The Royal Marsden. 2016/17 financial planning. Trust Board. March 2016

Transcription

1 2016/17 financial planning Trust Board March 2016

2 Overview Planning context Financial plan

3 3 Overview The Board reviewed the draft financial plan for 2016/17 at its February meeting with the draft plan then being submitted to Monitor. This paper provides an update on the plan reflecting the progress of the Trust s internal business planning process and for any external factors. It details the key planning assumptions and provides an analysis of the key financial risks and mitigating actions in relation to those risks. The detailed plan will be reviewed by the Audit and Finance Committee in early April ahead of the final plan submission to Monitor on 11 th April There are two sections within the report: 1. Planning context: this includes a recap of the requirements from the regulatory bodies (content and timeline) and our internal processes for planning; 2. Financial plan: this section covers an overview of the financial position with capital plan, movements from the draft plan alongside the underlying assumptions and risks.

4 Overview Planning context NHS Improvement requirements Internal process Timeline Financial plan

5 5 NHS Improvements requirements Foundation Trusts are required to submit or contribute to two separate but connected plans: A five-year Sustainability and Transformation Plan (STP), place-based and driving the Five Year Forward View. A one-year Operational Plan for 2016/17, organisation-based but consistent with the five year STP. The five-year STP is place based and driving delivery of the Five Year Forward View whereas the one-year Operational Plan for 2016/17 is organisation-based but consistent with the emerging STP. The Operational plan is consistent with requirements in previous years with a draft submitted on 8 th February and a final due on 11 th April. The STP is a new requirement on the system and RMH is contributing in the relevant localities, however there has been a suggestion about a national process for Specialist Trusts, yet it has not to date been finalised. As part of the 2016/17 financial settlement a sustainability and transformation fund of 1.8bn was established to alleviate provider deficits. This was allocated to providers based on their proportion of emergency care. The RMH was allocated 1.5m, however this is contingent on a surplus of 5.6m. Based on our current financial projections this is unachievable so the Board decided to reject NHS Improvement s initial offer, subject to further clarification and negotiation. This has been discussed with NHS Improvement and although they are sympathetic, no significant change has been forthcoming.

6 6 Internal process Guidance was issued on the one-year Operational Plan so the following process has been undertaken to deliver this requirement. When guidance on the STP is released, further actions will need to be taken. Quarterly Performance Review Group (PRG) meetings currently occur for the clinical divisions throughout the year and at the half year for the non-clinical divisions. They are an opportunity to review each division s financial position in more detail and share this with the executive team. These meetings form the basis of a rolling 12-month business planning process: underlying (normalised) run rate of expenditure and income are reviewed with a high level view of efficiency opportunities. The forecast for the following four quarters are reviewed, not just the period until the year end At the Q3 PRGs we reviewed plans for the following year including cost pressures and efficiency schemes. PRG acts as the Business Planning Panel, leading the process and reviewing plans developed by Directors for final approval. Consults with the Medical Director and Chief Nurse on all efficiency schemes and proposed changes to service. Outside of the quarterly meetings there should be no changes to budgets unless a business case is approved. All business cases valued > 100k revenue and/or capital investment are now reviewed by Financial Strategy Group (FSG). The timetable is set out on the following page.

7 7 Timetable Date Late October/early November November/December Late January/early February 8 th February Late February/early March 3 rd March 23 rd March Milestone Q2 PRG meetings CIP scheme development, ensuring liaison with support services effected. Underlying growth in NHS activity forecast by CBUs and provided to support services impacted. Q3 PRG meetings. Proposed 2016/17 plans presented. Draft plan submitted based on high level assumptions. Follow up Q3 PRG meetings to agree divisional plans. Overview of the plan at FSG to be discussed with the Board. Board presented with draft 2016/17 plan for approval and delegation to AFC for final approval. 6 th April AFC approve final Operational Plan. 11 th April Final plan submitted June STP submission

8 Overview Planning context Financial plan Summary Capital expenditure Assumptions Risks

9 9 Financial plan: Summary Summary Income and Expenditure Account units Actual Actual Out-turn Plan presented on 3rd Feb Current Plan Operating income (inc. in EBITDA) NHS Clinical income m Non-NHS Clinical income m Non-Clinical income m Total operating income, inc. in EBITDA m Operating expenses (inc in EBITDA) Employee expense m ( ) ( ) ( ) ( ) ( ) Non-Pay expense m ( ) ( ) ( ) ( ) ( ) Total operating expense, inc. in EBITDA m ( ) ( ) ( ) ( ) ( ) EBITDA m EBITDA margin % % 4.9% 5.7% 4.4% 4.2% 3.5% Operating income (exc. from EBITDA) Donations and Grants for PPE and intangible assets m Operating expenses (exc. from EBITDA) Depreciation & Amortisation m (12.310) (13.097) (12.958) (14.060) (14.010) Impairment (Losses) / Reversals m (4.308) (1.487) Total operating expense, exc. from EBITDA m (12.310) (17.405) (14.445) (14.060) (14.010) Non-operating income Finance income m Gain / (Losses) on asset disposals m (0.418) (0.850) (0.098) Total non-operating income m (0.385) (0.805) (0.015) Non-operating expenses Interest expense (non-pfi / LIFT) m (0.024) (0.160) (0.248) (0.248) (0.249) PDC expense m (4.755) (4.868) (4.600) (5.100) (5.101) Total non-operating expenses m (4.778) (5.028) (4.848) (5.348) (5.350) Surplus / (Deficit) after tax from Continuing Operations m FRR of Plan = 3. Cash Balance at 31/3/17 18m. Overall RMH is forecasting a break even position for 2016/17, which would deliver a 7m development reserve for investment to help fund the Trust s capital programme. Changes since the 3 rd February Plan: All income plans have increased as additional revenue is sought as part of the CIP programme e.g. 4m additional Private Care Income. A number of items in the Feb plan have been grossed up, splitting out the income and expenditure and thus increasing both lines e.g. 3m Sutton Community Service contracts outside of the recent re-tender. Employee and non-pay expenses have increased as CIPs are delivered through increased revenue but also as a number of safety and quality cost pressures have been identified.

10 10 Financial plan: Capital expenditure The capital plan for the next five years was reviewed at a Director s away day prioritising the investment in IT in the main to replace the EPR. The table below sets out the capital plan for 2016/17. Plan Forecast Carry Initial Plan Draft Plan 2015/16 Outturn Forward 2016/ /17 Internally Financed '000 '000 '000 '000 '000 IT Schemes 3,000 2, ,000 3,753 Backlog & Minor Works 1,500 1, ,500 1,500 Private Patients 3,484 2, ,000 3,582 Stewart's House ,600 3,600 Other schemes 2,216 1, ,000 1,619 10,200 8,256 1,954 12,100 14,054 Donated Income Financed '000 '000 '000 '000 '000 Lederman Linac ,238 4,090 Stewart s House ,200 1,200 MRLinac 4,590 3,179 1, ,080 Other 4,840 2, ,430 6,249 1,062 5,938 7,000

11 11 Financial plan: Assumptions The table below sets out the main assumptions underpinning the financial plan: Area NHS income Pay costs Drug Costs Other Non-Pay Costs Donated asset income Depreciation Dividends BRC allocation CIPs (Revenue & Cost) Assumption 1.1% Tariff Inflator (3.1% cost inflation less 2% efficiency) Reintroduction of 2% CQUIN in contract Additional Income from Local Price Increases / Payment of Paediatric Top Up / MDTs 3.3% Inflation plus changes in pension costs 4.5% Inflation in both income and spend 1.7% Inflation Initial assessment, dependent on timing of key schemes 1m cost pressure expected due to material capital investment in recent years 400k cost pressure expected Increase of 0.5m of budget for BRC projects 4% for Clinical Divisions, 10% for Corporate Divisions

12 12 Financial plan: Risks The table below sets out the main financial risks and mitigating actions in the financial plan: Risk 2016/17 NHS Commissioner Contracts unsigned and unlikely to by 11 th April. Significant risk ( 10m) in all areas including CQUIN, Local Prices, Pharmacy on-costs Private Care Strategy Risk that growth is not delivered Risk to cash flow as growth expected through shift from UK sponsored to embassy activity BRC renewal RMH is currently reapplying for BRC status. If unsuccessful, R&D activities will need to start reducing in 16/17 in anticipation of income reductions in 17/18 Mitigation NHSE have submitted an opening position but this is not a formal offer, therefore on-going commissioner negotiations which may require NHS improvement involvement. CQUIN has been reduced from 2.5% to 2% nationally without any formal consultation adding an additional cost pressure. Contracts are required to be signed by 25 th April or Trusts are to engage in an arbitration process. Strategic plan developed and marketing plan agreed. International Patient Manager in place to develop relationships with Embassies to improve payment An additional sum of 500k has been ring-fenced from Trust funds in 16/17 to support BRC activities ahead of the application

13 13 Financial plan: Risks Risk Junior Doctor position Deanery discussions to reduce workload of Junior Doctors and remove Private Care caseload. Unknown cost impact of new Junior Doctor contracts Temporary Staffing Costs CIPS have been identified to reduce usage and rate reduction. Pressure to maintain this position esp. if other London Trusts do not adhere to the Monitor price caps. Procurement CIPs Risk that Procurement strategy does not deliver expected savings. Equipment replacement programme The Trust is heavily reliant on major diagnostic equipment, a number of which require replacement in the next 5 years Mitigation Junior Medical Workforce Plan in development with a contingency set aside to fund this. Workforce reviewing all comms on new contracts so an impact assessment can be performed as soon as an agreement is reached. Controls on agency usage continue with close monitoring in both Performance Review Group and the Temporary Staffing Board. Adherence to price caps being enforced with agencies, internally and liaison with London Trusts and Monitor to maintain the wider position. Procurement savings plan to be signed off by 11 th April with performance monitored through Performance Review Group. Equipment replacement programme has been developed but requires funding. Internally financed capital is not sufficient to deliver requirements so charitable funds are being sought (e.g. Lederman Linac).