tb 052/15 - epsom st helier

TB 052/15

Great care to every patient, every day

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Meeting title Trust Board

Report title Financial Plan 2015/16

Meeting date 8th May 2015

Lead director Rakesh Patel – Chief Finance Officer

Report author John Sangster – Assistant Director of Finance

FOI status Disclosable

Report summary Trust Income and Expenditure Budget for 2015/16

Purpose Approval.

Recommendation

The board is asked to approve the final income and expenditure budget for 2015/16

Corporate objective links

Finance

CQC standard N/A

Identified risks and risk management actions

The key risks to achieving the 2015/16 Financial Plan are as follows:

•Timely implementation and delivery of the quality and cost improvement plan

•Achievement of quality elements of acute SLAs, in particular KPIs and CQUINs

•Delivery of significant amounts of elective activity above the level achieved in 14/15

•Non-payment and challenge of over performance against CCG contracts

•The Trust has not set aside a contingency for unidentified cost pressures.

•Delivery of schemes within the plan which deliver a contribution

Resource implications

The paper sets out the global revenue and resource for the Trust in 2015/16.

Legal implications N/A

Equality impact assessment

N/A

Report history N/A

Considered by other committees

N/A

Appendices N/A

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EPSOM AND ST HELIER UNIVERSITY HOSPITALS NHS TRUST

FINANCIAL PLAN 2015/16

TRUST BOARD MEETING: 8TH MAY 2015

INTRODUCTION 1. The purpose of this paper is to set out the process undertaken by the Trust in

setting Financial Plans for the 2015/16 financial year.

BACKGROUND 2. Following rejection of the national tariff proposals, the tariff was withdrawn and the

Trust was asked to select either the Enhanced Tariff Option (ETO) or the Default Tariff Rollover (DTR). This meant that the national planning timetable had to be revised and the final plan submission has been moved back from 4th April to 14th May.

3. From May 2014, the Trust has been working on its savings plans for 2015/16 and the Trust has submitted draft plans to the TDA in January and April.

4. The completion of the TDA annual plan has taken place alongside the process of setting 2015/16 budgets for the Trust at Directorate level.

5. The Trust submitted the draft plan to the TDA on 7th April and a final version is due

on 14th May. The plans submitted reflect a break-even position and £14.7m expenditure savings plan as set out in this report. The Trust needs to submit its final budget to the Board for approval in line with the TDA planning timetable. The plan will then be subject to final scrutiny and approval by the TDA.

PROGRESS TO DATE 6. The Trust has met all of its obligations in terms of submitting details and workings to

the TDA. It should be noted that the 2015/16 Financial Plan is for a break even position and thus the Trust should no longer require cash support for the position, however there is a risk to the cash position due to the impact of the 2014/15 underlying deficit.

7. The quality and cost improvement plan has been worked on at several meetings which started in May 2014.

8. The overall expenditure savings target for 2015/16 is £14.7m. This is supplemented by £2.4m of full year effects of the 2014/15 saving plan and the £3m of new income schemes which are planned to impact in 2015/16.

9. The Trust expects £3m contribution from service developments, which includes the private patient strategy.

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INCOME AND EXPENDITURE FORECAST – KEY ISSUES Overarching Principles 10. The Trust has used the agreed national planning assumptions on inflation and

known cost pressures. 11. It must be noted that, at this stage, the Trust is budgeting for a break-even position

and not the 1% surplus target. This is a change from the £1.8m surplus forecast in the Trust’s Integrated Business Plan (IBP).It must also be noted that the budget does not include a contingency for yet as unknown cost pressures.

Income Assumptions 12. The Trust in adopting the ETO tariff has accounted for the associated financial

changes in price changes, deflators and marginal rates for emergency and specialised activity. Other tariff changes relate to the application of a locally agreed ‘short stay’ tariff for activity undertaken within the Clinical Decision Unit.

13. The Trust has assumed the continuation of all system resilience funding but London CCGs have indicated that only 50% of the available funding is being repeated in 15-16. This represents a shortfall of c£0.75m to the Trust but contract settlements allow for the recovery of the balance of funding based on emergency performance.

14. The Trust has planned for 2% activity growth in 2015/16 and 5% on Renal services and has secured the majority of 2% across the major contracts, but only 3.3% has been agreed for specialised services. This is consistent with the national settlement for all specialist providers.

15. The Trust proposed a c£5m increase in the volume of additional elective activity above 2014/15 outturn, but commissioners have rejected these plans as performance against the national RTT standard has continued to improve. The Trust has reiterated that in order to maintain our performance additional activity is required and contract agreements reflect that commissioners will fund the additional activity should that be the case. The Trust has assumed that in terms of the financial plan that this activity will be delivered in 2015/16.

16. The Trust has presented commissioners with a small number of business cases; these remain subject to commissioner approval process and have been included in the contract under the Service Development Improvement Programme. These business cases are all subject to business approval decisions that are expected to be completed in Quarter 1, if approved they will be funded in year via contract variations.

17. Local KPIs have rolled forward with a cap of 1.25% and the financial consequences reflected in our contractual agreements.

18. The Trust has set its income plan at c£8.5m more than current expected SLA values. Historically the Trust has over performed its SLA value and the expectation is that the Trust plan will be delivered and paid under a PbR contract.

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19. Under the terms of the ETO option the Trust is entitled to CQUIN funding at 2.5%,

these schemes continue to be subject to joint development and have been long stopped in all contracts until the 31st May.

Operating Plan Update 20. Patient Care income targets were agreed internally at £335.9m and comprised of a

number of planning assumptions in order to move from the recurrent financial outturn to this year’s budget.

21. The key movements fell into three broad areas:

i. Enhanced Tariff Option – having adopted the ETO Tariff the trust was subjected to the mandated impact of this agreement e.g. tariff deflation, marginal rates etc.

ii. Commissioner Plans – these are the changes proposed by CCGs and NHS

England and reflected their QIPP / BCF plans and adjustments to short stay prices i.e. removing short stay activity from PbR and agreeing a local price for the CDU at St Helier.

iii. Trust Plans – these increases included proposals for growth, additional

activity to meet access standards, counting & coding changes and trust initiated developments e.g. service developments.

22. The detailed movement summary has been reflected in earlier versions of the

Trust’s financial ‘bridge’ reports and showed a planned increase of c£8m when comparing the income target with the 2014-15 outturn for patient care income.

Commissioner Contract Proposals

23. The operating plan assumptions were articulated in detailed proposals to all

commissioners and formed the basis of the contract negotiations. These negotiations have been progressing during the past few months with the aim of agreeing contracts for 2015-16.

24. At the 27th April the Trust is able to report the following progress: i. South London CCGs – contracts agreed and signed on 23rd April ii. Surrey CCGs – discussions continuing as host CCG (Surrey Downs) unable

to agree or sign contract at this stage iii. NHSE England – indicative financial values agreed on 24th April, awaiting

finalisation of contract documentation

Contracting Round – Key Outcomes 25. In seeking to agree contracts all parties have been required to review and adjust

their financial planning assumptions in light of technical guidance, affordability and the assessment of activity planning assumptions for the coming year.

26. The Trust has worked to provide commissioners with robust information, cases and arguments to support the proposed increases to the contracts; some of these assumptions have been rejected, but where activity is such to PbR rules

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commissioner have accepted their liability for payment should this work be delivered in year.

27. The latest contract position shows that the forecast for agreed contract values will

be c£8.5m less than that within the operating plan. The key areas of imbalance being:

i. Increased Elective Activity ii. QIPP / BCF iii. Growth iv. Service Developments v. Counting and Coding vi. Winter Resilience Funding

28. In considering the broader financial impact for the Trust it is worth noting two key

factors:

i. A number of the areas in the above list have discrete expenditure budgets to support the income planning assumptions e.g. increased electives, service developments and winter. In the event this activity is not required / delivered there will be compensating savings from the expenditure reserves, however this will impact on expected contribution and would require mitigation.

ii. Any activity provided within the scope of PbR will be chargeable regardless of

the planned contract levels. Therefore any increases in elective activity, shortfall in commissioner QIPP or improvements in coding will reduce the risk of an income shortfall.

Contract Management and Reporting

29. The Trust is currently working to develop the detailed contract plans at an activity

level to support both external and internal reporting from Month 1. An initial draft of our internal indicative finance and activity plan has been shared with directorate managers and clinical directors. Whilst these may be subject to change any movements are not expected to be material.

30. The Trust is seeking to improve the quality of monthly income reporting but it is important to understand there will effectively be two plans; the internal plan that aligns with the operating plan (and links to expenditure plans) and our contract plan which mirrors the agreement with commissioners. The profiling of the plans is different as commissioners monitor performance on equal twelfths whereas the internal plan seeks to reflect operational profiles.

31. Directorate performance will be reported and managed / monitored against the

internal plan only.

Expenditure Assumptions 32. The Trust has set aside inflation reserves for pay based on anticipated and notified

pay awards and has made an allowance for incremental pay increases.

33. Non pay and drugs inflation has been budgeted at the levels notified in the planning guidance which is 2.1% for non-pay and 7% on drugs.

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34. The Trust has not set aside an uncommitted contingency of 0.5%, as it has done in

previous years. 35. The Trust has budgeted £1.7m for winter pressures and system resilience which

matches the assumed income budget. This will only be available if the resource is negotiated with commissioners. The £1m recurrent funding for winter pressures remains in the Medicine directorate baseline.

36. The Trust has budgeted £2.2m, for the second year of the 5 year plan, to meet the London Quality Standards; the recommendations from Francis and Keogh and the expansion of the Friends and Family test.

37. The Trust has budgeted £1.4m for the net impact of the Better Care Fund, commissioner demand management and activity growth.

38. The Trust has assumed slippage on reserves/developments of £0.5m as many schemes will not be able to start on 1st April.

39. Underspending directorates start point for their 2015/16 budget was their rollover budget position, rather than outturn.

40. Directorate budgets are set out in Appendix 1 and the budgeted reserves are set out

in Appendix 2. SAVINGS PLAN 41. The indicative savings target that will be tracked in 2015/16 (excluding CQUINS and

KPI’s) is £14.7m. The value of projects/schemes identified and recorded in the PMO workbooks at 14th April total £12.4m although this does include £1.9m in respect of Procurement and Managed Service Contract schemes which are currently in the process of being scoped.

42. The current unidentified gap for 2015/16 is £2.3m.

43. The current profile of the schemes is: Pay £2.65m (21.41%) Non Pay £8.83m (71.33%) Income £0.90m (7.26%)

44. The PMO will track £3m of Service Developments schemes and £3m of NHS Patient Care Schemes.

45. The service development schemes and NHS patient care schemes will be closely monitored by the PMO to ensure that as a minimum, the schemes deliver to plan. QCIP targets will be increased to reflect any failing income schemes and substitute mitigating ‘cash releasing’ CIP schemes will have to be identified instead.

46. The table below shows the overall RAG status of projects against the annual target.

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47. The 2015/16 budget includes £3.9m of unidentified QCIPs from prior years, these

are set out below: Directorate £’000s Clinical Operations 334 Renal Services 1,102 Women And Childrens Servs 2,433 Total 3,869

CASH SUPPORT 48. As the Trust is planning for a surplus it should not require cash support, however

there is a risk around the impact of the 2014/15 recurrent deficit on cash in 2015/16. RISK 49. The Trust has a number of risks which are set out in the table below:

Risk

£m Mitigation

i) The Trust is planning to deliver the 2014/15 elective activity shortfall of £5m and deliver a £3m contribution. This assumes the activity can be largely scheduled within existing weekday sessions.

3.0 The directorates are working up detailed plans to deliver the activity in 2015/16, including signing off the operational profile.

ii) Private patient Strategy. The Trust is planning for £6.9m income in 2014/15 which will deliver a contribution. The Trust forecasts it will deliver £2.3m with a contribution of £0.7m in 2014/15. The delivery in January, if sustained, would deliver an

1.9 The Trust is currently averaging 12 beds in use and income per bed is increasing as elective surgery has increased. Increased theatre capacity will be available for private patients in 2015/16 and 50% of Northey’s rooms have been upgraded. The Trust will need to

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annual income stream of £4m so considerable improvement is still required to meet the target.

ensure that Northey’s beds are ring-fenced and available in order to meet the 2015/16 plan. A step change in activity is required in April and July to meet the plan. Marketing will be stepped up to target embassies.

iii) QCIP. The Trust is assuming that it will recurrently identify the £3.0m of 2014/15 non-recurrent QCIP in 2015/16.

3.2 Directorates have agreed detailed budgets for 2015/16 which do not include non-recurrent support.

iv) QCIP the Trust has currently £8.1m schemes rated red which includes £2.3m of schemes yet to be identified.

4.0 The Trust retains its PMO and its robust processes in setting and recording milestones and savings delivery. Progress of QCIP will be monitored at the Financial Management and Contracting Group.

v) QCIP the Trust has prior year unfound CIP budgets rolling forward as unfound into 2015/16.

3.9 These were covered by non-recurrent QCIP last year and the expectation is that non-recurrent savings will continue to be found.

vi) The Trust has assumed delivery of £3m against NHS income schemes.

3.0 The service development schemes and NHS patient care schemes will be closely monitored by the PMO to ensure that as a minimum, the schemes deliver to plan. QCIP targets will be increased to reflect any failing income schemes and substitute mitigating ‘cash releasing’ CIP schemes will have to be identified instead.

vii) The Trust has a number of business cases and service developments which are subject to commissioner approval.

1.0 These have been recognised within the Service Development Improvement Programme and if approved by CCGs would be funded in year.

viii) The 2015/16 Leaning and Development Agreement was received on 19th March and at this point in time the agreement does not include the full amounts expected for CPD and Non-Medical Education. The contract indicates a reduction of 26 FTE undergraduate trainees which would be a reduction of c. £1m

1.0 The Trust is working through its allocation of undergraduate trainees with St Georges University of London Medical School.

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this is being challenged with Health Education England.

ix)

Despite of the measures taken to control usage the Trust has continued to see a rise in temporary staffing expenditure. The Trust estimates it spent £4.6m in agency premiums in 2014/15

4.6 The Trust has set a target of recruiting an additional 200 permanent staff and so the Trust is considering bolstering the recruitment team and drawing up proposals to invest in new recruitment tools, branding and materials to help recruit into hard-to-fill posts.

x) Patient Care SLA’s are not all fully agreed with commissioners and the values assumed in this budget may not be achieved.

The directorates are working up detailed plans to deliver the activity in 2015/16 and as the Trust remains on a PBR contract it expect to be paid for the work that it completes.

CONCLUSION 50. At the time of writing the Trust has agreed SLA’s with all major commissioners with

the exception of Surrey Downs CCG.

51. The Trust has a break even plan after:

a cost improvement plan of £14.7m

delivery of additional elective activity

contribution from service developments and NHS patient schemes 52. The Trust has agreed budget control totals with Directorates and SLA negotiations

for 15/16 are complete with the exception of Surrey Downs and items that the Trust and its commissioners have agreed to long stop till the end of May. The plan remains subject to scrutiny and triangulation with CCG’s plans by the TDA, with the final submission being on 14th May 2015.

53. The key risks to achieving the 2015/16 Financial Plan are as follows

Timely implementation and delivery of the quality and cost improvement plan

Achievement of quality elements of acute SLAs, in particular KPIs and CQUINs

Delivery of activity plan which includes last year’s elective activity shortfall

Delivery of the private patient strategy

Emergence of further demand management plans and challenges from local commissioners during the year

Control of temporary staffing RECOMMENDATION

54. The board is asked to note the 2015/16 Financial Plan prior to final approval by the

Trust Board and the TDA.

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55. The board is to note the on-going approval process of the financial plan with the

TDA.

56. The board is asked to note the risks to the plan.

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APPENDIX 1

Final Budget 2015/16

2014/15 Budget 2014/15 Outturn

Less Non

Recurrent

Winter & RTT

Directorate

Internal

Transfer

Adjsuted

Outturn

2015/16 Budget

Before QCIP

QCIP & Income

Schemes 2015/16 Budget

£'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s

Directorate - Clinical Services

Clinical Operations 9,713 10,030 1,947 11,977 12,821 (794) 12,027

Crit Care\Surgery And Anaes 62,775 66,528 (1,334) 65,194 64,935 (1,041) 63,894

Clinical Services 54,790 58,977 (2,076) 56,901 54,642 (2,196) 52,446

Medicine 58,638 65,629 (1,778) 63,851 61,987 (2,348) 59,638

Renal Services 24,466 26,462 26,462 25,651 (1,311) 24,340

Women And Childrens Servs 38,605 42,250 42,250 41,117 (1,498) 39,620

Total 248,985 269,876 (3,112) (129) 266,635 261,153 (9,188) 251,966

Directorate - S.W.London - El. Ortho Centre

SWL EOC 33,016 34,459 34,459 33,764 (1,785) 31,980

Total 33,016 34,459 0 0 34,459 33,764 (1,785) 31,980

Directorate - Corporate

Corporate 3,180 2,481 2,481 2,724 (227) 2,497

Estates And Facilities 27,634 27,423 27,423 29,227 (1,789) 27,438

Finance 5,330 5,317 5,317 6,020 (382) 5,637

Human Resources 2,858 2,743 2,743 3,025 (150) 2,876

Medical Director 11,101 11,086 11,086 11,356 (263) 11,093

Nursing Director 1,099 1,455 1,455 1,559 (78) 1,481

Pcp Performance And Information 7,114 7,493 129 7,622 7,914 (289) 7,624

Research And Development 732 640 640 538 0 538

Total 59,048 58,638 0 129 58,767 62,362 (3,178) 59,184

Total Expenditure on Business Activity 341,049 362,973 (3,112) 359,861 357,280 (14,150) 343,130

Capital Charges (685) (684) (684) (685) 0 (685)

Contract Income 0 409 409 0 0 0

Reserves 9,893 (5,972) (5,972) (1,862) 17,152 15,290

Total Operating Expenditure 350,257 356,725 (3,112) 0 353,613 354,733 3,002 357,735

Depreciation (Excl Impairment) 9,806 9,207 9,207 9,658 0 9,658

Profit/Loss on Sale of Fixed Asset 0 (5,078) (5,078) 0 0 0

Finance Charge 127 0 0 0 0 0

Donated / Government Grant assets (0) (0) 0 0 0

Interest Receivable (43) (22) (22) (26) 0 (26)

Dividend Payable 5,084 5,084 5,084 5,084 0 5,084

Total Expenditure 365,231 365,917 (3,112) 0 362,805 369,449 3,002 372,451

Patient Care Income (337,482) (339,986) 3,112 0 (336,874) (343,859) (3,002) (346,861)

Other Operating Income (27,749) (25,603) (25,603) (25,590) 0 (25,590)

Total Income (365,231) (365,589) 3,112 0 (362,477) (369,449) (3,002) (372,451)

Retained (Surplus) /Deficit 0 328 0 0 328 (0) 0 (0)

Donated Asset Adjsutment 0 (407) 0 0 (407) 0 0 0

NHS Financial Performance (Surplus)/Deficit 0 (79) 0 0 (79) (0) 0 (0)

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Appendix 2

Reserves Budget

15/16

£000's

Payaward, Agenda for Change, Pay Drift 3,522

Non -Pay Inflation 1,900

Elective Work To 2014/15 Plan 2,000

Demand Management/Growth 1,400

Winter Pressures & Emergency Planning 1,700

Cost Of Quality 2,020

Finance Charge 222

Recruitment Slippage (540)

15/16 Business Cases agreed as part of IBP (Sleep, Cath Lab, Embryology) 1,504

Drugs 7% 1,000

Sign up to Safety 562

15,290

2015/16 Budget

Reserves

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APPENDIX 3

tb 052/15 - epsom st helier

Documents