Taking control of practice expenses

Purchasing expert Mark Pugh answers questions posed by GP Dr Dustyn Saint and practice manager Nick Nurden on how practices can secure better deals from suppliers

The recently released GP contract provided little succour for practices struggling to make ends meet in the current cold financial climate.

The 0.5% increase to the overall value of GMS contract payments in 2011/12 is intended to take into account the increased cost of expenses, but is unlikely to make much difference with inflation now running at over 4%.

In this climate, practices are going to have to keep an iron grip on the practice expenses they can control – and one important area is to try and use their purchasing power to extract better deals from suppliers.

Having said this, there comes a point where the work involved and time taken to search out that last few pounds saved actually costs more than you can gain.

This article will look at how to balance the effort expended with the result desired to solve some common problems that practices face.

1. How can we keep up with who is the cheapest supplier? Are there any cost comparison websites like confused.com that we can use to maximise cost-effective buying?

While there are price comparison websites for commodities such as gas and electricity, a different approach is required when buying practice supplies.

Suppliers will always offer eye-catching headline prices for ‘key value items' such as couch roll, with the intention of securing your order. Try to avoid chasing one-off deals and look for the best offer for the basket of items.

Ask different suppliers for costs across a representative selection of products.

A similar ‘basket price comparison' approach is often used for comparing supermarkets.

2. We have been burned by setting up an account with a cheaper supplier, only to find a month later that someone else has an offer on. How can we strike the best deals in the long term?

Price is just one element of the deal: it is important to consider other factors – such as delivery time, order fulfilment rate, price stability and customer service.

Suppliers run offers to attract new business, but once won, prices can often increase if unchecked.

Ask your supplier to advise you of price increases, demanding suitable justification if necessary, rather than comparing competitors' prices each time you order.

Find a ‘preferred supplier' and ensure they offer you best value for money across the range of products that you order.

Suppliers will often offer pricing stability (for three months or longer) if practices are willing to commit to using them longer term.

3. How can we be assured of quality when ordering budget ‘me too' products? We have sometimes saved money, but regretted it.

It makes little sense buying budget items if they are unsuitable, and it is quite possible to make significant savings even when buying so-called ‘premium' brands.

Identifying common requirements around specific items, whether they are straightforward – such as nurses' uniforms – or more specialist items of clinical equipment, can secure significant savings.

A recent National Audit Office report on purchasing in NHS acute and foundation trusts identified that the range of products varied widely from trust to trust. For example, one trust bought 13 different types of examination glove while another purchased 177 types.

Within your own practice, agree common specifications across a range of consumable products that you use and negotiate the best prices for those items.

If you are worried about the quality of alternative items, ask the supplier for free samples and test them. Remember, the level of discount is irrelevant – it is the price that the practice pays that matters. A large discount offered against an over-inflated retail price is misleading.

For high-value items, it might be worth seeking three quotes and comparing them – but ensure comparisons are like for like.

4. How far in advance do we need to order to get a good deal on medical supplies? We try and have drugs on standing order, but need to manage our stocks to make sure we don't stockpile and have some drugs go out of date.

When placing an order, avoid holding more stock than you need. Doing so ties up the practice's money and can result in stock going out of date before it is ever used.

Most suppliers will offer volume-based discounts (the more you order, the larger the discount), which can tempt a practice to buy more supplies than it needs. But the same benefit can be achieved by collaborating with other practices where there are common requirements.

For example, if five practices have a similar requirement or are using the same supplier (for drugs or otherwise) then they can negotiate a price structure based on their aggregated order profile.

5. How can practices take account of the impact of delivery charges on the overall cost of orders? Should I refuse to pay them?

Delivery charges have a disproportionate impact on low-value invoices; for small orders they can represent as much as one-third of the total invoice cost.

Think about the supplier's position. If your order is large, the delivery charge can be offset against its profit margin and may even be waived.

Delivery charges, like many contractual terms and conditions, are negotiable. Co-ordinate your deliveries, perhaps by placing aggregated stationery orders weekly, and a supplier is more likely to avoid charging for delivery.

6. By chance, I stumbled on excellent prices for a franking machine and copiers when buying last year on behalf of a large NHS organisation. How can we get in on bulk purchasing deals?

There are several purchasing organisations, NHS and otherwise, which practices can use to access pre-negotiated contract arrangements for competitive prices.

Purchasing partner companies, such as Buying Solutions and Eastern Shires Purchasing Organisation, can use the aggregated buying volumes of their members to maximise the potential savings across a wide range of goods and services.

They are often used by local authorities, schools and other public-sector teams and their framework contracts can be used by GP practices.

These organisations require users to pre-register to access details of the framework agreements. This ensures that users are eligible to use the public-sector agreements (by checking for a nhs.net email address during registration). Once registered, users can scan the list of framework agreements.

Rather than being negotiated specifically for NHS users, the frameworks focus on commodities (such stationery, utilities, electrical testing and so on). This often yields a better deal. Practices will get the best deal and reduce time spent by collaborating and approaching these framework providers together.

Using these framework agreements saves time and allows practices to piggyback existing contract agreements. Moreover, practices have the reassurance that suppliers will have been through rigorous financial and capability assessments before being awarded contracts. Leave procurement to professionals, let someone else do the hard work for you and reap the benefits.

7. Is it worth joining an LMC buying group? Sometimes it seems more trouble than it is worth.

Experiences with LMC buying groups have been mixed, and there are other choices. If you are in a buying group, practices should challenge the size of supplier rebates taken by the buying group and question whether those could have resulted in cheaper prices for the practice.

However, try running your own ‘mini-tender' in collaboration with other practices.

The established purchasing organisations are probably the best source of impartial advice on which suppliers you should use. Short-list suppliers and take the purchasing organisation's framework contract and re-negotiate it to suit the group's individual needs, such as a greater range of products or different service levels. This will ensure you start with a wider range of reputable suppliers than your average LMC buying group, and can hopefully negotiate a better deal.

Mark Pugh is an associate at PracticeProfit. Mark can be reached at mark@practiceprofit.co.uk. With thanks to Dr Dustyn Saint and Nick Nurden for their help in compiling these questions