NHS capital funding crisis leads to increase in leasing

Published: 8-Feb-2012

Leasing preferred procurement route for equipment as report reveals 28% increase in tenders


As capital funding in the NHS dries up, trusts are increasingly turning to leasing as a way of procuring the most up-to-date technology.

New figures from Siemens Financial Services (SFS) show the number of NHS leasing tenders rose by 28% in 2011, with a 68% increase in the aggregate value of these contracts.

The big question is how to afford technology, and it looks like there is a growing groundswell of NHS finance professionals now exploring the full range of options available to them

Leasing enables the procurement of more expensive technology, such as MRI and CT scanners, without tying up working capital. Instead, the equipment is leased to the trust, enabling it to pay from revenue budgets over time. It is also popular as lease contracts are often worded to ensure technology is upgraded automatically when new systems are released onto the market.

The latest SFS figures follow an earlier report published last year that calculated the amount of capital effectively ‘frozen’ in the UK healthcare due to outright equipment purchase is in excess of £615m.

NHS Supply Chain has seen a significant increase in interest from NHS trusts in using the leasing framework agreement

Chris Wilkinson of SFS explained: “There is major financial pressure on the NHS, despite budget protection, compared to other government departments. NHS spending as a whole has been ring-fenced, yet more than £20billion of efficiency savings has to be achieved by the middle of the decade, while capital spending is to fall by 17% by the end of the period.

“Acquiring up-to-date technology is critical to meeting efficiency targets. Many studies have shown that up-to-date healthcare technology often has a disproportionately large and positive impact on delivering better health outcomes and operating efficiencies. A relatively small investment in technology can have a large effect on radically improving the cost, efficiency and effectiveness of diagnosis and treatment.

“The big question is how to afford that technology, and it looks like there is a growing groundswell of NHS finance professionals now exploring the full range of options available to them. Also, the system of working with an expert financing advisor, utilised by most trusts, and the streamlined tendering system to find the best value offer, makes the process easy for trusts and for financiers alike.

Many studies have shown that up-to-date healthcare technology often has a disproportionately large and positive impact on delivering better health outcomes and operating efficiencies

Commenting on the effect leasing could have on the capital frozen in the system, he added: “Financing arrangements such as leasing free up that frozen capital, making such technology acquisition affordable for cash-pressured NHS trusts by spreading the cost across several years of affordable monthly payments, embracing service and maintenance in the deal, and often offering technology upgrade options during the leasing term.”

This swing towards leasing as a preferred procurement route is also being observed by NHS Supply Chain. Its senior buyer, Cheryl Cordon, told BBH : “NHS Supply Chain has seen a significant increase in interest from NHS trusts in using the leasing framework agreement.

“The value of the business awarded through our framework has increased by 35% and the volume of tenders by 11%. We offer a comprehensive range of frameworks to plan, aggregate, purchase or lease and maintain high-end equipment which we believe will be invaluable to the NHS moving forward.”

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