3 Equipment, Reagents and Consumables Board will contract with a Single Supplier for the Management of its:Equipment, Reagents and ConsumablesNote: Excludes Staff
4 HMRC allows VAT reclaim on a Managed Service Well established but:Stringent conditions to be met in terms of financesUK only
5 £ 55,000 saving for each million currently spent ProEconomy of scale ≈ 5%Tax reclamation ≈ 17%(Maintenance VAT exempt)Single invoiceie perhaps 22% of 25% = 5.5%£ 55,000 saving for each million currently spent
6 Upfront or loaded on reagents Service fees Support staff Flexibility ConsManagement feeUpfront or loaded on reagentsService feesPossible charge on 3rd partiesSupport staffDon’t come “free”FlexibilityCompromise!
7 Outright Purchase-Equipment Probably cheapest, but restricts:Options for finite periodTechnology ChangeIntroduces uncertainty – life span / ROITies up capitalLeasingFlexibleAids fiscal planning
8 Lease from manufacturer / supplier No capital outlay / No asset valueYou own nothingNo Capital Charges (UK)
9 Managed Service Contract Single ContractorTransfer of RiskVAT avoidance
10 Single ContractorLikely to be one of big 4 Diagnostics companiesChemistry is their core business
11 SpendChemistry/Blood Gas 40%Haematology 10%Transfusion 5%Microbiology 25%Pathology 10%
12 Laboratory Scoring Cost v Technical Managed Service 20% Biochemistry 35%Blood Gas / POCT 10%Haematology 15%Blood Transfusion 7 %Microbiology 7%Pathology 5%Centrifuges 1%
13 Single Contractor then Contracts with third party suppliers for: Equipment, service, consumables & support it is not able to provideMaybe more than 100 third parties in large contract mainly, but not exclusively, in general area of “diagnostics”.
14 Single Supplier, Glasgow 2004 AbbottChemistry + Immunoassay + Virology + ITSysmex HaemIL CoagDiamed TransfusionQiagen MolecularIL Blood GasSiemens Special IAAbbott act as the single point of contact for GlasgowThey manage all the other companies including their competitorsMenarini HbA1cPhadia AllergyMillipore WaterBinding Site ImmunologyDiasorin SerologyIDS Immunology
15 Risk Transfer – At What Price ? Optimum risk transfer ?PriceRisk Transfer
16 Transfer of RiskUndertaking to manage service does not refer to local interference with working practice.Provides and manages resource to guarantee financial and technical performance (KPI)
17 Will accept financial penalties but penalties don’t guarantee a service Board benefits from guaranteed prices and no surprises in terms of equipment failureSingle Invoice benefits Finance
18 All assets transferred to provider (in return for a cheque) All assets transferred to provider (in return for a cheque) You own nothing.Will provide sufficient capacity to cover growth and KPIs eg TAT and upgrade when required. Contract needs to cover changes in technology
19 Provides nominated or onsite staff such as engineers, financial or technical specialists Usually provide electronic reagent management system and are responsible for failures to deliver/alternative methods
20 “Provide” – Board is paying for all this expertise, penalties or transfer of old equipment somewhere in financial offer.Need to work together as “Partners” and you will need a flexible partner
21 Length of Contract CLO pushes towards 7 years ? 2 years to deliver England moves to long contractsCLO pushes towards 7 years? 2 years to deliver? 18 months to implementCost of change
22 The Forgotten Discipline? Managed ServiceHistopathologyThe Forgotten Discipline?
23 Big 4 operate dozens of Managed Services in Biochemistry, Haematology or Blood Sciences. BioMèrieux at least 1 in MicrobiologyVery few comprehensive Laboratory Medicine contracts
25 Contract on basis of: Operational fluidity Fiscal benefit Clinical needOperational fluidityFiscal benefitDo not have to take total offer from main contractor
26 Pathology ready to benefit from new technology and experience of large diagnostic companies – Lean, workflow logistics etc.Not all Big 4 have in house pathology so discipline can,to some extent, pick and choose from 3rd party offerings.Are benefits to “single supplier” concept even at discipline level
27 Process? Best in Class ? “Best Operational Solution” Classically How We Make ChoicesNowSurely now need to procure“Best Operational Solution”for organisation/discipline
28 Laboratory Scoring Cost v Technical Managed Service 20% Biochemistry 35%Blood Gas / POCT 10%Haematology 15%Blood Transfusion 7 %Microbiology 7%Pathology 5%Centrifuges 1%
29 What’s in it for Pathology? Added ValueRelationshipITEducation
30 Added Value Recapitalisation New Technology / Upgrade Path Experience – workflowDevelop your processReagent Management
31 Relationship Does provider understand Board? PartnershipDoes provider understand Board?Does provider understand PathologyDoes provider work well with 3rd party? Governance equivalence.Compromise
32 IT Middleware enhances traceability Reagent management software Write SOPs
33 Education Provider offers lump sum to central/local Training Budget Provider offers access to CPD via “Academy”.Do these cover Pathology?Does 3rd party offer anything above continuous training?
34 ConclusionMove towards single supplier brings economy of scale benefits without riskto patientNow possible to do this on an organisation rather than department approach in one contractFurther savings possible through managed service through VAT reclamation
35 You will NeedA Procurement representative who will guide you through the legal minefieldA Finance representative to validate your existing costsSupport from General ManagementA Leader who has the respect of all disciplinesAn ImplementerTO KEEP IT SIMPLE
36 Experience of a Pathology Managed Service Contract Steven HarrowerService Manager, Histopathology, NHSGGCScottish Association of Histotechnology, Dunfermline 2nd November 2012
37 Pathology Benefits Added Value Major Investment in Equipment Improved Automation & StandardisationIntroduction of New TechnologiesDigital Imaging, Specimen TrackingLeaner WorkflowAnticipated ValueReduction in Transcription ErrorsBar Coded Specimen forms/pots, Cassettes & SlidesImproved Audit/TAT InformationReduced RiskDealing with One Company?
38 Implementation Issues IT/Interfaces/Incompatible SoftwareGreater Emphasis on Disaster RecoveryExtra Staff Resource RequiredTrainingValidation of Equipment & ConsumablesQuality ControlValidation of ProceduresQuality Issues with some ConsumablesFinancialNew Ordering SystemDouble BillingHelpdesk Response Time
39 Lessons Learned Bidders Need to Understand Histopathology Ensure Tender Captures Histopathology & it’s Specialties(Histology, Mol Path, ICC, Cytology, EM, Neuro, Paeds)Incorporate the complexitiesDon’t focus solely on workload figuresScoring ResponsesPathology is only part of Overall ScoreAll Disciplines Involved (& Finance Weighting)Organise ResponsesMultiple 3rd Party BiddersIdentify any GAP’sMost Bids Focused on Core HistologyKnow what’s Included in Contract (and what isn’t)Equipment & ConsumablesAnticipate the Risks