Finance and Healthcare Purchasing
Lecture 1 – Purchasing and Supply Management (PSM) (14/11)
There is a difference between purchasing OF healthcare and purchasing FOR healthcare
Which health services do municipalities buy?
• Home care
• GGZ
• Social work
• Youth health / Elderly care
• Vaccination campaign
• Physiotherapy
How much % of their total budget do municipalities spend on healthcare? >40%
Why healthcare purchasing matters
Apart from drugs and PPE (personal protective equipment), what do you think a hospitals buys?
Software, cleaning companies, technology, services for laundry activities, office supplies (furniture,
screens, etc.).
→ Not staff: these are HR related costs.
Purchasing is everything the hospital is actually buying.
,Why purchasing matters: scale of spend
Why public procurement is important?
• Every year, over 250,000 public authorities in the EU spend around 14% of GDP (around €2
trillion per year) on the purchase of services, works and supplies.
• The public sector can use procurement to boost jobs, growth and investment and to create
an economy that is more innovative, resource and energy efficient, and socially inclusive.
• Impact the supply market through the promotion of innovation
Gross Domestic product (GDP) is the standard measure of the value added created through the
production of goods and services in a country during a certain period. As such, it also measures the
income earned from that production or the total amount spent on final goods and services (less
imports).
Projected public expenditure on healthcare as a share of GDP in the Netherlands: 6.2% in 2016 rising
to 7% by 2050.
Global spending on medicine is increasing.
Medicines is the highest expenditure in the Netherlands.
Why purchasing matters: scale of suppliers
What a hospital spends
• University Hospitals Coventry and Warwickshire NHS Trust 2020-21 Annual report
• Income from patient care:
o £698,287,000 = 823.274.290 Euro (1.18)
• Expenses
o Purchase of healthcare £7,901,000
o Staff and directors £458,385, 000
o Premises and transport £31,921,000
o Supplies and services (clinical exc drugs) £84,751,000
o Supplies and service (general) £10,537,000
o Drug costs £63,268,000
Rising spend
,Operating income 2020: 788.000.000
The purchasing volume as part of turnover can be very high
Spend volume as percentages of total turnover
Definitions and scope of HC purchasing
What is sourcing / purchasing / procurement?
• Selective) contracting providers by insurers
• Tendering medical equipment
• Wisely spending tax payer’s money
• Negotiations between insurers and providers
• Saving costs
• Outsourcing/insourcing
• Hiring advisors, temporary labor
• Purchasing elderly care by municipalities
→ It is not just purchasing department or a purchasing/procurement officer. It involves everything
you get an invoice for.
, Each step involves specific activities, which are to be performed
What does the purchasing process imply?
Sourcing is mainly focused on the tactical aspects of procurement, yet we will also cover a few issues
of procurement as well
Terminology
At the beginning of the procurement process, most costs can be saved
Lecture 1 – Purchasing and Supply Management (PSM) (14/11)
There is a difference between purchasing OF healthcare and purchasing FOR healthcare
Which health services do municipalities buy?
• Home care
• GGZ
• Social work
• Youth health / Elderly care
• Vaccination campaign
• Physiotherapy
How much % of their total budget do municipalities spend on healthcare? >40%
Why healthcare purchasing matters
Apart from drugs and PPE (personal protective equipment), what do you think a hospitals buys?
Software, cleaning companies, technology, services for laundry activities, office supplies (furniture,
screens, etc.).
→ Not staff: these are HR related costs.
Purchasing is everything the hospital is actually buying.
,Why purchasing matters: scale of spend
Why public procurement is important?
• Every year, over 250,000 public authorities in the EU spend around 14% of GDP (around €2
trillion per year) on the purchase of services, works and supplies.
• The public sector can use procurement to boost jobs, growth and investment and to create
an economy that is more innovative, resource and energy efficient, and socially inclusive.
• Impact the supply market through the promotion of innovation
Gross Domestic product (GDP) is the standard measure of the value added created through the
production of goods and services in a country during a certain period. As such, it also measures the
income earned from that production or the total amount spent on final goods and services (less
imports).
Projected public expenditure on healthcare as a share of GDP in the Netherlands: 6.2% in 2016 rising
to 7% by 2050.
Global spending on medicine is increasing.
Medicines is the highest expenditure in the Netherlands.
Why purchasing matters: scale of suppliers
What a hospital spends
• University Hospitals Coventry and Warwickshire NHS Trust 2020-21 Annual report
• Income from patient care:
o £698,287,000 = 823.274.290 Euro (1.18)
• Expenses
o Purchase of healthcare £7,901,000
o Staff and directors £458,385, 000
o Premises and transport £31,921,000
o Supplies and services (clinical exc drugs) £84,751,000
o Supplies and service (general) £10,537,000
o Drug costs £63,268,000
Rising spend
,Operating income 2020: 788.000.000
The purchasing volume as part of turnover can be very high
Spend volume as percentages of total turnover
Definitions and scope of HC purchasing
What is sourcing / purchasing / procurement?
• Selective) contracting providers by insurers
• Tendering medical equipment
• Wisely spending tax payer’s money
• Negotiations between insurers and providers
• Saving costs
• Outsourcing/insourcing
• Hiring advisors, temporary labor
• Purchasing elderly care by municipalities
→ It is not just purchasing department or a purchasing/procurement officer. It involves everything
you get an invoice for.
, Each step involves specific activities, which are to be performed
What does the purchasing process imply?
Sourcing is mainly focused on the tactical aspects of procurement, yet we will also cover a few issues
of procurement as well
Terminology
At the beginning of the procurement process, most costs can be saved
