The Council of Academic Hospitals of Ontario (CAHO) recently launched a new tool to help hospitals pull innovation into Ontario’s healthcare system. The tool is actually a quick reference guide titled “The Art of the Possible,” which exposes 16 myths with regard to public sector procurement in Ontario. The idea is that awareness of these myths will then help bring innovation into the system faster, while also improving patient care and health system efficiency.
It’s a reasonable idea, but it’s also debatable to what extent a 19-page reference guide can function as a strategic tool for improved procurement practices. Instead, it’s more of a handy factsheet. The guide itself, which was developed by a small panel of experts, claims to be of use for hospital executives and for individuals with intermediate to advanced knowledge of procurement. However, I can see how it would also be helpful for vendors who are either new to the market or considering entering into it.
The rationale for the reference guide was a 2016 survey across CAHO’s membership of Ontario’s 23 academic research hospitals, in which 76% of respondents identified “policies, directives and procurement rules as major hurdles to innovation adoption within their organizations.”
That isn’t surprising. What is surprising—to me at least—is that in setting out to expose the myths, CAHO is in effect saying that the barriers to innovation have more to do with a series of misunderstandings, as opposed to real structural problems.
The first myth tackled in the guide, and of course a real bugaboo in the discussion of value and innovation, is the notion that organizations must pick the lowest cost option in order to be consistent with the “value for money” principle in Ontario’s Broader Public Sector Procurement Directive.
The guide points out that value for money is to be assessed alongside accountability, transparency, quality service delivery and process standardization. And value for money itself can include other factors, such as the qualifications and experiences of the supplier.
The second myth is that organizations are stuck with traditional procurement models. In fact, the directive permits a variety of approaches as long as the approach is “fair, open and transparent and in compliance to the organization’s procurement-related trade obligations.” What that means is that negotiated requests for proposals (RFPs)—including with outcomes-based specifications—as well as competitive dialogue, innovation partnership, reverse auctions, and best and final offer, are all allowed.
Another myth is that the directive is inflexible; not true—as long as the procurement process is transparent, there are ways to build in flexibility. And organizations needn’t always go to market, given that non-competitive procurement processes are allowed in specific circumstances. The guide also asserts that the directive isn’t overtly bureaucratic nor is it only a “guideline”—compliance is required by law.
There are plenty of myths around vendor engagement, too. For example, you’re allowed to talk to vendors about unsolicited proposals outside of the procurement process, and RFPs can include opportunities for alternative proposals. Importantly, the guide clarifies that requests for information (RFIs) and requests for expressions of interest (RFEIs) can’t be used to prequalify or shortlist vendors. That said, there is some wriggle room with regard to conflict of interest, which is worth knowing given how small the community is in Canada.
In the sometimes rarefied world of hospital procurement, the guide confirms that advance contract award notice (ACAN) is permitted when no other vendors can provide the good or service, or meet related conditions. And you can still negotiate with vendors if desired, so long as that intent is covered in the RFP. Before the procurement process is initiated there is also plenty of legitimate opportunity for market engagement.
With regard to intellectual property, all IP issues needn’t be resolved to start a pilot, though they should always be taken into consideration. As well, an open process may not be required for a pilot. It could kick in if you then move to actual procurement, but co-development may not always require you to go to market. To help with this, organizations can consider engaging a fairness adviser.
That summation of the 16 myths is a lot to digest, and the guide does an admirable job of setting the record straight. It’s a bit of an overstatement, however, to say that it offers any deep strategic advice. That said, as panel member and procurement expert Sarah Friesen has noted, the guide “will increase confidence in exploring innovation procurement opportunities,” which in itself is a worthwhile goal. To some extent, the guide helps flesh out CAHO’s role as an innovation broker with the office of the chief health innovation Strategist.
Where I see the “The Art of the Possible” having an important—and perhaps unforeseen—role is in the vendor community. Brian Mackie, co-chair of CAHO’s Innovation Broker Task Force and vice-president of finance and chief financial officer at Baycrest Health Sciences, has said that “this work is helping us pull new technologies into our hospitals faster.” If that’s true, then healthcare tech innovators will be thrilled with this shift in focus.
But they may be wary, as well. There’s much in the document that suggests Canada—or in this specific example, Ontario—can move beyond a pre-commercial test-market, with wave after wave of small-scale pilots, and little transformation when it comes to using procurement as a tool of innovation. Still, we remain in a zero-sum environment, in which stakeholders compete for limited budgets, and in which administrators are pressured to satisfy numerous disparate interests.
In these environments, no matter what method or scorecard system you use, there is often a temptation for the final decision-making to default to arbitrary, executive-level preferences for purchases that keep as many people happy while solving as many urgent problems as possible—often in limited timeframes. In these scenarios, the emphasis is on keeping the ship afloat as opposed to embarking on longer voyages that embrace at times nebulous concepts of “innovation” and “value.”
Here is where it might be helpful to have a larger strategic discussion with regard to how to make decision-making objective and autonomous, and what we really mean by “transparency.” We don’t really have full public transparency and accountability on how individual organizations allocate budgets, or to what extent final procurement decisions off of RFPs are autonomous from administrative interference. A strategic approach to dealing with the political reality of budget-conscious decision-making, the real size of opportunistic shadow spending, and the positive role that the vendor community can play, could help bring about the cultural shift needed to get the best technology into our hospitals.
Tim Wilson is principal of T Wilson Associates. Follow him on Twitter: @TimothyEWilson