The Quality Opportunities & Challenges in the Implementation of Managed Service Contracts Ian Rothnie BMS4/Laboratory Manager Clinical Biochemistry NHS Grampian
1. NHS Finances 2. Budgets 3. Managed Service Contracts 4. Personal Experience
Why should you be interested? When nurses become more engaged with finance and more involved in management, they bring about a significant difference to the quality of patient care www.nursingtimes.net
NHS Scotland Finances
Arbuthnott Formula Introduced in 2000 replacing SHARE formula to allocate funding to NHS Boards across Scotland with 70% of NHS funding to Boards is allocated in this manner. Refined in 2009/10 and replaced by Resource Allocation Formula
Resource Allocation Formula As in most resource allocation formulae, the main driver is the population size of each area - the more people you have, the more resources you will get. Adjustments are made to the base population of each area to account for: The age/sex composition of the population The relative additional needs due to morbidity and life circumstances (MLC) and other factors The relative unavoidable excess costs of providing services to different geographical areas
What are budgets? Money in s Staffing in Whole Time Equivalents (WTE) Activity in workload measures The NHS Budget Holder's Survival Guide - David Bailey
What are budgets cont.? A budget is a detailed statement setting out anticipated expenditure and income, normally for a 12-month period. Once an organisation has set its overall strategy and its service and financial plans, these need to be translated into a budget. Setting a budget in this way will ensure that resources are allocated in line with the organisation s aims and objectives. The NHS Budget Holder's Survival Guide - David Bailey
What is the purpose of budgets? A budget serves many different purposes; Planning Monitoring Controlling Measuring your performance as a manager The NHS Budget Holder's Survival Guide - David Bailey
Budget Cycle The NHS Budget Holder's Survival Guide - David Bailey
How are budgets set Historic basis Budget rolled over from one year to the next with small changes made each year for: Pay awards Inflation Cost improvements Developments The NHS Budget Holder's Survival Guide - David Bailey
Historic Basis Strengths Uses minimum time Simple to calculate Uses a proven base Simple to understand Weaknesses Hides inefficiencies Assumes new equipment No link of finance to activity The NHS Budget Holder's Survival Guide - David Bailey
How are budgets set cont. Zero basis Takes zero as it s starting point rather than using last years figures and produces a fresh financial plan. To create a zero based budget you must question the continued existence of every activity in your department. The NHS Budget Holder's Survival Guide - David Bailey
Zero Basis Strengths Identifies inefficiencies Links activity to finance Challenging Identifies long term goals Weaknesses Time consuming Difficult to implement The NHS Budget Holder's Survival Guide - David Bailey
How are budgets set cont. Activity based Produces not one but a range of possible budgets which depend on the levels of activity within the department. Sometimes referred to as flexible budgeting The NHS Budget Holder's Survival Guide - David Bailey
Activity Based Strengths Flexes budget Links activity to finance Budgets realistic in line with activity Variances more easily understood Weaknesses Income may not flex in line with budget Changes to standard costs not recognised The NHS Budget Holder's Survival Guide - David Bailey
Budget Statements The NHS Budget Holder's Survival Guide - David Bailey
Methods of major equipment purchasing Capital funding Allocation of central funds to purchase equipment (subject to annual capital charge) Reagents, controls, calibrators and consumables are purchased from the instrument supplier or from alternative suppliers and are invoiced separately
Methods of major equipment purchasing cont. Leasing Lease agreements are usually entered into a period of 3 5 years. The instrument normally remains the property of the supplier. The insurance, maintenance, repair and depreciation of the instrument are the responsibility of the laboratory. Reagents, controls, calibrators and consumables are purchased from the instrument supplier or from alternative suppliers and are invoiced separately from the lease.
Methods of major equipment purchasing cont. Rental Agreements These are usually entered into for a set time period with the suppliers of the instrument. The insurance, maintenance, repair and depreciation of the instrument are included in the rental.
Methods of major equipment purchasing cont. Reagent Rental Agreements These are a variation of the basic rental agreement where the instrument rental, insurance, maintenance and repair are included in the cost of the reagents. This is calculated on the volume of tests and therefore reagents that the laboratory consumes over a period of time.
Methods of major equipment purchasing cont. Cost per reportable result. A refinement of the reagent rental system where the liabilities (insurance, maintenance, calibration etc.) are transferred to the instrument supplier. Consignment stock that includes reagents, consumables, control and calibrating material, are supplied to the laboratory. Periodically the numbers of test results are tabulated and an invoice is raised to the laboratory at a predetermined cost per reportable result. The laboratory incurs no direct cost prior to the performance of the test.
Managed Service Contracts Why have these become so prominent?
Growth of MSC in the NHS
MSC Components
What is a Managed Service? Managed Services means that the successful supplier/vendor will supply, maintain, service and provide consumables for a range of clinical analysers and deliver all associated activities.
What is a Managed Service cont. With an MSC, the cost and risk of ownership remains with the contractor, reducing significantly the risks and liabilities traditionally borne by the laboratory service.
What is a Managed Service cont. What are these risks? initial capital investment and unanticipated future requirements to meet service changes and rising demand unforeseen maintenance and spare part costs new staff training costs costs (financial and operational) associated with equipment downtime provision of services, reagents and consumables
What is a Managed Service cont. While the transfer of risk has clear benefits for the laboratory service, the presence of a collective and contractual agreement to mitigate risks on an ongoing basis is mutually beneficial in supporting a true partnership arrangement as opposed to a traditional purchaser/provider agreement.
Where are the savings made? The savings are generated principally from reduced reagent prices and the potential to recover VAT under HM Revenue & Customs regulations regarding contracted out services
Managed Service Contracts
Where does quality come into in all this? Acceptance Tests Define the minimally acceptable standard for an analytical method/test.
Where does quality come into in all this cont? Analyser Failures The vendor guarantees to provide fully functioning instruments to meet analytical turnaround times requirements. In event of analytical systems working less than optimal then vendor will replace the unit on a like for like basis.
Where does quality come into in all this cont? Service Guarantees In the event that the contracted service level (uptime) falls below agreed levels, vendor will reimburse the laboratory e.g. % In Service % Service Charge 98 100% 0% 93 98% 7.5% 90 93% 15%
Where does quality come into in all this? Late Delivery Charges Failure to deliver stated system developments in the timelines agreed by vendor will result in a fee adjustment equivalent to a 5% discount for every month the component is late up to 11 months, from the 12 th month the component will be supplied at 100% discount (i.e. free of charge).
Pre Procurement
Post Procurement
Clinical Biochemistry Pre Tender Immulite 2000 Previous track 2 x ADVIA 2400 plus 2 x Centaurs Dade Behring Dimension ADVIA 1650 Consolidation Of Platforms Roche P Unit Dade Behring ProSpec
Clinical Biochemistry Post Tender New track 3 x ADVIA 2400, 1 x ADVIA 1800, 3 x Centaur XP, Immulite 2500 ADVIA 1200 Consolidation Of Platforms Dade Behring Dimension Dade Behring ProSpec
Clinical Biochemistry Post Tender 2 New track 3 x ADVIA 2400, 1 x ADVIA 1800, 3 x Centaur XP, Immulite 2000 XPi ADVIA 1200 Consolidation Of Platforms Dimension Vista 1500
MSC Benefits Incorporate 3 rd Parties Incorporate New Technology or Adapt System Flexibility Of MSC VAT Reclamation on reagents, capital charges and 3 rd party suppliers Single Financial Interface Added Value Onsite engineer, monthly technical meetings, quarterly financial reviews, electronic reagent inventory.
MSC Benefits cont. Lean training provided to staff. Initial on-site training Basic and advanced level training courses included in MSC. Continuous Service Improvements Six Sigma training to yellow belt to selected staff. On-site engineers and access to system specialists for assistance in method development.
MSC Benefits cont. Built in redundancy. Centralink software on server with multiple disc array and backup power supply. Multiple platforms using same reagents, calibrators, QC etc Resilience Of Service Consistency of reagents, calibrators and QC across multiple sites. Stand alone operation if track or host computer failure allowing continuity of service to users.
ADVIA Pilot Control ADVIA CentraLink ADVIA Automation ADVIA Centaur ADVIA 1800 ADVIA 2400 Immulite 2500 From a single point *
Reagent Inventory Systems Use Trident to place order Goods arrive at Lab Delivery scanned into stock Trident Cycle Assess lab requirements Stock usage
Lean Training Process Mapping Proposal for pre-analytical process improvement at Aberdeen Royal Infirmary December 2008
Lean Training Process Mapping
Lean Training Process Mapping 70 10 50 600 Receipt Label Scanning Accessioning CT 5 CT 5 CT 6 CT 10 Batch 53 Batch 100 Batch 20 Batch >30 Sample Deliveries Start : 09.35 Leave 09.44 Take Bag Open Inspect Sort to IP / OP 1-2 1-2 1 2 Inspect form and sample Label as appropriate Place sample in rack Start 10.08 Leave 10.12 Walk to scanner Feed forms Place forms in box on shelf Start 10.13 Leave 10.35 Input demographics Input required trests Lead Time = 60 minuets Touch Time = 20 seconds
Lean Training Process Mapping Preliminary data collected for routine biochemistry requests Inspect, open, sort into in-patient & out-patient 5 seconds Inspect, label appropriately, place sample in rack 5 seconds Scanning Accessioning 10 seconds Touch time 20 seconds, time to track 60 minutes, batch size 100, 5 staff. The hands-on (touch time) for samples is very efficient at 20 seconds. However, the samples took 60 minutes to progress from receipt to being available for analysis this is the result of batching, constant interruptions, special treatment of samples and lack of standardised processes.
6-Sigma Project Process Improvement Team from Scottish Government investigating failure to consistently meet 98% A&E 4 hr admit/discharge target.
6-Sigma Project cont. Support from Black Belt to assist Yellow Belt trained laboratory staff to complete full specimen journey tracking: Collection to pickup Pickup to drop off Specimen receipt to result report
Benchmarking Keele Benchmarking Costs and activity compared across different laboratories. Automation Healthchecks Vendor compares your performance against systems expected performance and your peers.
References The NHS Budget Holder s Survival Guide by David Bailey
Questions?