Financial Plan 2008/09

Transcription

1 LOTHIAN NHS BOARD PAPER 8.2 Edinburgh Community Health Partnership 16 th April 2008 General Manager 1. Purpose Financial Plan 2008/ The purpose of this report is to inform the sub committee of the details of the financial plan for 2008/09 and to ask the sub committee to note that the plan was approved by the Finance and Performance Sub Group on 13 th March SUMMARY This report informs the sub committee of the details of the financial plan for 2008/09 for Hospital and Community Health (HCH), Prescribing and Cash Releasing Efficiency Savings (CRES). Separate plans will be prepared for Family Health Services once Scottish Government allocations are known. 2. Recommendations 2.1. The sub committee is recommended to: 2.2. Note the content of the plans and the agreement of the Finance and Performance Sub Group on 13 th March Agree the actions required to deliver the plans. 3. Summary of Issues 3.1. Appendices 1, 2 and 3 provide detail on the HCH, Prescribing and CRES plans respectively HCH Plan. The CHP will have a budget of m for 2008/09 compared to m for 2007/08. This is the net position after all uplifts, new investments and CRES targets have been applied Prescribing. The CHP will have a budget of m for 2008/09 compared to m for 2007/08. This is the net position after all uplifts, CRES targets and adjustments for other factors such as prescription charges reducing CRES. The CHP has a total CRES target of 4.676m for 2008/09. This figure includes the 2008/09 CRES applied to all budgets plus the unachieved amount from 2007/08. 1

2 4. Impact on Health Inequalities 4.1. Where appropriate individual plans will have impact assessments carried out. 5. Financial Implications 5.1. The financial implications of these proposals are that the CHP will meet its financial targets for 2008/09. David Small General Manager 2

3 APPENDIX 1 Financial Plan 2008/09 Hospital & Community Healthcare (HCH) Purpose The purpose of this report is to inform the sub group of the proposed 2008/09 Financial Plan for Edinburgh CHP and to seek the sub group s agreement to the plan as part of the NHS Lothian Financial Plan. SUMMARY This report informs the sub group of the Edinburgh CHP Financial Plan for Hospital & Community Healthcare budgets. Separate Plans will be provided for Family Health Service (FHS) budgets, including Prescribing and GMS. It also seeks the sub group s agreement to the plan. Recommendations The sub group is recommended to: Agree the proposed Financial Plan as part of the NHS Lothian Financial Plan for 2008/09. Undertake all actions arising from the Financial Plan to ensure delivery of Financial Balance and all other Performance Targets in 2008/09. Summary of the Issues The Financial Plan outlines the resources available and their application for Hospital and Community Health Services (HCH) funding to the CHP including both directly managed and hosted services. Separate Financial Plans for Primary Medical Services (ngms) and the Pharmacy Contract will be prepared following confirmation of any changes to SGHD allocations. In addition, the Prescribing Budget has been approved and CHP General Managers have agreed in principle the distribution of funds between CHPs. Total Resources available to the CHP Appendix 1 provides indicative budgets for the CHP for 2008/09. These budgets are based upon draft financial planning assumptions adopted within NHS Lothian (and discussed below). Risks to the budgets outlined are discussed within the plan and are considered in the Risk Matrix attached as Appendix 3. Where NHS Lothian has considered pressures and developments identified directly by the CHP, these are shown in Appendix 2, along with the provisional outcome of the NHS Lothian Planning process. Budget setting for the CHP is based upon the following process: Set Baselines current budgets, adjusted for non-recurrent resources Add uplifts (for pay awards and price inflation, etc.) Add Investments (including agreed funding for financial pressures and new developments) 3

4 Less Efficiency Targets (CRES) The financial plan does not specifically discuss non-recurrent funds however it is an explicit assumption of the planning process that except where highlighted all non-recurrent expenditure will be matched by an appropriate allocation. The Scottish Position - Resources Available Nationally The financial plan has been prepared following the receipt of the SGHD Allocation Letter for 2008/2009. The Cabinet Secretary for Health and Wellbeing has announced the revenue resource general allocations to NHS Boards for Despite a tight spending review settlement for Scotland, expenditure is increasing within Health in Scotland by an annual average of 4.1% over the next three years. Improving the health of all the people in Scotland is a top priority for the Government. The Scottish Government intend to use the growth in resources available to help achieve implementation of Better Health, Better Care, which itself supports the Government's overall purpose to focus on creating a more successful country, with opportunities for Scotland to flourish, through increasing sustainable economic growth. All NHS Boards and Special Health Boards will receive a minimum uplift of 3.15%; in addition there is a provision to provide parity uplift only to those Boards who are below both their Arbuthnott and NHS Scotland Resource Allocation Committee (NRAC) target allocations in in advance of any decision on implementing the NRAC recommendations. Further to the initial general revenue allocations announced today, there will be access to additional funding for a number of health priorities as set out in the Scottish Budget including significant investments to: Support health improvement & reducing health inequalities; Reduce waiting times; and prioritise treatment and care for patient groups with particular needs. Access to funding will follow agreement of specific delivery plans relating to these priorities between Scottish Government policy leads and counterparts within NHS Scotland. The allocation for Primary Medical Services funds and indicative allocations for Primary Care Services will be confirmed at a later date following conclusion of current contract negotiations. Other specific allocations and any top-sliced services (e.g. Distinction Awards, Research, National Services etc.) will also be confirmed in due course. The allocations announced do not take account of the recurring financial implications arising from changes to reimbursement prices for Part 7 Items (generic drugs) published in the October 2007 issue of the Scottish Drug Tariff. This initiative is currently being developed in conjunction with NHS Boards and it has been confirmed that this area will continue to form part of the Health Directorates national efficiency programme. Any adjustments to allocations in respect of changes to the above will be notified to Boards following confirmation of final figures. At the same time, SGHD will outline the additional funding to be provided in respect of the phased abolition of prescription charges. 4

5 Efficiency Boards are required to deliver 2% annual recurring efficiency savings from to These savings can be retained locally for re-investment. Boards will be supported by the NHS Efficiency and Productivity Programme in delivering this target. General The funding allocations provided, together with efficiency improvements, provide NHS Boards and Special Health Boards with the means to meet the costs of service developments and pay & price increases. Revenue resource expenditure must be contained within the allocation limits notified and you should continue to ensure that management costs represent no more than what is required. The Lothian Position - Available funding within Lothian Source of Funds The National settlement outlined above provides Lothian with an uplift of 3.47%. This is significantly less than previous years (6.44% in 2007/2008 and 7.16% in 2006/2007). The Revenue Resource Limit (RRL), amended for this settlement, forms the basis for distribution of funds between NHS Lothian Board and its operating units. Recurring budgets are established on the basis of assumed allocations and a full reconciliation of RRL to recurring budgets is undertaken on a regular basis. In line with the Efficient Government target the Board has reviewed its requirement for Efficiency Savings and has set an Efficiency target of 2.34%. This provides for an exemption from CRES (Cash Releasing Efficiency Savings) for the Consort PFI Contract, GMS contract and Property Rates charges. The planned releases from the 2.34% target provide a further 20million as a source of funding to the Plan. The CRES target across the CHPs/CHCP, REAS and the PCCO is million which includes million for Prescribing. The NHS Lothian financial plan therefore recognises increased recurrent resources of million (increase to base RRL), which are augmented by a further million planned CRES. The total recurrent resources of million are fully committed in the plan, which includes investments of million in support of service pressures and new developments identified by the NHS Lothian Planning Group. A requirement for non-recurrent resources of million is identified in order to continue planned repayment of brokerage to SGHD and to provide reinstatement of allocations from which non-recurrent flexibility was identified in prior years. The plan includes an assumption that this support will be provided through the continuation of existing measures including the utilisation of Capital Grants and the identification of non-recurrent flexibility on new allocations. Application of Funds The financial plan for NHS Lothian looks to fund the following: The recurrent effect of investments made in the 2007/08 Financial Plan including the full year effect step-up. 5

6 Pay Awards. Confirmation of the pay award has still to be notified however a prudent assumption of 2.5% has been made in 2008/2009. Uplift of Non-Pays. 2.0% has been provided for. Drugs/GP Prescribing. 6.0% uplift has been provided for. Scottish Medicines Consortium (SMC) recommendations. A provision of 5million has been included for 2008/2009. Indicative modelling indicates that this is an appropriate level. PFI Indexation specific provision is made for adjustment to the Consort agreement (RIE) on the basis of materiality. All other PFI indexation is assumed to be managed within the allowance for non-pay uplifts. Pay Modernisation. Provision has been made for the ongoing impact of Agenda for Change, including an allowance of 2m for 2008/09 and 2009/10 to address the anticipated effect of AFC reviews. The plan also recognises the realignment of a number of investments associated with management of Waiting Times and which were prioritised against the NHS Lothian settlement within the 2007/08 plan but which are now identified against additional Waiting Times funding. The Scottish Government Spending Review has identified an additional investment of 90 million in this area, for which NHS Lothian is assuming an Arbutthnott share. Available Resources within Edinburgh CHP (HCH only) NHS Lothian provides approximately 92% of funding from all sources to CHPs/CHCP/PCCO/REAS. The balance of funding is received largely from other NHS Boards within Scotland (for Cross-Boundary activity) and NHS Education for Scotland which provides a total of 6.5 million in support of Medical Teaching through the Postgraduate Medical Training Schemes and University Undergraduate programmes ( Additional Cost of Teaching ). For the purposes of the Financial Plan it has been assumed that all sources of funding will be uplifted on the basis noted above. Actual funding to each operational unit will be dependent on full recovery of appropriate uplift from each partner organisation. Uplifts As discussed above, the NHS Lothian plan includes provision for uplift to Pays and Non-Pays budgets, with specific provision made for Drugs and additional SMC recommendations as well as the continued effect of Pay Modernisation. Actual uplifts to CHP budgets will be provided following confirmation of national agreements on Pay Awards. Indicative figures provided are as follows: Indicative Uplift Uplift (m) Pays 2.5% Drugs 6.0% Resource Transfer 2.0% Other Non-Pays 2.0% Total Uplifts (Uplifts based on indicative funding from all sources) 6

7 A separate allocation will be provided for changes to the Lothian Formulary arising from reviews conducted by Scottish Medicines Consortium (SMC) and will be advised by NHS Lothian Pharmacy Department. Funding provided for Pay Uplifts will be held in reserve until final agreement of pay awards for 2008/09 has been agreed nationally. All other uplifts are available to the CHP for local prioritisation and may be applied differentially to meet existing and forecast financial pressures (see below) as well as the requirements of Cash Releasing Efficiency Savings targets. Recurrency of the 2007/08 Financial Plan All investments made directly to the CHP within the 2007/08 Financial Plan were made on a recurrent basis. No specific step-up effect has been highlighted in the 2008/09 Financial Plan against these allocations, however as noted above where the application is specifically linked to the delivery of Waiting Times targets the investment has been realigned against anticipated additional allocations for this purpose. For Edinburgh CHP this includes the investment of 74,000 (full year effect, 94,000) in the Vasectomy Services (Family Planning & Well Women Service). The 2007/08 Financial Plan also included a number of other investments made on a pan-lothian basis and which included additional resources to the CHP. The following list highlights those investments for which a step-up in expenditure for 2008/09 is funded within the 2008/09 plan: 2007/08 Step-Up 2008/09 Long Term Conditions 2,000, ,000,000 Mental Health & Wellbeing Strategy 300,000 1,200,000 1,500,000 Child Protection 158, , ,000 Although the Long Term Conditions investment does not include a step-up, the utilisation of this resource is expected to shift between Acute and Primary Care sectors for 2008/09. In 2007/08, Edinburgh CHP received 404,000 of this investment and the expectation is that this will increase to c. 808,000 in 2008/09. Mental Health & Wellbeing Strategy the strategy has already resulted in significant investment across CHPs/CHCP/REAS. NHS Lothian has identified a total investment plan of 9.4 million over a 5 year period to March 2010, of which commitments in 2007/08 are c. 6.3 million and for which the total step-up including retractions from existing hospital services is 2.1 million in 2008/09. The recurrency of commitments made in 2007/08 is projected at c. 7.7 million. With much of the investment made to date having addressed the delivery of strategy in East Lothian, Midlothian and West Lothian, it is anticipated that a significant element of the balance will be available to deliver service reconfiguration within the City of Edinburgh. For 2008/09, this will include the development of community teams for Mental Health Assessments and Intensive Home Treatment. Child Protection requirements for additional support have been coordinated on a pan-lothian basis and it is assumed that the step-up will include funding of the existing CHP pressure. New Pressures and Developments in 2008/09 Funding has been made available in the plan for investments of million in support of service pressures and new developments identified by the NHS Lothian Planning Group. Key service and planning issues likely to impact on 2008/09 and beyond have been reviewed by the Planning Group and proposed local investments prioritised as part of the preparation of the NHS 7

8 Lothian Local Delivery Plan and Financial Planning process. The list of prioritised investments will be submitted for approval to the NHS Lothian Finance and Performance Review meeting in April The following table shows proposed investments linked directly to Edinburgh CHP as well as relevant pan-lothian investments: Scheme Khush Dill 47,000 Equipment Maintenance - Sterilisers 36,000 Family Planning & Well Women - Contraception 78,000 Review of catering (QIS) in PFI contracts 135,000 Integrated Drugs Service 50,000 (within total Substance Misuse proposals) 346,000 Pan-Lothian schemes impacting on Edinburgh CHP Long term conditions (additional to 07/08 invest.) 1,000,000 Changing childrens services funding gap 331,000 Learning disabilities strategy 200,000 Cervical cancer vaccine (HPV) 400,000 GMS population growth and contraction obligations 1,861,000 Analysis of Proposed Investments Khush Dil. Building on a successful pilot among South Asian communities in Edinburgh the funding is intended to raise awareness amongst ethnic communities of multiple risk factors which contribute to a wide range of chronic diseases, including CHD, Stroke, Diabetes and some Cancers. Existing staff funded via the pilot project will transfer to the Minority Ethnic Health Improvement Project (MEHIP). Equipment Maintenance Sterilisers. As part of the implementation of the Glennie requirements for patient safety and instrument decontamination, sterilisers used within the podiatry department must be maintained as per Scottish Health Technical Memorandum Funding will support inhouse maintenance across the Edinburgh, East and Midlothian Podiatry service. Family Planning Contraception. NHS Lothian is second from bottom in the league table of NHS Boards in respect of uptake for contraceptive implants, Intra-Uterine Devices (IUDs) and Intra- Uterine Systems (IUS). NHS QIS standards for sexual health to be published in March 2008 recommend an increase of greater than 100% in the uptake of Long Acting Reversible Contraceptives (LARC) such as the above, which present an alternative to existing female sterilisation procedures and hysterectomy. Increasing demand in line with recommendations has resulted in a projected financial pressure on the Family Planning and Well Women service. Catering in PFI contracts. PFI contracts for Continuing Care units at Ferryfield House and Ellen s Glen include Facilities Management agreements. The implementation of revised NHS QIS quality standards contract variations has resulted in contract variations to these agreements. Integrated Drugs Service. The investment will partially support the continuation of current levels of service within Locality Drug Clinics in Edinburgh. Investment is net of anticipated funding from other agencies, including Drug and Alcohol Action Team (DAAT) partnerships. 8

9 Pan Lothian Investments Direct investment to the CHP is expected from the allocation of an additional 1 million for Long Term Conditions. Investment to support projects initiated under Changing Children s Services funds across Lothian will ensure continuity of service within the Child and Adolescent Mental Health Service in Edinburgh and other areas. Funding for the Learning Disabilities strategy and additional staff costs supporting Cervical cancer vaccines have yet to be allocated, but will impact on Community Services across Lothian. The substantial investment in GMS (to be discussed in a separate financial plan) will be utilised to meet the contractual obligations arising from population growth across Lothian. Other Pressures/Developments A number of other financial pressures and proposed developments were identified within the CHP as part of the Financial Planning Process. Appendix 2 itemises the full list of pressures submitted and proposed outcomes of the planning process. Where alternative funding is indicated, these items are discussed below: Nail Maintenance Training. Funding was sought to roll-out nail care training across non-podiatry staff (both NHS and CEC) in line with a successful pilot in North East Edinburgh. It has been agreed that possible funding will now be sought from within the CHP Long Term Conditions allocation. The CHP identified a potential contribution to the management of total patient pathways within the target of 18 weeks, shifting the balance of activity from Acute to Primary Care settings. It has been agreed that this proposal will be reconsidered against any additional Waiting Times allocations to NHS Lothian. A forecast pressure of 175,000 against the Adult and Paediatric Wheelchair service was identified where funding made available nationally in 2007/08 was understood to be non-recurrent. It is now anticipated that further funding will be available in 2008/09 and this pressure is unlikely to emerge. Integrated Drug Service. A total pressure of c. 100,000 was identified against the existing Locality Drug Clinics within Edinburgh; part funding has been confirmed through the pan-lothian Substance Misuse proposal to the 2008/09 Financial Plan (see above) however a balance of c. 50,000 remains unidentified. It is anticipated that this pressure will be addressed through negotiations with DAAT partners. Home Equipment (Joint Equipment Store). NHS Lothian has agreed to fund the financial pressure against home equipment on a non-recurrent basis until end-september 2008, with any further support thereafter to be identified from within agreed Long Term Conditions funding. Where costs relate to partner organisations including East and Midlothian CHPs, an appropriate contribution will be sought. Pressures to be Managed As part of the financial planning process NHS Lothian has identified expenditure for which no specific resource has been allocated. This includes expenditure currently managed on a nonrecurrent basis against slippage on other programmes, as well as projected areas of growth and cessation of existing funding streams. All of these areas will present financial pressures against operational budgets in 2008/09 and beyond and it is the responsibility of the CHP to identify appropriate management actions to deliver a balanced financial position within its own areas of accountability. 9

10 Appendix 2 to this report details those pressures and proposed developments identified through the financial planning process. Agreed sources of funding are shown with areas requiring management actions highlighted separately. The total of pressures to be managed either from a re-allocation of existing resources or by specific management action totals million, although this includes 0.6 million relating to proposed increases in Long Term Conditions funding (not yet implemented). The CHP will require action plans to deliver a balanced financial position including management of all pressures on an in year and recurrent basis. Other Additional Resources In addition to the investments prioritised through the Financial Planning process, the CHP will receive additional resources from a number of other sources. In 2007/08, NHS Lothian has received over 100 million of non-recurrent funds from SGHD to support specific national and regional strategies. Each allocation is reviewed against three key tests for flexibility by NHS Lothian Executive Management Team (EMT) prior to release to operational budgets, with slippage being reinstated in future years in line with an agreed expenditure profile. These allocations are not itemised here, however it is an assumption of this financial plan that the CHP will continue to receive an appropriate element of all such allocations. Cash Releasing Efficiency Savings (CRES) Additional CRES targets of million have been set against CHPs/CHCP/REAS/PCCO budgets for 2008/2009, comprising million against HCH and a further million for GP Prescribing. No target has been set against GMS in recognition of the non-discretionary nature of the majority of GMS expenditure. Indicative CRES targets for the CHP were published in January 2008 and are shown below. These targets include the recurrency of CRES not achieved within the 2007/08 position. 2007/ /09 Total Community Services 569,000 1,606,000 2,175,000 Hosted Services 586, ,000 1,130,000 Prescribing 0 1,371,000 1,371,000 Total 1,155,000 3,521,000 4,676,000 Draft CRES proposals have been developed for the CHP and are published separately. FHS Contracts As discussed above, separate financial plans will be prepared for Primary Medical Services (ngms) and the Pharmacy Contract payments funded by the Board (excluding Non-Cash limited). 10

11 It is assumed that the ongoing implementation of the new Pharmacy contract and continuation non-cash limited budgets for General Dental Services and General Ophthalmic Services will not generate any new financial pressures. Impact on Health Inequalities Where appropriate individual plans will have impact assessments carried out. Appendices 1 Draft HCH Budgets, 2008/09 2 NHS Lothian Financial Plan, extract Edinburgh CHP Proposed Investments 3 Risk Matrix 11

12 Appendix 1 Indicative HCH Budget Revised Recurring Budget 2008/09 Hospital & Community Services '000 Notes Baseline Budgets (as at 10th March 2008) Community Services 49,133 Hosted Services 22,770 Resource Transfer 20,780 92,683 Indicative Uplifts Pay 1, % Drugs % Resource Transfer % Other Non-Pays % 2,255 Investments Step-Up of 2007/08 Plan 856 App 2 Proposed 2008/ App 2 Other Funding - to be confirmed 1,322 App 2 2,524 CRES Recurrency of 2007/08 Additional 2008/09-2,150-3,305 Draft Budget 2008/09 95,312-1,155 Included within base, above 12

13 Appendix 2 NHS Lothian Financial Plan Prioritisation of Additional Investments 2008/09 Ref Scheme Pressures/- Developments To Be Managed FYE of 2007/08 Plan Prioritisation 2008/09 Other Funding - tbc FP72 Nail Maintenance Training 55,000 55,000 0 FP71 Stroke Physio Service 33,000 33,000 FP69 Transfer of Activity from Acute to Primary Care 300, ,000 FP68 Marie Curie 63,000 63,000 FP67 Lymphodema 73,000 73,000 FP66 Khush Dill 47,000 47,000 FP65 Continence Service 170, ,000 FP64 Long Term Conditions Stage 2 1,200, , ,000 FP62 Wheelchairs - Adult & Paediatric 175, ,000 FP61 Maintenance of Sterilisers 36,000 36,000 FP60 Community AHPs - Additional Annual Leave Backfill (AfC) 75,000 75,000 FP59 FP&WW Service - Contraception 78,000 78,000 FP57 Child Protection 48,000 48,000 FP56 Review of catering (QIS) in PFI contracts 135, ,000 FP55 Community Enteral Nutrician Team 51,000 51,000 FP54 LMTS 20,000 20,000 FP53 Integrated Drugs Service 100,000 50,000 50,000 FP52 Home Equipment 197, ,000 FP70 Hospital at Night 124, ,000 FP63 FP58 Long Term Conditions - step-up on 2007/08 SBIRS (hosted service) - Loss of Tertiary Income 808, , , ,000 3,918,000 1,270, , ,000 1,322,000 13

14 Risk Matrix Outline of Key Financial Risks to Edinburgh CHP 2008/09 Area Comments Key Areas of Risk Assessment Actions Timescales CRES Failure to deliver To be reported separately Medium Identification of accountable officer by scheme CRES against Detailed plans to be developed against each programme, agreed including timescales and monitoring arrangements. Monthly programmes and to an agreed timescale, in full and on a recurrent basis. GMS Prescribin g Impact of Uplifts Recovery of Income Impact of population growth and other demographic and/or demand factors on nondiscretionary elements of contract. Impact of population growth and other demographic factors; Impact of Price Changes and other national agreements (including changes to Prescription Charges and Tariff agreements) Actual cost of uplifts may exceed amounts provided within plan; Recovery of appropriate uplift from partner organisations Income for all activities commissioned by partner organisations Global Sum Payments linked to practice list size and new registrations Quality Achievement linked to performance against QoF framework Demand-led Enhanced Services - e.g. Drug Misusers Contractual Entitlements e.g. locum cover for sickness and planned absence Low Management of GMS risks on a pan-lothian basis, to be coordinated through the Primary Care Contractor Organisation Development of an Early Warning System to notify CHPs of any significant variance against GMS Financial Plan, together with proposed remedial actions, where appropriate. Qtly reviews Jul/Oct/Jan To be reported separately Medium To be reported separately Monthly monitoring on retrospective basis with forecast outturn. Uplift on pays baselines against rolling agreements, e.g.daat and other public sector partners. Growth against service baselines (activity and price) Low Low Full review of all income from third parties and formal agreement of variations to existing agreements, where appropriate. Development of monitoring arrangements to notify partner organisations of variances against cost estimates in year and forecast. June 2008 (assuming agreement of national pay awards within that timescale) Ongoing, forecasts to be updated on quarterly basis 14

15 Loss of Tertiary Income Delayed Discharge s Mental Health & Wellbeing Strategy should cover the full cost of the agreed activities. Income from Other HBs in relation to specialist services and ad hoc referrals may fall below target (budgeted) levels Transfer of Chisholm funds to City of Edinburgh Council Implementation of service change across Inpatient and Community services within agreed resources. Increased Lothian demand leading to reduced capacity for non-lothian referrals Volatility in activity trends Continuation of existing programmes within NHS budgets Management of D/D targets Low Medium Management of capacity in line with agreed funding profile for specialist units. Identification of opportunities for full utilisation of available capacity. CHP to seek early confirmation of all funding agreements re. direct NHS schemes Continuation of existing D/D management arrangements to ensure throughput against NHS capacity To be reported separately Low Development of coordinated monitoring arrangements across partner organisations Per above Agreeement of funding by end-june 2008 Ongoing To be reported separately 15

16 16

17 APPENDIX 2 Prescribing Assumption for 2008/09 1. Purpose of the Report The purpose of this report is to invite the CHPs to review the proposals and recommendations for CHP prescribing budget setting in 2008/2009. This report covers both the overall amount required for CHP prescribing budget and the allocations to each CHP. In line with the Scottish Government (SG) allocation letter the CHPs should note that the report includes two assumptions relating to the loss in prescribing income and the adjustment to boards allocation around Category M savings 2. Recommendations The CHPs are invited to accept the following recommendations: A net 4.6m uplift to current allocation. This uplift will allow the anticipated pressures of 6.8m per the Medicines Management Team (MMT) report (Appendix 1) to be funded in addition to setting a 2.34% ( 2.586m) CRES target; Ensure CHPs prepare CRES Prescribing Plans, these may need amended following advice to be received from the Scottish Government; Consider increasing the Shared Care Allocation, which is used to fund shared care protocol and list size adjustment from 1million to 1.5 million. This would be funded by a top slice from the overall allocation - Finally the CHPs are asked to agree the proposed allocation methodology between CHP s and accept the recommendations of the Prescribing Budget Setting Group (PBSG) report (Appendix 2) 3. Prescribing Budget for 2008/2009 The main objective is to set a budget which allows the CHP s and their GP practices an appropriate resource to continue their excellent prescribing record and to meet the pressures anticipated for the coming year. Lothian has a good track record on prescribing and is considered to be efficient in the national context however recurring efficiencies are expected and a CRES program will be delivered. The prescribing budget comprises an allocation from NHS Lothian and also income from Sales and targets for discounts to be achieved. 17

18 Due to the move towards free prescription our income will fall and it is assumed at this stage that this will be reinstated by an increased allocation from the SG as indicated in the allocation letter. Our discount income will also fall due to a falling price base for some generic Drugs, i.e. the Category M products. As also indicated in the allocation letter the 2008/2009 allocation does not yet take account of the recurring financial implications arising from changes in to reimbursement prices for Part 7 Items (Generic Drugs) published in the October 2007 issue of the Scottish Drug Tariff. This initiative is currently being developed in conjunction with NHS Boards. When final figures are confirmed the adjustment to allocations will be made. The budget in 2008/2009 will move forward from an underspend position in 2007/2008 and will be set to breakeven in 2008/2009. BUDGET 000 S 2007/2008 NHS Lothian Allocation 110,519 Estimated uplift 6% 6,631 CRES (2,586) 2008/2009 Allocation 114,564 Sales Discounts 14,976 Other Prescribing (1,000) Sub-Total 2008/2009 CHP Budgets 128,540 Further Adjustments (assumed levels): Reinstatement of Lost Income 2,500 Reinstatement of Lost Discounts 500 Loss of Category M Savings (3,000) 2008/2009 CHP budgets 128,540 Final figures are dependent on the levels of assumed adjustments on Prescribing Income, Loss of Discounts and Category M Adjustments being confirmed. Distribution of Budget Once the overall resources available are determined, budgets are allocated to CHP s on the basis of the weighted capitation model as proposed by the PBSG. This is a statistical model developed with the help of ISD based on a variety of factors influencing prescribing. PBSG recommend that 70% of the budget is set on the basis of the model s weighted capitation formula with the 30% balance being based on historical spending. In previous years there have been different levels of performance against budget between the CHPs. The varying degrees of distance between actual spend to the expected weighted shares caused some CHPs to feel they were not allocated sufficient budget. However we have recently seen 18

19 a vast improvement in the consistency of CHP performance which brings this significantly more in line weighted allocation. The anticipated outturn expenditure shares in 2007/2008 are now very close to the expected 2008/2009 weighted shares at CHP level. As such the model is now even better placed to allocate budget which ensures each CHP should deliver on it breakeven target and the risk share schemes which were required in previous year are not required for 2008/2009. Budgets are calculated at practice level and aggregated to the relevant CHP. The final outturn figures may vary slightly. Previously our figures were based on October 2007 data and this can be revised to November 2007 and finally December We would expect the relationships in the following tables to hold. The population figures highlight the extent of weighted capitation which gives more budget to areas which require a higher budget though having a population with higher need. Summary of relationships between expenditure and proposed 2008/2009 budgets 2007/2008 Pop. Est. 2007/2008 Spend Est. 2008/2009 Weighting Est. 2008/2009 Budget CHP Based On Oct. Forecast Edinburgh 57.8% 53.2% 53.4% 53.3% West Lothian 20.8% 22.2% 22.2% 22.2% East Lothian 11.5% 12.9% 12.9% 12.9% Midlothian 9.9% 11.7% 11.5% 11.6% As in previous year we would propose holding a central contingency (in 07/08 1m) for Shared Care Protocol Drugs and List size changes which will be distributed to practices at quarterly intervals. However our recommendation is to increase this to 1.5 million, in line with forecast demand. Setting the actual budget for each CHP requires agreement on available budget. If we use the expected m, the following CHP budgets will be in place for 2008/09. Considering the level of contingency we hold we thus have two options, Option A to continue with 1m or Option 2 to increase to 1.5m which is recommended given the increases seen in Shared Care Protocol Drugs. The PBSG report recommends we use December data which became available in early March. Revision from October to November position and those related forecasts, gave a slight movement mainly between Edinburgh and WL. This was likely to be a closer match to the December figures and moved budget in the direction of the CHP which faces the most current pressure on budgets. We now have the December figures and CHP s can see the recommended splits for the 2008/09 budgets. For completeness and reference back to earlier papers all 3 basis are shown 19

20 Expected CHP budget for 2008/09 (based on October data) Option A Option B Diff 000 s 000 s 000 s Edinburgh 67,832 67,565 (267) West 28,142 (111) Lothian 28,253 East Lothian 16,417 16,353 (64) Midlothian 14,763 14,705 (58) OOH Contingency 1,000 1, Total 128, ,540 0 Revising to November data gives the following Profile Option A Option B Est. 2007/2008 Spend Est. 2008/2009 Budget 000 s 000 s % % Edinburgh 67,769 67, % 53.25% West 28,316 28, % 22.25% Lothian East Lothian 16,417 16, % 12.9% Midlothian 14,763 14, % 11.6% OOH Contingency 1,000 1,500 Total 128, ,540 Reworking the figures form October to November transfers 63,000 budget from Edinburgh CHP to West Lothian CHCP. Final revision has been done of the basis of December figures. This is considered to be the most stable forecast. The split of 128,540,000 intended budget is as follows December based position Option A Option B Est. 2007/2008 Spend Est. 2008/2009 Budget 000 s 000 s % % Edinburgh 67,610 67, % 53.13% West 22.29% 22.29% Lothian 28,369 28,258 East Lothian 16,440 16, % 12.92% Midlothian 14,847 14, % 11.66% OOH Contingency 1,000 1,500 Total 128, ,540 20

21 Edinburgh CHP s reducing proportion of the overall Lothian spend does mean a further redistribution. Proposed Edinburgh budget reduces by 159,000 while there is a 53,000 increase to WL, a 23,000 increase to East Lothian and a 84,000 increase to Midlothian. This revised final profile means that, when considering the December based Option B, the 2008/09 budgets represent approximately a 2% increase in relation to expected 2007/08 outturn expenditure The distribution is evenly spread from 2.0% in East Lothian and Midlothian to 2.3% in Edinburgh with WL at 2.1%. Access to the contingency means the 2008/09 settlement is an overall 3.3% increase on 2007/08 expected expenditure. Category M prices Category M is an increasingly complex position but in essence it is group of commonly prescribed generic drugs whose price is being monitored and set to achieve savings which are part of the implementation of the new pharmacy contract. Prices are set quarterly by the Department of Health and endorsed by the Scottish Government and while these prices fluctuated in 2006/07 there was a dramatic step change reduction in 2007/2008 from October 2007 onwards. It is important to recognise that the underspend in 2007/2008 has come about mainly through the reductions in expenditure on Category M drugs. It is a dynamic process with many factors changing but the expected 2007/2008 spend of 124.4m in Lothian was achieved by a reduction of Category M expenditure of 6m but an increase on other drugs of 6.8m. Thus spend overall increased by 0.8m in 2007/2008 over 2006/2007 overall and as we had increased the budget by 4.6m from 2006/2007 we have an underspend. The Category M baseline is crucial and our model assumes that spend will be circa 20m i.e. the same as overall spend in 2007/2008. This was down from 26m in 2006/2007 and Category M is becoming a much lower proportion of our spending. We do not expect to see the low prices of late 2007/2008 repeat for a full year effect. We saw a spend of 12.4m in the first half of 2007/2008 and only expect 7.6m in Qtr3/4 but do not expect this to repeat and give circa 15.2m spend in 2008/2009. We are thus assuming a repeat of the average level of 2007/2008 Category M prices and a spend of 20m. We also do not anticipate further reductions in category M as the current recovery is already thought to be high by pharmacy contactors and this is being investigated. We have a risk if Category M prices do rise dramatically as our assumption is for simple volume movements only. Income and Category M Adjustments As stated in section 3 we have built in assumptions around the loss of prescribing income, reduction in discounts and Category M adjustments to 21

22 allocations. ALL CHP ALLOCATIONS WILL BE ADJUSTED ONCE THE SG HAVE FINALISED THE PROCEDURES FOR THIS. 7. Prescribing Requirement for 2008/2009 A number of factors come together to determine the amount of resource required. We move forward from the 2007/2008 expenditure building in various assumptions. There is an underspend expected in 2007/2008 of 3m on budget of 128m and this saving represents a gross 3.5m less 0.5m lost discounts. Our calculations give the overall increase as an additional 4.1m on our allocation. The 4.1m assumes full recognition of Medicine Management Team s growth of 6.8m; calculations were done to ensure that this requirement remained valid after revision to the lower price base seen in the second half of the year. Offsets are CRES at 2.586m and we anticipate a small benefit from Drugs coming off patent of 0.2m. 4.1m is our expected increase in expenditure. We assume a full year effect of reduced generic discount 0.5m due to the lower price base in Category M drugs (effectively 12% reduction on 2007/2008 level of discounts and consistent with other heath boards) and a reduction in allocation of 3.0 million in gross terms for the full effect of the Category M adjustment. We also assume sales income will reduce by approx 33% or 2.5m in the move to free prescriptions but will be reinstated by a new matching allocation The additional 4.1m allocation will allow a 3.3% increase in 2007/2008 outturn but due to the 3m underspend budgets given to CHP s will only increase by 0.5% from the 2007/2008 levels. The following tables summarise the starting position in 2007/2008 and the expected requirement for 2008/2009 EXPENDITURE 000 S 000 S 2007/2008 Outturn 124,452 MMT Pressure 6,800 CRES (2,586) Off Patent (225) 4,575 Est. 2008/2009 spend 128,441 BUDGET 000 S 2007/2008 NHS Lothian Allocation 110,519 Estimated uplift 6% 6,631 CRES (2,586) 2008/2009 Allocation 114,564 Sales Discounts 14,976 Other Prescribing (1,000) Sub-Total 2008/2009 CHP Budgets 128,540 22

23 Further Adjustments (assumed levels): Reinstatement of Lost Income 2,500 Reinstatement of Lost Discounts 500 Loss of Category M Savings (3,000) 2008/2009 CHP budgets 128,540 INCREASES 000 S 2007/2008 Budget 127, /2009 Budget 128,540 Increase on Budget 588 % Increase on Budget 0.5% 2007/2008 Spend 124,452 Increase on Spend 4,088 % Increase on Spend 3.3% Lynne Hollis Associate Director of Finance List of Appendices The following Appendices are referred to: Appendix 1: Medicines Management Team Report Appendix 2: Prescribing Budget Setting Group Report 23

24 APPENDIX 3 1. Purpose Cash Releasing Efficiency Savings (CRES) Plans 2008/ The purpose of this report is to update and inform the sub group of progress with CRES plans for 2008/09 and to seek the sub group s agreement to the CRES programme as part of the financial plan. SUMMARY This report informs the sub group of the CRES targets and plans for the CHP for 2008/09. It also seeks the sub group s agreement to the plans. 2. Recommendations 2.1. The sub group is recommended to: 2.2. Agree the CRES plans as part of the CHP financial plan for 2008/ Summary of Issues 3.1. The financial settlement for 2008/09 is very tight and there are limited funds available for pressures and developments, including the full year effect of the 2007/08 investments. The details are provided in the separate paper on the 2008/09 financial plan The Scottish Government has set a target of a 2% efficiency improvement for all public sector bodies This has been translated into a CRES target for NHS Lothian of 2% ( 20m) overall. However, since some areas cannot achieve CRES (General Medical Services, Capital Charges and Rates) the target for those areas that can is slightly higher at 2.34% in order to still achieve the 20m The indicative CRES target for Edinburgh CHP is 4.676m. This comprises 1.371m on Prescribing and 3.304m for HCH services. The HCH figure includes an unachieved figure carried forward from 07/08 of 1.155m The overall financial plan includes an assumption that CRES is achieved in order to deliver a balanced financial plan to 2008/ The table below sets out the most up to date proposals for where the CHP will achieve efficiencies in 2008/09 and a progress update. 24

25 3.7. Progress A joint group with the Council has been established to oversee plans that have a shared impact. Initial financial modelling has been done and additional opportunities have also been identified with the Council. A project manager has been appointed to manage the service changes involved and to ensure that the efficiencies are delivered Work is underway to analyse all current underspends to identify those that are recurring and can deliver the 500,000 target A proposal is being developed to support a wider range of prescribing efficiency initiatives in practices to allow the 1.6m CRES target to be delivered. 25

26 3.9. Many of the individual lines in the plan can be actioned on 1st April i.e. resource transfer, supplies uplift, drugs uplift, skill mix changes Others are being managed through regular CRES meetings between the General Manager, budget holders, finance department and the partnership representative. 4. Impact on Health Inequalities 4.1. Where appropriate individual plans will have impact assessments carried out. 5. Financial Implications 5.1. Delivery of the CRES plan will be a major factor in allowing the CHP to achieve its financial targets for 2008/09. David Small General Manager 26