It is unsurprising that healthcare organisations and manufacturers of devices and pharmaceuticals frequently turn to external consultancies for support – given the relentless pressure to achieve ambitious targets in highly complex environments fraught with stringent regulatory requirements.

Using consultants, however, has not been without controversy – and the occasional backlash. The accusation that the UK National Health Service turns to consultants too readily has been levelled in recent months, although the Management Consultancies Association’s 2009 report Improving care, reducing cost, states that annual expenditure by the NHS on consultancy as a proportion of total spend has only been running at around 0.3%.

One specific accusation levelled at the hiring of consultants is often that the costs are hard to justify, especially during the current difficult economic climate. Tim Hebditch, director of operations at UK healthcare management consultancy Salterbaker, comments: “the use of external consultancy by acute Trusts and Primary Care Trusts has certainly taken a hit since the beginning of the fiscal year. A key driver is undoubtedly cost – the initial outlay on consultancy fees is proving discouraging as the NHS seeks to achieve its financial targets; there are also signals from central government to reduce the use of consultancy.”

“In light of these figures, seeing consultancy as a drain on resources can be short-sighted.”

Achieving cost savings

Due to current pressures facing healthcare providers, it is unlikely that consultancy will lose out in the longer term. One of the key issues is the difficulty that hospitals have in improving productivity, while continuing to pursue patient-centred care and achieve desired healthcare outcomes.

A 2008 UK Office of National Statistics report suggested that productivity in the health service had actually fallen by 2.5% on average between 2001 and 2005.

In light of these figures, seeing consultancy as a drain on resources can be short-sighted. According to Hebditch “if used suitably, external consultancy can contribute significantly to the cost-effectiveness of services, and also produce cash-releasing cost savings.”

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Used effectively, consultancy can pay for itself many times over. One recently reported example is the Utah-based Delta Healthcare Consulting Group’s productivity review, completed in March 2010, for the Lee Memorial Healthcare System in Florida which consists of four hospitals. This involved looking at 29 ‘work streams’ ranging from business services and case management to surgical services and cardiology. The review identified over $50m in cost savings and $90m in revenue enhancements.

Getting products to market

Product development is one specialist area tackled by consultancy, and specific market conditions mean that the imperative is to seek external support are strong.

Andrew Diston, head of global medical technology practice at Cambridge Consultants, explains the challenges large, well-established manufacturers face: “The stream of well-advanced venture capital funded start-up companies is diminishing as a result of the credit crisis. Such start-ups were the main basis of growth for blue-chip companies over the past decade, offering low-risk acquisition targets once the technology was proven.

“With fewer acquisition targets available, the large players must once again turn to innovation and new product development, yet lack the skills and internal scientific and engineering resources to do this. Faced with the need to innovate, they are reaching out to large, established product development companies to bring new products to market,” Diston said.

Diston also points out that, while many mechanical devices are almost entirely mechanical in nature, electronics, software and advanced communication technologies are increasingly coming to the fore. The businesses that have traditionally focussed on mechanical devices are consequently looking to consultancy to help them embrace these new developments.

In terms of start-up businesses he adds: “Start-ups frequently have superb scientists or academic credentials behind them but invariably lack the range of skills and depth to bring a medical product to market alone. Recruiting and building a team with the right mix of skills is a long, arduous process, so it makes sense to outsource major portions of the development.”

Recent examples of collaborations include Cambridge Consultants’ work with Sun Pharma Advanced Research Company on a new high-efficiency, easy to use, dry power inhaler, and PA Consulting Group’s development with Centocor R&D of the SmartJect autoinjector, described as the world’s first pre-filled, single, disposable autoinjector including needle retraction.

Another area that can be a minefield for companies is successfully negotiating regulatory and clinical trial processes. For example companies wishing to enter new markets, such as the USA, Canada or Europe, may feel they would reduce the risk and time involved in getting their product to market by working with an organisation that already has significant experience of dealing with the regulatory framework in these areas.

In-house versus consultancy

There are a number of reasons why it may not be appropriate for projects to be undertaken by in-house staff.

Tim Daly, healthcare expert at PA Consulting Group, says: “It may be that a piece of work is highly specialised and resources to do it are in short-supply or non-existent; sometimes it is because the hospitals require a short burst of additional capacity or capability; and sometimes it is because consultancies can provide an independent view of the situation and are better placed to implement a change, working through some of the internal vested interests.”

Avoiding pitfalls

There are a variety of factors to bear in mind when considering using an external consultancy versus relying on internal resources.

“There are a variety of factors to bear in mind when considering using an external consultancy.”

If project goals are not clearly defined, or if it would make more sense for an organisation to have in-house staff performing the task, then outcomes may not be as beneficial as intended. Also, for large-scale projects associated with significant risk, clients may need to think about the precise nature of their relationship with a consultancy.

Salterbaker’s Tim Hebditch points out, for example, that consultancies undertaking cost savings reviews are increasingly being expected to share the risk, waiving upfront daily fees in favour of a percentage of the savings.

He concludes: “It can happen that the consultancy brief is inadvertently shaped so as to result in an unclear or unsatisfactory set of outcomes; consultancy can be over-priced (but having said that, different consultancies can charge a range spanning from £300 a day to well into four figures, so market forces have the chance to apply here); and, if the task is performed for a fixed fee regardless of outcome, then the organisation is taking a risk and needs to judge whether the level of risk is worth taking.”