A Peak into the Procurement Process of Healthcare in New Zealand: Shared services and National contracts

The New Zealand healthcare system was originally an essentially public healthcare system, however, in the past three years, the healthcare organization has undergone reforms and market regulations that have transformed it into a mixed public-private healthcare system.

New Zealand is regionally divided into twenty Districts, all of which have a designated District Health Board (DHB). Working closely with the DHBs to support their processes and to handle their procurement needs, is the New Zealand healthAlliance.

HealthAlliance is a not-for-profit joint venture originally founded in 2000 by the New Zealand Waitemata DHB and Counties Manukau to facilitate non-clinical business services for the aforementioned DHBs. It was joined by Northland and Auckland DHBs in 2011. As of July 2014, healthAlliance started to provide procurement services nationwide to all twenty DHBs. Currently healthAlliance covers 38 percent of the population; a complete national coverage is expected to be due in the next three to five years.

In 2014, approximately two to five percent of the total healthcare expenditure was spent on medical devices. The government’s purchasing strategy will continue to push cost containment, whilst continuing to seek the best possible quality and shared procurement services opportunities.

There is a national trend across the New Zealand healthcare sector towards harmonizing reporting systems and sharing services in order to make procurement processes, product evaluation, supplier selection and the monitoring of product efficacy smoother.

DHBs, who are the regional administrators, funders and providers of primary to tertiary healthcare services, have relative autonomy to devise the procurement of medical devices as they wish; however, the government strongly encourages them to use shared services procurement agents in order to improve efficiency and prices.

PHARMAC (the government agency that lists publically reimbursed pharmaceuticals), healthAlliance and Health Benefits Limited are organizations directly involved and responsible for procurement at a national level for regional healthcare.

Since 2014, the government has asked PHARMAC to gradually take charge of procuring all public hospital devices. In the process of doing so, it attempts to create beneficial national contracts with suppliers for the procurement of medical devices that are already in use within New Zealand. A national contract entails establishing a fixed price for a given product that is available to all DHBs, and is neither exclusive nor mandatory for the DHBs.

HealthAlliance procurement

HealthAlliance manages procurement processes of healthcare products as efficiently as possible on behalf of the DHBs, in order to give the DHBs more time and resources to focus on their principle concern of providing frontline healthcare services to the community. They are contracted by the Health Benefits Ltd to manage procurement services nationwide for all DHBs for expenditures under 100,000 NZD.

They organize the entire procurement process from contract management to price changes and delivery in coordination with the DHB. The management of key suppliers is done in consultation with the DHB and a healthAlliance procurement team, and is coordinated at local, regional and national levels as deemed appropriate.

DHBs remain involved in the decision making process and have particular obligations within it, and have direct contact with suppliers also.

HealthAlliance manages contracts for the procurement of the following:

  • projects and operations
  • medical products
  • imaging, for cardiology and radiology
  • laboratory
  • surgical
  • wards and general ambulatory
  • non-clinical services

HealthAlliance creates economic advantages and opportunities by grouping product needs together across the sector and obtaining economies of scale for volumes and deliveries, and reducing risk.

Their tasks include:

  • supply chain management and integration to ensure delivery of products and service
  • measuring supplier performance and reporting
  • procuring clinical and non-clinical products
  • managing contracts

As a non-profit organization their interest is to optimize the healthcare system and administration for the nation as a whole.

New Zealand shows a clear preference and trend of optimizing purchasing processes through unified regional and national purchases, and by obtaining national contracts to stabilize costs and expenditures for all public healthcare providers who wish to take advantage of the pre-negotiated prices.

For further quantitative information on the New Zealand healthcare system and the macroeconomic climate, please look into our Business intelligence platform or order the TforG Deep Dive report for New Zealand containing volumes of 620 surgical procedures in 13 specialisms.