CWM TAF HEALTH BOARD. FINANCIAL PLAN 2013/14 to 2015/16 FINAL DRAFT

Transcription

1 CWM TAF HEALTH BOARD FINANCIAL PLAN 2013/14 to 2015/16 FINAL DRAFT 3 APRIL

2 1. INTRODUCTION The context for the Financial Plan is outlined below in terms of : Quality and safety Comparisons within NHS Wales and with England Relative efficiency and Allocation of Resources An outline of 12/13 performance Quality and Safety As part of the 2012/13 planning process, the Board underlined its commitment to quality safety and patient experience in adopting the IHI Triple Aim approach to service delivery. One consequence of this is that the mechanisms for service, workforce and financial planning have been grounded in a system of risk assessment against known quality indicators. These principles have been used in the development and implementation of cost improvement plans where triangulation of quality, performance and cost has meant that informed decisions have been made to manage risk as well as deliver cost reductions. For example, the ward refurbishment programme in Prince Charles Hospital established more single rooms and resulted in each ward reducing its beds. The Board used this opportunity to realign staffing levels to deliver improved safety and not as a reason to reduce nurse establishment levels, this pre-empting the Francis Inquiry. At the same time, in light of unscheduled care pressures, the LHB invested in Advanced Emergency Practitioners in A & E, an additional Consultant in A & E; additional Middle grade Doctors in A & E and 2 additional acute Physicians to support front-door activity in response to escalating risk in the management of emergency care. Altogether, these actions represent 2m of cost that had the Board been adopting a uni-dimensional financial approach to planning could arguably have contributed to the in-year savings plans. The Board is committed to continuously reflect on the context of the triple-aim requirements as the service and financial plan over the next 3 4 years is developed and assessed. 1

3 Comparison within NHS Wales An assessment has been made of where the Health Board stands in relation to it s expenditure levels and productivity, relative to other LHBs in Wales, and relative to English PCTs with comparable population characteristics. There is no clear overall measure of weighted population we can use to compare the health needs of Cwm Taf with that of other LHBs. When for example the Townsend formula is applied, it assesses a health need per head of population that is 12% higher than the Wales average. It might be further agreed that, based on most recent public health data identifying that on average, Cwm Taf residents live for circa 10 years longer with chronic disease before they die than the Welsh average, this variance could now be even higher. When comparing the 2011/12 expenditure per head for each LHB relative to Cwm Taf, Cwm Taf is clearly the highest at 1,913 per head. This is 8% above the Welsh average; however this takes no account of the health variance referred to above. Comparison with English PCTs Cwm s Taf s expenditure per head has also been compared with that of English PCTs which fall into the same Office for Population Studies category as Cwm Taf (Former Industrial Hinterlands Category A). Both 2010/11 programme spend (from programme budgeting returns) and total 2011/12 expenditure from the accounts have been compared. The results show Cwm Taf net spending on average is 5% less with a range of between -7% and +8%. There are technical differences in that some costs are met by PCTs in England but not charged to LHBs in Wales; the principal of these being clinical negligence, blood and blood products and capital charge dividends, these however account for less than 5% of the expenditure. The 2013/14 funding differential against the English PCTs likely to be greater than that outlined above for 2011/12 and 2010/11. The National Audit Office report comparing expenditure on health in Wales with England, Northern Ireland and Scotland shows that there is a widening gap between Wales and the other countries, as Wales is operating on a flat cash basis. Relative efficiency Comparison of reference cost returns show that Cwm Taf has unit costs (i.e. efficiency) very slightly greater than the Wales average. A comparison has not yet able to be done with efficiency outside Wales due to the different methodologies employed. 2

4 Allocation of resources As our work develops it will be refined to reflect differences in spending per head of population and activity levels per head of population for particular services. This will then be taken into account in the Health Board s medium term plan. The National Audit Office in 2012/13 undertook a comprehensive comparative review of the financial positions of the home nations in which particular attention was drawn to the specific challenges faced by NHS Wales. This, together with the evidence recently provided by the Auditor General to the Finance Committee of the Welsh Government relating to the financial outlook for NHS Wales and the constraints associated with a financial regime that requires year-on-year financial balance underlines the scale of the challenge for all LHBs within Wales. The key conclusion is that Cwm Taf Health Board starts with a level of resource and expenditure that is lower than that of comparable organisations given the population health which means that the scale of the challenge is comparatively larger. This needs to be considered in the context of the risk that the Inverse Care Law predicts for this community. These key issues must be addressed within potential changes to the financial regime over the lifetime of this plan. This fact, together with the output of the Francis Review serves to underline the need for the Board to continue to hold true to the Triple Aim principles in service and financial planning so that quality and safety are maintained whilst driving efficiency and productivity improvements. Outline of 2012/13 performance During 2012/13, the Health Board recognised that the financial challenge for the organisation of 28.4m would not be resolved in-year through the savings plans that had been identified and further developed. The Health Board consistently identified that its best case position would be an inyear deficit of 10m. The plan was predicated on a clinical change programme that would continue with the trajectory of activity shift from hospital to the community enabling a further reduction in the community hospital bedstock in the first 2 quarters of 2013/14. The changes in clinical models that have been developed and delivered have had a positive effect on the management of increased demand for acute services over the last 12 months. However, in line with the unprecedented unscheduled care pressures that have faced the NHS over the last 3 months, the decision to pursue further bed reductions has been suspended on grounds of safety and quality. This means that whilst the Health Board has been able to maintain its overall forecast to its initial best case position of 10m, this has been achieved through non-recurrent 3

5 , ,021-1,363-1,229-1,331 measures which will enable the LHB to achieve a year-end financial break even position. This has impacted upon the underlying position of the LHB when compared with the original plan. The Finance and Performance Committee have had a scrutiny role to play in ensuring that the Board hits its forecast end of year position. This means that any plans for service redesign must be reconsidered in light of changing unscheduled care demand such that the recurrent potential for a further 10m recurrent savings must now be subject of further challenge. The chart below illustrates the monthly financial position of the LHB. The significant movement in November 2012 reflects the further financial support to Health Boards made by the Welsh Government (Nov - 6.7m, Dec, Jan Feb, March m per month). Monthly surplus/(deficit) run rate Actual Forecast 7000 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar An assessment has been made of the underlying recurrent position in 2012/13, which will roll into 2013/14. This indicates an underlying deficit of 14.1m as shown below. 4

6 forecast 0 Non Recurrent Allocation Brokerage to WG -4, Non Recurrent Directorate Costs -468 FYE of Directorate Establishment 3, Non Recurrent Directorate Income 1,322 12/13 Accounting Write backs 2,450 12/13 WG Unscheduled Care Funding /13 Non recurrent WG Funding 10,000 12/13 Other Non Recurrent Adjustments /13 recurring deficit 14, PLANS FOR 2013/14 AND SUBSEQUENT YEARS This section of the report covers our plans for 2013/14 and subsequent years under the following headings: Allocation reductions Inflationary and other cost pressures Cost avoidance assumptions Redesign and efficiency savings ( 2013/14 and medium term) Overall medium term financial plan Key further actions Key risks to the Financial Plan Allocation Reductions On the 7th February 2013, the Health Board Revenue Allocation Letter was issued by the Welsh Government. Together with assumed further changes to allocations not included in the letter, the impact for 2013/14 and subsequent years is shown in the table below. 2013/ / / / Capital charge support for strategic schemes RTT Funding (after assuming 0.5m to 1, Cwm Taf from the new T&O monies) Welsh Eye Care Services Pharmacy Contract Wet AMD drug funding Total 2, In addition, we have received funding from the Welsh Government in previous financial years to support schemes that would deliver recurrent 5

7 financial benefits. In 2013/14, a repayment of 3,000k is required as agreed in the acceptance of the funding support. Further repayments of 900k and 800k are due in 2014/15 and 2015/16 respectively. Inflationary and Other Cost Pressures The tables below set out the projected inflationary and other cost pressures for 2013/14 and the following three years. Table 1 - Recurring 2013/ / / /17 '000 '000 '000 '000 Inflation Pay Inflation 4,834 4,600 4,400 4,200 Pensions costs due to auto-enrolment Non pay Inflation 1,492 2,000 2, Travel Allowance Changes Continuing Heath Care , Funded Nursing Care Total 8,695 7,911 7,550 7,350 Service Development NICE and new high cost drugs 2,750 2,300 2,350 2,350 Specialist Services 1,000 1,000 1, Total 3,750 3,300 3,350 3,350 Service Demand Continuing Heath Care Funded Nursing Care Prescribing 2,200 1,520 1, Demographic / Demand on Acute Services Total 2,200 1,920 1,945 1,945 Local Cost Pressures and investment in quality & safety 2,300 1,600 1,600 1,600 Total Recurring 16,945 14,731 14,445 14,245 Table 2- Non Recurring 2013/ / / /17 '000 '000 '000 '000 Invest to save repayments (see above) 3, Contingency and Change programme 3,000 1,100 1,100 1,100 Local Cost Pressures and investment in quality & safety Total Non Recurring 6,700 2,200 1,900 1,100 The basis for the above estimates is outlined below. 6

8 Pay cost inflation Pay cost pressures have been assessed to include An assumed overall 1% wage award in each year. Agenda for Change incremental drift which has been evidenced to still be impacting upon and increasing the cost of the workforce. The increases in recent years have been slowing down - 3.0m in 2010, 2.4m in 2011, 1.9m in m has been assumed for 2013/14 and 1.2m, 1.0m, 0.8m for subsequent years. Incremental drift for medical staff is projected at 0.5m in each year. Commitment awards for consultants are projected at 0.2m in each year. Pension contribution costs are affected by the plan for auto enrolment of staff onto the pension scheme. Whilst it is assumed that this will be introduced from 1st June, there is a transition option to defer this until 1st October If organisations choose to apply the transition option they must have done so prior to 1st March Staff would need to be advised of this in writing, as well as the fact that they have a right to join the NHS Pension Scheme at any point prior to the re-enrolment on 1st October The cost estimate of 0.6m in 2013/14 is based on a 40% enrolment rate into the pension scheme of those staff not already in the scheme. Non Pay Inflation Following the approach taken in previous years, a matrix largely based upon the Health Services Cost Index (HSCI) has been developed and applied to 2011/12 accounts expenditure heads to derive an assessment of non pay inflation. To provide a more accurate assessment, colleagues from WHS have provided estimates on medical and surgical consumables, provisions and external general service contracts. The NHS Staff Council is introducing new NHS mileage allowance arrangements to reimburse members of staff that use their own vehicle for work business. This impacts on all staff who are on A4C NHS terms and conditions of service but does not apply to medical and dental staff. The new rate comes into effect from 1st July 2013 and under the new arrangements, the NHS rates will be reviewed every April/May and October/November, based on the latest AA guides. The NHS rates will only change if the AA costs result in a five per cent shift, up or down. The AA published single standard rate per mile is 68p for the first 3,500 miles and 23p per mile thereafter. Whilst this rate could change by July 2013 it has been used for resource planning purpose. 7

9 NICE and new high cost drugs The cost of NICE technical appraisals and nationally adopted high cost drugs continue to be a significant cost pressure. The overall estimated cost of 2.75m for 2013/14 is built up as follows :- 0.8m full year effect of 2012/13 new drugs 1.5m for new drugs in 2013/14. The major area is new drug regimes for Hepatitis C. 0.65m estimated NICE cost increases in contracts with other LHBs 0.2m reductions in other areas The position in later years in less clear as the relevant technical appraisals will follow. We have assumed 2.3m in each year based on historical experience. Specialist Services Actual expenditure growth in specialist services was 1.7% in 2011/12 and is expected to be 2.0% in 2012/13. An average over the last two years would be a 1.85% increase in the cost of specialist services, equating to a 10.8m annual cost increase, with an estimated cost to the Health Board of 1.0m in each year. Continuing Health Care and Funded Nursing Care The anticipated cost increases in Continuing Health Care have been assessed on the basis of price inflation only in 2013/14. No allowance has been made for growth in demand, as this is projected to be broadly static. A low level of growth (c 1.5%) is assumed in subsequent years. As with Continuing Health Care, the anticipated cost increases in Funded Nursing Care have been on the basis of price inflation only. The assessed potential price increase for 2013/14 reflects the risk of a national cost assessment currently being commissioned to review an appropriate rate for FNC in Wales, with increases in subsequent years reflecting underlying inflation. However, it should be noted at this stage that this assessment does not in any way prejudice the outcome of the review. It could be argued that on the basis of a flat cash settlement for the NHS in Wales, such an approach is also extended to all contracted services if not, this simply exacerbates the cost pressures on core NHS services. Primary Care Prescribing The anticipated cost pressures on prescribing have been based upon an assumed 3.2% level of underlying growth, which equates to 4% on costs net of Category M savings. Growth of 2% per annum is assumed in subsequent years. 8

10 Local Cost Pressures and Investment in Quality and Safety No allowance has been made for demand growth. As outlined above, demand is projected to be static or slightly down. The potential cost pressures and quality investments that have been identified for 2013/14 are shown in the table below: Non Recurring recurring Total m m m Capitalised staff LIMS Radiology on call New nutritional standards H&S inspectorate fees YCC rates YCR legal fees Decommissioning costs Neurology Regional Network Loss of income: CAMHS (Framwaith) HSCWB Sexual Health Measures Act Funding Secondments Deanery posts McMillan Funding Restorative dentistry Staff health checks Velindre SLA PCH Total Recurring cost pressures and quality investments have been assumed at 1.6m for the next 3 years plus a non recurring cost of 200k in 2014/15. Invest to Save and Contingency Given the extreme scale of the savings required, provision of 3m has been made in 2013/14 for non-recurring costs of the change programme, and also to act as a contingency. This provision reduces to 1.1m in subsequent years. 9

11 Cost avoidance assumptions In the first instance, every opportunity will be taken to avoid or defer cost pressures. As shown, the current assumption is that 5.5m of cost pressure can be avoided in 2013/14. However, there are some high risk assumptions; in particular, that the FNC increase can be avoided, and that a longer repayment of VER funding can be agreed, or new funding received. The main area of cost avoidance assumed for subsequent years is NICE implementation. Recurring and Non recurring 2013/ / / /17 'm 'm 'm 'm National issues Defer auto-enrolment Avoid /reduce 20/week increase in FNC rates Negotiate longer repayment of VER funding/new funding Local issues Reduce/avoid local cost pressures Phase in HEP C NICE implementation over years Dispose of St Tydfil s hospital early Contingency reduction Total Within the overall budget, provision of 4.6m has been made for a number of potential cost pressures and quality investments that would cost 7.5m if they were all agreed. The 4.6m is partly included in the assessment of recurring deficit ( 14.1m) and partly in the new local pressures category. These pressures are in the process of being assessed by the responsible managers and decisions will need to be made where necessary by the Executive Board. Clearly, we need to avoid new cost pressures wherever possible. Redesign & Efficiency savings As outlined earlier in this report, the Health Board is adopting the matrix approach to its monitoring and delivery of its change plans, including the efficiency and other cost savings plans. This incorporates the identification of bottom up savings plans developed by directorates from new and existing schemes together with further savings targets informed by the opportunities matrix. 2013/14 savings targets In terms of the quantum issue of what savings can be achieved in total, the key factors to consider are as follows :- 10

12 There are a number of areas of opportunity being identified through the benchmarking work to date, where productivity is below average or upper quartile and/or costs are above average or lower quartile The capacity and capability of the organisation to respond to these opportunities quickly is variable The level of staff turnover is low, and this limits the practical level of pay savings that can be achieved without a major restructuring programme to around 2% to 3% The run rate of spend through 2012/13 is broadly flat we do not have momentum from an underlying downward trend In the best run organisations, real cash releasing savings (as opposed to productivity savings from undertaking additional activity at a marginal cost) above 5% in any one year are very difficult to achieve. Taking these factors into account, it would appear unlikely that we could achieve over 5% in year in any one directorate. Two key principles in allocating savings targets are as follows :- They should reflect relative opportunity to achieve savings The process should not dis-incentivise good management - so those directorates that have done well in the current year should not find they are rewarded with a bigger target in the following year without good reason. Similarly failure to achieve targets should not be automatically written off. Our approach to setting these provisional targets is described below: Savings targets for all directorates are initially assessed to cover their underlying deficits brought forward from 2012/13 plus the new inflationary pressures in 2013/14 for pay and non pay inflation plus primary care prescribing growth. This approach gives rise to a total savings target of 33.9m (excluding assumed cost avoidance of 5.5m) and a residual gap of 1.1m. A savings target of 33.9m would represent circa 7.7% of net operational expenditure excluding primary care). Virtually all directorates would have targets over 5%. There is also significant variability in individual savings targets with several targets in 11

13 excess of 10%, due primarily to differences in the underlying deficits brought forward. The variability in individual targets is then restricted by adopting a minimum target of 3% and a maximum target of 5% for all directorates. This approach gives rise to a total savings target of 21.5m. This excludes assumed cost avoidance of 5.5m but includes the full year effect of 2012/13 savings. A savings target of 21.5m represents circa 4.9% of net operational expenditure excluding primary care. This process makes no allowance for variable ability to achieve savings, as so does not fully accord as yet with the principles set out above. The reason for this is that at this stage of development of intelligence on spend and benchmarking, we are not able to form robust conclusions on relative opportunity differentials. However, these individual targets would be subject to change in light of our developing picture of relative opportunities. 2013/14 savings plans The savings plan for 2013/14 developed to date has been prepared in the following broad stages: The full-year contribution of savings schemes (including strategic initiatives) has been assessed All directorates have prepared local plans for new 2013/14 savings The resulting planned savings, after an adjustment for the assessed probability of delivery, is 8.9m. A corporate assessment has been made of the potential for further savings plans to be developed and delivered in year, over and and above the 8.9m. This assessment is 5.3m, giving a total savings plan of 14.2m. Given that the savings to date are only 8.9m, and then still only 14.2m after an assessment of the potential for further progress in year, a central budget contingency of 7.3m has been made, equal to the difference between the savings targets totalling 21.5m, and the savings plan of 14.2m. The tables below show the savings targets and savings plans by directorate, and the savings plans by key theme. We will use the medium term savings plan approach described below to take forward savings plans during 2013/14, and this will support the identification of the further 5.2m planned. However, the lead times for developing and implementing plans will mean the main benefit will be in subsequent years. 12

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15 Table /14 Savings by Directorate Target Probability (2013/14) Adjusted Savings Recurrent & Non Recurrent Chief Operating Officer Mgt 7 - Act Directorate 1, Acute Medicine And A&E Directorate 2, General Surgery, Trauma & Orthopaedics 1, Head & Neck Directorate Obstetrics & Gynaecology Paediatrics Therapies Localities 1, Pathology Directorate Radiology Directorate Operations 10,989 4,052 Mental Health & Camhs 2, Primary Care Services Medicines Management 2,735 1,958 Primary, Community & Mental Health 5,099 2,601 Chief Executive 63 - Director Of Corporate Services Facilities Directorate 1, Director Of Finance & Procurement Director Of Workforce & Organisation Development Patient Care & Safety Directorate Director Of Planning & Strategy Contracting & Corporate Income 1,000 1,000 Non-clinical Directorates 4,096 2,275 Sub Total 20,184 8,928 Other assumed savings excluded from above Prescribing 1,354 1,354 RTT - 1,500 Contracting & Corporate income Continuing Healthcare Non pay management Nursing workforce (Non ward) Non clinical income generation Clinical back office Medical staff productivity Budget contingency 7,357 - Total 14,181 14,181 14

16 Table /13 Savings by Matrix Theme 'm Back Office/Corp Services 0.5 CHC/FNC 0.7 Commissioning 1.5 Community Services Productivity 0.5 Diagnostics 0.5 Long Term Conditions 0.1 Medical Staff Productivity 1.7 Non Clinical Income Generation 0.4 Non Pay Management 1.5 Nursing Workforce (Non Wards) 0.5 Outpatients 0.0 Patient Care Admin 0.3 Patient Flow/LoS 1.0 Prescribing 3.1 Skillmix/T&Cs/Sickness 0.4 Surgical Pathways 0.0 Theatres 0.5 Therapy Workforce 0.6 Urgent Care 0.0 Ward Nursing 0.6 Other - Grand Total 14.2 It is important to highlight that the net savings of 1.5m in respect of Contracting and Commissioning is based on the following key assumptions: Agreement of a 1% deflator in relation to our expenditure to WHSSC Full cost recovery in respect of agreed repatriation of activity from ABMU Health Board. No net income loss in respect of our provider contract to Aneurin Bevan Health Board. Overall directorate budgets for 2013/14 The overall directorate budgets for 2013/14 are summarised below. As noted above these are based on the estimated underlying deficits, pay and non pay inflation, primary care prescribing growth less savings targets ( min 3%, max 5%). The budgets for local cost pressures and investments in quality and safety has yet to be delegated and is currently held in Reserves. 15

17 Financial Plan 2013/14 Allocated Resources: '000 Initial Allocation Letter 524,892 Anticipated Allocations 6,319 Total Resource Allocation 531,211 Application of Resources: Delegated Directorates: CHIEF OPERATING OFFICER MGT 3,313 ACT DIRECTORATE 34,016 ACUTE MEDICINE AND A&E DIRECTORATE 50,314 GENERAL SURGERY, TRAUMA & ORTHOPAEDICS 26,599 HEAD & NECK DIRECTORATE 8,231 OBSTETRICS & GYNAECOLOGY 17,124 PAEDIATRICS 12,896 THERAPIES 13,882 LOCALITIES 41,979 PATHOLOGY DIRECTORATE 13,062 RADIOLOGY DIRECTORATE 9,332 Total Operations 230,749 MENTAL HEALTH & CAMHS 51,119 PRIMARY CARE SERVICES 59,641 MEDICINES MANAGEMENT 80,725 Total PCMH 191,485 CHIEF EXECUTIVE 2,046 DIRECTOR OF CORPORATE SERVICES 4,338 FACILITIES DIRECTORATE 25,540 DIRECTOR OF FINANCE & PROCUREMENT 2,879 DIRECTOR OF WORKFORCE & ORGANISATION DEVELOPMENT 3,501 PATIENT CARE & SAFETY DIRECTORATE 4,811 DIRECTOR OF PLANNING & STRATEGY 16,539 Total Corporate Support 59,654 CONTRACTING & CORPORATE INCOME 37,261 Total Delegated Resources 519,149 CONTROL & RESERVES 32,893 Total Non Delegated Resources 32,893 Total Application of Resources 552,042 Planned Surplus / (Deficit) ( 20,831 ) 16

18 Functional related productivity Medium Term Savings Plans It is clear that when developing medium term plans we should be mindful of the requirement to phase in programmes of work to ensure a whole systems approach is being adopted and to maintain equity across the Health Board. To facilitate this we have identified those cross-cutting themes where we believe there is greatest gain from a focussed crosscutting project process, and are in the process of setting up project teams in these areas. These projects are as follows Emergency care Frail elderly and rehabilitation care Planned care Theatre productivity Outpatient productivity Patient care administration Diagnostics Non-pay management Medical staff productivity Nursing productivity General workforce productivity Contracting and patient flows Each of these projects will have a scope that describes the scale of opportunity to enable redesign and to achieve efficiency savings. Additionally they will describe delivery plans for improvements in quality and productivity in the respective areas. Plans for the other cross-cutting themes will be developed by the relevant directorates. This work is being informed by the bench marking and other data referred to earlier. In advance of the opportunities being quantified, an outline initial assessment has been made of the scale of net saving possible over the medium term. This is shown in the summary table below. THEME Outline opportunity asse ssment Additional spend to achieve Net saving k k k Redesign of services General acute ward nursing 0 0 Theatres Outpatients Patient care admin Diagnostics Non-pay management Acute prescribing Primary care prescribing CHC/FNC/Out of area placements

19 Whole health system/commissioning Workforce related THEME Outline opportunity asse ssment Additional spend to achieve Net saving Community service productivity Mental health & CAMHS community productivity Non-clinical income generation Clinical directorate management 0 Facilities Estates Back office/corporate svces Skill mix, Ts&Cs, sickness management Medical staff productivity Pharmacy Nursing workforce (outside general wards, theatres & community) Therapy workforce Commissioning from other LHBs Acute patient flow/length of stay Community hospital length of stay Mental health admissions & length of stay Acute redesign Outpatients Planned care Urgent care Total It is important to note that the outline estimate of potential savings of 60m over four years significantly exceeds the annual level of savings and workforce reductions that have been achieved in previous years. The profile of the total saving of 60m over 4 years is shown below: 2013/ / / /17 Total 'm 'm 'm 'm m Whole system service re-design Productivity improvements pay Productivity improvements non pay/income Commissioning changes Total savings The impact of the savings plans on pay, workforce, non-pay and income is shown in the table below. 18

20 2013/ / / /17 Total m 'm 'm 'm m Permanent staff Permanent staff income generation (0.3) (0.65) (0.65) (0.65) (2.25) Variable pay Non pay traditional Non pay income generation (0.3) (0.65) (0.65) (0.65) (2.25) Non pay primary care prescribing Non pay acute prescribing Non pay Continuing healthcare Non pay Agreements with other Health Boards/providers Non clinical income generation Additional spend: Invest to save (0.7) (1.3) (1.3) (1.3) (4.6) Total Recurring The total theoretical potential workforce reduction is projected at circa 1000 wtes over 4 years, which equates to circa 14% of the current workforce. It is assumed that given our turnover is running at 6% per annum, the maximum reduction that could be made in any one year is 3%. This assumes 50% of leavers will be in posts that are necessary and they need to be replaced. Other impact assessments would be required but if we are to rely on existing systems of staff turnover we would require four years to fully implement the savings. Any changes would be developed in partnership with staff side colleagues. Overall Medium Term Financial Plan Taking account of all the projected changes over the next four years that have been outlined above, the resulting medium term plan that would result from these changes is shown in the table below. 19

21 R= Recurring and NR = Non Recurring 2012/13 to 2013/ /14 to 2014/ /15 to 2015/ /16 to 2016/17 R NR Total R NR Total R NR Total R NR Total Brought forward Allocation reductions Inflation Service development Service demand Invest to save repayments Local cost pressures and Investment in quality & safety Other Sub total Whole system service re-design Productivity improvements pay Productivity improvements non-pay Commissioning changes Cost avoidance Sub total Total change Carried forward It is worth stressing the key assumptions that drive the plan :- Flat cash core allocations (with some reduction in temporary allocations). Pay increases at 1% per annum. Non-pay increases in line with projected inflation. Overall demand flat before the impact of service re-design. 60m of re-design and efficiency savings over 4 years (14%). The current status of the plan can therefore be summarised as follows: 20

22 Cwm Taf starts 2013/14 with an underlying deficit of 14.1m. Break-even was delivered in 2012/13 with the benefit of a nonrecurring allocation of 10m. Had this been a recurrent allocation the challenge for 2013/14 would have been a combination of an underlying deficit of 4.1m plus new in-year unfunded cost pressures. Despite identified savings of 14.2m to date, the current status of the plan identifies that expenditure in 2013/14 exceeds income by 20.8m. This represents a deterioration of 10.8m from 2012/13 prior to the non recurring allocation of 10.0m last year. However, this deterioration is after dealing with new cost pressures of circa 26.5m, which therefore represents a net real terms improvement of 15.7m. The plan identifies that based on the assumptions we have made about financial settlements and future year cost-pressures over the next 4 years, it should be possible to manage the in-year pressures which means that further actions are required to eliminate the underlying 14.1m deficit The Health Board is working through opportunities to identify further strategies to address the underlying position where this can be achieved without detriment to quality and safety. Further reductions in costs would require further dialogue with Welsh Government, our clinicians, staff side colleagues and CHC to ensure that we are maintaining safe and sustainable services and clinical care remains at optimum levels. The items which might need to be included in these discussions include: Cost reductions from changes in elective activity Revised system for implementation of new NICE recommendations. Identifying lower priority clinical interventions, and reducing or stopping activity in those areas. Opportunities to reduce the pay bill and potentially accelerate the pace of change currently limited by turnover rates. All of the above actions must have a degree of consistency across Health Boards to ensure local variation is minimised. 21

23 Key further actions The key further actions in relation to the financial plan are as follows: Agree interim plan with Welsh Government, including exploring other measures to maximise resource opportunities and reduce cost. Complete review of 12/13 expenditure against 11/12 expenditure to identify further savings opportunities. Manage down potential cost pressures below the current assessment of 4.6m. Further review and challenge of the latest savings plan submissions from Directorates. Implement the cross cutting projects and new governance structures Work up in more detail the integrated savings plans External validation of the actions taken to date to maximise opportunities within the context of the agreed quality and risk parameters Key risks to the Financial Plan The following outlines the key potential risks to the financial plan :- Risk of achieving the changes in service provision to enable safe and sustainable services to be provided. Low staff turnover levels. Continuing unscheduled care pressures. Management capacity and capability to deliver. Impact of the South Wales Programme. Ability to develop more appropriate Long-Term Agreements. Availability of robust information and improved data quality. Availability of Major & Discretionary Capital. Agreement with Welsh Government to defer 13/14 Invest to Save repayment by 2m. Contracting and commissioning assumptions in relation to WHSSC and other Health Boards. 22