify, test and adopt health innovations
Thank you for your letter. I noted in the article the huge opportunities for the healthcare system to use value-based procurement to improve the sectors’ ability to access innovative technologies. The article centred on this, given that Canada, more often than not, lags behind other comparable OECD countries in the adoption of health technologies, including innovative pharmaceuticals, medical devices, and medical informatics. Canada is still playing catch-up, when compared with other developed countries, in the use of electronic health records. The slow pace of adoption of innovative technologies has a profound negative impact on the ability of the healthcare system to manage its resources more effectively, and most importantly, on the health of Canadians. A study last year concluded that health care organizations that adopt medical innovations have better health outcomes.[1] The study suggested that survival rates in the fastest-adopting hospitals are 3.3 per cent higher. That is equivalent to one-third of total improvements in survival rates over the last two decades. Value-based procurement allows health care organizations to identify valuable health innovations, and then test and adopt them within a framework that is directly linked to better health outcomes. Furthermore, and as I pointed out in the article, value-based procurement also provides the opportunity to focus R&D efforts on finding solutions to the most pressing healthcare challenges, which would boost Canada’s health and life sciences sector.
But, as you well noted, the opportunities within value-based procurement go beyond health and innovation outcomes. The BCG and MedTech Europe’s value-based procurement framework (one I have supported since its development) includes sustainability and macro socio-economic elements. (See Procurement: The Unexpected Driver of Value-Based Health Care.[2]) By extending the notion of “value” to recognize environmental impact and socially responsible supply chain practices, and by including these within value-based procurement, healthcare systems have the opportunity to contribute to social, environmental, and economic sustainability. Sustainable public procurement, which refers to purchasing practices that align with socially responsible and environmentally sound products and services, is increasingly imbedded within value-based procurement. In addition to the Swedish example you noted, there are others across Europe. (See Health Care Without Harm.[3]) Norway has implemented its Ethical Trade Framework[4] that prescribes ethical requirements for contracts, based on risk assessments and audits to evaluate compliance.
From my perspective, there are four elements required to optimize the role and impact of health systems in advancing social and environmental sustainability: legislation, policy, leadership, and culture. Value-based procurement can be linked to all four. Legislation and policies have been key in European efforts to meet international greenhouse gas emissions standards, and these have created incentives for green hospitals and green procurement practices that are making a difference. Leadership and culture that values innovation and sustainability is also needed to embrace and disseminate these practices with courage and enthusiasm.
I agree that the economic and social implications of responsible healthcare sector purchasing are sizable. As value-based procurement continues to be adopted in Canada, I hope that policy-makers and health leaders see the opportunity to test more, study more, and ultimately do more toward building social and environmentally responsible and sustainable practices—uncovering the part of the iceberg that is under water.
It is great to see the interest on what we do. I encourage you to visit The Conference Board of Canada’s e-Library to access publications and webinars on this topic, or send me a note at prada@conferenceboard.ca to continue the conversation.
Gabriela Prada; MD, MHA, CHE
Director, Health Innovation Policy and Evaluation
The Conference Board of Canada
[1] Jonathan Skinner and Douglas Staiger, “Technology Diffusion and Productivity Growth in Health Care,” Review of Economics and Statistics 97, 5 (December 2015), 951–64.
[2] Götz Gerecke, Jennifer Clawson, and Yves Verboven, “Procurement: The Unexpected Driver of Value-Based Health Care,” BCG Perspectives, December 8, 2015. http://www.bcgperspectives.com/content/articles/medical-devices-technology-sourcing-procurement-unexpected-driver-value-based-health-care/?chapter=3.
[3] Health Care Without Harm, Sustainable Public Procurement in European Healthcare (Brussels: HCWH Europe, 2014). https://noharm-europe.org/sites/default/files/documents-files/3125/Factsheet%20%7C%20Sustainable%20Public%20Procurement_0.pdf.
[4] Helse Sør-Øst, Ethical Trade (Hamar, Norway: Helse Sør-Øst, 2013). http://www.helse-sorost.no/fagfolk_/temasider_/etikk_/Documents/Ny%20estetisk%20handelsbrosjyre_Engelsk%20Korr4.pdf.
Thank you for your letter. I noted in the article the huge opportunities for the healthcare system to use value-based procurement to improve the sectors’ ability to access innovative technologies. The article centred on this, given that Canada, more often than not, lags behind other comparable OECD countries in the adoption of health technologies, including innovative pharmaceuticals, medical devices, and medical informatics. Canada is still playing catch-up, when compared with other developed countries, in the use of electronic health records. The slow pace of adoption of innovative technologies has a profound negative impact on the ability of the healthcare system to manage its resources more effectively, and most importantly, on the health of Canadians. A study last year concluded that health care organizations that adopt medical innovations have better health outcomes.[1] The study suggested that survival rates in the fastest-adopting hospitals are 3.3 per cent higher. That is equivalent to one-third of total improvements in survival rates over the last two decades. Value-based procurement allows health care organizations to identify valuable health innovations, and then test and adopt them within a framework that is directly linked to better health outcomes. Furthermore, and as I pointed out in the article, value-based procurement also provides the opportunity to focus R&D efforts on finding solutions to the most pressing healthcare challenges, which would boost Canada’s health and life sciences sector.
But, as you well noted, the opportunities within value-based procurement go beyond health and innovation outcomes. The BCG and MedTech Europe’s value-based procurement framework (one I have supported since its development) includes sustainability and macro socio-economic elements. (See Procurement: The Unexpected Driver of Value-Based Health Care.[2]) By extending the notion of “value” to recognize environmental impact and socially responsible supply chain practices, and by including these within value-based procurement, healthcare systems have the opportunity to contribute to social, environmental, and economic sustainability. Sustainable public procurement, which refers to purchasing practices that align with socially responsible and environmentally sound products and services, is increasingly imbedded within value-based procurement. In addition to the Swedish example you noted, there are others across Europe. (See Health Care Without Harm.[3]) Norway has implemented its Ethical Trade Framework[4] that prescribes ethical requirements for contracts, based on risk assessments and audits to evaluate compliance.
From my perspective, there are four elements required to optimize the role and impact of health systems in advancing social and environmental sustainability: legislation, policy, leadership, and culture. Value-based procurement can be linked to all four. Legislation and policies have been key in European efforts to meet international greenhouse gas emissions standards, and these have created incentives for green hospitals and green procurement practices that are making a difference. Leadership and culture that values innovation and sustainability is also needed to embrace and disseminate these practices with courage and enthusiasm.
I agree that the economic and social implications of responsible healthcare sector purchasing are sizable. As value-based procurement continues to be adopted in Canada, I hope that policy-makers and health leaders see the opportunity to test more, study more, and ultimately do more toward building social and environmentally responsible and sustainable practices—uncovering the part of the iceberg that is under water.
It is great to see the interest on what we do. I encourage you to visit The Conference Board of Canada’s e-Library to access publications and webinars on this topic, or send me a note at prada@conferenceboard.ca to continue the conversation.
Gabriela Prada; MD, MHA, CHE
Director, Health Innovation Policy and Evaluation
The Conference Board of Canada
[1] Jonathan Skinner and Douglas Staiger, “Technology Diffusion and Productivity Growth in Health Care,” Review of Economics and Statistics 97, 5 (December 2015), 951–64.
[2] Götz Gerecke, Jennifer Clawson, and Yves Verboven, “Procurement: The Unexpected Driver of Value-Based Health Care,” BCG Perspectives, December 8, 2015. http://www.bcgperspectives.com/content/articles/medical-devices-technology-sourcing-procurement-unexpected-driver-value-based-health-care/?chapter=3.
[3] Health Care Without Harm, Sustainable Public Procurement in European Healthcare (Brussels: HCWH Europe, 2014). https://noharm-europe.org/sites/default/files/documents-files/3125/Factsheet%20%7C%20Sustainable%20Public%20Procurement_0.pdf.
[4] Helse Sør-Øst, Ethical Trade (Hamar, Norway: Helse Sør-Øst, 2013). http://www.helse-sorost.no/fagfolk_/temasider_/etikk_/Documents/Ny%20estetisk%20handelsbrosjyre_Engelsk%20Korr4.pdf.
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