BOARD MEETING DATE OF MEETING: 18 JULY Month 3 (June) Financial Performance Update Eifion Williams, Director of Finance

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1 AGENDA ITEM: 3.1 BOARD MEETING DATE OF MEETING: 18 JULY 2018 Subject : Approved and Presented by: Prepared by: Considered by Executive Committee on: Other Committees and meetings considered at: Month 3 (June) Financial Performance Update Eifion Williams, Director of Finance Pete Hopgood, Deputy Director of Finance Christian Thomas, Finance Business Partner Not considered at time of reporting None PURPOSE: This paper provides an update to the Board on the June 2018 (Month 03) financial position of the heath board. RECOMMENDATION(S): It is recommended that the Board: DISCUSSES and NOTES the financial position and forecasts against the health board s key financial targets, the action required and risks to delivery. NOTES that action will be required to ensure full achievement of savings targets NOTES the Capital Position. Page 1 of 12

2 Approval/Ratification/Decision 1 Discussion Information THE PAPER IS ALIGNED TO THE DELIVERY OF THE FOLLOWING STRATEGIC OBJECTIVE(S) AND HEALTH AND CARE STANDARD(S): Strategic Objectives: Health and Care Standards: 1. Focus on Wellbeing 2. Provide Early Help and Support 3. Tackle the Big Four 4. Enable Joined up Care 5. Develop Workforce Futures 6. Promote Innovative Environments 7. Put Digital First 8. Transforming in Partnership 1. Staying Healthy 2. Safe Care 3. Effective Care 4. Dignified Care 5. Timely Care 6. Individual Care 7. Staff and Resources 8. Governance, Leadership & Accountability EXECUTIVE SUMMARY: As at month 3 (June) the Health Board Financial Position is as summarised in the table below: Month 3 year to date Year End Forecast Area m FRP Savings Target (full year) FRP Delivery at risk Capital resource Limit Capital Expenditure to Month overspent breakeven DETAILED BACKGROUND AND ASSESSMENT: 1 Equality Impact Assessment (EiA) must be undertaken to support all organisational decision making at a strategic level Page 2 of 12

3 1. Introduction Powys Teaching Health Board (PTHB) submitted a 3 year Integrated Medium Term Plan (IMTP) to Welsh Government (WG) on 31 March 2018, which indicated a financial gap of 3.504M in 2017/18. However, the plan did show a balanced position over the three year period of the plan. The health board subsequently provided a revised financial plan to WG which indicated the action needed to achieve a balanced position and the risks inherent within this plan for the 2018/19 financial year. The IMTP has now been approved by Welsh Government on the basis that a break even financial position will be delivered in 2018/19. In line with previous years, timely data is not available at Month 3, for a number of expenditure categories and therefore at this stage it has been assumed that spend matches budgets in respect of commissioned services, primary care and provider non pay, except where robust actual expenditure is known. As at month 3, the health board is reporting an overspend position for the year to date of 0.658M, but is forecasting a breakeven position at year end. The following table details actual performance against the original IMTP deficit plan and the revised breakeven plan (as approved), which is dependent on the following additional actions:- reduce spend on CHC and other operational areas - 1m anticipated inflation funding (against structural support funding) - 1m further review of balance sheet opportunities - 1m 2. Summary of Year to Date and Year End Forecast Position Page 3 of 12

4 As at Month 3 the health board is reporting an over spend of 0.658M with a year-end forecast of breakeven. Table 1 Overall Summary of Month 3 position and forecast BUDGET YTD ACTUAL YTD VARIANCE YTD ANNUAL BUDGET YEAR END FORECAST 01 - Revenue Resource Limit (73,468) (73,468) 0 (296,461) (296,461) 02 - Capital Donations (32) (32) 0 (130) (130) 03 - Other Income (2,701) (2,609) 92 (10,769) (10,769) TOTAL INCOME (76,201) (76,109) 92 (307,360) (307,360) 05 - Primary Care - (excluding Drugs) 9,918 9, ,674 39, Primary care - Drugs & Appliances 7,282 7, ,129 29, Provided services -Pay 18,333 18, ,281 73, Provided Services - Non Pay 4,316 4, ,191 17, Secondary care - Drugs Healthcare Services - Other NHS Bodies 29,933 29,862 (71) 119, , Continuing Care and FNC 3,563 3,389 (174) 14,253 14, Other Private & Voluntary Sector (0) 3,189 3, Joint Financing & Other 1,616 1, ,496 6, DEL Depreciation etc ,694 2, AME Depreciation etc Non Allocated Contingency Profit\Loss Disposal of Assets TOTAL COSTS 76,701 76, , ,360 TOTAL The analysis above, Table 1, includes all services provided by PTHB and therefore includes expenditure in respect of all hosted organisations, i.e. HCRW and the All Wales CHC Retrospective Team. Table 2 below shows the Month 3 position excluding the hosted organisations Table 2 Overall Summary of Month 3 position and forecast (excluding hosted) BUDGET YTD ACTUAL YTD VARIANCE YTD ANNUAL BUDGET YEAR END FORECAST 01 - Revenue Resource Limit (73,468) (73,468) 0 (296,461) (296,461) 02 - Capital Donations (32) (32) 0 (130) (130) 03 - Other Income (1,325) (1,305) 20 (5,264) (5,264) TOTAL INCOME (74,825) (74,805) 20 (301,855) (301,855) 05 - Primary Care - (excluding Drugs) 9,918 9, ,674 39, Primary care - Drugs & Appliances 7,282 7, ,129 29, Provided services -Pay 17,300 17, ,150 69, Provided Services - Non Pay 3,973 4, ,817 15, Secondary care - Drugs Healthcare Services - Other NHS Bodies 29,933 29,862 (71) 119, , Continuing Care and FNC 3,563 3,389 (174) 14,253 14, Other Private & Voluntary Sector (0) 3,189 3, Joint Financing & Other 1,616 1, ,496 6, DEL Depreciation etc ,694 2, AME Depreciation etc Non Allocated Contingency Profit\Loss Disposal of Assets TOTAL COSTS 75,325 75, , ,855 TOTAL Page 4 of 12

5 Summary comments on and reasons for the main variances reported in the above analysis (table 2) are outlined below Line 01- Revenue Resource Limit The main source of funding is received from WG based on the annual resource allocation letter adjusted for any subsequent allocations together with anticipated allocations. In summary, the RRL is based on the following levels of confirmed and anticipated allocations. Table 3 Summary of RRL allocations Allocations Received Recurring Non Recurring Allocations Anticipated Recurring Non Recurring Hospital and Health Services (HCHS) Initial Allocation 231, ,301 Additional Allocations (in year) (59) , ,058 General Medical Services (GMS) Initial Allocation 31,741 31,741 Additional Allocations (in year) Dental Initial Allocation 5,682 5,682 Additional Allocations (in year) Pharmacy Initial Allocation 4,753 4,753 Additional Allocations (in year) TOTAL 273, , ,461 Total Line 05 Primary Care (excluding Drugs) & Line 06 - Primary care Drugs and appliances The budgets for primary care drugs and appliances are as outlined within the 3 year IMTP and include increases over the 17/18 budget to reflect assumed inflation and growth for the new 2018/19 year. The health board has assumed additional funding will be forthcoming from WG in respect of the likely GMS budget uplifts. There is limited data available for Month 3 in respect of expenditure levels and therefore, it has been assumed that expenditure will match budgets. Line 07 - Provided Services Pay The month 3 pay is showing an overspend of 0.252M when compared to the annual year to date plan (this includes assumptions regarding the continuing achievement of underspends in previous years together with the achievement of the savings targets in 2018/19). Page 5 of 12

6 The key service areas where the budgets are overspent at Month 03 are the South Locality and Mental Health. Finance will work with Service Leads in these areas to identify action/ recovery plans to rectify the overspending position. The health board is aware of the increasing level of agency staff use in service areas with vacancies and is actively pursuing the recruitment of additional bank staff in an attempt to alleviate this cost pressure. Line 08 - Provided Services Non-Pay Expenditure The non-pay budgets include assumptions regarding potential opportunities of balance sheet support as envisaged by the revised balanced financial plan. The Month 3 position has factored in the availability of 0.250M of accountancy gains in line with the revised plan, which has thereby improved the financial position. The main costs pressure area relates to nonemergency patient transport and this has contributed to the reported overspend of 0.099M as at the end of June. Finance will work with Service leads to identify opportunities that will attempt to complete action/ recovery plans to rectify the overspending position. Line 10 Healthcare Services provided by other NHS bodies Some external NHS providers have only provided limited data on actual activity undertaken to date for Month 3, and consequently it has been assumed that expenditure for those providers is mostly in line with budgets, with the exception of the unachieved element of the savings targets. Line 12 Continuing Healthcare and FNC The 2018/19 budget is in line with 2017/18 expenditure and includes assumptions in respect of inflationary and growth increases as outlined in the IMTP. As at Month 3, with the data available, there is a reported 0.174M underspend against budget. Lines 15 and 16 - Depreciation etc As at Month 3, the assumption is that expenditure will match current budgets, until a further review is undertaken later in the financial year. Line 17 - Non allocated Contingency The health board is holding contingencies at 30 June 2018 of 0.783M which are not yet allocated to budgets given the levels of uncertainty at this point in the year. These are reviewed each month. 3. Ring Fenced and Directed Expenditure Page 6 of 12

7 Table 4 below on the following page summarises the current level of ringfenced and directed expenditure allocations Table 4 Ring-fenced and Directed Allocations Page 7 of 12

8 Details of Ringfenced and Directed Allocations As per Allocation letter Allocations received in year Total allocations M M M HCHS Allocations Learning Disabilities Depreciation (Table 4 Column 1) Mental Health Services (Table 2 column 10) Renal Services Palliative care funding Integrated Care Fund Integrated Care Fund (WCCIS Allocations) Integrated Care Fund (Autism Allocations) Delivery plan funding (Table 5) Paramedic banding Clinical Desk enhancements Sub total - HCHS Ringfenced Directed Expenditure Radiotherapy Community Health Council funding Assistive Technology (Staff costs) Sub total - Directed General Medical Services TOTAL As at Month 3, the health board does not anticipate any underspends against the areas shown above. 4. Performance against Savings Plans Included in the original and revised financial plan is a savings target of 3.371M (for 2018/19). The month 3 position and breakeven year end forecast is based on the assumption of full delivery of the target. It should be noted that the THB has risk assessed that 1.2M savings could be at risk of non-delivery. This will be closely monitored and corrective action identified in order to keep delivery on track. The delivery of the required savings target is a key action area for the health board and a number of meetings have been arranged to review the current forecast delivery, to ensure that relevant leads are clear on expectations and to identify potential for further contingency actions to cover any shortfall. 5. Welsh NHS Assumptions Page 8 of 12

9 The health board has progressed as per timetable to ensure that LTA s are signed by the end of June 2018 as outlined in WHC Dispute Arbitration Process - Guidance for Disputed Debts (invoices and service agreements) within NHS Wales / /19. At this stage no issues have been submitted for arbitration. 6. Resource Limits The overall RRL includes M of anticipated allocations as detailed in Table 3. This mainly comprises the anticipated allocation in respect of the on-going structural support in the sum of M. 7. Risks to achievement of year and forecast position The health board has ranked the risks and opportunities in order of probability in order to enable an enhanced assessment of levels of risk Risks and opportunities as at Month 3 Worst Case Best Case Most likely Outurn Commissioning Contract Performance 2,000 Non delivery of Saving Plans/CIPs 1,200 NCSO Drugs 360 No Inflationary uplift on structural Support 337 Secondary Care High Cost Drugs 500 Potential Use of General Reserves (200) (200) TOTAL 4,197 (200) Possible Risks/opportunities Limited growth has been applied to Commissioning contracts in 2018/19 in light of 17/18 experience, however, there is a risk that historic growth levels may resume in 2018/19 thereby increasing expenditure commitments. Savings Achievement There is a risk on the assumption of full delivery within the health board s savings programmes. The current assessment of worst case indicates a possible underachievement of 1.200M. Page 9 of 12

10 There is a risk NCSO Drugs costs may continue into 2018/19. Significant growth in Secondary care high Cost drugs may continue to present a risk in 2018/19. Avoidable Risks/opportunities The health board has assumed an allocation uplift of 1.390M on the level of structural support funding provided in 17/18, which now includes the correction at full inflation for 2018/19 on this item since its provision in 2013/ Capital Position The capital allocation shown below is based on the Opening Capital Resource Limit received on 1 st April Discretionary Capital 1.431M The discretionary capital limit for the year has been set at 1.431M. From this allocation there is a number of Estates and Statutory Compliance programmes and Equipment (Medical and IT) purchases to be undertaken. The Board at its meeting on 21st March 2018 approved the initial discretionary programme with an interim value of 1.056M. The remaining monies are currently being prioritised, and all the schemes are planned to be undertaken throughout the financial year. An amount of 0.149M has been spent to date. Llandrindod Wells FBC 2018/ M The health board has received approval of its Full Business Case in respect of the final works for the reconfiguration of Llandrindod Wells Hospital. The remaining works encompassed by the project include endoscopy, dental and outpatients departments to compliment the already completed birth unit and roof and façade works. This scheme continues on from 2017/18. Current expenditure to date is 0.284M. Page 10 of 12

11 Donated Assets 0.130M It is estimated that the health board will receive donated capital assets from the League of Friends and the PTHB Charity within the year of 0.130M. NEXT STEPS: In summary this paper identifies that: The health board is reporting an over spend at month 3 of 0.658M, with action being taken to identify the means to correct the position. The health board is forecasting achievement of the financial plan but this is subject to a number of significant key actions being delivered and mitigation of risks to delivery. The Capital position is as detailed in the report. The following Impact Assessment must be completed for all reports requesting Approval, Ratification or Decision, in-line with the Health Board s Equality Impact Assessment Policy (HR075): IMPACT ASSESSMENT Equality Act 2010, Protected Characteristics: Age Disability Gender reassignment Pregnancy and maternity Race Religion/ Belief Sex Sexual Orientation Marriage and civil partnership Welsh Language No impact Adverse Differential Positive Statement Please provide supporting narrative for any adverse, differential or positive impact that may arise from a decision being taken Risk Assessment: Level of risk identified Page 11 of 12 Statement

12 None Low Moderate High Financial Risk if do not deliver breakeven target Clinical Financial Corporate Operational Reputational Page 12 of 12