NHS LANARKSHIRE FINANCIAL PLAN 2009/ /14

Transcription

1 NHS LANARKSHIRE FINANCIAL PLAN 2009/ /14 1. Purpose of Report 1.1. This paper seeks Board approval for the NHS Lanarkshire Financial Plan for the five year period 2009/10 to 2013/ Overview 2.1. In 2008 the Board approved a five year financial plan with a substantial programme of forward investment. Under this plan, Primary care, community and mental health services would be enhanced through the development of 8 new community facilities. Funding was set aside for national and regional initiatives including an HPV vaccination programme, a bowel cancer screening programme, enhanced cardiac services through optimal reperfusion and continuing the successful health initiatives tested through the Keep Well pilot. In recognition of the changing shape of the medical workforce, 4.0m was set aside over three years to maintain service cover and develop new roles such as advanced nurse practitioners in critical care. Over 7.5m new funding each year was set aside for introducing new drug treatments or increasing the volume of prescriptions. A range of smaller developments were also supported An additional 2 building projects (the Diabetic Centre at Monklands and the Community Clinic at Douglas Street, Hamilton) were added to the plan during Of the 10 planned premises developments, 8 are now either open or plans are well under way. All other service developments are either in place or on a firm implementation path These developments were to be funded from income growth (primarily from funding due to Lanarkshire under the NRAC allocation formula), from funds the Board had already accumulated and from cash released from internal efficiencies In refreshing this plan for 2009, cost increases have been reflected for energy prices, for new pay deals and for the Board s contribution to the NHS risk sharing scheme for clinical and other risks (CNORIS). Assumptions round future income growth have been shaded downwards. Recognising all these aspects has put considerable strain on the Board s financial framework The 2008/09 approved investments remain substantially intact within the plan, with minor adjustments for costs, timing and new funding sources. A moderate amount ( 0.875m) has been added to the plan during the year in the Board s high priority 1

2 areas such as Healthcare Acquired Infection, Patient safety, Neonatal care, sexual health and IM&T infrastructure. The costs of new regional and national developments such as cochlear implants, increased blood product costs, and ovarian cancer service enhancements have been built in Achieving this has required the explicit cash releasing efficiency target to be raised by 0.6m to 3.9m in year 1. This requires to be sustained over the 5 years of the plan. It also requires the divisions to absorb internally the cost pressures arising from incremental progression on the pay scales and from increased supplies costs. 0.5m over 2 years has been kept in the plan to support the roll out of LEAN techniques to help the divisions achieve this. The 1.0m overspend on out of region mental health services has to be managed out by 2010 when the Rowanbank and local facilities are operating as intended. All additional activity to meet access targets, including that for Lanarkshire residents referred to Glasgow, has to be met from within the waiting times allocation received by the Board In view of the challenge presented by the above, the Board s capacity to approve investments beyond those already in the plan is limited at this stage. All cost estimates will be kept under constant review and resource released through more efficient working will be tracked throughout the year. 3. Deployment of 2009/10 Uplift 3.1. The table overleaf provides a summary of the additional resources available for 2009/10 and their proposed utilisation All Scottish NHS Boards received a minimum uplift of 3.15%. NHS Lanarkshire received a further 0.37% on top of this towards the implementation of the NRAC recommendations. In total this equated to an additional 26.4m funding, of which m represents the general uplift and 2.779m the NRAC parity adjustment. This brings the baseline allocation for 2009/10 to 777.4m Other resources covers 2008/09 budgets or reserves which have been judged available for reinvestment, one-off allocations and the non recurring saving from the reduction in the superannuation contribution level Appendix A summarises the overall plan for the 5 year period, highlighting the brought forward surplus, a breakdown of the additional resources of funding, planned utilisation of funding, and the CRES target for each year. 2

3 Financial Plan 2009/10 Recurring Non recurring Total m m m Opening surplus Additional resources Uplift NRAC Other Utilisation of resources Pay Non Pay Drugs Local Priorities National / Regional Priorities Other CRES Forecast Surplus 0.4 (3.2) (2.8) 4. Planning Assumptions 4.1. SGHD Uplift The formally notified allocation has been included in the plan for 2009/10 as described above. Thereafter, the plan assumes a standard uplift of 3.15%, and 3.0m per annum toward implementation of NRAC over the period 2010/11 to 2013/14. The affordability of the financial plan, in particular the ability to maintain recurring balance, is predicated on the level of funding assumed through NRAC Expenditure - Uplifts Pay issues A net pay increase of 2.87% in year 1 and 3% in future years has been assumed. This is to cover cost of living rises (estimated at 2.58% for 2009/10) and the ongoing impact of Agenda for Change or other pay deals. 5 years into the Agenda for change deal and with slowing staff turnover rates the impact of incremental progression up the pay scale is expected to be felt more acutely from 2009 onwards. The impact is expected to be managed within the divisions although once the budgets have been rebased 3

4 for the cost of living rise and the Agenda for Change reviews have been concluded this can be reassessed The Agenda for Change review process is expected to conclude in 2009/10. An assumption has been made that the outcome of reviews will remain in line with current trends across Scotland. Recurring funding has been allocated to meet the impact of this In addition, funding has been set aside for the impact of the new contract for Staff Grades and Associate Specialists. Previous estimates have been reviewed with the potential recurring impact now assessed at 1.9m m has been built into the plan to cover the estimated impact of a national pay agreement to fund Specialty registrars travel costs from their base whilst on rotation through different Boards. This deal is due for renegotiation in 2009 and any extension of the training grades to which the deal applies will increase costs. Non pay uplift A supplies uplift of 1% has been applied to non pay budgets. Specific funding has also been allocated to cover the impact of inflation on the PFI contracts, energy costs, the introduction of the new national uniform and the additional revenue costs associated with investment in new equipment Energy budgets have been increased by 1.5m to reflect current estimates of the impact of global price changes. These will be reviewed in light of national negotiations on prices as we progress through 2009/10. Drugs Based on current spending trends and the anticipated costs of new drugs across both primary and secondary care, a total of 7.6m has been set aside for further investment in hospital and GP prescribing The 3.89m increase in GP prescribing budgets represents a 3.61% increase in the 08/09 budget. Included within this is 4% expected volume growth ( 3.5m), 1.0m of anticipated savings and 1.0m to redress a cost pressure arising from a national allocation adjustment in 2008/ The 3.3m uplift proposed to the hospital drugs budget represents a 15.3% uplift as there are major additional costs anticipated for Cancer, Anti TNF and Ophthalmic drugs. 4

5 4.3 Expenditure NHS Lanarkshire Local Investment Acute Each year, from 2009/10, the plan allows for an additional 0.5m investment in acute services. This will be used to part offset the rising consumables costs in Laboratories and theatres which in 2008/09 are forecast to outstrip budget by 1.5m each Over the last 4 years the number of investigations per annum carried out by the laboratories has increased by 40%. Since 2005/06 the number of tests per annum increased from 11 million to 14.3 million (30%). Over the same period the budget has only received an uplift of 16%, 3% of which came from the central allowance for price inflation and the rest from other sources The theatre consumables budget has been overspent since Since then there has been a 2.2m (31.6%) increase to the budget to try to address the historic problem, to fund increased activity to reduce waiting times and to enhance decontamination practices. However costs continue to outstrip the budget. In % (357) more procedures were performed laparoscopically than in previous year. These present benefits to the patient in terms of recovery time and in length of stay. However the consumable costs can be over 700 per procedure greater than traditional surgery. Over the period it is estimated that over 0.5m of the rise in cost can be attributed to this source. Price increases beyond the 1% inflationary uplift and increased vascular surgery activity are also factors Since 2005/06 the Acute division have been managing these pressures internally. The phased investment proposal in the financial plan relies on them continuing to do so for some time. This will become increasingly difficult with incremental draft and medical vacancies being filled The final cost of the negotiated settlement to extend Agenda for Change conditions to the PFI contracts was 0.55m more than initial estimates and this has been covered in the plan. This was partly offset by a 0.3m benefit in the main contract uplifts due to lower RPI. Local Investment Primary care The 0.5m general provision for primary care premises in the previous plan has been used to cover the running costs of the new Douglas Street Community Clinic in Hamilton which is expected to open in early 2009/10. It has also been used to offset small increases in the capital charges for the 5

6 new Bellshill Community Health Clinic. An additional 0.5m per annum remains in the later years of the plan. Capital Programme The costs and timing of the programme previously approved by the Board have been refined but the programme remains intact. Full business cases are expected for the Airdrie Health Centre and Acute Mental Health during 2009/10. Investment in Staffing The 1.3m set aside in the 2008/09 has been fully committed to support the reshaping of the medical workforce and sustaining rotas. Modelling work on a specialty by specialty basis is ongoing. There is no reason to believe the 2009/10 and 20010/11 step costs will be any less than the 1.0m and 1.2m budgeted for m was set aside previously to introduce Advanced nurse practitioners in critical care. Mental Health The 2008/09 financial reports highlight underspends within mental health due to the time taken to fill posts as the transition is made to new service models. These are expected to reduce during 2009/10. Funding has been set aside non recurringly to cover the overspends in out of region referrals for eating disorders and forensic mental health An additional recurring growth in funding of 0.5m has been set each year from 2010/11 onwards in addition to the revenue set aside to support the capital investment programme in mental health facilities. Long Term Conditions The Board has been notified of additional allocations of 1.0m in 2009/10 and 1.9m and 2010/11 to support the continuation of the Keep Well initiative. 1.0m recurring investment for support for long term conditions has been set aside in the financial plan from 2011/12. 6

7 4.4 National & Regional Priorities 5. CRES A share of the proposed spend of new monies is linked with nationally or regionally agreed priorities. This includes the Bowel Cancer Screening Programme; the ongoing development of the COPD redesign pilot; additional posts to support the HAI agenda; Gynaecology Oncology services within Glasgow and the final tranche of investment required to support the Optimal Reperfusion service across the West of Scotland. 5.1 Delivery of a CRES target across the organisation is a key component in achieving a balanced financial plan. There is an inevitable relationship between the funding of developments/service pressures and the delivery of savings. It is essential that the 3.9m recurring savings sought in 2009/10 are released from existing budgets. 5.2 In addition to the annual targets devolved to each division, prescribing efficiencies are already netted off the drugs budget uplift and service redesign, such as the mental health strategy, seeks to make more effective and efficient use of existing resources to deliver better services. Taken together all these efficiencies will make up the 2% national Efficient Government target set by SGHD which equates to 15m for 2009/ Cumulative Position 6.1 The plan requires the use of the 14.8m surplus over the next 3 years. It covers the up front costs of invest to save projects such as LEAN process redesign and estates rationalisation. It bridges the double running costs of new services and meets other one off costs such as the implementation of a new patient management system. 7. Risks 7.1 Whilst every effort has been made to ensure all likely cost pressures and national, regional and local priorities have been incorporated into the five year plan at this time, a number of risks remain. These include Capital investment programme - Transitional / double running costs - Revenue impact of capital investment - Timing of developments New Children s Hospital in Glasgow, assumed as cost neutral The cost pressures on consumables in laboratories and theatres 7

8 The level of waiting times funding against the work involved meeting new targets Agenda for Change Pay and prices, in particular new drugs and utilities Impact of Modernising Medical Careers and the new contract for Non Consultant Career Grade doctors Ongoing achievement of CRES/Efficient Government targets Uplift/NRAC funding Impact of IFRS, particularly in relation to the accounting treatment of PFI schemes Release of delayed discharge funding from the local authorities 7.2 Appendix B sets out a high level risk assessment for these issues. Many of these are common across the NHS in Scotland and it is essential that we work closely at a local, regional and national level to mitigate these where possible. 8. Conclusion The Board is asked to approve the financial plan for 2009/ /14, noting Recurring balance is maintained throughout the five year planning period, with a recurring surplus of 1.2m at the end of 2013/14; In 2009/10 2.8m of the brought forward surplus will be used to support non recurring initiatives in the Board s plan. This will reduce the cumulative surplus to 12.1m and will mean a technical in year deficit of 2.8m will be recorded for 2009/10; The remainder of the cumulative surplus will be fully utilised within the 5 year planning period; NRAC funding of 3m is required annually from 2010/11 in order to sustain recurring balance and to deliver the planned investment programme. Laura Ace Director of Finance 23 March

9 Appendix A NHS LANARKSHIRE DRAFT FINANCIAL PLAN 2009/ / / / / / /14 Rec Non-Rec Total Rec Non-Rec Total Rec Non-Rec Total Rec Non-Rec Total Rec Non-Rec Total m m m m m m m m m m m m m m m Recurring Surplus / (Deficit) brought forward ADDITIONAL SOURCES OF FUNDING Scottish Executive Uplift Arbuthnott / NRAC HCH Allocations - Sexual Health Smoking Cessation Keep Well & Anticipatory Care HPV Vaccination Other Sources - Re-investment of existing budgets - various Superannuation Total Additional Funding Available PLANNED UTILISATION OF FUNDING Uplifts - Pay (17.6) (17.6) (15.3) (15.3) (15.7) (15.7) (16.2) (16.2) (16.6) (16.6) - Non Pay (4.9) (1.0) (5.9) (3.9) (1.0) (4.9) (3.8) (1.0) (4.7) (5.2) (0.5) (5.7) (4.9) (4.9) - Acute Drugs / GP Prescribing (7.6) (7.6) (7.2) (7.2) (7.6) (7.6) (8.1) (8.1) (8.3) (8.3) NHS Lanarkshire - Acute Services (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) - Primary Care Services (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) - Revenue Consequences of Capital Programme (0.4) (0.8) (1.2) (1.0) (2.6) (3.6) (1.1) (2.3) (3.4) (2.1) (1.0) (3.1) (1.4) (1.1) (2.6) - Investment in Staffing (3.1) (3.1) (1.2) (1.2) National & Regional Priorities - Cancer Services (0.5) (0.2) (0.7) (0.4) (0.4) - Childrens Services (0.3) (0.3) - Health Improvement (0.1) (0.4) (0.5) (0.4) (0.4) (0.4) (0.4) - Healthcare Associated Infection (HAI) (0.3) (0.3) - HPV Vaccination Programme (0.1) (0.1) (1.0) (1.0) - Long Term Conditions (1.1) (1.1) (2.0) (2.0) (1.0) (1.0) - Mental Health (1.0) (1.0) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) - National / Regional Issues (0.9) (0.9) (0.5) (0.5) (0.9) (0.9) (0.5) (0.5) (0.5) (0.5) - Palliative Care (0.1) (0.5) (0.6) (0.5) (0.5) (0.4) (0.1) (0.5) (0.1) (0.1) Other - IM&T (0.3) (0.3) (1.5) (1.5) (1.5) (1.5) - Other (0.4) (2.4) (2.8) (1.4) (1.7) (3.0) (0.4) (0.8) (1.2) (0.8) (0.8) (0.8) (0.8) Total Additional Expenditure Commitments (37.0) (7.4) (44.4) (33.4) (9.6) (42.9) (32.9) (5.6) (38.5) (33.5) (2.3) (35.8) (34.1) (1.1) (35.3) CRES Target In year Surplus / (Deficit) 0.4 (3.2) (2.8) 0.0 (4.5) (4.5) 0.0 (5.6) (5.6) 0.4 (2.3) (1.9) 1.2 (1.1) 0.0 Cumulative position (assuming 08/09 c/f of m)

10 Appendix B NHS LANARKSHIRE FINANCIAL PLAN 2009/ /14 RISK ASSESSMENT Key Assumptions/Risks Resources. Reliance has been placed on the availability of additional funding from SGHD, with an assumed 3.15% increase per annum from NRAC. An assumption has been made that an additional 3m per annum from 2010/11 until the end of the five year planning period, will be recurrently available through the introduction of the NRAC formula. Pay Uplifts (including Agenda for Change and other associated pay issues). A basic pay inflation of 2.54% has been assumed, with a further 0.46% recurringly available to support the ongoing impact of Agenda for Change including incremental impact and unsocial hours. In addition, provision has been set aside for Staff Grade and Associate Specialists and Modernising Medical Careers. Prescribing / New Drugs. Work is ongoing through the local Prescribing Management Board to finalise estimates of likely spend on both GP and hospital prescribing spend in 2009/10 and beyond. Waiting Times. The ongoing delivery of waiting times targets is challenging. It is assumed that any investment will be fully funded from additional allocations received; this includes the funding Risk rating/impact There is a risk that the standard uplift applied throughout the five year financial plan is not confirmed by SGHD. For every 0.25% movement in standard uplift per annum, there would be a 8m impact over the five year financial plan. Any changes to the NRAC formula for other NHS Boards have a subsequent impact on the funding available for NHS Lanarkshire. If this funding does not materialise, this would equate to a reduction of 12m recurring funding over the five year plan. Provision has been made for succesfull appeals/reviews in 2009/10. A movement of 0.25% in overall pay costs equates to c. 1.3m per annum against the current pay baseline. There is always a risk that the financial provisions set aside in the plan may not fully cover the actual costs. A 0.5% increase in prescribing costs equates to c. 0.7m per annum at current budget levels. Any changes to the national targets and availability of central funding will have an impact on the overall position 10

11 required to support the NHS Lanarkshire share of the NHS Greater Glasgow and Clyde capacity plan, and the investment required to deliver the 31 day target for Cancer treatment, which had previously been assumed to be funded separately. Capital Investment Programme. Considerable work has been carried out during 2008/09 to take forward business cases and to firm up on the likley profile of capital invesment over the coming years. A number of FBCs are now approved and there is greater clarity over cash flow profiles for these schemes. However, timing issues and other uncertainties remain with a number of other projects and this affects the robustness of estimates included in the capital plan. In particular, work is ongoing to draft the Initial Agreement for the Monklands Hospital site. An initial assumption of 5m per annum has been included in the capital plan from 2010/11 onwards, however the level of investment required to meet statutory compliance alone is considerable. Further work is required through the IA / Business Case process. Impact of IFRS. The roll out of International Financial Reporting Standards across the NHS in Scotland will impact from 2009/10 onwards. As one of the key components of this is the accounting treatment of PFI and PPP hospitals, there is the likely to be an impact on the financial position within NHS Lanarkshire. CRES. A recurring target has been included each year. Other Non Pay. A high level of cost pressure is being managed within operational budgets, particularly in relation to laboratory and Infrastructure investment in Monklands Hospital is essential and the ability to deliver a carefully planned programme while maintaining services on an ongoing basis is critical. The financial impact will be considerable across both capital and revenue plans. In relation to those projects already underway, the current economic climate does not suggest there is likley to be high inflation across the construction industry and the use of framework agreements for a number of these brings greater certainty on prices. Initial modelling work has been undertaken to assess the financial impact of bringing Wishaw General and Hairmyres Hospital 'on balance sheet'. Any likely impact is assumed to be fully funded by Treasury. Delivery of recurring savings year on year is essential and can be seen as a trade off against the funding of premises developments and other service pressures. The two areas are not mutually exclusive and savings must be released from existing budgets to free up the funds for future investment across the system. Additional funding has been put in place for the laboratory and theatres costs pressures in particular. 11

12 theatres costs within the Acute Division (mentioned in 4.3) and on drugs, equipment, printing and stationery and telephones within the CHPs. Utilities. Work is ongoing to assess the impact of the recent price negotiations on the position for 2009/10 and beyond. The Acute Division and CHPs will continue to seek to manage any additional pressures beyond funded levels Close monitoring is required during 2009/10. Market conditions remain volatile. If prices had held at 2008/09 levels, there would have c. 4m cost pressure in this area. Negotiation at a national level across the public sector remains ongoing and the fall in oil prices will continue to impact on the potential costs for 2009/10 onwards. 12