The health sector in the UK is facing significant pressure to meet budgets and contain escalating costs. Doncaster and Bassetlaw Teaching Hospitals NHS Foundation Trust (DBTH) have identified historical and future cost saving opportunities through advanced contract management.
Outcomes:
- Three contracts analysed: Addressable spend of approximately £10 million per annum.
- Significant savings identified: Up to 10% cost-saving opportunities through improved commercial management.
- Cash recovery: Plans in motion to reclaim approximately £1 million in historic cash leakages.
- Future-proofing savings: Actions being considered to lock in future cost savings/avoidance of up to £900,000.
Contract management resources are scarce
DBTH, like many NHSTrusts, have faced a significant resourcing challenge exacerbated by Covid-19. Contract management and commercial skills in the sector were already incredibly stretched. Adding to this, general business challenges such as personnel changes, complex or limited data sources and enhanced reliance on third party relationships only heighten the leakage risks. Efforts by procurement to negotiate strong contracts from the beginning cannot prevent leakages from occurring during the contract lifecycle. Without strong contract management and detailed invoice reconciliation, issues often compound over time impacting not only the bottom line, but patient care and service delivery as well.
“The challenges of recent years stretched our resources and impacted our contract management efficiency,” said Richard Somerset, Head of Procurement at DBTH. “KPMG’s unique approach, blending commercial expertise with cutting-edge technology, was pivotal in identifying a addressing contract value leakage. Their capability to analyze complex data and uncover discrepancies was impressive.”
Harnessing the power of technology to find value
The most appropriate approach for analysing each contract was determined, incorporating a blend of traditional contract reviews and technology-led methods, including KPMG’s Cognitive Contract Management (CCM) platform – a smart, AI-enabled tool designed to support reviews at scale, thereby enhancing speed and accuracy, and enabling the testing of levers that would be impractical to test manually.
Bringing this to life, the review of one of the supplier contracts involved reviewing six years’ worth of invoices totalling approximately 1,300 pdf documents. CCM ingested and ‘read’ these documents, structuring data such as rates, quantities and descriptions into a useable format. CCM analysed this data for trends and tested the charges against contractual rate cards and other source documents, using coded tests developed by KPMG to calculate discrepancies between actual charges and agreed rates.
The final report provided to the Trust was user-friendly, including detailed transactional data and a high-level summary of commercial opportunities and recommended actions. This empowers DBTH to engage in effective settlement discussions and secure significant financial recoveries and future savings.
Rachel Flowerday, Director - CCM IGH Product Lead, KPMG concluded: “in-life contract and commercial management is not a new topic but is often difficult to get right. The impact arising from limited capacity in this area is becoming increasingly important given the cost pressures faced by our clients. We can provide a range of solutions to these problems. This may include using our CCM technology to unlock value at scale to obtain cash recoveries and savings but can also include practical toolkits and strategic advice to support clients in getting the value they need from their contracts."
