The NHS has been dealing with funding challenges for more than a decade now, and experts predict more funding crises will continue and get worse over the foreseeable future. A 2020 report by the BBC reveals that we spent more than £156 billion on the NHS in 2019 – approximately 12 times more than we spent 70 years ago. Notably, healthcare costs are rising, increasing the size of the NHS budget, with an average increase of 1.4% per year from 2009 to 2019.

In this article, we will discuss how NHS organisations’ inefficiency when tracking procedure-level and patient-level costing makes NHS trusts incur avoidable financial losses. We will also propose an efficient and practical solution: utilising inventory management to track and manage costs.

Many NHS organisations don’t understand procedure-level costing

Unfortunately, many NHS organisations don’t know how much they spend on delivering healthcare procedures such as surgery. Some organisations unnecessarily spend more on a procedure than others because of adopting inefficient policies and practices or using inefficient healthcare equipment.

NHS organisations’ inefficiency when tracking and determining procedure delivery costs results in avoidable financial losses for their respective trusts. NHS trusts pay a fixed tariff for every procedure delivered. However, the inability to track costs means that trusts could be losing money on every procedure, adding to the cost pressure and funding crises.

How can implementing inventory management help?

Fortunately, NHS trusts can help ease the growing cost pressures and financial crises affecting the NHS by monitoring and managing procedure-level costing. Proper inventory management is one of the best ways to do this, as it can give NHS organisations valuable insights into the following factors:

Procedures’ tariff-to-Cost ratios

The tariff-to-cost ratio refers to a comparison of the tariff paid and the cost incurred for each procedure. Proper inventory management can provide valuable insights into which procedures cost less to deliver than the tariff paid, enabling NHS trusts to capitalise on them.

Costly procedures

Some procedures cause unavoidable cost pressures, essentially making cost-control solutions useless. Fortunately, proper inventory management can also help NHS organisations identify procedures that are simply a cost pressure and manage them accordingly, such as allocating more tariffs or reducing the number of procedure deliveries.

The impact of different medical equipment on procedure delivery costs

Surgeons and other healthcare professionals can choose to use varying interchangeable medical equipment and items to conduct their procedures. Variations in the type of equipment and items used can mean that some surgeons spend more on procedure delivery than others, essentially causing cost pressures. Fortunately, there is a simple solution to this problem: providing healthcare professionals with cost-efficient medical equipment and items.

Facilitating constructive discussions around procurement and product rationalisation can help convert cost pressures into cost benefits. Product rationalisation entails identifying and eliminating items that negatively impact the organisation’s strategic goals, such as reducing costs and losses.

The goal is to identify cost-effective items and make them available to healthcare professionals. Besides making cost-efficient items and equipment available, NHS organisations should also recommend that healthcare professionals use them instead of cost-inefficient alternatives, reducing cost pressures and increasing cost benefits.

Time spent on procedures

Ideally, NHS healthcare facilities should attend to patients within four hours of arrival. Unfortunately, the summer of 2015 is the last time that the NHS in England met this target – many patients wait considerably longer than four hours to get seen in most NHS hospitals, adding to the organisation’s inefficiencies and cost pressures.

Proper inventory tracking can enable NHS organisations to measure the amount of time spent on delivering different procedure types. It can also enable reviews on why some surgeons spend more time on procedure delivery than others.

NHS organisations can then use these insights to facilitate the sharing of knowledge of time-efficient practices between surgeons, reducing procedure-delivery times for all surgeons and procedure types. Ultimately, this can help reduce patient waiting times to reduce cost pressures and improve throughput rates to create more cost benefits.

Resource allocation

As explained, proper inventory management can help NHS organisations determine different procedure types’ tariff-to-cost ratios. The organisations can then use these insights to make informed decisions on how and where to allocate resources for larger positive cost impacts. A more prudent resource allocation plan can enable organisations to reduce waiting times while reducing the potential burden of costs over budget sizes.

Proper inventory management can help NHS organisations reduce cost pressures and increase cost benefits for procedure deliveries. The Scan4Safety program is based on GS1 standards and can help improve inventory management and supply chain management.


  • Chris Norman

    Chris is VP of Healthcare of spend management specialist Elcom. He has over 20 years’ experience supporting the healthcare sector to secure greater savings by improving supply chain performance.

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