PHASE 6.2:

HOSPITAL PROCUREMENT

description

hos·pi·tal / pro·cure·ment

In Ontario, individual hospitals or buying groups have the autonomy to purchase a health product or implement a service from their own health care budget. A hospital budgets comprises three segments: 1) global budget, 2) health-based allocation model (HBAM), and 3) quality-based procedures. Every year, the MOHLTC releases fixed funding to the Local Health Integration Networks (LHIN) in Ontario. The LHINs are responsible for administering regional funding across all Ontario hospitals and have the autonomy to make strategic decisions to fund new products or programs. Individual hospitals or hospital buying groups also have the autonomy to purchase goods and services, including new, innovative health products. In this case, a health care product may undergo an intensive procurement process before it is purchased and adopted by a hospital or a group of hospitals in Ontario.

In Ontario, the Broader Public Sector (BPS) Procurement Directive mandates the legal parameters for procurement by setting requirements and standard processes to guide designated BPS organizations on how to provide goods and services to Ontarians. The BPS mandates that procurement must be fair, competitive and transparent. Depending on the cost of the items being procured, the rules guiding the procurement of goods and services for hospitals are often done via public Request for Proposal (RFP). The BPS Directive may however impede collaborative procurement as there are limited opportunities for innovators and clinicians to work together to develop new, or to enhance existing medical technologies. 

Procurement notices are often posted through tendering portals, including:

  • Biddingo

  • Ontario Tenders Portal (OTP)

  • Ontario Tech Opportunties Platform (OTOP)

Buying Groups:
In Canada, there are two types of hospital buying groups: 1) Shared Service Organizations (SSOs) at the provincial level, and 2) Group Purchasing Organizations (GPOs) at the national level. These groups follow standardized procurement policies and processes that aim to increase efficiency, financial control, quality and value for money.

  1. SSOs: Ontario-specific not-for-profit corporations providing integrated supply chain management services to member and customer hospitals regionally. 

  2. GPOs: Non-for-profit national strategic sourcing organizations working on behalf of hundreds of healthcare organizations across Canada

Both SSOs and GPOs manage and reduce supply costs by leveraging better pricing from suppliers through aggregated volume purchasing.

Individual hospitals or long-term care home facilities may only need to acquire a single product or service as a one-time purchase or special need. In this case, a hospital can independently initiate a Request for Quote (RFQ) or RFP based on the hospital need.

Procurement Methods:
In Ontario, the most common procurement method used by purchasers is to procure goods and services with the cheapest upfront cost. While this method offers immediate savings for a purchaser, there are often long-term costs associated with the maintenance of these products and services. This method is not financially sustainable and impedes the introduction of innovative health products into the health care system.

To create a shift in culture towards the adoption of value-based procurement, policy makers in Ontario have introduced two alternate procurement methods: 1) bundled payments (BP) and 2) value-based procurement (VBP):

  1. Bundled Payments: Bundled payments are an alternative procurement methodology designed to move toward value-based care. BP functions as follows: a single payment is provided to cover the complete spectrum of needs of an individual’s care for a specific health issue.  The bundled care approach integrates efficient care and complete health care delivery while providing the patient with high-quality care that improves their outcomes at overall lower costs.

  2. Value-Based Procurement (VBP): VBP is an alternative procurement method that can be used under the BPS directive. VBP is designed to facilitate investment decisions based on the overall value of goods and services to the organization and/or health system, rather than focusing narrowly the specific costs associated with an individual product or service. Innovative procurement practices are becoming increasingly tailored towards VBP.


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innovator's checklist

  • Determine the evidence requirements for this payer.

  • Determine the funding mechanism of the payer (e.g., global budget, health-based allocation model (HBAM), quality-based procedures)

  • Understand the pricing and procurement practices for this payer (individual hospital or SSO/GPO).

  • Verify that the product fits within an existing procurement goal.

  • Identify possible strategic business relationships for the commercialization of the product.

  • Identify competitors to build a strategic business case.

  • Determine the costs to procure the product against its value.

  • Consider alternative payers in addition to hospital procurement.

 

 

Last update: 2018-Nov-26

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