Healthcare Procurement in Ontario:the Evolving Landscape

UpOnDIGITALMarch 26, 2018

Healthcare Procurement

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What is a Supply Chain?

• The sequence of events and processes that connect customers and suppliers

• The right materials to the right people at the right time at the right price

• An intricate and cross functional undertaking

• An integral and strategic part of all healthcare organizations, enabling the delivery of quality patient care

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Goo

ds &

Equ

ipm

ent • Light Bulbs

• Syringes• Saline Solution• Drugs• Computers• Surgical Staplers• Shelves• ICU Carts• Surgical Robots• MRIs and CTs

Serv

ices • Loaner surgical sets

• MRI Maintenance & Repair

• Fire safety audits• Snow removal• IT• Legal• Audit

Cons

truct

ion/

Facil

ities

Man

agem

ent • Parking garages

• Painting• Boiler services• Architecture Firms• Engineering Firms• General Contractors• Trades• Plumbers

Healthcare Procurement Culture

Relationship based

Hierarchical

Risk averse

Slow to change

Dichotomy between those who• engage in R&D and drive change• embrace product/process familiarity

Major influencers are physicians/surgeons• Focus on patient outcomes• Require evidence based information

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Evolution of Healthcare Procurement: then

• Driven by local physician/surgeon demand and preferences, with long established relationships in place

• Buyers were order takers who had typically only worked in healthcare

• Processes were not always well defined and procurement was driven by relationships or price

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Evolution of Healthcare Procurement: evolution

• Aggregation of volume and standardization of products/processes maximizing value for public money– most provinces have moved to a single supply chain/procurement organization– Ontario has regional aggregation through eight shared services organizations– three national Group Purchasing Organizations

• Strategic Sourcing specialists– enhanced skills for increasingly complex procurements

• Growing emphasis on value based procurement– increasing interest in innovation

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Landscape: SSOs and GPOs Supporting Ontario

Evolution of Healthcare Procurement: vision

• Increased emphasis on systemic value– total cost of ownership across the healthcare system– Ontario Integrated Funding Models – Ontario SSO member/customer base expands to encompass the

continuum of care

• Recognition of Innovation Procurement as a strategic and innovative approach to procurement focused on – patient outcomes– increasing efficiency to the system– achieving value for money

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Procurement is a Strategic Enabler

• Over 5 million hits for “strategic enabler” on the internet• Common references:– Deliver value– Enhance customer satisfaction– Increase efficiencies– Mitigate risk (continuity of supply and compliance)– Maximize savings and benefits

– Accelerate innovation

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Value Based Procurement

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Value Based Healthcare

• Value-based healthcare is a framework for achieving better outcomes that matter to patients, optimizing the cost of care delivery to the health system

• Formulae developed by Professor Michael Porter and others define value as the outcomes that matter to patients divided by the cost to deliver this care– the product/service that performs best, providing the highest measurable quality outcome relative to

need at the lowest cost, is the product/service offering the highest relative value

• Optimizing value means– identifying the alternative with the most cost effective or highest achievable performance under

given constraints, by maximizing desired factors and minimizing undesired ones– maximizing the desired factors as a collective versus maximizing one individual factor like purchase

price: each desired factor may not be maximized if taken individually, but all desired factors are optimized when considered holistically, hence deriving maximum value

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Evolution to Value Based Procurement

• Good procurement practices ensure publicly funded goods and services are acquired in a fair, open and transparent manner– Public procurement in Canada must align with relevant trade agreements such as the

Canadian Free Trade Agreement (CFTA) and CETA• Increasing awareness of need to achieve value for money, yet perception persists that

current procurement processes are price driven, not value based• Most traditional RFP processes are structured to focus on value, with a high scoring

component for clinical requirements, based on known specifications– In reality, differential on rated criteria can be narrow, so price determines the outcome

• Conference Board of Canada defines value based procurement as a process that creates healthcare value by, among others, placing emphasis on overall system value

• Leveraging learnings from other jurisdictions, processes are beginning to evolve:– Innovation as an enabler– Outcome based specifications– Value based evaluation criteria

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Value Based Procurement in Ontario

• Value for Money is a foundational principle of the Ontario BPS Procurement Directive– “organizations must maximize the value they receive from the use of public funds”– this means optimizing value for a given set of circumstances, not focusing on price alone

• Ontario Health Innovation Council (OHIC) was established in 2013 to– accelerate the adoption of new technologies in our health care system– support the growth and competitiveness of Ontario’s health technology sector

• OHIC report, the Catalyst (December, 2014), made 6 recommendations: – Establish an Office of the Chief Health Innovation Strategist

– Appoint Innovation Brokers to Connect Innovators with Resources

– Invest in Made-in-Ontario Technologies

– Accelerate the Shift to Strategic, Value-Based Procurement

– Create Incentives and Remove Barriers to Innovation

– Optimize the Pathways to Adoption and Diffusion of Innovation

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Innovation Procurement in Ontario

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What is Innovation Procurement?

• MGCS: BPS Primer on Innovation Procurement (Interim) defines it as:– “the purchase of solutions that do not exist in the market, or need to be

adapted or improved to meet specified needs and create value for users and the procuring organization”

• When the potential exists for varied and various solutions to a stated problem, traditional specifications are typically inadequate

• Thus the procuring organization must focus on the value the solution can bring, based on the desired outcomes

• This requires new methodologies and approaches to procurement, and the development of new competencies to manage the complexity

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Why Encourage Innovation Procurement?

• Best fit-for-purpose solutions

• Reductions in wait times

• Better diagnosis

• Higher levels of end user satisfaction

• Potential total cost of ownership reduction

• Access to public sector clients

• Opportunity to apply research, testing and commercialize ideas

• Support for small and medium-sized enterprises

• Opportunity to develop new markets

• Improvements in patient outcomes and quality of life

Healthcare Sector Supplier

Society

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Barriers to Innovation

• Healthcare leaders focus on short-term cost savings rather than total cost of use

• Procurement organizations are resource constrained and innovation procurement initiatives are typically resource intensive and lengthy

• There is significant variation in how new technologies/solutions are introduced to healthcare organizations in Canada– Suppliers and end users are unclear on when, how and to whom to present new ideas

• In Ontario, the BPS Procurement Directive may be perceived to inadvertently hamper the procurement of innovative products due to inconsistent interpretation

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Innovation Procurement in Ontario: Supporting Tools

• MGCS: BPS Primer on Innovation Procurement (interim)– Assist Broader Public Sector in “planning, designing and implementing innovation procurement”– 7 early market engagement strategies– 6 innovation procurement models

• “Pilot in a Box”– Tools to help innovators plan, manage and strategize based on their current needs, including

• Converting Knowledge to Action• Achieving Spread & Scale

• HSCN: Innovation Procurement Toolkit– Tools and templates to help health service providers manage innovation procurement initiatives– Early market engagement strategies and innovation procurement models based on those

published in the BPS Primer on Innovation Procurement – Gearing up for training in early summer 2018– For more information visit www.hscn.org

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Innovation Procurement in Ontario: Activities

• There are an increasing number of initiatives underway facilitating the adoption of innovative solutions through innovation procurement.

• “Pilot” innovation procurement initiatives include:– Southlake Regional Health Centre: cardiac program– Waterloo Wellington LHIN: System Coordinated Access

• Innovation initiatives currently underway:– REACH (Resources for Evaluating, Adopting and Capitalizing on Innovative Healthcare

Technology): second round announced– HTF (Health Technologies Fund): third round announced– MaRS Procurement by Co-Design: second cohort underway– OCHIS Value Based Innovation Program

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Innovation Procurement Workflows

Pilot projectHSP assesses merit Innovator presents concept

Outcome Based Specifications: emphasis on value

Total Cost of Ownership: emphasis on systemic value

Early Market Engagement: learn about market capabilities to inform strategy

Procures InnovationAssesses and engages marketProvider identifies need

Internally Driven

Externally Driven

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Discussion

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