This chapter explores experiences in a small set of high-income countries around procurement and SCM in the health sector. The international component of the work presented here sought to complement the findings of the REA reported in Chapter 3. Specifically, we report on two themes: first, a whole system change involving the centralisation of the procurement function in New Zealand; and second, the role of GPOs in Europe, focusing on recent experiences in France, where, as part of the national Hospital Performance for Responsible Procurement [Performance Hospitalière pour des Achats Responsables (PHARE)] programme launched in 2011 by the French Ministry of Health, public sector GPOs have been tasked with supporting and advancing efforts to strengthen procurement across the health system.116
Centralisation of the procurement function in New Zealand
Main features of the New Zealand health system
Health care in New Zealand is financed largely through public sources, mainly general taxation (74.9% in 2011) and the employment-based accident compensation scheme (7.8%).117 The remaining 17.3% is funded from private sources including private health insurance and out-of-pocket payments (10.9%); in 2011, approximately 31% of the New Zealand population (of around 4.3 million) had some private health insurance.118 In 2011, national health expenditure was 10.3% of gross domestic product (GDP), which was higher than the Organisation for Economic Co-operation and Development (OECD) average of 9.3% (UK 9.4%), although remaining lower in terms of per capita spending, at US$3182 compared with an average spend across the OECD of US$3339 (UK US$3405).117 Compared with 2000, health expenditure in New Zealand grew by 5.1% per year in real terms (OECD 4.1%; UK 4.5%).117
Since 2000, with the introduction of the New Zealand Health and Disability Act, responsibility for the organisation of publicly funded health services has been devolved to 20 geographically defined DHBs. DHBs administer about 75% of public funding and they are responsible for planning, managing and purchasing publicly funded health and long-term care services for the population within their region.119 DHBs are governed by a board whose members are elected by popular vote or appointed by the Minister of Health; they are overseen by the newly established National Health Board (see Ministerial review of New Zealand health system performance) and are required to report progress regularly against a set of performance measures and other accountability requirements set out in a nationwide service framework.120
District health boards operate government-owned hospitals, health centres and community services, and also purchase some (mostly elective) services from private hospitals, and long-stay residential and community-based services from non-governmental organisations.121 They purchase a significant proportion of primary care services through contracts with primary health organisations (PHOs), which were introduced as non-statutory, not-for-profit bodies following the 2001 Primary Health Care Strategy.119 PHOs organise and manage publicly funded primary care, and subsidise low-cost access to general practitioner (GP) services, covering over 95% of the population.122 They bring together doctors, nurses and other health professionals providing care in the community, through either employed staff or affiliated provider organisations and individual general practices; enrolment is voluntary for patients. The number of PHOs was consolidated through merger over the years, from an initial 80 to 31 by the end of 2011.123
Health-care provision is both public and private. Specialists in public hospitals are paid a salary whereas GPs are usually independent, self-employed providers. GPs act as gatekeepers to secondary care; residents are free to choose any GP.
Ministerial review of New Zealand health system performance
In 2008, amid concerns about the future direction of health-care provision and financial sustainability, and a new commitment to create more efficient and accessible public health services, the newly elected government commissioned a Ministerial Review Group to review the performance, quality and sustainability of the New Zealand health system.29,121 In its 2009 report Meeting the Challenge the group recommended (re)centralising some of the planning and purchasing functions.124 The overall direction was to reduce bureaucracy, including reducing duplication of ‘back office’ functions of DHBs and PHOs and an aim to ‘reduce waste and inefficiencies within the health system’.29 The group also advised the integration of different aspects of planning that had so far been undertaken separately and the development of a joint approach for health services, workforce, technology and capital planning across the entire public system.124
Among the main changes introduced by the New Zealand government in response to more than 170 recommendations issued by the review125 was the establishment of the aforementioned National Health Board to oversee and guide planning at district and supradistrict levels. Appointed by the Minister of Health and supported by a business unit within the Ministry, the National Health Board is responsible for overseeing operational functions that were formerly the responsibility of the Ministry of Health. These include the funding, monitoring and planning of DHBs, as well as the planning and funding of designated national services.126 Further significant changes included the creation of a Shared Services Establishment Board, which was to become Health Benefits Limited (HBL) (see next subsection) and a Quality and Safety Commission.125 Furthermore, the National Health Committee, an independent statutory body, was reconfigured to provide advice to the Ministry of Health on new and existing health technologies in the health and disability sector.127
A new central procurement agency: Health Benefits Limited
As part of its review, the Ministerial Review Group noted how New Zealand’s Pharmaceutical Management Agency (Pharmac) had contained pharmaceutical cost growth and concluded that a similar approach should be adapted to ‘other non-wage costs in back office areas that all DHBs have in common, in order to free up resources for front-line care’.124 It thus proposed the creation of a new national procurement agency or ‘Pharmac-like national shared service agency with a mandate to manage the assessment, standardisation, management, purchasing, and/or SCM of any of the common back office functions of DHBs that are referred to it by the Minister of Health’.124
In response, in 2010 the government established HBL as a shared services organisation for the District Health Boards.128 It is a standalone Crown-owned company, owned by the Ministers of Health and Finance, whose purpose is to ‘help District Health Boards (DHBs) save money by reducing their administrative, support and procurement costs’129 by means of facilitating and leading national initiatives and managing the related implementation programme.130 Overall, HBL has been tasked with delivering a total of NZ$700M (around £360M) in gross savings to the DHBs between 2010 and 2015.131 It is anticipated that these savings will arise from cost reductions, cost avoidance, operational efficiencies achieved in administrative and support services or non-administrative areas, and sharing of good practice in administrative and support services.130
Principles of working
Health Benefits Limited is separate from the Ministry of Health; it has its own board which reports directly to the Minister of Health.132 A core aim of HBL’s activities is to generate savings that can be reinvested into front-line services, so supporting the wider objectives of reform activities towards patient-centred care. The responsibility for decisions about the (re)allocation of savings remains with the DHBs and other stakeholders.
As an organisation mandated to support DHBs, HBL seeks to work with DHBs ‘to help facilitate the processes required to deliver gains and savings through shared service initiatives’.131 In its 2010–11 statement of intent (a statutory annual document), HBL highlighted that engagement and communication activities were to be targeted at different levels across the health sector and at the different needs of a range of stakeholders, including ministers, government agencies, the different administrative ties within DHBs and different suppliers.131
In the same statement, HBL also noted that while working with DHBs to meet their needs would be of key importance in order to deliver effective shared services, there may be instances of lack of consensus on a given activity or initiative. In these instances, HBL could consider asking the Minister of Health to direct DHBs using his/her ministerial power in line with the New Zealand Public Health and Disability Act.131 In practice, this lever has not been used so far and the Ministry of Health could draw on other, more informal methods of performance management if deemed necessary (NZ KI).
Health Benefits Limited publishes two accountability documents: a statement of intent and an annual report.130 The statement of intent is prepared on an annual basis, reviewed and approved by the shareholding ministers. The annual report documents activity during a given year. HBL also provides the Ministry of Health with information to enable responses to parliamentary questions and process Select Committee inquiries, among other things.131
The identification and formulation of long-term objectives and short-term outputs evolved as HBL became more established in the wider system. The 2013/14–2015/16 statement of intent describes three long-term objectives:129
effective and efficient provision of DHB administration and support services
benefits realised in DHB administration and support services
sustainability of benefits and implemented services and initiatives.
These objectives are to be delivered by means of defined output classes, which continued to be developed over time along with HBL’s work streams and the organisation as a whole. Thus, in its initial work programme,131 HBL identified a number of non-clinical support services as areas with the most potential for savings, which were further developed into a set of defined work streams and which, in the 2011–12 period, were identified as:133
collective procurement, working with Pharmac and the National Health Committee to prepare a co-ordinated strategy for procurement of medical devices (for all DHBs)
finance, procurement and supply chain, which includes food and laundry services
facilities management and support services
information services; and
human resources and workforce management.
The 2013/13–2015/16 statement of intent further refined these work streams into six distinct ‘output classes’, redefining ‘collective procurement’ as ‘Direct Services to DHBs: Shared Banking, Insurance, National Procurement’, and adding a new output class, ‘new opportunities’.129 The following provides a brief summary of activities in the two output classes ‘collective procurement’ and ‘facilities management and support services’.
Collective (national) procurement activities
National procurement centres on identifying procurement opportunities across the health sector, including engaging with suppliers and negotiating contracts.129 Supplier engagement involves regular (quarterly) meetings that seek to explore potential for efficiencies from the supplier perspective also (NZ KI). In 2011–12, there was an ‘emphasis on categories of goods and services or suppliers that are most likely to quickly deliver the savings needed’.133 To this end, HBL had identified 29 categories where it led or worked with other agencies ().
Goods and services categories with savings potential as identified by HBL, 2011–12
Of these, eight national procurement projects were completed during 2012–13.129 These included medical examination gloves (Box 2) and rehabilitation equipment supply agreements, alongside hospital bed contracts and a single banking contract for all DHBs.134
National procurement agreements: non-sterile gloves Reviewing the procurement arrangements for non-sterile gloves, HBL identified that there were 18 suppliers to the 20 DHBs, while noting that these supplied gloves from two manufacturers worldwide. The (more...)
The collective procurement workstream also involved the establishment of HBL Clinical Council, which includes representatives of the medical and allied health professions across New Zealand.136 The council is expected to provide advice on product groups and on opportunities to improve care quality and delivery more generally to inform HBL’s work. Equally important, perhaps, it also provides an avenue for HBL to access wider clinical networks and associations, so ensuring that ‘clinical communities remain informed of HBL’s programme’,136 which can be seen to secure ‘buy-in’ from clinicians, perceived to be a powerful lever for success (NZ KI).
Finance, procurement and supply chain programme
Health Benefits Limited has been working with DHBs on the design and implementation of a national finance, procurement and supply chain (FPSC) operating model, and by mid-2013 a single provider for warehousing and distribution services to all 20 DHBs had been agreed upon.129,136 As part of the FPSC programme, HBL, in collaboration with DHBs, has also been working to develop a DHB National Catalogue134 and a single financial management information system for the sector.129 The catalogue seeks to address the fragmentation of the current system in which DHBs approach purchasing of goods and services in different ways in the absence of a single register. The focus of the catalogue is on clinical and non-clinical consumables which can be reordered.137 It is anticipated that DHBs will be able to begin purchasing from the catalogue, enabled through GS1 (global standards) net,138 progressively over 18 months, beginning from 2014, as a common computerised purchasing system is being put in place.135
The anticipated benefits of centralising the approach to procurement through a single catalogue and the use of a single provider for supply chain services include savings through permitting bulk purchasing, consistent processes and systems, and operational cost savings, among others.136
In this context, HBL has built a strategic partnership with healthAlliance N.Z. Limited (healthAlliance), a stand-alone company established in 2000 as a joint venture between two DHBs in the north of New Zealand to provide key non-clinical business services for both DHBs.139 HBL became shareholder in 2011, along with two additional DHBs, each holding 20%. healthAlliance is expected to have a variety of roles as one of the FPSC shared service providers for the New Zealand health sector.129
Assessment of the changes in procurement in New Zealand
In its first 2 years of operation, HBL was reported to have achieved cumulative savings of NZ$114.6M (≈ £60M); these were largely attributed to collective procurement initiatives.133 Forecasts estimate further gross annual savings from around NZ$100M in 2012–13 to NZ$150M per annum in subsequent years, adding to a cumulative gross saving of NZ$795M by 2015–16 (≈ £415M).129
The overall impacts of the establishment of HBL and the wider changes in the system towards the intended development of a sustainable health system in New Zealand have yet to be demonstrated (NZ KI). The performance of HBL as such can be assessed against the objectives it set out to achieve, that is, the extent by which HBL succeeded in contributing to gross benefits over the 5-year period after its establishment, with defined long-term outcomes providing a further benchmark for measuring success.129 Important achievements can be seen in centralising the procurement function. Concerns among suppliers that the centralised approach might stifle innovation have been countered by the argument that the processes put in place by HBL have provided for a clear framework for suppliers to work with (NZ KI).
However, challenges remain. For example, one of the key barriers to strengthening procurement in the health sector in New Zealand, in addition to a fragmented approach to procurement activities, has been a perceived lack in procurement capacity and capability (NZ KI). There has been an interest in centralising leadership by bringing together procurement leads into one group to build capacity and optimise training, but such a move has an impact on positions locally.
When interpreting the New Zealand experience, it is important to consider that with a population of 4.3 million the New Zealand market is small. For comparison, the average population size overseen by strategic health authorities in England before the 2012 health reform was around 5 million.140 The overall bargaining power in New Zealand is thus small compared with larger markets, which are able to leverage size vis-à-vis negotiating power (NZ KI). A key feature of the New Zealand system can be seen to lie in a perceived culture of working together for the benefit of the population (NZ KI), which may facilitate introducing system changes that may be less acceptable elsewhere.
Group purchasing organisations in the hospital sector in Europe
Background
Group purchasing organisations in the health-care sector act as ‘purchasing intermediaries’ that negotiate contracts between health-care providers and manufacturers, distributors and other suppliers of a range of medical goods and services.141 Through pooling the purchases of these products for their customers, GPOs can negotiate lower prices from suppliers, which may result in cost savings for health-care providers.142
Group purchasing organisations started emerging in the USA in the late 1950s.143 According to the Healthcare Supply Chain Association, which represents 14 GPOs in the USA, about 98% of US hospitals use GPOs to purchase products, on average between two and four GPOs per facility.144 It is estimated that GPO contracts account for just over 70% of non-labour hospital purchases.144,145 Although a large number of GPOs operate in the USA (> 600), the market is concentrated in a small number, with six of the largest national GPOs accounting for almost 90% of all hospital purchases.146
During the early 2000s, GPOs became subject to congressional scrutiny because of concerns about potential anticompetitive practices, including the charging of fees to manufacturers by GPOs, raising questions about conflicts of interest, among other things.141,143 In response, in 2005 nine GPOs established the Healthcare Group Purchasing Industry Initiative to promote best practices and public accountability among its member GPOs.146,147 Although this effectively operates as a self-regulatory body, the government has retained federal oversight.146
Empirical evidence of the impact of GPOs on pricing for hospitals in the USA is limited.142 Studies that are available suggest that GPOs appear to reduce health-care costs by lowering product prices,148,149 and also reduce transaction costs through commonly negotiated contracts.148
Group purchasing in European countries
Group purchasing in the publicly funded health-care sector has become an increasingly important feature in some European health systems from the late 1990s onwards, in response to a perceived need to reduce fragmentation, inefficiencies and lack of transparency in procurement activities; examples include England, France, Germany and, more recently, Italy.11 The nature of group purchasing differs across countries, however, with varying involvement of national or regional public agencies in the co-ordination or oversight of procurement activities in the publicly funded system.150 For example, in Italy collaborative procurement associations or other forms of collaboration have been set up at regional level,28 and the national procurement agency is tasked with the co-ordination of a network of regional central purchasing bodies.151 In France, public sector reforms in the mid-2000s have encouraged the formation of nationally and regionally grouped procurement consortia, including in the health-care sector,11 with GPOs playing an increasingly important role in the government’s efforts to strengthen public procurement, as we shall see in the next subsection.
In Germany, about 80% of hospitals use GPOs, and the volume of non-labour hospital spending processed through GPOs increased from an average of around 20% in 2000 to 42% in 2010.152 The organisational structure, remit and scope of GPOs in Germany varies, ranging from hospitals jointly co-ordinating their procurement to non-binding and binding purchasing companies.153 The main focus of hospitals joining purchasing associations or organisations has been on cost savings through custom contracting, that is, contract and price negotiations,154 although more recently GPOs have begun to offer additional services such as IT, process consulting and logistics services.153 It has been estimated that in 2010, hospitals in Germany made cost savings in the region of €4B through the use of GPOs.152 GPOs are also playing an increasingly important role in Austria and Switzerland;152 there are indications of an increasing consolidation and Europeanisation of GPOs, with, for example, Prospitalia, one of Germany’s leading GPOs, which has established subsidiaries in Austria and the Netherlands, also foreseeing the formation of so-called ‘super GPOs’ across the European health sector.155
Group purchasing in European countries: the experience in France
The French health system is based on statutory health insurance (SHI) and provides all legal residents with health coverage, as per the 1999 Universal Health Coverage Act (CMU Act).156 In 2011, SHI accounted for 73.1% of health expenditure, complemented by taxation (3.6%), out-of-pocket payments (7.5%) and private health insurance (15.7%).117 About 95% of the population hold complementary private health insurance to cover user charges and/or excluded services (e.g. psychologists, dieticians).157 National health expenditure in 2011 was 11.6% of GDP (UK 9.4%), with per capita spending at US$4118 compared with an average spend across the OECD of US$3339 (UK US$3405).117 Compared with 2000, health expenditure in France grew by 2.5% per year in real terms (OECD 4.1%; UK 4.5%).
Although the Ministry of Health oversees overall health sector planning and provides guidance on health policies, regions have an increasingly important role in health-care governance through regional health agencies [agence régionale de santé (ARS)].156 Created in 2010 following the 2009 Hospital, Patients, Health and Territories Act, the ARS are responsible for ensuring that health-care provision meets the needs of the population by improving co-ordination between ambulatory and hospital care and health and social care services, while respecting national health expenditure objectives.
Health services are delivered by public and private providers in ambulatory care and in hospital. GPs mainly work in private practice as self-employed professionals, with around 75% working in health centres or hospitals in addition to their private practice. GPs are reimbursed on a fee-for-services basis, with fees set nationally, based on agreements between professional organisations and the SHI administration. Since 2009, GPs can also enter into individual contracts with the SHI to receive additional payment in compensation for ‘practice improvements’ (pay for performance; from 2011 this was extended to also include specialists).158 Specialists are paid based on fee for service in both private practice and private hospital settings. Specialists employed in a public hospital receive a salary.
Patients are able to access specialists in hospitals and private practice directly. In 2004, a ‘soft’ form of gatekeeping was introduced to encourage patients to see a GP before visiting a specialist, referred to as ‘preferred doctor’ (médecin traitant). Although a voluntary scheme, there are strong financial incentives for patients to sign up, and more than 85% of the population is registered with a GP.157
The hospital sector in France
Secondary and tertiary care is provided by a mix of public (including private not-for-profit) hospitals, covering two-thirds of hospital beds, and private for-profit hospitals.157 There were just under 2700 hospitals in France in 2011.117 Public hospitals are legally and financially independent but overseen by the state, whereas private not-for-profit hospitals are typically managed by associations, foundations, mutual insurance companies or others.159 Private for-profit hospitals are civil or commercial enterprises and, increasingly, form large corporations.157
Hospital care is financed through an activity-based funding system using diagnosis-related groups, which became fully operational in 2008. The system is used to reimburse both public/private not-for-profit and private for-profit hospitals. Private for-profit hospitals have been paid entirely through diagnosis-related groups since 2005.160 The aforementioned 2009 Hospital, Patients, Health and Territories Act has introduced a number of changes to the governance of public and not-for-profit hospitals, increasing their autonomy and organisational flexibility.156 This also included devolving executive responsibilities from the administrative board of the hospital (subsequently the monitoring board), which comprises representatives of the state, local authorities, hospital staff, patients and qualified personnel, to the hospital director.
In 2006, the government launched a continuum of initiatives that sought to strengthen efficiency in the French public sector, in particular the introduction of nationally and regionally grouped procurement strategies.161 As part of this strategy, in 2011 the government introduced the PHARE programme, in an attempt to achieve further efficiency gains in the hospital sector.162 It is estimated that procurement in the hospital sector amounts to an annual expenditure of €18B, of which around 60% is spent on medical goods and services.163 The PHARE programme set out to realise ‘smart savings’ by means of providing hospitals with greater flexibility within a financially constrained environment while improving the quality of care provided to patients.116 The overarching goal was to enable all the levers for effective procurement, including group purchasing or framework contracting, optimising products and services purchased and optimising procurement processes.116
The programme identified a hospitals’ savings potential of a total of €910M over the period 2012–14.162 This was to be achieved through the development of a purchasing function within institutions with a unique responsibility for procurement; the development of a regional procurement policy by the ARS; and the development of a national pilot project led by the Directorate General of Health Care Provision at the Ministry of Health [Direction générale de l’offre de soins (DGOS)].162
The programme is organised around six areas: (i) procurement performance, which seeks to mobilise all levers and build support through projects (project ARMEN; Box 3) and support for the development of regional markets; (ii) institutional support, including support for the leading 150 institutions in the development of their first shared procurement plans, and development and dissemination of dedicated tools (‘Kit ES’) and training opportunities; (iii) support for regional health agencies (ARS) as moderators and facilitators of strategic procurement at regional level, including for the development and dissemination of specific tools (‘Kit ARS’); (iv) communication including newsletters, websites and meetings of decision-makers; (v) leadership, including monitoring of progress of the programme and possible corrective action; and (vi) launch and management of high-impact cross-cutting projects such as streamlining the procurement process, procurement information systems and supply chain.162
The ARMEN project The ARMEN project is one of the major arms of the PHARE programme; it seeks to identify opportunities for savings in a range of purchasing domains. Bringing together 10 working groups from the hospital community (purchasers, pharmacists, (more...)
Group purchasing organisations as key players within the Performance Hospitalière pour des Achats Responsables programme
One of the aims of the PHARE programme was to demonstrate ‘quick wins’ in its efforts to strengthen procurement in the health-care sector.162 This was to be achieved, in part, through building on and bringing in the expertise of existing operators in the market, identified as the four large public, not-for-profit GPOs: UniHA, UNICANCER, Union des Groupements d’Achats Publics (UGAP) and Réseau des acheteurs hospitaliers d’Ile de France (Résah-idf). In brief, the French public sector procurement co-operative UniHA represents 56 hospitals across France, including 30 university hospitals; it represents half of all public hospital procurement in France.165 The UNICANCER group brings together the 20 French comprehensive cancer centres and their federation and pools their strategic activities: research, purchasing, human resources, hospital strategy, quality control and information systems.166 UGAP is the only general public procurement agency in France, which represents public sector organisations in different areas including health care.167
We here focus in on Résah-idf, which has been tasked by the Ministry of Health, as part of the PHARE programme, to support and co-ordinate the inter-regional network of health-care group purchasers (Alliance Groupements), bringing together over 100 groups, with an annual procurement volume of €8B.168
Réseau des acheteurs hospitaliers d’Ile de France
Réseau des acheteurs hospitaliers d’Ile de France was established in 2007 as a public, not-for-profit organisation which supports the purchasing activities of about 135 public and private not-for-profit hospitals and nursing homes in the Paris region.169 Funded by the Paris regional health authority (L’ARS Ile de France), Résah-idf covers around 42,000 beds and an annual procurement volume of €1.5B.
As noted above, Résah-idf has been tasked to co-ordinate the inter-regional network of group purchasers in the non-university hospital sector, the Alliance Groupements. The main objective of the Alliance is to help its members achieve efficiency gains on their purchases of a total of €215M during 2013 and 2014 in the areas of pharmaceuticals, medical devices, medical goods and supplies, alongside office supplies and consumables, food, waste and estate, among other things, while seeking to continuously improve the quality of care and staff working conditions.168 Résah-idf’s role is to support the alliance by means of sharing best practice and leading on the professionalisation of the procurement process (Fr KI). Operating in close collaboration with the regional health agencies as facilitators of strategic procurement at regional level, this has involved, for example, the organisation of two inter-regional conferences to enable networking and information exchange.170 Support further includes the development of tools, methods and procedures to enable efficient procurement through, for example, pricing models, benchmarking activities, the provision of training, etc.
Réseau des acheteurs hospitaliers d’Ile de France also co-ordinates the European Health Public Procurement Alliance (EHPPA), established in 2012,171 and co-ordinates the procurement special interest group at the International Hospital Federation172 in an attempt to promote the exchange of good practice and advancement of procurement practices through the provision of a framework for joint procurement policies and strategies, and to enhance and professionalise the non-profit health procurement sector in Europe more broadly.
Assessment of the Performance Hospitalière pour des Achats Responsables programme
Since the inception of the PHARE programme in 2011, reported progress has included an initial pilot phase that sought to demonstrate potential savings with one region and one facility as well as encouraging key actors to engage in the programme, and a subsequent expansion of the activities to cover a larger number of regions (at least 10) and facilities (20–30).162 Since June 2012 through 2014, the programme is being rolled out nationally, including an acceleration of exchange of best practices, support for the top 150 institutions in the implementation of their first shared procurement plans and promotion of the creation or consolidation of regional procurement policies. Given the ongoing roll-out of the programme, it is too early to assess its overall impact. Important achievements of the programme could be seen as having placed procurement as a strategic issue on the agenda, and its facilitation of the networking of actors within and across regions (Fr KI). Recent figures from the French Ministry of Health suggest that by mid-2013 savings of approximately €200M had been achieved within the PHARE programme.163
A key feature of the French approach to public procurement in the health sector is the emphasis on the region as a hub for group purchasing activities. The regional unit, with a procurement volume in the region of €1.2–1.5B, can be seen to provide potential for the demand side to take advantage of savings achieved through collective procurement while allowing sufficient scope for suppliers to engage in the process and guarantee contracts (Fr KI). Elsewhere, there has been concern that increasing centralisation of the procurement function, whether at regional or national level, may have a negative impact on the adoption of innovation in the health-care sector, with the possible exemption of ‘breakthroughs’, because of demand standardisation and reduction of market prices.150 Related concerns have been raised around the extent to which collective procurement may disadvantage small- and medium-sized enterprises (SMEs), for example in relation to large volumes or administrative requests under public tendering conditions.150 Empirical evidence regarding whether GPOs promote or hinder innovation is rare and conflicting. Burns and Lee (2008),148 based on a national survey of hospital purchasing groups in the USA, did not find evidence that GPOs exclude new innovative firms from the marketplace, while Hu and Schwartz (2011),149 using modelling techniques, concluded that GPOs reduce manufacturers’ incentives to introduce innovations to existing products. These two findings are not mutually exclusive, however, and highlight the need for further research to understand the impact of GPOs and collective procurement more generally on innovation.11
