THE HEALTH Service Executive (HSE) is in talks with key suppliers about reductions of up to 30 per cent as it seeks to cut at least €170 million from the cost of the goods and services it buys.
The Government is likely to cut €1 billion from the HSE’s overall budget in 2011, but as it cannot reduce pay under the terms of the Croke Park deal with the public service unions, it will have to seek savings elsewhere.
Its head of support services, Brian Gilroy, confirmed at the weekend that the HSE intends making significant cuts in its €2.4 billion budget for procurement, that is the goods and services it buys from largely private sector suppliers, as part of this process.
The HSE, which is responsible for running the Republic’s public health service, is beginning talks with suppliers, such as energy companies and utilities and medical and surgical equipment providers, this week to establish what savings it can make.
According to Mr Gilroy, it intends cutting €170 million in payments to suppliers alone over the course of next year. He added that as some of these savings would not apply for the full 12 months of 2011, that figure should translate into €200 million from 2012.
The HSE will initially talk to the 30 to 50 suppliers with which is spends the largest sums of money, and will move on to the group below that when the process is finished.
“We’ll be looking at ways of reducing our spend with each of them by 15, 20 or possibly 30 per cent,” Mr Gilroy said.
He added that the talks would look at all possible means of making savings, such as the cost of the products and services themselves, and other factors, such as the methods of supply and delivery.
The HSE is also going to examine the cost of services supplied by the voluntary hospitals. This cost is included in the overall €2.4 billion budget, but a significant element of that cannot be cut as it includes staff pay.
As a result, the overall €170 million saving will have to come from a headline figure of about €700 million.
Mr Gilroy warned that where it believes suppliers are engaged in anti-competitive practices, such as abuse of a dominant position or a monopoly, the HSE will refer these cases to the Competition Authority, which has the power to investigate and prosecute such offences.
The HSE has several thousand suppliers, the majority of which are private-sector businesses, from which it buys supplies such as medicines, food, surgical equipment and energy.
However, a government deal, struck with the unions when the HSE took over from 11 local health boards in 2004, prevented it from centralising its procurement until June of this year. This necessitated negotiating a new agreement with staff.
This meant the HSE lost out on potential savings that it could have achieved by negotiating deals with suppliers for the health service as a whole. It also created a situation where it was paying different prices for the same products and services in different parts of the country. This left the HSE with different financial control and purchasing systems across the service as a whole. It recently sought tenders for a single system.
