Finance Professionals: the Key to Value-Based Procurement adoption in Healthcare

A joint article with Rob Bull, former Chief Financial Officer at Southlake Health in Canada, on why finance professionals are central to unlocking Value-Based Procurement in healthcare. The article sets out four practical challenges facing healthcare finance teams and offers a F-A-S-T framework for making Value-Based Procurement stick. Now published and available to download.

Introduction

Traditional approaches to healthcare procurement, often heavily weighted towards upfront price, are 

increasingly seen as insufficient to address rising demand, workforce pressures and long-term sustainability 

challenges. Many health systems are facing growing pressure to improve outcomes while managing rising 

costs and constrained resources.

Value-Based Procurement (VBP) broadens procurement decision-making beyond unit cost and product 

specifications to consider outcomes across care pathways. The approach emphasises engagment with clinical 

teams and patients to identify challenges in treatment pathways, what needs to change and by how much to 

make a difference. It typically sees healthcare systems engage collaboratively with industry, both Medtech 

and Pharma, to identify and create solutions to meet these needs. Benefits created can include reduced 

costs, improved levels of efficiency, enhanced patient and provider experience, and reduced carbon 

emissions.

From experience of developing and promoting the adoption of VBP as a stepping stone to value-based 

healthcare, it is evident that one of the primary challenges to its adoption has been gaining support and 

recognition from the Healthcare Finance Community.

In this article we share the views of the challenges and opportunities for greater VBP integration with 

finance and conclude with recommendations to act F-A-S-T.

Challenge #1 — What is "Value"?

There have been numerous articles that have cited this challenge, as it's evident that there is a different 

interpretation of ‘value’ from the different functions within healthcare and in Medtech and Pharma 

suppliers.

The pursuit of ‘value’ in healthcare is often championed by clinicians and associated with the delivery of 

improved patient outcomes. The reality of delivering healthcare in the 21st century is that there are limited 

financial resources, making affordability a key consideration in the delivery of sustainable healthcare. 

Therefore, it is essential for outcomes to be articulated in a way that clearly quantifies the economic benefits 

created and how VBP’s impact on the total patient pathway will be measured and monitored.

Opportunity #1 — Creation of standardised metrics

In 2023 the NHS aimed to address this challenge by developing a value and savings methodology. This was 

achieved with the support and input of Senior Finance leaders from NICE and the NHS.

The purpose of the document is to help create a common understanding of how value can be recognised in 

financial terms. The document defines a series of common value/efficiency metrics and applies an associated 

proxy cost to each area. This form of approach is something that could be considered and built upon by 

other health systems.

Challenge #2 — Silo working

At a macro level, finance and funding structures (in public healthcare systems in particular) operate in siloes. 

This can cause significant barriers for hospital budget holders and organisational finance leaders to assess 

value-based solutions where costs are incurred in one part of the pathway, but benefits accrue elsewhere; in 

other words, "Who pays — Who saves?" Literature shows  that this misalignment of incentives across 

stakeholders is a significant barrier to implementation, despite the potential for reductions in whole-life 

costs of care. 

Opportunity #2 — Integrated care and bundled payments

Many countries are looking towards the adoption of Integrated Care Systems (ICSs), which aim to embed 

system-wide health economic perspectives into financial flows. However, for those providers and payers not 

yet transitioning toward an ICS, there are opportunities and indeed a necessity to look at ways to collaborate 

across local commissioners, primary and secondary care providers. This could be achieved with the support 

of senior organisational leaders agreeing to create some form of mutually beneficial gain share agreement, 

where if one party incurs cost the benefiting party will share the upside gains.

Another option is to agree some form of bundled payment model with national or local commissioners. 

Instead of being paid for each individual service (imaging, a surgical procedure, or home care), the providers 

receive a lump sum that can be distributed according to the care needs of the particular patient. This 

bundled payment promotes greater integration and coordination of care to reduce costs while maintaining 

quality, thereby incentivising providers to work together to deliver better outcomes.

Challenge #3 — Light green $ v dark green $

Many value-based solutions will result in improved efficiency and improved healing rates, generating a 

reduction in the time patients spend in hospital (reduction in length of stay) and overall lower treatment 

costs of care.

However, experience has shown that many healthcare finance professionals are unconvinced that this 

represents a financial benefit to the hospital as the bed is still there and being staffed. Indeed in a physical 

sense the bed has not been removed, nor the ward in which it sits; however through more efficient process 

this would mean that there is less time spent per patient in the bed. Together, this makes it possible to 

improve patient flow, reduce waiting times in emergency departments, and treat more elective patients 

without the need to invest in additional capacity. This improved productivity gain will reduce the total costs 

of treatment for a healthcare provider and enable them to undertake more procedures within their 

allocated budget.

Where public owned health systems are using the private sector to reduce waiting lists, a VBP approach 

could reduce the level of that expenditure.

In respect of removing barriers between finance and procurement functions, the recommendation is for a 

programme of interdepartmental knowledge sharing be undertaken, with finance professionals encouraged 

to play an active role in creation of value based tendering and evaluation methodologies.

Opportunity #3 — Clearly articulate the benefits

Value-based proposals should highlight clearly the level of capacity released and its impact on the potential 

to centralise resources. This can help create opportunities for economies of scale and reduction in front line 

service costs.

Studies show that returning patients home quickly can reduce their likelihood of acquiring infections, 

improve their rate of recovery, and increase their satisfaction.

Challenge #4 — Relationships with industry

Adversarial relationships between buyers and suppliers are still largely prevalent across health systems, 

alongside a degree of scepticism about industry motivations.Value-based proposals are often viewed less as 

genuine attempts to improve patient care and more as a justification for premium pricing.

While Chief Financial Officer (CFO) at Southlake Health, Rob Bull and his team sought to dispel this notion 

and engaged in innovative procurement project aligned to the principles of value leading to reductions in 

cost, reduced wait times, and increased bed capacity. Value Based Procurement Improves the Patient Experience

Opportunity #4 — Assurance agreements

Acknowledging that value-based solutions require input and commitment from both buyers and suppliers to 

ensure the delivery of the project objectives, the recommendation is for the creation of value-based

assurance agreements as part of the supply contract that can act as guard rails for the duration of the 

contract. Within the assurance agreement is a requirement to set out clear roles and responsibilities for 

delivery, measures and targets and embed remedies for underperformance and incentives for exceeding 

delivery expectations. 

Challenge #5 — Leadership

Pursuit of value in healthcare requires change at a system level, within both healthcare providers and 

industry, to align policy, processes and people. In terms of the adoption of value, leadership my need to take 

the form of both organisational and political commitment at the highest level to transition from short-term, 

localised financial accountability to one that recognises and measures the reduction in the costs of 

population healthcare provision.

Opportunity #5 — Evidence

Organisations at a local, regional or national level should pursue programmes of activity to establish a 

portfolio of use cases that can demonstrate how a value-based approach to procurement can work and give 

system and government leaders the inspiration and confidence to provide support for the adoption.

Summary — Act F-A-S-T

F - Finance leaders’ support is critical to creating mechanisms for the delivery of improved patient outcomes 

and sustainable healthcare provision. Engage with government Health and Finance Ministers, Hospital CFOs

and finance representative groups to demonstrate the benefits of the adoption of a value-based approach to 

procurement.

A - Assurance agreements are an effective tool for overcoming traditional adversarial buyer/supplier 

relationships. They act as a mechanism to reduce the perceived financial and operational risk of working 

with industry to embed new ways of working resulting from value-based initiatives. They instil confidence in 

healthcare providers that supply partners are committed to working in collaboration to create value for the 

healthcare system.

S — System thinking is critical to delivery of value in healthcare. Engage across your health system, align 

agreements to promote whole health economy benefits and provide economic incentives for participation

T — Tangible benefits must be evidenced if a value-based approach to healthcare and procurement is going 

to be adopted. For healthcare providers, identify your top three most problematic treatment pathways, 

determine what needs to change and by how much. Engage with industry, measure the results and 

communicate success.

Conclusion

The pursuit of value in healthcare is a passion shared by both authors of this article. We see that healthcare 

is facing unpredicted challenges and are encouraged to see the growing momentum across global health 

systems in transitioning to value-based solutions as a means of providing effective, affordable and highquality patient care. We hope our thoughts will stimulate discussion and offer some pragmatic steps you can 

use on your value journey.

Brian Mangan — Founder, Luach Consulting Group

Rob Bull — Executive Vice President and Chief Financial Officer, Sinai Health