Beth Loudon, Director of Market Access at the British In Vitro Diagnostic Association discusses the rollout of Value-Based Procurement (VBP) in the NHS.
The NHS is embarking on a significant shift in how medical technologies are evaluated and purchased. Through the rollout of Value-Based Procurement (VBP), the Department of Health and Social Care is encouraging the NHS to move beyond acquisition cost and consider broader measures of value, including patient outcomes, pathway efficiency, sustainability, resilience and whole-life cost. The ambition is clear: procure technologies that deliver the greatest value, not simply the lowest price.
For in vitro diagnostics (IVD) and pathology, this is a welcome development. BIVDA has long supported approaches that recognise the wider contribution diagnostics make to patient care and health system performance. However, for VBP to succeed in pathology, we need to address a more fundamental issue.
The pathology challenge
Pathology has historically occupied a somewhat unique position within the NHS
Despite informing the majority of clinical decisions and underpinning almost every patient pathway, pathology services have largely been commissioned through block contract arrangements. These funding models have focused on ensuring service provision and controlling costs, but they have done little to measure or reward the wider value pathology creates across the health system.
As a result, commissioners have generally had a clear understanding of what pathology costs, but much less visibility of what pathology delivers. The contribution of diagnostics to earlier diagnosis, reduced admissions, faster treatment, improved patient outcomes, elective recovery and system productivity has often remained invisible within commissioning frameworks. This has had important consequences for procurement behaviour
There is often an assumption that procurement teams simply need better tools or training to adopt VBP. While capability is important, the real issue is incentives.
Providers operate within the financial framework established by commissioners. If they are commissioned to deliver services within a fixed financial envelope, they will naturally focus on cost control.
In that environment, a diagnostic technology that costs more upfront but delivers benefits elsewhere in the system can be difficult to justify
While the laboratory pays for the test; the benefit may be realised through: reduced hospital admissions, earlier diagnosis, faster access to treatment, reduced length of stay, fewer outpatient appointments, or improved workforce productivity
The budget holder making the investment is rarely the budget holder seeing the financial benefit.
Why ICBs are central to VBP success
Integrated Care Boards (ICBs) are uniquely positioned to address this challenge. Unlike individual providers, ICBs have oversight across entire pathways and populations. They can consider how diagnostics contribute to wider system objectives rather than focusing solely on individual departmental budgets.
This allows them to ask fundamentally different questions:
- Does earlier diagnosis reduce downstream healthcare costs?
- Can improved testing reduce pressure on emergency departments?
- How can pathology support elective recovery?
- What contribution can diagnostics make to prevention?
- How can testing reduce health inequalities?
- Where can pathology improve productivity across the wider system?
These are commissioning decisions, not procurement decisions
If ICBs begin commissioning services around these outcomes, they create the financial incentives for providers to seek technologies that deliver them.
Value-based commissioning
The current VBP framework places significant emphasis on value domains such as efficiency, patient outcomes and whole-life benefits. This is entirely aligned with the role that diagnostics play within modern healthcare.
However, there remains a risk that procurement reform is expected to solve a commissioning problem. If providers continue to be measured primarily on activity and cost, procurement teams will remain incentivised to buy on cost.
If providers are commissioned and rewarded for delivering outcomes, pathway improvements and system productivity, procurement teams will seek solutions that maximise those outcomes.
An opportunity to reposition pathology
For pathology, this presents an important opportunity. For many years, pathology has been viewed primarily as a support service and cost centre. Yet the NHS increasingly depends on diagnostics to deliver earlier diagnosis, personalised medicine, prevention, operational productivity and sustainable healthcare delivery.
The introduction of VBP offers a mechanism for recognising this contribution, but only if commissioners actively measure and reward the value generated by pathology.
The real transformation will not occur when procurement teams start asking better questions. It will occur when commissioners start valuing pathology for the outcomes it enables across the healthcare system.
If ICBs commission pathology services for value, providers will procure diagnostics for value. Until then, the aspiration of Value-Based Procurement will remain more difficult to achieve than it needs to be.
Beth Loudon
Beth Loudon is Director of Market Access at the British In Vitro Diagnostic Association (BIVDA) – the national industry association for manufacturers and distributers of in vitro diagnostics. Previously she was the Medical and Surgical Consumables Director for NHS Supply Chain, leading the clinical and commercial team responsible for assurance of value and resilience for the supply of clinical goods to the NHS and was also Category Director for Pathology and Therapies for NHS Supply Chain during the COVID19 response. Beth has broad and deep experience across the NHS procurement and commercial landscape, gained over 25 years. www.bivda.org.uk