NHS procurement - Report for the Board of Foods

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1 Meeting of Lanarkshire Lanarkshire NHS Board NHS Board: Kirklands 28 January 2015 Fallside Road Bothwell G71 8BB Telephone: SUBJECT: FINANCE REPORT FOR THE PERIOD ENDED 31 DECEMBER PURPOSE This paper is coming to the Board: For approval For endorsement To note 2. ROUTE TO THE BOARD This paper has been: Prepared Reviewed Endorsed By the following Committee: or Is a standing item From the following Committee: As agreed this report comes straight to the Board from the Director of Finance. The Operating Management Committees receive financial reports for their own area. 3. SUMMARY OF KEY ISSUES Aided by the announcement of additional funding in January 2015, the Board is continuing to hold to its 2014/15 financial targets despite rapidly rising hospital drug costs, an over spend within the Acute Division of 3.1m to date and a revised forecast of a 2.6m overspend against the budget for GP prescribing. 4. STRATEGIC CONTEXT This paper links to the following: Corporate objectives LDP Government policy Government directive Statutory requirement AHF/local policy Urgent operational issue Other 1

2 5. CONTRIBUTION TO QUALITY This paper aligns to the following elements of safety and quality improvement: Three Quality Ambitions: Safe Effective Person Centred Six Quality Outcomes: Everyone has the best start in life and is able to live longer healthier lives; (Effective) People are able to live well at home or in the community; (Person Centred) Everyone has a positive experience of healthcare; (Person Centred) Staff feel supported and engaged; (Effective) Healthcare is safe for every person, every time; (Safe) Best use is made of available resources. (Effective) 6. MEASURES FOR IMPROVEMENT Achievement of LDP agreed position for revenue resource limit, capital resource limit and efficiency target. 7. FINANCIAL IMPLICATIONS As set out in the paper. 8. RISK ASSESSMENT/MANAGEMENT IMPLICATIONS As set out in the paper. 9. FIT WITH BEST VALUE CRITERIA This paper aligns to the following best value criteria: Vision and leadership Effective partnerships Governance and accountability Use of resources Performance Equality management Sustainability 10. EQUALITY AND DIVERSITY IMPACT ASSESSMENT An E&D Impact Assessment has been completed Yes No Please say where a copy can be obtained Please say why not 2

3 This is a factual position report prepared from information in the financial ledger. It contains no proposals with an equality and diversity impact. 11. CONSULTATION AND ENGAGEMENT This is a factual position report prepared from information in the financial ledger. It contains no proposals on which to consult. 12. ACTIONS FOR THE BOARD The Board are asked to: Approval Endorsement Identify further actions Note Accept the risk identified Ask for a further report 13. FURTHER INFORMATION For further information about any aspect of this paper, please contact Laura Ace, Director of Finance Telephone: Laura Ace Director of Finance 3

4 Meeting of Lanarkshire NHS Board Lanarkshire NHS Board Kirklands 28 January 2015 Fallside Road Bothwell G71 8BB Telephone Fax SUBJECT: FINANCE REPORT FOR THE PERIOD ENDED 31 DECEMBER PURPOSE This report gives the Board an overview of the financial performance for the 9 months to December CONTENT/SUMMARY OF KEY ISSUES The Board is expected to live within its Revenue Resource limit (RRL) with authority to use 3.144m of its 3.540m brought forward surplus. Only 0.396m of the retained surplus will be left at the end of the year. This target position is being held to despite a likely GP prescribing overspend now being recognised in addition to the longstanding overspend within the acute division and in high cost drugs. The activity to ensure access targets are delivered is also running ahead of funded levels. On 12 January Boards received notification of additional non recurring funding for pressures including drugs and clinical negligence. Notification of further funding to support hospital activity over the winter is expected on 22 January, with confirmation of the amount to be received for new medicines expected to happen soon after. Combining these with existing underspends, reserves and slippage has resulted in a strategy to balance the financial plan. The prescribing overspend is believed to be partly due to slower than hoped for achievement of savings plans and partly due to external factors affecting Boards more widely. The time lag in prescribing data means we have not yet been able to share sufficient intelligence on emerging trends to assess the impact of each. We have provisionally downgraded the estimated savings by 1.5m and although additional efficiencies were identified elsewhere we are now recording that we have to identify a further 0.145k to meet the 3% target. The capital plan remains on track m was transferred from revenue to capital to support the Board s ICT replacement programme (PCs, Servers, Network Equipment) alongside the capital element of boundary change property upgrades. 4

5 3. CONCLUSION The NHS Board is asked to note the contents of the report. 4. FURTHER INFORMATION For further information or clarification of any issues in this paper, please contact: Laura Ace - Director of Finance Laura.ace@lanarkshire.scot.nhs.uk 5

6 NHS LANARKSHIRE FINANCE REPORT FOR THE PERIOD ENDED 31 DECEMBER Introduction 1.1. The purpose of this report is to provide the NHS Board with a summary of revenue and capital financial performance for the first nine months of the financial year 2014/ Overview 2.1. The three year Financial Plan 2014/ /17 was approved by the NHS Board and signed off by the Scottish Government in March This planned an in year deficit of 3.144m and when added to the predicted cumulative surplus of 3.540m at 31 March 2014, this left NHS Lanarkshire with 0.396m of accumulated funds for use in 2015/16 and beyond On current forecasts, we can live within the 2014/15 RRL despite the continuing Acute over spend and rapidly rising drugs costs. The Corporate and CHP under spends combined with additional income, efficiency, areas of slippage and minor reserves not likely to be required will be used to keep the Board within its overall financial envelope. Table 1 details the position to date, an under spend of 0.296m, which is in line with our year to date target of ending the year with 0.396m of prior years reserves. Table 1 - Summary Financial Position 2014/15 YTD YTD YTD Budget Actual Variance M M M Acute Operating Division (3.117) North CHP South CHP Primary Care Other Services (0.720) Headquarters / Corporate Functions Service Level Agreements / Other Healthcare Providers (0.096) NHSL - wide Net operating costs Revenue Resources 3.1. At the end of December 2014 confirmed allocations bring the Core Revenue Resource Limit to 1, m and the Non Core Revenue Resource Limit to m. Annex A provides further detail.

7 3.2. The December 2014 Core Revenue Resource Limit includes confirmation of additional resources of 0.400m to maintain Treatment Time Guarantees (TTG), Family Nurse Partnership 0.195m, 0.070m for Winter local unscheduled care action plan (LUCAP) and 0.227m for distinction awards paid to NHS Consultants Although not yet received, the Board has confirmation from SGHSCD of the transfer of 0.250m from revenue to capital to support the Board s ICT replacement programme (PCs, Servers, Network Equipment) An additional 0.532m was notified to NHS Lanarkshire to help with the rising costs of new drugs on 12 th January. The cost of legal claims against Boards over a national ceiling will also be absorbed by SG, allowing 0.784m of reserves set aside for this purpose to be released. Additional financial support for meeting access targets is expected to be notified by 22 nd January and the amount NHS Lanarkshire will receive from the new drugs fund should be notified soon after. Although not in the figures to date this new money has been taken account of in the forecast that we can still deliver the opening LDP position despite rising cost pressures. 4. Acute Division 4.1. The Acute Division is reporting an over spend of 3.117m for the period to the end of December 2014, as detailed in Table 2, an increase of 0.503m from the previous month. The increase in month can be split 0.108m from nursing, 0.108m from medical and the rest from supplies, predominantly drugs. Table 2 - Acute Division 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Pay (1.786) Non Pay (1.331) Healthcare Purchases Gross operating costs (3.117) Less: miscellaneous income (21.194) (21.194) Net operating cost (3.117) m of the pays over spend is within nursing (last month 1.369m). The increase in over spend in month is 36% less than the average in the first 8 months which site management believe is the impact of various control measures. 7

8 4.3. The graph below shows the trend in overspend in each division. The Monklands site is successfully holding to breakeven. The weekly meetings held by the site director to review the nursing position are felt to be very effective An over spend of 1.198m (last month 0.898m) has been recognised to date against the acute drugs budget. December costs rose higher than expected for a variety of reasons. As a result the predicted year end over spend has been increased from 2.2m to 2.4m. New Hepatitis C drugs remain the single most significant factor in the rise in drugs costs this year and as they only came into use over the summer, this element of the overspend is forecast to increase rapidly The expenditure against the capacity plan in the first 9 months has been higher than budgeted for. Further funding of 0.400m was received from Scottish Government in December and more is expected to be announced in January as a result of this we have not attempted to curb the higher levels Taking into account all the factors above the forecast total over spend for the acute division for 2014/15 should be just under the previous forecast of 2.657m on pays and supplies but has been raised to 2.4m for drugs. 5. Primary Care 5.1. Both CHPs continue to underspend but based on continued volume rises in excess of the 2.5% budgeted and a high price per item in October 2014 ( v budgeted and last month), it is no longer tenable to forecast GP prescribing will remain within the budget. Based on comparative analysis that the price per item has been rising less slowly than the Scottish average, the indications are that this is part due to factors affecting Boards 8

9 more widely and part due to slower progress with saving plans than originally planned The North CHP is 0.721m under budget for the period to the end of December 2014, as detailed in Table 3, an increase of 0.174m from the previous month. Although most areas of the CHP within pays are under spent there remains an over spend within Mental Health, though this is gradually being pulled back. Table 3 - North CHP 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Pay Non Pay Net operating cost The South CHP is 0.446m under budget for the period to the end of December 2014, as detailed in Table 4, an increase of 0.152m from the previous month. Both units of the CHP reflect an under spend position. Although the overall pay budget is under spent there are over spends within Cambuslang / Rutherglen and Clydesdale localities. There is a slight over spend within the Community Traumatic Brain Injury Service due to the increase in placements to the private sector mainly the Murdostoun Neurodisability Centre but this is being offset for now from other non pay under spends. Table 4 - South CHP 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Pay Non Pay Net operating cost Primary Care Other Services are now reporting an over spend of m for the period to the end of December 2014, as detailed in Table 5, based on the more pessimistic prescribing cost forecast derived from the latest data to October

10 Table 5 - Primary Care Other Services 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Pay Non Pay Family Health Services Prescribing (0.762) Gross operating costs (0.693) Less: Family Health Service income (7.015) (6.988) (0.027) Less: Miscellaneous income (6.528) (6.528) Net operating cost (0.720) 6. Headquarters/Area Wide Departments 6.1. The Headquarters and Area Wide Departments are 1.055m under budget for the period to the end of December, as detailed in Table 6, an increase of 0.194m from the previous month. The figures also include the realignment of Occupational Health (SALUS) which is now reported under Headquarters and Area Wide Departments The under spend is spread across Occupational Health ( 0.483m), Property & Support Services ( 0.269m) and Corporate Departments ( 0.303m), linked to a combination of income generation, vacancies and slower than expected spends across all three areas. Table 6 - Headquarters / Corporate Functions 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Pay Non Pay Net operating cost Service Level Agreements/Other Healthcare Providers 7.1. Service Level Agreements and Other Healthcare Providers are reporting an over spend of 0.096m for the period to the end of December 2014, as detailed in Table 7, a decrease of 0.089m from the previous month. 10

11 7.2. The under spend of 0.584m being reported against service level agreements is due to activity costs being lower than the budget set aside primarily charges in respect of the West of Scotland Forensic Medium Secure Unit at Rowanbank combined with the benefit realised from changes in the way the financial model shares costs among Board s, moving from 33% NRAC 67% activity to 10% NRAC 90% activity The over spend of 0.732m being reported against unplanned activity is mainly due to estimated increases in renal transplants ( 0.326m) and exceptional drug costs ( 0.635m) with other high cost low volume areas slightly under budget. The latest data from NHS Greater Glasgow and Clyde is for the 6 months to September The Independent Sector is reporting an under spend of 0.099m, a net figure which includes an over spend of 0.273m in neurodisability placements in the private sector. The under spend is partly due to a fewer mental health and learning disability placements to low and medium care facilities within the private sector than in past years. Table 7 - Service Agreements / Other Healthcare Providers 2014/15 Budgeted Actual Actual Operating Operating saving / Costs Costs (excess) 31/12/ /12/ /12/2014 M M M Service Level Agreements Unpacs and Oats (0.732) Resource Transfer and Bridging (0.050) Independent Sector Mental Health Net operating cost (0.096) 8. CRES/Efficiency 8.1. Through the LDP process all Boards have been given a minimum target of achieving cash releasing efficiency savings equal to 3% of budget which equates to m for NHS Lanarkshire Downgrading the prescribing forecast, even with recognising some additional efficiency in other areas, has left a gap of 0.145m still to be identified before the Board could meet its 3% target as shown in Table 8. 11

12 Table 8 LDP description LDP Plan Revised Plan Plan to date Actual to Date Drugs Estates and Facililies Procurement Service Productivity Support Services Workforce Unidentified Total Previous Month Capital 9.1 Since the start of the year there have been a series of adjustments to the capital allocation, the latest of which was a transfer of 0.250m from Revenue to Capital to ensure we could cover IT needs as well as the capital element of backlog maintenance and extension on the boundary change properties. The Capital Allocation now stands at m. 9.2 The Full Business Case to upgrade the 7 Theatres at Monklands and provide new ICU facilities is being finalised for submission to the Scottish Government Capital Investment Group. The revised forecast has allocated the 0.250m Revenue to Capital to allow e-health Projects scheduled for 2015/16 to be advanced in this financial year. 9.3 Expenditure in December 2014 was 1.735m taking expenditure for the nine months to m. The main areas of expenditure in the month were: Flat Roof Replacement and Fire Safety Work at Monklands m; Mental Health Strategy Ward 24 Monklands m; Theatres & ICU at Monklands m; West of Scotland Radiotherapy Beatson at Monklands m; Medical Equipment m. 9.4 All areas are currently on target to deliver the year end forecast but a detailed review of all projects will be taken to the February 2015 Capital Investment Group and contingency plans are in place to ensure the board s Capital Resource Limit is met should there be any slippage in some of the building projects due to adverse weather conditions. 12

13 9.5 A full detail of the expenditure in the nine months to December 2014 is contained in Annex B. 10. Developments and Approvals 10.1 After the October Board which approved the winter plan, the Boards financial plan had fully committed all recurring revenue for the year and had 0.714m of non recurring funding still unallocated. There have been no further developments approved since then and it has been assumed this unallocated funding will cover the areas of overspend in year. 11. Risk Assessment 11.1 There are a number of areas of risk and uncertainty within the financial plan. The most significant are: The new hepatitis C treatments are likely to cost at least 1.325m more than had been budgeted for in 2014/15 and continue to rise thereafter; Other drug classes, particularly the biologics, are rising faster than anticipated; An initial assumption that only half of the 3m savings to be delivered through the GP prescribing action plan will be achieved. It has been assumed the volume rise will drop back to 2.5% and the price per item will drop from its October peak of Knowledge of what is driving expenditure trends in the drugs market is imperfect so these assumptions are vulnerable and need to be kept under close review; The amount of funding we might receive from the rare conditions medicines fund is not yet known; Based on provisional discussions an assumption has been made that some additional funding will be made available to support access target achievement Providing the uncertainties above are resolved within tolerable ranges, a strategy for financial balance is possible. The nearer we get to the year end the variations impact on a shorter time period but conversely the Board s flexibility to alter other plans to remain in balance also lessens While potentially manageable for 2014/15 these risks will have an impact on the 2015/16 position that is likely to increase the savings target once fully assessed. 13

14 12. Conclusion The Board is asked to note: the actual revenue under spend of 0.296m as at 31 December 2014 which is in line with the approved Financial Plan and the target cumulative retained funds of 0.396m as at 31 March 2015; the highlighted significant risks; the need to evidence at least half the 3m prescribing savings and find 0.145m of further efficiencies in order to meet the 3% efficiency target; the capital resources available of m and expenditure of m in the nine months to 31 December LAURA ACE DIRECTOR OF FINANCE 20 January

15 ANNEX A REVENUE RESOURCE LIMIT 2014/15 Baseline Earmarked Non Recurring Recurring Recurring Total M M M M Core Revenue Resource Limit as at 30 November , (2.655) 1, Reimbursement to NHS Board Family Nurse Partnership Dementia Improvement Support - 8 Pillars Model Test Site Falls in Care Homes Project SDAI Final 20% of Grant - J & U B AST Waiting Times Standards / TTG Delivery AEC Support NHS Lanarkshire Improvement Fund - BID 15 Provision of DAFNE Diabetes Foot Co-ordinator Distinction Awards for NHS Consultants Improvement Fund - BID 35 Texting Young People with Diabetes Additional Winter LUCAP Funding Core Revenue Resource Limit as at 31 December , (1.744) 1, Non Core Revenue Resource Limit as at 30 November Non Core Revenue Resource Limit as at 31 December Total Revenue Resource Limit as at 31 December , ,

16 ANNEX B NHS LANARKSHIRE CAPITAL EXPENDITURE TO 31st December 2014 Original Actual to Plan Forecast Date M M M Initial Capital Formula Allocation: Capital Resource limit adjustments: West of Scotland Radiotherapy Satellite Centre Detect Cancer Early Prpgramme Latest Capital Formula Allocation: Anticipated Allocations: Revenue to Capital Forecast Capital Formula Allocation: Disposal Programme: Property Disposals Adjusted Capital Allocation: CAPITAL EXPENDITURE: Business Cases ~ Approved Monklands Projects Business Cases ~ Under Discussion Primary Care Hubco Proects Equipment Mental Health Strategy Single site Pathology Monklands Theatres/ICU Primary Care Boundary Changes West of Scotland Radiotherapy Satellite Centre Ring-Fenced Expenditure Medical Equipment Capital Grants Other Expenditure Statutory Maintenance PSSD Equipment subtotal e-health e-health Projects subtotal TOTAL CAPITAL EXPENDITURE (OVER) / UNDER COMMITTED