Nicci Briggs Director of Finance. Nicci Briggs Director of Finance PFR

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Jonas Hawkins
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1 Affiliated Teaching Hospital TRUST BOARD: 22nd DECEMBER 2017 AGENDA ITEM: 3.2 SUBJECT: RESPONSIBLE DIRECTOR: AUTHOR: PREVIOUSLY CONSIDERED BY: Q3 REFORECAST Nicci Briggs Director of Finance Nicci Briggs Director of Finance PFR EXECUTIVE SUMMARY: This paper provides members with a report which provides an assessment of the current financial projections and forecast outturn scenarios complete with risks and mitigations. ACTION REQUIRED: RISK TO THE TRUST (include reference to BAF or Corporate Risk Register) WORKFORCE ISSUES: (including training and education implications) DIVERSITY & INCLUSION FINANCIAL IMPLICATIONS: Specify No/Yes (Detailed within the report). COMMUNICATION/CONSULTATION ISSUES (including patient and public involvement) STRATEGIC OBJECTIVE: (specify trust strategic objective) CQC DOMAINS safe. effective. caring. responsive to people s needs. well-led Please indicate which domain the report is providing assurance on The Finance & Resources Committee has discussed the options and is supporting the recommendations for approval by the Board of Directors. Ability to deliver the financial plan Noted in the report Equality Impact is Neutral Yes detailed within the report Communication wil need to be considered once recommendations are made. Become a financially sustainable organisation Safe, effective, well led 1

2 Q3 REFORECAST 1. CURRENT POSITION The 2017/18 financial year has seen an above average amount of non-recurrent spend as a result of capital delays and other decisions that have largely impacted the Trusts trading position. The YTD deficit of 19m is a 5.4m variance to plan and 4.7m of that variance is due to reduced activity related income. The remainder of the adverse variance is on non pay which is largely offset by agency reductions. This would suggest the Trust set its plan to deliver a certain level of activity, thus any recovery must be aimed at improving trading or right sizing the organisation if the 2017/18 activity levels are believed to be recurrent. Any right sizing will take time as reducing costs is more difficult and require process change or consultation. There have been significant improvements over the last 2 months since theatres have been fully operational and the grip and control and financial recovery actions have been developed and moved to delivery. These improvements have seen the run rate reduce from a year to date average of 2.6m in the first 2 quarters to 1.6m in M8 but in order to deliver a 19.9m plan this run rate would need to reduce by a further 1m to 0.5m a month for the final 4 months of the year. 2. REFORECAST - UPSIDE The Trust board must declare at Q3 if it is going to deliver its 19.9m plan or submit an alternative forecast. It is highly likely that the 19.9m deficit plan will be surpassed in M9 and any recovery and improvement plan will need to consider the impact of winter over the remaining months of the financial year. The table below sets out the summarised assumptions for M9 to M12 over and above the financial plan. The detailed forecast is set out in Appendix 1. Theatres 0.9 Agency 0.8 Contingency 1.0 New Actions 4.2 M9-12 (0.9) M9-12 (19.9) This table assumes initially that the plan is delivered for months 9-12 and then the following assumptions are overlayed; 2

3 Continued pressures of endoscopy refurb, HRG 4+ NEL impact, critical care under utilisation, clinical support non pay, CIP shortfalls and estates non pay Theatres recovery plan this is delivery of the recovery plan set by theatres in M6 with a reduction for 2 weeks over the christmad period. Agency underspends continue at current run rates Corporate CIPs continue to offset the CBU CIP shortfalls Contingency the non committed contingency of 1m is available to released into the position Financial Recovery plan delivers all green and amber rated schemes New actions these will need to be developed to impact on Q4 and the Executive team have taken the lead on each of these schemes and provide assurances on delivery. These actions are set out in Appendix 2 but will not alone deliver 4.2m of improvements so a decision will be required about how best to protect T&O income over Q4. All of these actions would be required in order to deliver a 19.9m deficit. 3. REFORECAST BASE PLUS POSITION Theatres 0.9 Agency 0.8 Contingency 1.0 M9-12 (5.1) M9-12 (24.1) This base position removes the new actions but assumes all other pressures and mitigating actions are delivered as set out in the table above. This is still a challenge and requires a number of actions to support a reduction of the run rate to a monthly rate of 1.3m 4. REFORECAST BASE POSITION This only difference in this position to the base plus position is it assumes surgery can only recover to plan with no additional recovery given the potential winter pressures 3

4 Agency 0.8 Contingency 1.0 M9-12 (6.0) M9-12 (25.0) 5. REFORECAST DOWNSIDE Winter impacts on elective delivery (1.4) M9-12 (9.2) M9-12 (28.2) The downside 28.2m deficit forecast assumes agency cannot be controlled over the winter period and contingency is used for additional winter pressures. There is an additional pressure that elective income is impacted by winter but corporate CIP over delivery and FRP actions continue. 6. UNDERLYING POSITION Despite the challenges seen in 2017/18 the underlying run rate has the potential to provide an exit run rate that will support a starting position of 19.3m for 2018/19 (using the base plus scenario for prudence purposes). The reported deficit for 2016/17 was 25.6m, or 20.8m after removing non recurrent items a deficit. The underlying deficit after adding an increase in CCG penalties of 5.2m was 26m. Therefore an underlying deficit of 19.3m for 2017/18 represents a 6m improvement to the run rate in 12 months. When presenting the reforecast we will need to ensure that NHSI, the organisation and other interested parties understand this message. 4

5 s 2015/16 to 2017/ / / /18 Underlying deficit Reported deficit 6. RISKS AND MITIGATIONS The main risks that are not taken into account in any of the scenarios above are; Sepsis In April 2017 NHS Digital changed its guidance on the clinical coding of sepsis. As a result CCGs have rasied a concern about the financial impact of such changes. A determination will be made between NHSE and NHSI and the risk to the Trust is 0.3m MRET In April 2017 the Trust saw its MRET penalty increase from 1.5m to a proposed 4.8m. The Trust decided to challenge the baseline assumptions and recognised 50% of the potential benefit putting only a 3.4m penalty into the 2017/18 plan The main mitigation will come from any winter funds that can be used to cover committed schemes thus allowing a direct release to the bottom line. This is estimated at somewhere between 0.9m and 1.8m. This mitigation is currently being held against the Sepsis and MRET risks but if any of the resolutions is settled in the Trusts favour the mitigation could be released to support an improvement of the forecast. 7. ACTION REQUIRED BY THE BOARD The PFR Committee and Executive team are supporting a reforecast of the position to 24-25m once the December financial position is known. The Board are asked to support a reforecast and to enable the Executive to determine the final value once the December position is known but for it to be no greater than 25m. 5

6 Appendix 1 Detailed Assumptions PRESSURES/ RISKS MITIGATIONS M1-7 M8 Rec/NR M9-12 Outturn Planned (12.8) (0.9) (6.3) (19.9) Endoscopy Closure N/R (0.6) (0.1) (0.2) (0.9) Theatre Closure / Productivity N/R (1.4) - - (1.4) Non Elective - Medicine N/R (0.5) (0.1) - (0.6) Non Elective - HRG 4+ R (0.8) (0.1) (0.4) (1.3) Critical Care Productivity R (0.4) (0.1) (0.2) (0.7) Overseas Nurses / Urgent Care HCA over-establishment N/R (1.0) (0.1) (0.2) (1.3) Escalation Beds N/R (0.6) - - (0.6) Medinet N/R (0.3) - - (0.3) Clinical Support Non Pay 50% N/R (1.2) (0.2) (0.7) (2.1) CIP Performance R (0.8) (0.2) (1.2) (2.2) Consultancy costs N/R (0.4) (0.6) (1.0) Medway N/R (0.1) Bank Partners R - (0.1) (0.2) (0.3) Other CBU trading issues N/R (0.2) Estates Spends N/R (0.6) (0.2) (0.2) (1.1) Accruals release N/R Commissioning gains N/R Corporate CIP N/R Agency Reduction R Non operating Expenditure N/R Delayed capital programme R Surgery Recovery Plan R Contingency N/R FRP R New Actions R Upside Outturn (17.6) (1.6) (0.9) (19.9) Risk of unidentified FRP (4.1) (4.1) Base (5.0) (24.0) Non Recurrent items in base forecast above Underlying Position (13.6) (0.9) (0.8) (19.3) 6

7 APPENDIX 2 NEW ACTIONS 1. ITU Right sizing Executive Leads Leanne Hackshall and Professor Chilton The ITU has been running at a staffing level that is higher than the YTD occupany levels so staffing should be reduced or alternative use for the beds should be saught. 2. Teleradiology Executive Leads Rebecca Brown and Professor Chilton The spend to date is 695k compared to 493k over the same period last financial year despite the Trust having a significant EMRAD issue in 2016/17. This is despite a 7% reduction in direct access activity over the same period. Rebecca and Andrew to review the necessity and alternative options 3. Overseas nurses Executive Lead Leanne Hackshall The Trust has invested over 1.1m YTD in the overseas nurses without an opposite reduction in nursing agency. Leanne will review the programme but also the overestablishment and year on year increases in HCAs 4. Medical Locum and Agency Executive Leads Rebecca Brown, Professor Chilton and Mark Smith Over the same period this year compared to last Medical Agency has decreased by 1.6m but substantive pay has increased by 1.4m and locum/ bank by 1.5m. An urgent review of locum approval process and locum bookings is required. 5. T&O recovery plan Executive Leads Rebecca Brown and Nicci Briggs The T&O recovery plan needs to be presented to NHSI and needs to include the decision to do minimum activity over the Christmas period and first two weeks of January. 6. Drugs spend Executive Lead Nicci Briggs with Duane McLean Despite reduced elective and non elective activity drugs spend (once PBR Excluded drugs are removed) has increased by over 1.7m. 7

Approve X Ratify For Discuss For Information X

Approve X Ratify For Discuss For Information X NHS North Cumbria CCG Governing Body Agenda Item 5 April 2017 08 Financial Plan Purpose of the Report The purpose of the report is to provide the Governing Body with the CCG s Financial Plan for the next