Trust Board 26 th March /9 Financial Plan

Transcription

1 Trust Board 26 th March 2008 Agenda Item No: /9 Financial Plan PURPOSE: To set out the 2008/9 Financial Plan for the Trust. Implications: The 2008/9 Financial Plan aims to deliver a 2m surplus in year; this over and above substantial new investment in year. Risks: Referred to in Plan and will be further analysed in supplementary April 2008 report to Board. Financial: Human Resources: Trust needs to deliver at least a 1.5m surplus in 2008/9 to cover cash requirements on the DoH loan. The Plan includes a pro active recruitment drive to reduce overall vacancies. National Policy: Links to Corporate Objectives: Legal: Plan reflects national policy as set out in the 2008/9 NHS Operating Framework and NHS East of England guidance. HCC standard C7d None. Other: A further supplementary report will be taken to the Board in April 2008 setting out further details of individual business cases for specific service development, together with a full risk review. Recommendations: The Trust Board is asked to: In summary, the Financial Plan identifies a 2m surplus in 2008/9 and further confirms that all service line budgets will deliver a contribution to overheads and most will also deliver a profit; As a consequence the Board is asked to: Approve the 2008/9 Financial Plan Receive a supplementary report in April 2008 setting out further details of: risks to the 2008/8 Plan; business cases for major new service developments identified in the report; impact of the 2008/8 plan on the 7 Year Financial Plan as modelled in the LTFM DIRECTOR: Director of Finance PRESENTED BY: Director of Finance AUTHOR: Director of Finance DATE: 19 th March

2 DRAFT 2008/9 FINANCIAL PLAN CONTEXT The Trust s financial prospects have dramatically improved in the last 2 years. That, in combination with market strength in particular services, will continue to ensure further improvement into the future. Year End Positive 2003/4 0m Balance 2004/5 (8.6)m Deficit 2005/6 (22.4)m Deficit 2006/7 (1.5)m Deficit 2007/8 2m Surplus 2008/9 plan 2m Surplus Through a pro active and internally driven turnaround process, the Trust has both improved its financial position and, equally importantly, has instilled the culture and processes to monitor, manage and change performance. Crucially the focus has shifted away from uni dimensional budget control, to understanding spend in relation to patient throughput and consequently income. The Trust has adopted the Service Line Management approach and Directorates discuss and develop the profitability of their current services and are beginning to identify profit making service opportunities. The most significant proposals include: Cardiology develop a second catheter lab for angioplasty and seek to be named as a Heart Attack Centre. Critical Care expand ITU capacity (currently running close to 100% usage) through a complex staged and phased development reflecting national guidance and clinical evidence. Will facilitate further expansion of complex surgery, particularly orthopaedic in future years. Radiology expand non obstetric ultra sound and CT Scanning services to improve diagnostic waits and the range of services available. All of this has allowed a very different approach to developing both the 2008/9 financial plans and the LTFM. One of the strengths of the Trust s longer term financial position is the Pan Herts Strategy as set out in Investing in Your Health (IIYH), jointly agreed by the Herts PCTs and Trusts and now through public consultation. That Strategy sees the Trust consolidating all acute services 2

3 onto the Lister site while the QEII site becomes a community focused Local General Hospital offering the possibility that the Trust may continue to provide managed services to the PCTs and some elective complex surgery, particularly Orthopaedics. All this, plus the profit making initiatives mentioned above, continued growth in emergency activity from the local population and real opportunities to increase income from public franchise. The following tables set out the details and time lines. The following sections focus on 2008/9 and set out the detail of the Financial Plan for the New Year. 3

4 2008/9 Actions Impact Outcome Expected population growth +1.5% Additional activity in: midwifery emergency medicine A&E Extra income/profit Deliver 18 weeks targets Radiology business case to improve diagnostic wait times and expand Ultra Sound & CT capacity Unpick block contract Transfer community focused services to PCT to improve profitability Expand profitable services Cardiology business case for 2 nd Cath Lab Critical care business case to expand capacity for Level 2 ITU cases. Allows expansion of specialist surgery eg: spinal orthopaeds Trust becomes bowel cancer screening hub, enabling expansion in colonoscopy service Delivers 18 weeks Improves reputation and choice Extra income/profit Improves profitability Creates capacity for new developments Trust identified as Heart Attack Centre Extra income/profit Improves reputation and choice Extra income/profit Improves quality and reputation Provides capacity to support specialist developments Extra income/profit Finalise ISTC proposal Frees up capacity on Lister site Capacity for new income generation Finalise Women s & Children s business case to consolidate on Lister site Allows service expansion to cope with rising birth rate locally Provides state of art facilities Generates significant rationalisation savings Improves reputation and choice Contributes to efficiency requirement 4

5 2009/10 Actions Impact Outcome Continued population growth 1% 18 weeks targets secure allowing expansion of profitable specialist services: Orthopaeds Plastics Other eg: colonoscopy New services offered in: Spinal Surgery? Foot/elbows/shoulders? with limited local competition Similarly Plastics Services expanded in Broxbourne catchment areas using Cheshunt Clinic? Reputation and choice improvement Expand market Extra income/profit Additional car parking at Lister planned as commercial proposition Improves patient and staff access Improves reputation and choice Explore with PCT opportunities to provide managerial services to community services developing on QEII site Explore expansion of complex Orthopaedic and Private Patients work at QEII site as profit making initiatives. Renal Expansion Phase 2 completed providing additional bespoke facilities/capacity Will employ specialist nurse and related Trust staff effectively Generates managed service income for Trust Uses existing capacity effectively Adds to Trust profitability Offering new home dialysis service ahead of other local providers Improves joined up services Extra income/profit Extra income/profit Expanded range of private and specialist services Reputation and quality improves Extra income/profit Refurbishment of surgical beds on Lister site to allow centralisation to support ISTC Improves quality Improves reputation and choice 5

6 2010/11 Actions Impact Outcome Population growth continues, but Improves access Trusts reviews geographical flows following opening of: Car Park ISTC New Women s & Children s New Cath Lab Provides State of Art facilities Surgical Services consolidation on Lister site (except complex Orthopaedic as above) Improves quality Generates rationalisation Quality and reputation improves Improves competitiveness and income Contributes to efficiency requirement Strategic vision enabled for provision of Health Services in Hertfordshire PCT/Urgent Care Centre complete on Lister site allowing centralisation of A&E services on Lister site Improves quality Improves efficiency particularly in use of medical staff.) Contributes to efficiency requirement through savings released Trust reviews emergency theatre requirements following surgical transfer to ISTC Improves efficiency Trust EWTD compliant Transfer of out patient work to community settings complete Specialist staff will provide more local services to community Improves quality 2012/13 Development of a new ward block on Lister site will facilitate final elements of consolidation and generate significant savings in running costs and other overheads at QEII site. Improves quality Significant improvements in efficiency: substantial savings released on closure of second site. 6

7 PROSPECTS FOR 2008/9 Both National and SHA Planning Guidance for 2008/9 has now been received. The documentation is extensive and includes a national standard contract for use between all PCTs and Trusts, including Foundation Trusts (to be adopted when existing contracts expire). Key aspects include: National and local priorities for 2008/9; Tariff and uplift factor including efficiency requirements; Contract issues. The 2008/9 NHS Operating Framework sets out goals for the next 3 years in relation to both specific improvements to services and business conduct. A list of indicators or vital signs across a range of services are being developed to monitor progress and enable partnership working between PCTs and LAs to deliver joint outcomes through Local Area Agreements (LAAS) and PCT operational plans. The Darzi Review continues to set the vision by focusing relentlessly on improving the quality of care. National Priorities for 2008/9 5 Key areas for PCTs to progress by working with providers: Improving cleanliness and reducing HCAIs; Improving access through achievement of 18 weeks wait times and improving access to GP services (including evenings and weekends); Keeping adults and children well, improving their health and reducing health inequalities; with particular action in cancer, stroke, children s & maternity services. Improving patient experience, staff satisfaction and engagement; Preparing to respond to emergencies eg flu pandemic. Local Priorities In addition to these national priorities, PCTs are required to set local improvement plans for areas of concern identified through consultation with local populations, partners and Joint Strategic Needs Assessment (JSNA). A range of services are referred to including equality, mixed sex accommodation, diabetic retinopathy, dementia, end of life, disabled children, mental health and learning disabilities. Choice, World Class Commissioning, Practice Based Commissioning, Specialised Services Commissioning are all identified as key enablers together with the introduction of a National Contract. 7

8 The National Contract Contacts will need to be signed by 28/02/2008. Included are nationally mandated sanctions as follows: Breaches of the 18 week target: a financial adjustment of 0.5 per cent of contract income for every 1 per cent by which the 18 week target is breached, up to a cap of 5 per cent of elective income or 2 per cent of contract income, whichever is less; Inappropriate excess activity: non payment for activity which has breached an agreed prior approval scheme, or has breached an activity management plan, etc; Failure to provide required information: temporary withholding of 10 per cent of the monthly contract value until the required information is provided; Breaches of the C difficile target: a financial adjustment of 0.2 per cent of contract income for each 1 percentage point by which the target is under achieved, up to a cap of 2 per cent. High performing providers will be exempt, so long as they maintain current performance. 2008/9 FINANCIAL REGIME Chapter 4 of the NHS Operating Framework for 2008/9 sets out aspects of the financial regime and confirms the underlying principles as stated in 2007/8 of transparency, consistency, independence and fairness. Allocations PCTs will receive an increase of 5.5% in revenue allocations in 2008/9. Allocations are announced for one year only and reflect the Comprehensive Spending Revenue (CSR) Commitment to 4% real growth over the next 3 years. RAB Adjustments Trusts will no longer have income adjustments caused by the RAB (Resource Accounting & Budgeting) regime: Consequently over or under spends will affect the balance sheet, but will not be carried over into the following year. However, until NHS Trusts become FTs, responsibility for any surplus or deficit will need to be agreed within the SHA s Plan. Payment by Results 2008/9 Tariffs are confirmed as previously road tested, assumed to be broadly neutral to this Trust. 8

9 The uplift is net 2.3%, which includes the efficiency requirement of 3% as follows: Breakdown of 2008/09 Tariff Uplift 2008/9 over 2007/8 baseline m % Assumptions Baseline 59,540 Increase in pay and prices Pay 1, Pay settlement in line with DH recommendation to the Pay review Bodies: 1.5% Doctors and Dentists and 2% NHS PRB. Also include pay drift and staging Non pay inflation GDP deflator at 2.75% Drugs Includes NICE Clinical Negligence Forecast local contributions Revenue cost of capital PFI; depreciation; cost of capital Gross pay and price 2, Efficiency 1, Assumes 3.0% efficiency Net pay and price 1, Quality and reform To cover costs of tackling HCAI, pay reform/legislation, staff security and local cost of delivering the IM&T programme. Overall 2.3 Figures may not sum due to rounding Trusts have to submit activity data monthly, and the information supplied as of 30 days after the end of the month will be the basis for payment reconciliation. Efficiency 3% cash releasing efficiency savings are required in 2008/9 and in each of the next 2 years of the Comprehensive Spending Review (CSR). An NHS led working group has been reviewing and developing strategies for sustainable future efficiency delivery and will report in early

10 The Trust s Efficiency Requirements On the Trust s current relevant income base of 225m, a 3% efficiency requirement translates into 7m savings pa. This is obviously challenging coming on top of the work done over the past 2 years to recover the deficit position. The Trust will outturn 2007/8 in recurrent surplus (min 3m) but there are real service development pressures needing funding in 2008/9, not least of all commitments made to HCAI prevention. What does this mean to the Trust? Applying the net uplift factor of 2.3% to an income base of 225m provides 5.175m new funds. Requirements are: m 55m Doctors 1.5% = m Other 2% = m Non 0.5% = In addition, 2007/8 pay was abated to 1.9% in year and will need a further 0.6% funding in 0.72m. This analysis makes no allowance for development proposals, for which the Trust would have to use it s recurrent surplus. A major contribution to efficiency would be to secure from the PCT improved funding for the block contracts. The following section sets out further detail. PCT Block Contract At the time of the introduction of national tariff prices there remained a number of services commissioned by the PCTs for which no prices existed. The funding for these was grouped into a block contract, which then over the years only attracted inflation uplifts. The Trust gave notice to the PCTs last year (as required by the PBR Code of Conduct) that it was seeking to unpick the block based on a reassessment of the actual cost of running the services included in the block contract. 10

11 Through the 2008/9 PCT Contract negotiations, a successful outcome has been secured by the Trust as follows: Service running costs based on: m Trust reference 2008/9 prices 52.1 (i) National average reference costs 52.5 (ii) Indicative tariffs were available 53.5 (iii) Indicate: Trust s reference costs (i) less than other relevant benchmarks (ii) + (iii) Current Funding 2008/9 prices 45.7 (iv) Funding Gap 6.1 (iv) (i) Adjustment to reflect additional activity undertaken between 2007/8 reference cost base and 2008/9 estimated 3.1 Revised Funding Gap 9.2 PCT offset funding for IT etc Agreed Funding Gap Final funding gap agreed with PCT to be paid to the Trust as follows: 2008/ / Schedule A included in the Technical Annex gives full details. Directorate Targets In light of the above and following Board discussion, a realistic target for all Directorates for 2008/9 is proposed of: Overall budget reduction of 2% Of which, 0.5% relates to extra activity at no additional cost 0.5% reflects improved working processes, using IT better, etc. All Directorates have been asked to focus on a Trust wide initiative to reduce the current spend on bank staff and overtime, currently estimated at 6m per annum in 2007/8. Vacancies are currently high at overall 10% and this clearly creates difficulties in covering shortterm sickness and other absences. An ambitious recruitment drive is proposed and Directorates will be encouraged to recruit up closer to funded establishments. This should mean that the day to day absences can be more easily managed without the current extensive use of bank staff. Consequently savings can be used by Directorates towards their efficiency targets of 2%. 11

12 2008/9 Proposed Savings/CIPs In summary, the following are proposed for 2008/9: Original Revised m m m Reduce vacancies and use of bank staff and overtime Reduce premium rate working Review medical staff rotas etc IT benefits realisation/process reviews Directorate specific Better Buying via Procurement Hub Increase in PCT block contract income to better reflect actual costs Total Detailed proposals have been confirmed with each Directorate and startpoint budgets have been adjusted accordingly. 12

13 THE 2008/9 FINANCIAL PLAN The 2008/9 Financial Plan brings together: 2008/9 expected Trust income recurrent and non recurrent, including the outcome of the unpicking of the current block contract with the PCTs, as set out above. 2008/9 expected Trust spend, including inflation costs, efficiency/cips and Directorate budget requirements to deliver the activity assumed in the startpoint income. 2008/9 agreed and proposed new service developments. The balancing of these 3 components defines the Trust s financial plan for 2008/9. The Trust is required to make a surplus of, at least 1.5m, in 2008/9 in order to repay the 5 year cash loan of 7.8m agreed in 2007/8. In terms of overall approach, the sequencing has been: Finalise income assumptions with PCTs based on expected patient activity. Complete contract schedules and sign by 28 Feb 2008 complete, contract signed 7 March 2008; Work with Directorates to refine budget proposals and detail of CIPs etc, again by end Feb 2008 complete, relevant schedules included in Technical Annex; Develop service line reports to summarise 2008/9 startpoint profitability across each Directorate and sub speciality complete, relevant schedules included in Technical Annex; Chief Executive to sign off Directorate budgets with Clinical Directorates at March 2008 Performance Review Meetings. Clarify plans and final business cases in relation to major investment proposals from Directorates including: Cardiology: business case identifies significant income over expenditure adding to the current profitability of this service; Critical Care: business case identifies both requirement for additional capacity which will be funded on agreed cost per case basis and opportunities to repatriate Herts cases; Radiology: PCTs requesting additional non obstetric ultrasound thereby creating income source. Oral Max Fax: business case identifies significant income over expenditure by increasing day case procedures. 13

14 New Service Developments The First and Second Cut papers to the Board (Finance Committee) set out progress with the stages identified above. This final Third Cut continues to confirm an excess of income over expenditure of 2.00m (surplus), excluding the Cardiology, Critical Care and Radiology Business cases, as follows: 2008/9 Total estimated income /9 Total estimated expenditure including information and other specific reserves /9 Planned surplus 2.1 m Once complete, the 4 new business cases identified above (and possibly other new proposals) will need Board approval. All have the support of the PCTs and consequently in all cases, costs identified will be (at most) matched by additional income, plus a contribution to overheads and profit. Most will become operational during 2008/9. Any set up costs in 2008/9 can be primed from the non recurrent carry forward from 2007/8. Further new service developments currently being explored with the PCT include: Expansion of Stroke Services; Expansion of Orthopaedics to reflect local demand with potential to include Specialist Spinal Work (dependent on increase in Critical Care/ITU capacity); Expansion of Plastic Surgery, including Outreach Clinics; Trust based Intermediate Care/ step down beds to alleviate delayed discharges. The following sections set out the detail of the various components of the 2008/9 Financial Plan: 2008/9 Estimated Income The attached schedule B sets out in some detail the activity proposals for 2008/9, which in have now been agreed with the PCTs. Applying the 2008/9 tariff prices to this activity calculates the PBR income. To this, as the schedule sets out, can be added the other components of the Trust s income. Detailed modelling is in hand to refine the implications for the 18 weeks targets. As set out above, the total income estimate now includes 4.2m to reflect the first phase contribution towards the now agreed revision to the block contract funding. The second phase is agreed for 2009/10 as set out above, together with a commitment to transfer the GP access Pathology and Radiology services to a cost and volume basis. Given the recent steep growth in GP diagnostics, this should secure further funding for the Trust. This aspect is of particular relevance to the Radiology/CT Scanner business case mentioned above and to emerging proposals relating to Pathology Services. 14

15 The Trust s estimated 2008/9 income, compared with the plan for 2007/8 is shown below. Activity levels in 2008/9 will be in line with 2007/8, and the 14m increase in funding can broadly speaking be rationalised as follows; 2.3% inflation uplift (net of 3% savings target) equals 6m, 2007/8 over performance versus plan is 3m, non recurrent funding from the SHA is 1m and additional non PBR service funding makes up the remaining 4m. 2007/08 Plan 2008/09 Plan % Value Activity Value Activity Value Change Outpatient First Attendances 84,556 13,075 82,906 13, % Outpatient Follow up Attendances 140,130 10, ,514 12, % Nurse Lead Attendances ,498 1, % Ward Attendances 1,682 21,909 2, % Outpatient Procedures 458 3, % Total Outpatients 26,626 30, % Elective Admissions incl. Day Case 34,724 39,295 31,674 37, % Emergency Admissions 40,766 65,373 40,805 67, % A&E Attendances 129,716 9, ,095 10, % Excluded Drugs 1,402 1, % Non PbR Services 44,010 50, % Total SLA excl Mount Vernon 186, , % Mount Vernon Non PbR Services 5,311 6, % Mount Vernon PbR Services 25,620 25, % Total Mount Vernon 30,931 32, % Total SLA 217, , % Market Forces Factor 26,610 27, % Hosted Services 3,500 3, % SHA Non recurrent Funding 1,000 External Training Funds 11,506 11, % R&D Funding 1,975 1, % Grand Total Income 260, , % SLA Breakdown by PCT (exlcuding MV) E&NH PCT 155, , % West Herts PCT 9,655 11, % Bedfordshire PCT 15,579 18, % Luton PCT 3,290 3, % West Essex PCT % NCA 1,807 2, % Total SLA excl Mount Vernon 186, , % Activity levels from patients living in West Hertfordshire and Bedfordshire have increased substantially in 2007/08, adding further to the increases summarised above. Clearly, the Trust is a local hospital of choice and activity continues to increase. Future prospects thereby look good, all of which is in addition to the further 4m in 2009/10 for Phase 2 of the block contract funding. The next task is to capture these refresh income assumptions in the 7 Year Financial Plan as modelled in the LTFM. 15

16 Non recurrent Income The income analysis above includes 1.0m non recurrent funding; spend against this funding has already been included in startpoint budgets as follows: Business Support 000 FT Application 170 IT/CSC Programme Manager 150 Rural Transport 75 Childcare 85 Coding support / Clinician Engagement 50 Pump Prime Business Cases: OMF 1 wte staff grade 80 Chaplains 20 Radiology 200 Critical Care 1 wte Consultant for rota compliance In addition, the Trust expects to carry forward a non recurrent balance into 2008/9 from 2007/8. This figure should be (at least) 2m, but this cannot be confirmed until the 2007/8 Accounts are complete and audited. 2008/9 Estimated Expenditure Clearly, Directorate budgets need to provide adequate resources to allow delivery of the agreed activity targets set out in the 2008/9 contract with the PCT. The income so generated by each Directorate should then (at least) make a contribution to overheads and ideally produce a Directorate surplus. This is the essence of service line reporting allowing Directorates to manage their service line or production area. The startpoint for 2008/9 discussions with Clinical Directorates is a firm understanding of changes in activity relative to performance and spend in 2007/8; further refined for relevant Directorates to ensure delivery of the 18 weeks wait time targets and milestones in 2008/9. Those discussions will necessarily include Directorate proposals to deliver the agreed 2% efficiency, as agreed at the January 2008 Finance Committee, and set out in previous sections. Particularly, Directorates are exploring the proposal to reduce the current level of vacancies through permanent appointments and thereby reduce the reliance and spend on bank staff and overtime. A comprehensive Trust wide recruitment drive is planned to support this proposal, again, already referred to above. 16

17 In headline terms, the activity plan is broadly in line with that delivered in 2007/8, consequently an understanding and analysis of overspent budgets in 2007/8 helps define activity related spend requirements in 2008/9. Such overspends have been challenged as Directorates can now plan to deliver that activity in a better organised way thereby avoiding premium staff payments and other high cost approaches. Startpoint budgets have also been updated to reflect developments agreed in 2007/8, particularly in relation to HCAI. Again this process of challenge needs to continue to ensure cost effective spend. The impact of inflation requirements and the national efficiency target are also included in the full analysis of 2008/9 budget requirements set out in the Schedule C. In summary, the Trust s estimated 2008/9 spend is as follows: /8 Recurrent Startpoint including Directorate cost pressures 257, /9 New Investment to reflect: income changes 2,446 additional activity 4,927 agreed service developments: HCAI 1,649 Other 958 9, /9 Inflation & other reserves 7,223 CIPs/Efficiencies (2000) Grand Total Expenditure 273,081 Schedule C gives further details by individual Directorates together with specifics of the new investment, which include in total 77 wte new posts for nursing 1.7m. 17

18 Comparison of Income with Expenditure The preceding analyses of 2008/9 income and expenditure can be summarised as follows: m m m Income 2007/8 Startpoint /9 Increases for: growth in activity 3 growth in block services 4 inflation (net of savings) 6 non recurrent /9 Total 275 Expenditure 2007/8 startpoint /9 Investment growth in activity (includes growth in 2007/8 now funded) HCAI and other priorities: recurrent 2 non recurrent 1 inflation and other reserves (net of savings) /9 Total /9 Planned Surplus 2m Confirmation of a 2m planned surplus in 2008/9 will ensure that the Trust has sufficient cost to repay the DoH loan (2008/9 is the second year of the five years repayment period). Depending on the 2007/8 actual year end out turn, the Trust will also carry non recurrent funds into 2008/9. As set out in the report, the cut does not identify funding for the major new service developments identified for Cardiology, Radiology, Critical Care, plus new emerging proposals for Pathology. The individual business cases will need to demonstrate profitability to the Trust by, at least, matching additional expenditure with income. Those business cases are due to be approved at the April 2008 Board meeting and will be implemented during 2008/9. Non recurrent funds (including capital) have been identified for any pump priming costs in year. 18

19 2008/9 Service Line Budgets Clearly success in delivering the 2008/09 Finance/Business Plan will rely on effective monitoring and management by Directorates. Directorates should increasingly be seen as key business units through which the Trust delivers the components of its financial and service plans. All Clinical Directorates are headed by a Clinical Director, who is supported by a General Manager and Assistant, together with dedicated HR, Finance and Information staff. The Corporate Team meets monthly with each Directorate in a structured and formal performance review process, identifying issues and agreeing constructive actions as necessary. Through this process, Directorates have a good understanding of their spend/budget control in relation to delivering performance targets/sla contract activity and other national requirements. As already stated, this is the essence of Service line management and reporting. The format of SLAs is now embedded and this linked information has been influential in identifying profitable business opportunities for the Trust in 2008/9. The 2008/9 start point income and expenditure estimated for each Directorate set out in earlier sections of this report, and in detail in the Technical Annex, have been summarised into detailed Service Line Reports (SLRs) at set out in Annex D. In summary the position is as follows: 2007/ / /10* Clinical Directorates Contribution Net Surplus Contribution Net Surplus Contribution Net Surplus (Deficit) (Deficit) (Deficit) Emergency 15,434 4,733 17,652 5,265 17,865 5,478 Care Speciality (1,591) (3,084) 420 (1,309) 688 (1,041) Medicine Cardiology 2, , , Renal 4,021 1,391 2,308 (737) 3, A&E 1,974 (13) 1,611 (689) 1,655 (645) Total Medicine 22,260 3,751 23,990 2,566 25,587 4,163 General Surg, Urology & 8,851 1,508 9,997 1,497 10,198 1,698 Gastro Orthopaedics 5, , , Surgical 4,048 (908) 5,586 (150) 5, Specialities Total Surgery 18,776 1,309 21,614 1,396 22,237 2,019 Obstetrics & 5,152 (3,750) 8,242 (2,062) 8,691 (1,613) Gynaecology Paediatrics 668 (2,545) 2,044 (1,675) 2,569 (1,150) Total Women's & Children's 5,820 (6,295) 10,286 (3,737) 11,260 (2,762) Critical Care 2, (1,152) 1,374 (451) Mount Vernon Cancer 5,467 3,869 5,736 3,886 5,736 3,886 Services Oncology & 602 (1,221) 1,228 (883) 1,432 (678) Haematology Total Cancer 6,069 2,648 6,964 3,003 7,168 3,208 Grand Total 55,131 2,042 63,526 2,076 67,626 6,176 *Shows the impact of the additional Non PbR block funding due in 2009/10 19

20 In 2008/9 all services make a contribution to overheads and overall profit is similar between the years. The various presentations or SLR toolkit of this information has been agreed by the F&P Committee, and reports are routinely included in the monthly Finance Report to the Board. Already service line reporting is proving to be a powerful focus of discussion for the Board. It is no longer sufficient to confirm that the Trust will deliver a surplus of 2m in 2008/9, all services are expected to make a contribution to overheads, and potentially all services should be planning to achieve break even or better. This will happen in aggregate across medicine and surgical specialities, but clearly information systems need to better reflect the various sub specialities. Some services will improve once the balance of the block constraint is received in Even so, the Board will seek to systematically review each service during 2008/9, looking for efficiencies to further improve profitability. Risks to the 2008/9 Financial Plan The 2008/9 Financial Plan is based on a series of working assumptions that have been set out in the report. Work continues to validate those assumptions and to assess their likely impact. This sensitivity analysis is a key feature of the LTFM and an effective method of determining financial consequences. As is the convention, all estimates of income and expenditure are shown on a worst case basis. Broadly, the degree of risk in the 2008/9 startpoint is significantly lower than at the start of 2007/8; the Trust is in recurrent surplus of 2 to 3m and has successfully negotiated a further 9m recurrent funding over the two years 2008/9 and 2009/10 for the block contracts. CJPs have already been agreed with Directorates and included in 2008/9 budget start points. Risks do remain, around performance targets, particularly 18 weeks, A&E and Cancer. New business cases have yet to be fully finalised and are primed in the new year with expected nonrecurrent funds. It is proposed therefore that a further paper is brought to the April 2008 meeting more fully explaining the potential impact of the various risks identified. If possible, this will include an FT Financial/Risk matrix for the 2008/9 start point. 20

21 SUMMARY AND RECOMMENDATIONS After two tough years of turnaround, the Trust has now fully recovered its financial position. The remaining historic debt will be repaid in 2007/8 as the target surplus will be achieved. As the analysis sets out, the Trust continues to be a local hospital of choice and activity continues to increase. This creates challenges in terms of workforce, capacity and targets, including 18 weeks, A&E waits, cancer waits, etc. Investment to support this on going level of activity is therefore proposed as set out in the report. Beyond this, the Trust has secured fair funding for the block contract services, attracting 9m new funds payable in equal instalments, 2008/9 and 2009/10. Confidence is therefore rising in the Trust and already Directorates have identified clinicallyevidenced, profitable service development proposals, the business cases for which will be reviewed in April This reflects the growing impetus of service line management and reporting across all Clinical Directorates. The remaining task is now to restate the Trust s 7 Year Financial Plan and to incorporate into the LTFM the 2008/9 position as set out in this report along with the Delivering Quality healthcare in Herts (DQHH) proposals already agreed by the Board. RECOMMENDATIONS In summary, the Financial Plan identifies a 2m surplus in 2008/9 and further confirms that all service line budgets will deliver a contribution to overheads and most will also deliver a profit; As a consequence the Board is asked to: Approve the 2008/9 Financial Plan; Receive a supplementary report in April 2008 setting out further details of: risks to the 2008/9 Plan; business cases for major new service developments identified in the report; impact of the 2008/9 plan on the 7 Year Financial plan as modelled in the LTFM. Wendy Hull Director Of Finance 18 th March

22 Technical Annex A Block Contract Service Details, costs and growth in activity B Income Analysis by PCT by Directorate by Activity Type C Expenditure Analysis by Directorate by contribution by surplus/deficit by comparison, 2007/8 and 2008/9 D Service Line Analysis by Directorate by contribution by profit/loss by comparison with last year 22