Capital Funding Meeting on 14 th November 2017 Agenda item 2a Capital Programme Funding Update Ian MacDonald, Head of Capital Finance

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1 Finance & Performance Committee ABM University Health Board Capital Funding Meeting on 14 th November 2017 Agenda item 2a Subject Prepared by Approved by Presented by Capital Programme Funding Update Ian MacDonald, Head of Capital Finance Simon Davies, Assistant Director of Strategy (Capital) Lynne Hamilton, Head of Capital Finance Siân Harrop-Griffiths, Director of Strategy Ian MacDonald, Head of Capital Finance Simon Davies, Assistant Director of Strategy (Capital) 1. SITUATION The Health Board receives funding allocations from Welsh Government for Capital expenditure, which is accounted separately to revenue funding. The approval and monitoring of Capital schemes, including financial spend is undertaken across a number of groups within the Health Board. The purpose of this paper is to provide assurance to the Committee on the management of this year s Capital Programme, including allocation of slippage funding and the development of future years spending decisions. 2. BACKGROUND The main source of capital funding for the Health Board is from Welsh Government via an annual discretionary allocation and funding for capital schemes approved through the All Wales Capital Programme. Welsh Government allocate discretionary capital to NHS organisations for the following priority obligations across all healthcare settings; Meeting statutory obligations, such as health and safety and firecode; Maintaining the fabric of the estate; and The timely replacement of equipment Schemes for larger replacement and new investments form part of the All Wales Capital Programme. These investments will normally require submission of a Business Case, which follows the Treasury five case model and to go through a comprehensive Welsh Government scrutiny process including presentation at the Infrastructure Investment Board. The nature of capital schemes means there is often slippage funding available towards the latter part of the financial year from Welsh Government. 1

2 3. ASSESSMENT Achievements Over the last few years, this Health Board has built up an excellent reputation within Welsh Government and NHS Wales in the way it has developed and delivered its Capital Investment Programme. This includes; The close working relationship that has been built up between the Capital Planning and Capital Finance Teams. This integrated team approach, along with other teams, including Procurement, Medical Equipping and Informatics, has allowed it to combine good governance yet at the same time remain agile when it comes to accessing additional year-end funding opportunities ( 16m over the last 3 years as in table 3) The comprehensive Capital Resource Limit forecasting process. An exemplar adopter of Treasury best practice in the completion of five-cases model Business cases for major capital investments. An early adopter in the use of Programmes and Portfolios, including Health Vision Swansea (HVS) and Reshaping Mental health Services Swansea (RMHSS) from More recently, the Health Board was the first organisation in NHS Wales to develop an Informatics Strategic Outline Programme (SOP), one that was held up as an exemplar to other organisations and which received approval by the Welsh Government in July In the same context, Welsh Government also approved an Environmental Infrastructure SOP in April This set out opportunities to secure fundamental improvements in the fabric and infrastructure of our estate through significant capital investment on each of the acute hospital sites over the next decade through the development of a series of supporting Business Justification Cases. Table 1:- Programmes and Portfolios This success has also led to a large number of major Business Cases receiving capital funding through the All Wales Capital Programme, as shown below. Table 2:- Approved Business Cases 2

3 Table 3:- ABMU Capital Funding to Challenges The challenge for the Health Board over the short to medium term is to ensure that it can maintain sufficient investment to maintain (replace) its existing fixed asset base, while at the same time providing capital investment into areas of Service Improvement and Spend to Save projects. The existing capital asset base is around 800m, with the two biggest investment areas being buildings & engineering and equipment. Table 4:- ABMU Fixed Assets as at 31 st March

4 To put these challenges into context, work has been undertaken using the Finance Fixed Asset Register, to highlight the trend in backlog equipment replacement. While this graph takes no account of the actual operating efficiency of equipment, it does highlight that even if the average annual 6m investment from discretionary capital was to continue, there is a significant increase in the value of equipment operating in excess of its expected useful life. This is estimated to grow from 75m in 2017/18 to just under 150m by 2021/22. Table 5:- Trend of Equipment Operating Past Expected Useful Life as at July 2017 This trend is one that has been highlighted previously to the Health Board, as a report to the Capital Investment Committee in June 2012 by the Director of Finance highlighted that 4

5 by March 2015, the estimated value of all equipment fully written down in value but still in use, was estimated to total 76m. This work in ABMU led to work being commissioned on an All-Wales basis through the Capital Technical Accounting Group, which identified a significant number of assets were now beyond their useful economic life, with an estimated value of 473m by March The Wales Audit Office highlighted this risk, in their report Health Finances and Beyond published in July Welsh Government recognised this risk and in , the previous 40% reduction in levels of discretionary funding applied in and were reversed. The latest risk adjusted backlog maintenance assessment for buildings and engineering from the 2016/17 NHS Wales EFPMS return (Estates & Facilities Performance Management Systems) shows 18.2m for high and significant risks (although this will reduce following completion of the Morriston site demolitions later this year), including 2.9m related to statutory compliance. Although the EFPMS return is completed on an annual basis, the data submitted by the Health Board is somewhat out of date as the last property survey was undertaken in c2005 and updates to the EFPMS return are mainly from desktop information. An updated six-facet property survey is required to bring the information up to date. In-Year Capital Financial Plan The Health Board has a number of processes and groups in place to ensure close management and monitoring of the in-year capital position. These include the Capital Resource Limit review process, which feeds through to the monthly Capital Management Group and Investment and Benefits Group. The recent announcement by Welsh Government that remains problematic given the scale of forecast spend for the new Grange University Hospital in Aneurin Bevan UHB, has a two-fold effect on the Health Board; Due to the scale of the financial pressures in , WG advised all Health Boards that normal slippage rules have been suspended and any further slippage on the AWCP schemes during will not be re-provided by WG in This was reinforced at the Capital Monitoring Review meeting with WG officials in September, when the Health Board was asked to manage any AWCP slippage over and , subject to WG approval. Following this direction, the Capital Management Group made recommendations on managing slippage of 1.148m to the Investment and Benefits Group in October. The Health Board has two Business Cases, which were anticipated for approval this year, for future years funding through the AWCP (Environmental Modernisation BJC 2 c 7m and the Singleton Neo Natal TCU Expansion 9.7m). If Welsh Government approve the cases this year, it is very likely they will not be in a position to provide funding until at least 2019/20. The impact for the likely delay with the Environmental Modernisation BJC has already played into the slippage bids now being progressed this year (Chillers Plant 900k below) and is likely to mean an increased investment from the discretionary programme in 2018/19. The draft AWCP update provided to 5

6 the Chief Executives Group in September (Appendix A) confirms there are no planned allocations for ABMU over the next 4 years. At the October meeting of the Investment and Benefits Group, additional allocations for capital funding this year for 1.948m (utilising the 1.148m AWCP slippage above), were approved from contingency. The majority of schemes were for changes to existing allocations and in addition two larger requests for replacement of existing assets were agreed; Chiller Plant Refurbishment, Morriston 900k and Informatics Refresh (Storage Area Networks and Servers for the Health Board 735k. Future Years Capital Investment Planning for future years capital investment is driven by service requirements that come through the Capital Prioritisation Group and Integrated Medium Term Plan (IMTP) process; For items of replacement equipment and building & engineering fabric, in conjunction with the Service and Corporate Units, the Capital Prioritisation Group oversee a risk-based approach. The majority of these requirements fall within the funding remit of discretionary capital. This process is also used to make recommendations for the allocation of in-year slippage monies. The output from the IMTP process in was a 5-year road map (Annex 1) of investments (capital and revenue). From the summary below, this indicated a requirement for capital investment from Welsh Government (excluding discretionary) of 235m, which excluded ARCH investments. The recent JET meeting with WG confirmed the Health Board only needs to undertake a one-year plan for that covers Targeted Intervention measures and sets us on the path to sustainability. However, it is recommended that a five- year capital plan is maintained, as this provides an overview of areas that will require the support of Welsh Government Capital. Table 6:- ABMU 5 Year AWCP Funding Estimates Initial work has commenced on the Discretionary Capital plan for and an early draft was presented to the October meeting of the Investment and Benefits Group. The 6

7 plan includes known commitments, a high-level risk analysis on the existing asset base and the funding outlook. The process to determine a final balanced plan for will continue over the next few months and will involve discussion and review at a number of forums, including IBG, CPG and the IMTP process. The initial plan summarised below shows an over-commitment of 14.4m. Table 7:- Draft Discretionary Capital Plan Other Funding Opportunities There a number of other funding opportunities that the Health Board is exploring to ensure it can maximise the income for capital. These include; WG Invest to Save and Efficiency through Technology Fund (ETTF). Bids for 19 schemes were submitted to Welsh Government in September. The bids requested funding of just over 5m, on a mixture of capital and revenue investments. Welsh Government scrutiny has commenced and final announcements are expected towards the end of November. Green Growth Invest to Save Fund. Work is progressing on a bid through the Welsh Government Invest to Save fund linked to the Refit-Cymru Framework. This bid would bring private sector innovation with guaranteed financial savings through reduced energy usage. Primary Care. The Cabinet Secretary for Health recently announced an initial pipeline of primary and community care projects to be delivered by Four projects has been identified for ABMU, including two capital refurbishment projects at Penclawdd Health Centre and Murton Community Clinic and two capital new build projects at Bridgend Town Centre and Swansea Wellness Centre. The next step is now to move to implementation and delivery, subject to provision of successful business cases. Governance 7

8 Given the substantial levels of capital investment and the on-going pressures for additional investment, the Board has in place a significant level of monitoring and scrutiny. Detailed functions are described in Appendix A and include; Investment and Benefits Group Capital Management Group Capital Resource Limit Project Assessments Capital Prioritisation Group 4. RECOMMENDATION The Finance and Performance Committee is asked to- NOTE the recent achievements of the Capital Programme and the on-going challenges related to the significant levels of backlog replacement. NOTE the governance and scrutiny arrangements in place to managing the in-year capital position and future years investment requirements. Appendix A NHS Wales Capital Programme September

9 Appendix B Capital Scrutiny Functions and Groups 9

10 10

11 Major Service Change Plans (Service Change and Capital Schemes) ARCH Schemes Capital Scheme Other linked service change Digital v8 Service Change Requiring Revenue (including external funding and WHSSC) Does not include service or efficiency improvement within resources Primary and Community 2017/ / / / /22 + Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021/ / / / /26 Dyfed Rd Network Hub (GMS) Aberkenfig and Cwmllynfell Improvemen Glanrhyd N Network Hub (Integrated Community Services) Roll out of cardiology scheme Patient Appointment Penclawdd and Merton Refurbishmen ts (TBC) Brynhyfryd Primary Care Development Mayhill Primary Care Development Porthcawl Primary Care Development Vale Of Neath Primary Care Development Implement new Respiratory Pathway Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models Cwmafan Primary Care Development Implement new AF model Further Phases of Digital Strategy Road Map ARCH Wellbeing Villages Bridgend - Neath - Swansea Embedding 111 Roll out of standardised spirometry Maximise Intermediate Care model Community INR service Primary Care Test Requesting Improvement Grants for primary care premises including Upper Afan Valley, and others to be confirmed New build primary care premises as required in line with the LDP housing growth plans Mobilising Community based staff WIFI - Community Sites Welsh Community Care Information System (WCCIS) - Bridgend LA WCCIS - with Swansea LA WCCIS - with Neath LA Morriston Demolition programme CDU model and TAU model in place Increase thoracic surgery Agree portfolio of short stay surgery to move to Singleton Isolation rooms Isolation rooms Decant ward Implement moves to Singleton Early Supported Discharge Service End of Life Care Model WEDS - Assessment Units 4 to 6 demountable wards New therapies accommodat New HSDU Elective Orthopaedic Unit Complete therapies and MSK Extended critical care space Morriston 2nd CEPOD theatre Centralised medical take for Swansea & New Stroke Model New Access Road ICNET - Infection ERAS in specialised surgery Frailty and AEC model Patient Appointment Radiology (WRIS) Citizen Held Portal - coproduction eprescribing Catheter Lab PROMS Hybrid Theatre Morriston new car park Thoracic Surgery Capacity Inpatient Flow CT Scanner Pathology move to Morriston Further Phases of Digital Strategy Road Map Welsh Clinical Portal rollout (Results/ Docs/ GP Record/ Referrals/ Test Requesting / Discharge Summaries) Digital Dictation RFID, Scanning of Casenotes Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models Major Trauma Network Major Trauma Centre?? ARCH: Tranches 2 and 3 Obstetric, neonatal and gynaecology relocation to Morriston Paediatrics relocation to Morriston Cancer Centre - new LINACs Supraregional surgery Acute hub/major trauma Regional septic Suite Regional Pathology Singleton Increase number of BMTs Citizen Held Portal LINAC replacements eprescribing LINAC replacements WIFI ICNET Temporary Car park Patient Appointment Reminders Aseptic unit in place New surgical model for Singleton Tenovus mobile cancer unit Relocate PAU - develop SARC New admissions unit (No revenue in IMTP) PROMS Neonatal expansion Digital Dictation Breast Unit in NPTH Create increased CDU space Inpatient Medical move to Morriston School of medicine in to pathology space New colposcopy model

12 Major Service Change Plans (Service Change and Capital Schemes) ARCH Schemes Capital Scheme Other linked service change Digital v8 Service Change Requiring Revenue (including external funding and WHSSC) Does not include service or efficiency improvement within resources 2017/ / / / /22 + Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021/ / / / /26 Flow Welsh Clinical Portal rollout RFID, Scanning of Casenotes WRIS WEDS - Assessment Units Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models New MRI Scanner Ambulatory care unit (no revenue in IMTP) Neath Port Talbot Agree portfolio of short stay surgery to move to Singleton Day unit to Y Rhosyn Implement moves to Singleton Rapid access diagnostic cancer hub WEDS - Assessment Units Transfer Orthopaedic work to NPT Digital Dictation PROMS New breast unit - NPTH Rheumatology infusion unit Further Phases of Digital Strategy Road Map New colposcopy model Patient Appointment Welsh Clinical Portal rollout Citizen Held Portal Inpatient ICNET eprescribing RFID & Scanning of Casenotes Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models POWH ICNET ENT Surgery Model Inpatient Flow - Pilot Patient Appointment Develop Clinical Strategy for POW Welsh Clinical Portal rollout RFID, Scanning of Casenotes eprescribing Early Supported Discharge Service Implement SAU/AEC model Decant ward POWH Transfer Orthopaedic work to NPT Digital Dictation End of Life Care Model ASU model in place Breast unit in NPTH JAG accredited scoping suite PROMS Isolation rooms Inpatient Expansion of critical care space ASU at POWH New colposcopy unit Further Phases of Digital Strategy Road Map Citizen Held Portal Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models MH&LD Strategic Review and Engagement Phase Agree MH model at POWH Planning Phase PROMS eprescribing Replace MH Acute Assessment Admission beds Re-provide Swansea Older People's Inpatient Acute Assessment services Resolve model for Phillips parade Demolition programme for Cefn Coed Mobilising Community based staff WCCIS - Bridgend LA WCCIS - with Swansea LA WCCIS - with Neath LA Learning Disabilities estate strategy Welsh Clinical Portal rollout Inpatient Flow Technology Enabled Care (TEC): Telehealth, Telecare, Telemedicine models Further Phases of Digital Strategy Road Map