The Future of Purchasing in Victorian Health Steve Sant Health Purchasing Victoria

2 Objectives  History of HPV  Role and Structure of HPV  Strategic Objectives for the next months  Current Issues  What the future may hold

3 History of HPV  May Ministerial Review of Healthcare Networks  Budget - $6m savings  July 2000 – DHS Procurement Strategy Unit  September Procurement Reference Group

4 Duckett Review  Ministerial Review of Healthcare Networks  Mandate that all hospitals will purchase a specified range of pharmaceuticals and general medical supplies.  Establish a Task Force to examine the best possible model for centralised purchasing.  Build on existing structures and centres of proven performance.  Amend section 42 of the HSA to authorise statutory directions.

5 History of HPV  May Ministerial Review of Healthcare Networks  Budget - $6m savings  July 2000 – DHS Procurement Strategy Unit  September Procurement Reference Group

6 History of HPV  January/February 2001 – Minister’s agreement  February 2001 – Cabinet – Approval in Principle  May/June Legislation  July 2001 – Appointments to HPV  August 2001 – 1 st Board meeting

7 Role of HPV  Supply of Goods and Services tendering & contracting data & information for decision making  Policy & Regulation establish policies, practices and directions monitor compliance  Fostering of Systems Improvement & of Electronic Trading  Provision of Advice, Training & Consultancy Services

8 Structure of HPV HPV members Chairperson 5 hospital DHS and DTF

9 Strategic Objectives 2001/02 1. Negotiate a small number (3-5) of contracts to meet the defined savings target of $5-6m for 2001/2001 for services or goods purchased by Victorian public hospitals and health services. 2. Establish the contract/tender program for future years. 3. Ensure that all public hospitals and health services are aware of HPV, its mandate and operating plans, and their opportunity and responsibility to participate in the HPV central purchasing process.

10 Strategic Objectives 2001/02 4. Communicate a well developed procurement policy framework. 5. Create expectations, monitoring processes and incentives to encourage compliance with HPV policy and regulations. 6. Further develop HPV organisational infrastructure. 7. Promote best practice purchasing systems. 8. Develop a plan in 2002 to foster e- commerce

11 2 years  Next 2 years emphasis will be on:  Identifying savings opportunities  Aggregation of volumes to achieve better pricing  Implementing lead agency arrangements  Developing rolling tender program  Encouraging regional purchasing alliances  Planning for e-commerce and establishing the standards as a foundation  Tender and contracts database  Determining the post HSA arrangements for Pharmacy tendering and wholesaling

12 3 Years  3+ years  Continue to aggregate volumes  Business process reengineering with the hospitals  Focus on the whole supply chain rather than segment by segment  IT as an enabler

13 Issues  Data, data, data  Minimal usage and cost information  Total spend on supply ???  Number of items purchased – 100,000???  Number of suppliers – 2,500???  Capital  Business case for investment in systems and infrastructure

14 Issues  Standards  Product identification and numbering  Catalogue  Messaging  Billing  Contract and tender documentation  What model for the future  Exchange – which one(s)?  Vertical and Horizontal  Prime Vendors  3rd Party Logistics Providers

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16 What the Future may hold  Supply Chain Management will be elevated in importance, focus will be on reducing costs across the whole chain  Information will become available that will allow hospitals to better understand and manage their non-labour costs  More aggregation of spending and on- contract purchasing – less individual pricing  ‘Collaborative Competition’

17  Greater co-operation between hospitals, regions and States – purchasing alliances  Supply chain management will have been reengineered  Logistics may have been outsourced to a prime vendor or a 3 rd party logistics provider  Emphasis in hospitals will be on sourcing What the Future may hold

18  E-commerce tools will be used across a large range of suppliers and the full suite of functionality will be available, including:  Improved workflows  Customised virtual catalogues  Detailed Management Information and accurate forecasting  Reduced stock levels - JIT?  Sophisticated order and stock tracking systems What the Future may hold

19 Thank you hpv.org.au

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