Value-Based Procurement: The New Healthcare Imperative
Value-Based Procurement: The New Healthcare Imperative
This blog is part 5 of a series on the MEAT value-based procurement project, an initiative that advocates towards a shift from price-based procurement towards value-based procurement. It does so by defining a Most Economically Advantageous Tendering (MEAT) framework that includes the value of medical technologies, services and solutions in procurement processes across Europe. Read part 1, part 2, part 3 and part 4.
Despite heroic efforts to control healthcare costs, Canada is still among the countries with the highest healthcare expenditures. In 2013, Canada spent 10.2% of its GDP on healthcare, which was above the average for its peer OECD countries. Yet, the quality of healthcare services does not always match this level of investment. There are still great variations in healthcare quality across the country and, most importantly, Canada’s performance is weak on key indicators when compared with its peer countries. For example, as shown in the Conference Board of Canada’s latest How Canada Performs report card, Canada obtained “C”s for mortality due to cancer, mortality due to diabetes, mortality due to musculoskeletal diseases, and infant mortality. Canada’s health performance has dropped to 10th place from a much more enviable 5th place in the 1990s out of 17 peer countries.
The need for improving outcomes while controlling costs is not unique to Canada. Many other countries are facing the same challenge and this has led to the emergence of ‘value-based’ agendas, which feature patient-centeredness, health services integration, and a shift from emphasis on volume of services provided to emphasis on improved patient outcomes. Value-based healthcare models are being adopted globally to maximize value for patients. Procurement is a key enabler of this transformation given that it is at the heart of purchasing value. Therefore, value-based procurement goes hand-in-hand with value-based healthcare.
Value-based procurement is only possible when procurement transactions go beyond short-term cost savings to involve quality-based factors such as technical merit, accessibility, environmental characteristics, and innovative characteristics. The recognition in Europe that these factors are critical to extract greater value from procurement transactions has led to important changes to the latest European Procurement Directive, which now makes MEAT (most economically advantageous tender) mandatory. In Canada, our work over the last few years (see Innovation Procurement in Health Care: A Compelling Opportunity for Canada; Innovation Procurement for Medical Devices: Driving Health System Improvement) and the recent report by the Ontario Health Innovation Council, The Catalyst: Towards an Ontario Health Innovation Strategy, have provided significant impetus to rethink value and have motivated many fruitful discussions on strategic, value-based procurement.
Value-based procurement is under way in many jurisdictions. We have studied, documented, and shared some of these experiences. We have also facilitated the exchange of insights and ideas on how to implement value-based procurement through our Council for Innovation Procurement in Health Care. Our most recent report, Value-Based Procurement: The New Imperative for Canada’s Health Care, identifies key lessons that could help organizations transition toward more strategic, value-based procurement. These include the need to:
- take a longer term view of success and broaden the definition of value, including, for example, patient experience and longer term efficiencies;
- foster collaboration and cooperation between public and private stakeholders;
- engage clinicians and other key opinion leaders in the procurement process to determine value and enable and accelerate adoption;
- ensure that value-based procurement is broadly adopted, aligned between all funders and buyers, and informed by relevant data.
Shifts in government policy have created space for value-based procurement strategies in healthcare. For example, Supply Chain Ontario, a department of the Ministry of Government and Consumer Services, has been encouraging efficiencies and innovation and earmarked $20 million to support innovative procurement approaches in the healthcare sector.
Healthcare stakeholders, including shared service organizations and group purchasing organizations, have an opportunity to take advantage of this enhanced government interest in value-based procurement and align their own procurement practices with each other to facilitate the creation of a more streamlined supply chain. Development of widely shared, patient-oriented metrics and standards to evaluate the utility of an innovation and the effectiveness of innovative procurement approaches is essential for the success of strategic, value-based procurement. Performance measurement is greatly facilitated by the collection and centralized aggregation of relevant data, such as usage or implementation of innovative products and services in hospitals.
The importance of value-based procurement has been established. Implementation is now imperative. We are committed to continue supporting this shift in Canada and beyond because we believe on the power of value-based procurement to reinvent the future of healthcare. Over the next two months I will be facilitating value-based procurement dialogues in Vienna, Halifax, and Toronto. Publications and an online-learning program are also in the pipeline. Stay tuned for more details!
Value in MEAT procurement
Healthcare procurement often focuses only on the purchase price. This fails to address the needs of other stakeholders such as patients, providers, health systems and society as a whole. It also clouds the true cost of care and does not account for the economic value of health and care.
The MEAT value-based procurement framework places at its core the outcomes that matter to patients, quality and further benefits for providers, health systems and society.
By choosing MEAT value based procurement instead of selecting the product with the lowest up-front cost, procurement authorities can factor the real value of a product into their decision-making and obtain the most economically advantageous solution.
‘Value’ in European law
The new EU directive on public procurement encourages this smarter, more holistic approach to procurement and innovation.
The MEAT value-based procurement approach can help to break down organisational silos within healthcare institutions, reduce inefficiencies and spur innovation-driven investments.