Medium Term Financial Strategy: 2012/13 and beyond. Recovery and Sustainability

Transcription

1 Attachment 08 Medium Term Financial Strategy: 2012/13 and beyond Recovery and Sustainability Destination: Longer, Healthier Lives for all the People in Croydon (Source: Copy of interactive tool from NHS Improvement Access tool via Mike Sexton Chief Finance Officer (Designate) Version 22 October 2012

2 1. Introduction: Purpose and Context 1.1 Purpose 1.2 Organisational Objectives 1.3 Population, Demographics and Disease Prevalence 1.4 Source Strategy Documents 2. Principles & Strategic Approach 3. Financial Strategy 3.1 High Level Financial Strategy 3.2 Financial Performance - Outlook 3.3 Revenue - Sources of Funds 3.4 Revenue 5 Year Financial Projections 3.5 Revenue Recovery/QIPP/ Levers for Change 3.6 Revenue Service Investment Strategy 3.7 Capital Investment Strategy 3.8 Treasury Management Strategy 3.9 GP Network Engagement 3.10 Robust Financial Processes 3.11 Risk Assessment & Management 4. Delivering & Managing Our Strategy 4.1 Robust Financial Systems 4.2 Robust Governance Arrangements 4.3 Supporting GP Network Decision Making 4.4 Programme Management Office 4.5 Investment / Disinvestment Prioritisation 4.6 Value for Money Approach to Use of Resources 4.7 Action, Monitoring, Control, Review & Revision 4.8 Financial Strategy Action Plan 5. Policy and Economic Context 6. Financial Background Croydon PCT 6.1 Historic Financial Performance 6.2 Current Use of Resource 6.3 Programme Budgeting 7. Appendices Appendix 1 5 Year Financial Projections Appendix 2 Programme Budgeting Appendix /13 QIPP Programme Appendix 4 Value for Money Policy Version Draft - October 2012 Page 2 of 52

3 1. Introduction: Purpose and Context 1.1 PURPOSE The Financial Strategy is concerned with using the CCG s limited resources wisely to meet the health needs, and so improve the health and well-being, of patients The desired outcome of the Financial Strategy is for the CCG to achieve, through prudent control, sustainable financial viability to enable the delivery of the corporate and financial objectives The Financial Strategy supports the delivery of corporate, statutory and NHS Operating Plan objectives by: communicating the CCG s financial position, financial risks, and context; ensuring that the CCG has in place robust and reliable financial systems to support informed decision making by clinical commissioners; and identifying the shift of service investment required to deliver the corporate objectives, within the constraints of its resource allocation and responsibilities The purpose of the Financial Strategy is as follows: to review the resource allocation to the CCG and promote the fair allocation of resources to meet the needs of Croydon patients to monitor and ensure the ongoing financial viability of the CCG to ensure the resource needs of the CCG and potential financial risks are correctly identified to enable the CCG to make informed decisions on new initiatives, future developments and opportunities to support the CCG s service strategies through effective and prioritised use of resources to enable the movement of financial resources to support changing health needs and changes to the delivery of health. 1.2 ORGANISATIONAL OBJECTIVES The CCG Vision is for Longer, healthier lives for all the people in Croydon. This is further described in our values statement: Working with the diverse community of Croydon, using our resources wisely, to transform and provide safe, sustainable, effective, high quality, patient centred services (Source: Consitution) The corporate objectives for are as follows: Achieve financial sustainability in three years (2013/ /16) Commission integrated safe, high quality services in the right place at the right time Have collaborative relationships to ensure an integrated approach Develop as a mature membership organsation has a number of financial duties to achieve, both statutory and required by the 2012/13 NHS Operating Plan. Version Draft - October 2012 Page 3 of 52

4 The statutory duties, enshrined in the CCG constitution are: not to exceed its revenue resource in any one year (s Act) not to exceed it capital resource in any one year (s Act) not to exceed its cash limit in any one year (s Act) act effectively, efficiently and economically (s Act) take account of any Directions by NHS Commissioning Board on expenditure (s Act) In addition, the 2012/13 NHS Operating Plan duties are: to pay all valid invoices by the due date or within 30 days of a valid invoice to deliver a 1% surplus on the revenue allocation to establish a 2% non-recurring investment reserve to not exceed the running cost target of 25/head. The NHS Operating Plan for 2013/14 is expected to be published in December 2012 and will update the targets outlined above. 1.3 POPULATION, DEMOGRAPHICS, DISEASE PREVALENCE The Joint Strategic Needs Assessment (JSNA) 2011/12 provides a comprehensive analysis the demographic profile and health needs of the Croydon population The following are key extracts from the JSNA: The first results of the 2011 Census show that Croydon s population has grown more rapidly in the last 10 years than estimated by the Office for National Statistics (ONS); Nationally the population is ageing as life expectancy increases. Compared to other areas, however, Croydon has a relatively young population. Growth in the younger and older age groups is expected in coming years; Over half of Croydon s population are from Black, Asian and minority ethnic groups, and the proportion is increasing over time; The number of Croydon citizens with long term conditions is expected to increase over time, particularly with Diabetes, Chronic Kidney disease and COPD; The gap in life expectancy between highest and lowest by ward is approximately 9 years for men and 10 years for women. Circulatory diseases, cancers and respiratory diseases cause the majority of excess deaths which contribute to the gap in life expectancy. There has been little movement in reducing the life expectancy gap. Version Draft - October 2012 Page 4 of 52

5 1.4 SOURCE STRATEGY DOCUMENTS The corporate strategic context is drawn from the following documents: Draft Constitution, ; Draft Integrated Strategic Operating Plan (ISOP) 2012/13, ; Draft Joint Health and Well Being Strategy , Croydon Health and Well Being Board; Joint Strategic Needs Assessment 2011/12, Croydon Observatory; Commissioning Strategy Plan (CSP), Croydon PCT; Draft Better Services Better Value Pre-Consultation Business Case, South West London Joint PCTs; NHS Operating Framework 2012/13, Department of Health; NHS : from good to great. preventative, people-centred, productive, Department of Health; Integrated Single Financial Environment documents, NHS SBS and NHS Commissioning Board; Memorandum of Understanding (incl service specifications), South London Commissioning Support Unit; NHS Constitution. Version Draft - October 2012 Page 5 of 52

6 2. Principles & Strategic Approach 2.1 The Financial Strategy has been developed on the following principles: an understanding of the current and future resource allocations, how they compare to needs-based allocation targets, and current and emerging pace of change policy; an understanding of the current and prevailing financial position, current use of resources, and the recognition that we need to better understand what we get for our healthcare spending through benchmarking, care pathway and disease spend analysis; consideration of the context in which the PCT operates in terms of health care policy and strategy and the impact of influences; resources are prioritised to deliver the PCT s strategic objectives; that local clinicians and managers work together to develop financial awareness, understanding and ownership of financial issues in the delivery and commissioning of services to deliver immediate and long term change and that the finance function will support them in making the right choices and commitments; the need to develop public engagement programmes which will facilitate ownership of the use of resources and the financial challenge; new investment and disinvestment reviews are focused on the change in health improvements delivered; that the underpinning financial processes need to be sufficiently developed to provide robust and complete financial information to assist in the delivery of the strategy. Monitoring, control, review & revision Where are we? What is influencing us? Communicating, implementing, delivering & learning Financial Strategy Where do we wish to be? Do we have the capabilities and controls to get there? What do we need to do? What do we wish to achieve? Version Draft - October 2012 Page 6 of 52

7 3. Financial Strategy 3.1 HIGH LEVEL FINANCIAL SUMMARY The CCG is working towards authorisation from 1 April The CCG has clearly stated a corporate objective to Achieve financial sustainability in three years This objective means addressing the financial challenge from 2013/ /16, such that from April 2016 the monthly expenditure run rate is in line with the recurring resource limit Full financial recovery has the following graduated milestones: Monthly run rate breakeven Annual statutory breakeven 1% Surplus 1% Surplus plus 2% Non Recurring Fund [Full Recovery] The cumulative recurring financial challenge over the initial three year period is 39m ( 13m pa) in the base case, or 60.9m ( 20.3m pa) in the downside case scenario. The maximum level of turnaround savings delivered benchmarked at around 5% of turnover ( 24m for ). The two financial scenarios are outlined below: BASE CASE DOWNSIDE CASE The financial modeling highlights a significant challenge in 2013/14, with further challenge in the subsequent two years. Both the base case and down side cases reflect this profile in the challenge, which is largely driven by the need to meet full recovery by 2013/14, per current guidance The recommended strategy is to deliver 20m savings over each of the following three years (2013/ /16) to deliver a balanced position against the downside scenario by end of 2015/16. This recognises the time it will take to recover the position and delivers a risk buffer in the base case scenario. This would largely deliver statutory balance in 2013/14, and full recovery by 2015/16. [This is subject to agreement by the NHS Commissioning Board and 2013/14 Operating Framework.] During this period, the investment strategy is entirely based on invest to save, with payback required (i) in Year 1, and (ii) to be significantly higher than the level of investment Whilst there is a clear argument for additional resources to meet the historical and future growth of the population in Croydon, and its needs, any favourable Version Draft - October 2012 Page 7 of 52

8 settlement in CCG resources would only moderate the challenge, and not eliminate it. The CCG fully recognises that change in the delivery of patient care is required, in all funding scenarios However additional improvements are required and will rely on changes to care pathways and delivery of improved primary care and patient self management. The key levers for change are outlined below The key QIPP themes for delivering improved quality and financial savings in 2013/14 and beyond are: Integrated pathways for Long Term Conditions; Ambulatory care pathways for emergency care; Improved quality and consistency of primary care to reduce inappropriate outpatient attendances and inpatient admissions (e.g. CReSS and intermediate services); Continued delivery of efficiency on prescribing and continuing care whilst supporting long term conditions; Promotion of the prevention and self-management agenda; Maximising benefits of vertical integration of community and acute services to improve quality of care and reduce inappropriate care. A number of these changes have already been modeled as part of the South West London sector wide Better Services Better Value draft business case analysis, and are currently being refined at local level. At this stage in the planning process there remains significant work to do to close the gap on the financial position, as outlined in the table below. Version Draft - October 2012 Page 8 of 52

9 In addition to responding to commissioner QIPP initiatives (service redesign, demand management, KPIs), NHS providers are also expected to make 4% saving per annum under the PbR tariff regime There are a number of key enablers for the delivery of the required changes to achieve full recovery. Section 4.8 includes the action plan to enable delivery over the next three years The following variables will determine the extent of the financial challenge for years 2 and 3: Baseline allocations to CCGs (and other receiver organizations NCB, LA etc) Growth levels and pace of change policy Version Draft - October 2012 Page 9 of 52

10 Financial planning targets for 2013/14 and beyond, including population base for running cost targets Risk pooling arrangements (e.g. central/local contingencies) Phasing of Croydon recovery Version Draft - October 2012 Page 10 of 52

11 3.2 FINANCIAL PERFORMANCE OUTLOOK During the early to mid 2000 s, the NHS received unprecedented levels of funding growth. From 2008/09 onwards, all PCTs have been faced with a challenging financial position as growth rates fell from above 8% to 2% As disclosed in the May 2012 Ernst & Young Report on Croydon PCT, a significant overspend occurred in the 2010/11 financial year, particularly on acute services. The underlying run rate of expenditure is being addressed over several years, against a back-drop of increasing demand. The most significant area of increased expenditure is on acute services The PCT set a plan in 2012/13 that fully reflected the underlying recurrent position, growth in activity, inflation and provider efficiency assumptions and cost pressures. This identified a revenue shortfall of 25m against which a recovery plan has been identified and is being implemented The forecast outturn position for 2012/13 requires support of 9.0m to cover emerging risks on growth in acute activity, risks on delivery of cash releasing savings from elements of the QIPP programme, and contractual pressures on out of hospital services (including primary care). A further significant risk is the liability for continuing care restitution payments which is currently being assessed The outlook on growth in resources is around 2.5% per annum for the next 4 years, subject to formal notification by the NHS Commissioning Board. There may be political desire to increase the rate of pace of change for above and below target CCGs in 2013/14, which would be favourable to Croydon as its resource allocation is below its needs based target allocation. Whilst the CCG will lobby the position, the financial forecasts do not reflect this opportunity Quality, Innovation, Productivity and Prevention (QIPP) are key policy drivers to unlocking the level of efficiency required. Whilst delivering efficiency savings is not a new requirement, the scale of the level of efficiency required over the next three years is unprecedented. Achievement is dependent upon local clinicians and managers working together to deliver both immediate and long term change. To recover the financial position, significant QIPP programmes have been developed and implemented: 16m of QIPP was delivered in 2011/12 and a further 25m is planned for 2012/13 (forecast to deliver 22m/90% at Month 6). Version Draft - October 2012 Page 11 of 52

12 m QIPP Savings Draft Financial Strategy 2012/13 & Beyond 30.0m 25.0m 20.0m Croydon PCT QIPP Delivery Net QIPP Target 25.0m Net QIPP Actual 22.0m 18.4m 16.8m 15.0m 10.0m 5.0m 1.3m 1.3m 4.4m 4.1m 0.0m 2009/10 Outturn 2010/11 Outturn 2011/12 Outturn 2012/13 M6 Forecast An increasingly challenging financial environment means the continued requirement to develop the CCGs focus on contingency planning, prudent financial planning and investment prioritisation and the delivery of significant, sustainable efficiency savings Continued investment will only be achievable if efficiency savings are created through service review and redesign over and above that required to deliver financial balance. 3.3 SOURCE OF FUNDS In 2012/13 Croydon PCT received 567.6m recurrent resource limit. This included 16.4m growth (2.8%). In 2012/13 all PCTs received 2.8% growth. In addition, the PCT also received non-recurring allocations of 27.8m, giving a total resource limit of 595.2m The anticipated distribution of total PCT resources to receiver organisations (including ) is summarised below: 2012/13 PCT Resource Split ( 595.2m) Croydon Council, 16.1m, 3% Other (PHE/NHSPS), 3.9m, 1% NHS CB, 109.7m, 18% CCG, 465.5m, 78% s share of the current resources is estimated to be 465.5m ( 460.6m recurring and 4.9m non-recurring). Version Draft - October 2012 Page 12 of 52

13 3.3.2 The NHS Commissioning Board will receive 109.7m for mainly primary care and specialist commissioning. Following the confirmation of the 2 nd take list of services for specialist commissioning, this figure will increase (reducing the allocation to the CCG). Croydon Council will receive 16.1m of resources associated with public health, commissioning children s services, and addiction services The 465.5m (78%) expected to be transferred to the CCG is currently contracted across a range of care groups, per the chart below. The significant issue is that the CCG starts with a portfolio where 64% of the expenditure is in the acute sector. The precise allocations for 2013/14 have yet to be made by the Department of Health and NHS Commissioning Board Growth allocations to PCTs (and in future CCGs) are usually informed by (i) the difference between actual allocation and the needs-based weighted capitation target (aka distance from target ) and (ii) the pace of change policy on reducing the distance from target. This analysis is overseen by the Advisory Committee on Resource Allocation (ACRA) The needs based formula recognises differences in needs based on census variables and statistical regression analysis. The data for 2011/12 allocations shows that whilst Croydon has higher need indicators for hospital and community services (HCHS) than the rest of South West London, the needs of its population are still lower than the national average. Source: 2011/12 Exposition Booklet, DH Version Draft - October 2012 Page 13 of 52

14 3.3.6 The last year that weighted capitation targets were calculated was in 2011/12. At this point Croydon was 0.5% ( 2.8m) below target. The pace of change policy in 2011/12 year meant that Croydon received 2.2% growth compared to the 2.0% national average. Source: 2011/12 Exposition Booklet, DH The weighted capitation targets for the last 10 years have been based on population estimates and needs indicators derived from the 2001 Census. In July 2012, the first estimates from the 2011 Census were released and indicated that the Croydon population is about 6% higher than was assumed in the 2011/12 weighted capitation target calculations To ensure is allocated the appropriate level of resources for its population, it is vital essential that the NHS Commissioning Board uses population data from the 2011 Census. This will materially affect the CCGs distance from target and therefore growth allocation. Version Draft - October 2012 Page 14 of 52

15 Population Count Draft Financial Strategy 2012/13 & Beyond 360,000 Croydon Populations 355, , , , % / 14,676 less than actual population 342, , % less than actual - 125k in running cost allowance 357, , ,000 Population for 11/12 Allocations (2008 based 2011 est from 2001 census) Population for Running Cost (2011 estimates from 2001 Census) 2011 Census (July 2012 Release) (adj for Xboundary) The majority of non-recurring allocations for PCTs are for primary care and will therefore transfer to the NHS Commissioning Board. The CCG may receive other non recurrent allocations relating to specific programmes of expenditure in any given year, some of which are allocated on a host PCT/Provider basis. The CCG is assuming that many of these allocations will continue and that should funding cease, expenditure commitments will also stop. Examples of such expenditure include Clinical Excellence/distinction awards The Market Forces Factor (MFF) is used in PbR (Payment by Results) to adjust the national tariff to give the local price to each NHS Trust. It takes into account unavoidable differences in the cost of providing services across the country. Specifically it considers the additional cost of staff, buildings and land. Currently the resource allocation includes MFF which funds the local profile of expenditure. The following table summarises the MFF for key local providers. Version Draft - October 2012 Page 15 of 52

16 The higher the MFF, the higher the cost for the same treatment/procedure. The opportunity cost of routine work undertaken at the following providers, compared to Croydon University Hospitals is as follows: St George s +1% King s +3% Guy s & St Thomas +7%. It should be noted that South London Healthcare (2% lower) and Epsom & St Helier (1% lower) are both lower cost providers than Croydon University Hospital, under the PbR pricing system The funding for Commissioning for Quality Innovation (CQUIN) is included in the funding allocations. In 2012/13, NHS providers have the opportunity to secure additional income from commissioners through their local arrangements under CQUIN. CCGs are required to make 2.5% of their contract values (for both tariff and non tariff services including MFF) available and agree with their providers how this potential additional income is linked to quality in their contract. The Department of Health has given increasing emphasis to this mechanism to secure quality improvements (originally CQUIN was only 0.5% in 2009/10). In 2012/13, CQUIN is worth 8m for Croydon PCT and its providers (acute, mental health and community). Version Draft - October 2012 Page 16 of 52

17 3.4 5 YEAR FINANCIAL PROJECTIONS The detailed assumptions for the base case and downside case are included in Appendix 1. The following section highlights key assumptions and outputs Allocations The CCG s recurrent allocations over the planning period based on the comprehensive spending review are assumed as per the NHS London guidance as: Recurrent 2013/ / / /17 Assumptions Growth % 2.62% 2.84% 2.84% 2.84% Growth m 12.1m 13.4m 13.8m 14.2m Each 1% plus or minus growth represents 4.7m plus or minus growth allocation. Downside growth scenario is in Appendix Application of Funds The first call on growth or efficiency generated funds is to fund the recurrent cost of prior year outturn, inflationary tariffs and generic pressures and to recurrently fund known existing and future uncontrollable activity increases. Inflation is set by the DH and reflected in the national tariff The assumptions on demand growth, inflation and other pressure is summarised for each case in Appendx 2. The key assumptions on the acute tariff are outlined below for the base case: ACUTE ASSUMPTIONS 2013/ / / /17 TARIFF Inflation 2.7% 2.7% 3.8% 3.8% Efficiency (4.0%) (4.0%) (4.0%) (4.0%) Net Tariff Uplift (1.3%) (1.3%) (0.2%) (0.2%) CQUIN 2.5% 2.5% 2.5% 2.5% GROWTH Acute Demographic 1.49% 1.47% 1.47% 1.47% Acute Non Demo 2.20% 2.22% 2.22% 2.22% Specific assumptions have also been made for out of hospital care, in particular prescribing, continuing care and community services. These can be reviewed in detail in Appendix Contingency Reserve The 2012/13 Operating Plan required all PCTs and NHS Trusts to include an appropriate level of contingencies in their financial plans. NHS London Planning guidance assumes 0.5% of recurrent resource. It is assumed CCGs will also have to operate a contingency at this level. Version Draft - October 2012 Page 17 of 52

18 The 2012/13 Operating Plan requires NHS organisations to plan for surpluses of 1%. It is assumed the CCG will need to establish a 1% surplus (circa 5m) The Operating Plan also requires SHAs to ensure that PCTs do not recurrently commit the totality of their recurrent funding, so that at least 2% (circa 9m- 10m) is only ever committed non-recurrently to support service transformation and create in year financial flexibility in CCGs Outputs of 5 Year Financial Projections The following section summarises the QIPP challenge for each each scenario by year Base Case The product of the assumptions is the following QIPP challenge across the next four years Downside Case The product of the assumptions in the downs side case is the following QIPP challenge across the next four years. A 1% movement in the assumptions generates a circa 5m point shift in the net position. Version Draft - October 2012 Page 18 of 52

19 3.5 RECOVERY / QIPP / LEVERS FOR CHANGE Efficiency strategies as a result of lower growth and increasing demand will be required to be developed further by the CCG to deliver sustainable savings outside of, and in addition to, the tariff. These plans will be under pinned by best value principles, which recognise service delivery and quality improvement as well as cost reduction The DH refers to this agenda as the QIPP (Quality, Innovation, Productivity and Prevention) programme. The objectives of the QIPP programme are to drive efficiencies in providers, optimise spend and deliver quality care in the most cost effective settings An important focus of ongoing efficiency will be the development of a programme of service review. This will focus on all commissioned services, particularly recently implemented business cases, which will be conducted under the best value principles of: challenge, consultation, competition and comparison and the economic concept of value added or health gain achieved. The current QIPP programme is attached in Appendix This savings requirement clearly increases if the CCG wishes to generate an investment fund over and above that reflected in the existing plan The following levers will form the CCG s demand management and efficiency plan: I. Redesign and Lower Cost Settings. Finding ways of achieving the same (or better) outcomes for patients for less cost by completely redesigning and reorganising the way in which services are delivered and/or delivering services in a lower cost setting. This includes improving access to urgent care services in the community. II. Long Term Conditions & Case Management. Through improving the management of long term conditions through better use of community specialist and existing services. III. Prevention and Self Management. Focusing on prevention and screening - additional examples of projects and investments over and above those within the choosing health programme. IV. Management of Acute Contract Activity. Monitoring and challenging of activity and finance monitoring returns to ensure adherence with PbR contracting rules, performance targets and effective commissioning guidance. V. Utilisation of Demand Management Activities. Reducing inappropriate GP referrals to acute services by managing referral thresholds and managing conditions in the community. VI. Decommissioning. Decommission evidence-based low-value-adding interventions - for example cosmetic procedures, grommets, Version Draft - October 2012 Page 19 of 52

20 tonsillectomy, and minor skin lesions. This also covers decommissioning acute capacity following transfer of services to alternative settings. VII. Market Management/Procurement. A key part of the Recovery Plan will be the appropriate market testing of services to secure (i) best value from the market and (ii) to secure innovative ideas for maximising outcomes for patients These levers are summarised in the diagram below The draft QIPP programme is outline below. The key QIPP themes for delivering improved quality and financial savings in 2013/14 and beyond are: Integrated pathways for Long Term Conditions Ambulatory care pathways for emergency care Improved quality and consistency of primary care to reduce inappropriate outpatient attendances and inpatient admissions (e.g. CRESS and intermediate services) Continued delivery of efficiency on prescribing and continuing care whilst supporting long term conditions. Promotion of the prevention and self-management agenda Maximising benefits of vertical integration of community and acute services to improve quality of care and reduce inappropriate care Based on the collaborative clinical and financial modeling undertaken as part of the development of the South West London Better Services, Better Value business case the following assumptions have been agreed across CCGs and local providers. Version Draft - October 2012 Page 20 of 52

21 The CCG is refining the trajectories, savings and investment assumptions in taking these themes forward. 3.6 SERVICE INVESTMENT STRATEGY Given the financial challenge facing the CCG, the investment strategy is entirely based on invest to save. Any investment must deliver savings in Year 1 that at least cover the cost of investment CQUIN funding is a key opportunity to invest to achieve strategic and financial objectives. For 2013/14, a smaller number of strategic CQUINS need to be identified to ensure quality is an integral part of the strategic change agenda Funding streams for social care, including reablement funding, need to be wisely invested and monitored for the benefit of the health and social care system Forward planning to ensure schemes start on 1 April 2013 (or sooner) is essential to maximise delivery for the CCG in its first year The CCG s Prime Financial Policies and budget virement powers control the use of the CCG s resources. In order to maintain sustainable financial viability of the CCG, strong financial control is required to be maintained over recurrent budgeted expenditure, which must not exceed recurrent resource Non-recurrent resources are not to be used to finance recurrent expenditure without the written authority of the Chief Officer and Chief Finance Officer. 3.7 CAPITAL INVESTMENT STRATEGY It is not expected that the CCG will own significant assets. The new arrangements from April 2013 will establish NHS Property Services as the owner of all CCG land and buildings not otherwise transferred to an NHS Trust. IT equipment (for commissioning support and primary care) is Version Draft - October 2012 Page 21 of 52

22 expected to be owned by South London Commissioning Support Unit (NHS Commissioning Board). However the principles in this section are outlined for completeness should the CCG in fact own specific assets In the event the CCG receives a capital allocation, the CCG will establish a Capital Review Group to carefully consider the bids against the following bid criteria: Statutory Requirements; Essential Works to ensure continuation of Services; Previously agreed developments or improvements where commitments have been made; Prioritised schemes It is essential that the CCG uses any capital resources efficiently as capital expenditure decisions have significant future revenue financial consequences for the organisation To recognise that the use of capital has a cost, the NHS has a system of capital charges that are a charge to revenue, comprising of two elements: 1. depreciation, which is calculated annually to spread the cost of the asset over the expected economic (useful) life of the asset; 2. rate of return or interest or capital cost absorption rate. Set by the Treasury, the rate since 2003 is 3.5% (previously 6%) Typically the cost per annum of utilising each 1m of capital per annum is as follows: Impact of Capital Allocation on Revenue Costs Life Depreciation pa Interest pa Total Revenue Cost pa Office, IT Equipment 3 years 333k 23k 356k & Installations Vehicles 5 years 200k 28k 228k Medical Equipment, Plant & Machinery, Fixtures & Fittings 5 years 200k 28k 228k Buildings & 20 years 50k 35k 85k Enhancements minimum 3.8 TREASURY MANAGEMENT STRATEGY The CCG has a financial duty not to exceed its cash limit in any one year. The CCG receives a cash resource, which is based on its revenue and capital resource less any capital charges. The CCG will draw its cash resource from the treasury on a monthly basis. It is unable to invest this resource The level of cashflow risk facing the CCG will generally be in line with the underlying revenue position. To the extent that revenue support is required, an equivalent amount of cash limit support would also be required. CCG cashflow issues generally manifest themselves in the final month (March) of each financial year because CCGs can draw down up to their full cash limit at any point during the year to meet expenditure commitments. Version Draft - October 2012 Page 22 of 52

23 3.8.3 The unwinding of the historical arrangement that Croydon PCT hosted the London Specialist Commissioning Group means that, as a CCG, much tighter control and management of the cash position is required. This is in line with requirements on other CCGs and will be delivered by the South London Commissioning Support Unit The PCT s cash management strategy is based on: continued delivery of income and expenditure balance production of accurate detailed cash flow forecasts achievement of creditor payment targets income collection and debtors management cash support is secured to match any agreed revenue support or deficit position Key to the delivery of the PCT s cash management strategy is the robust and regular forecasting of the PCT s cash flow to ensure that it achieves its year end balance and that it utilises appropriately the cash it draws on a monthly basis. Achievement of Creditors Payment Policy & Targets One of the CCG s financial duties is to pay all valid invoices by the due date or within 30 days of a valid invoice. The achievement of this Better Payment Practice Code (BPPC) for all of the CCG s creditors is an important part of the PCT s cash management strategy The CCG aims to pay its smaller suppliers as quickly as possible within the 30 days Better Payment Practice code The CCG is working with budget holders and the South London CSU s Supplies function to ensure: invoices are promptly coded and electronically approved by authorised signatories; immediate action is taken where necessary to resolve invoice disputes; continued development of the purchase order management system. 3.9 CLINICAL ENGAGEMENT ON FINANCIAL PERFORMANCE A key element of the GP member engagement strategy is the development of a small number of GP Clinical Networks that are geographically based. A key role of GP Clinical Networks is to take financial responsibility for commissioning resources for their population including: ownership of the financial performance of individual practices; ensuring local delivery of QIPP; informed decision making on commissioning intentions and plans The objective of the financial regime has been to set budgets in a way that provides incentives to CCG members to: improve clinical practice, promote care in the most appropriate setting and generate financial savings to be reinvested in the local health economy by CCG members All CCG budgets are notionally allocated to networks and practices, preferably on an historical actual activity basis. In the absence of meaningful practice level data, some lines will be allocated on a weighted capitation (needs) basis. In particular, the following budgets will be allocated using Version Draft - October 2012 Page 23 of 52

24 historical activity for 2012/13: A&E, UCC, outpatients, elective day case and inpatient, emergency admissions and prescribing. Key areas for refinement in terms of allocation methodology are community services and mental health services Practices, as members of the CCG, are expected to deliver the contribution to corporate and financial objectives Consideration of a financial incentive scheme would be in the context of the broader member engagement strategy, the membership role practices will have and the financial position of the CCG ROBUST FINANCIAL PROCESSES AND SYSTEMS Financial management is central to the CCG s decision making process to provide information that is used to direct and control the CCG s activities, report and discharge accountability and utilise resources efficiently and effectively Central to the CCG s ability to provide good financial planning, budget setting and budget reporting and monitoring is the delivery of accurate, timely and efficient treasury management functions, including adherence to better payment practice codes The CCG will commission all its financial support from the South London Commissioning Support Unit as part of the core offer, in the form of three specified services: Financial Accounting (incl Counter Fraud and ISFE); Financial Management and Planning; Finance element in Acute Contracting Multi-Disciplinary Team The Financial Accounting offer includes using the Integrated Single Financial Environment (ISFE) provided by NHS Shared Business Services using an Oracle Financials (Release 12) platform. This arrangement has been negotiated and agreed by the NHS Commissioning Board at no cost to CCGs The CCG has been actively involved in the development of the three financial services offer from the South London Commissioning Support Unit, which will need to continue to refine systems and processes, and ensure the recommendations from the Ernst & Young report continue to be fully embedded in their service delivery model IDENTIFICATION AND MANAGEMENT OF FINANCIAL RISK The CCG manages risk under the local Risk Management Policy and Board Assurance Framework The key risks within this plan have been noted throughout the document, but in summary these are: Final confirmation of CCG allocations, and transfers to other organisations; Version Draft - October 2012 Page 24 of 52

25 changes/late notification to key planning assumptions for growth and expenditure as a result of the current downturn in the economic climate; the use of non-recurring sources to manage the 2012/13 financial position; the contribution to continue the strategic work of South West London wide strategic change programme Better Services Better Value ; ability of the CCG to deliver scale of efficiency required within the time frame required; CCG distance from target and recent experience of very low pace of change to bring CCG back to target; Croydon populations used in allocation formulas understating the size and need of the population compared to 2011 Census; impact of funding National Policies & Priorities (including 18 week pathway, movement of acute hospital activity to community setting) ; local impact of PbR tariffs versus road-tested national average impact ; implementation of Mental Health PbR tarrifs and rebasing of costs across commissioners; implementation of local cost and volume contract on community services - robustness of currencies and quality of data issues may undermine the strategic intent; poor information bases to make commissioner decisions; insufficient financial flexibilities realised from invest to save schemes eg, referral management, long term conditions pathway redesign The CCG has fully identified the financial risks facing the organisation. The following risk mitigation and management strategies are being deployed to manage the position: PCT/CCG Plans for 2012/13 reflected prudent planning assumptions, including 3% growth in acute activity, aggressive KPI penalties in acute contracts, and established 9m of reserves to cover performance and QIPP delivery risks; Actively developing service redesign plans for 2013/14 to improve quality and to shift setting of care, in particular long term conditions; Developing strategies to improve primary care delivery and improve prevention and self management of diseases; Collaboratively developing financial risk sharing arrangements with South West London CCGs, and potentially South London CCGs; Reviewing benchmarking and value for money information to drive opportunities for QIPP efficiency; Securing the benefits and experience of South London CSU in contract managing both acute and out of hospital contracts, as well as an end to end offer to ensure seemless support to Clinical Commissioner decision makers; Advocating the use of 2011 Census data for resource allocation purposes Under the CCG s Risk Management Framework, certain situations will mean that sharing financial risk with other organisations (providers, local authority, other CCGs, NCB) will be the most appropriate risk management action to take. This will typically be appropriate for service areas either (i) with high volatility year on year, or (ii) limited robust information to inform commissioning decisions. Version Draft - October 2012 Page 25 of 52

26 4. Delivering the Financial Strategy 4.1 Robust Financial Systems and Processes The strategy will be delivered through the continued development of robust financial systems to enable informed decision-making. Focus will be on improving: financial policies, controls & processes; the timeliness and efficiency of treasury management functions including creditor payments and debt recovery; the implementation of sound, modern financial systems, procedures and policies through the Financial Control and Financial Management offers from the South London Commissioning Support Unit, including the national Integrated Single Financial Environment (ISFE); clear & timely financial reporting & preparation; accurate and improved forecasting and modelling techniques; the support and training given to service managers; transparency & governance within the CCG, including establishment of a Finance Committee ; communication with budget holders and GP networks; devolved decision making to budget holders and GP clinical networks to encourage greater accountability Key to achieving this will be the ongoing support and development of the skills, capability and expertise of staff within the Finance Directorate. The SL CSU model for delivering financial services to CCGs is expected to harness the collective finance experience across South London, reduce duplication in the system and standardise processes. 4.2 Robust Financial Governance The CCG Governing body will establish the following sub-committees to govern financial issues: Integrated Governance and Audit Committee Finance Committee The following assurance arrangements will be in place for 1 April 2013: Lay Members: External Audit: Internal Audit: Counter Fraud: The CCG will appoint lay members by end of November 2012, who will chair the above committees. Auditors are expected to be appointed by the Audit Commission under the Audit Commission Act In advance of the CCG convening an audit committee, the is managed through the Joint SWL PCTs Audit Committee. The CCG will appoint professional, high quality internal audit provider, whilst seeking continuity over the transition period from the current provider. The CSU Financial Accounting Offer includes procurement and performance management of the outsourced contract. The CCG is securing professional, high quality Counter Fraud Services through the South London CSU, which build on the existing experienced team. This offer includes accredited counter fraud specilialist support. Version Draft - October 2012 Page 26 of 52

27 4.3 Supporting GP Network (and Practice) Decision Making To deliver the strategy it is imperative that GP Networks and practices have the information required to support decision making on commissioned services for the people of Croydon At the heart of the process, is accessible Business Intelligence tools to engage primary care in identifying and addressing unexplained variation in utilisation of, and outcomes from, commissioned health services. Refinement of non-acute contract currencies and costs is a key element of improving information for clinical commissioners (e.g. mental health and community) The planning and monitoring process of PLAN, DO, MONITOR, REVIEW will be applied to network/practice level use of resources (expenditure and activity levels). This will also include the collective assumptions on QIPP savings schemes mapped to practice level for delivery Initially summary information will be provided, with the expectation that, in collaboration with the South London CSU, interative tools will be available to practices to drill into the summary variance reports. 4.4 Programme Management Office The CCG established a Programme Management Office in 2007/08 to ensure delivery on a number of demand management and quality investment schemes. Since 2011/12 the PMO has focussed exclusively on the development and delivery of efficiency and value for money schemes: the recovery /QIPP plan. The PMO team currently includes 2 WTE. The CCG plans to expand the team to provide additional capacity to work with the GP Clinical Networks to deliver the recovery The objective of the PMO is to provide an implementation and measurement structure that enhances the PCT s capacity and capability to drive and deliver QIPP savings programmes, to ensure sustainable change is achieved and that the benefits are identified, managed, monitored and ultimately realised. The methodology is transferable to straight investment schemes once a sustainable position is achieved The PMO has become embedded within the processes and reporting structures within the CCG, reporting to individual responsible directors, the Senior Management Team and the Finance Committee Central to the development of the PMO is ensuring visibility and challenge on financial and non financial aspects of delivery, including milestones. 4.5 Investment/Disinvestment Prioritisation The prioritisation process seeks to assess the relative importance or value of health service interventions and programmes against agreed principles and criteria. Prioritisation decisions include; introducing new or increasing resources or services, reducing existing resources or services and replacing existing resources or services. Version Draft - October 2012 Page 27 of 52

28 4.5.2 The prioritisation process is essential as it: 1. aligns investment to pre-agreed strategies, priorities and policies 2. facilitates making fair decisions which balance competing need 3. supports understanding of funding options, outcomes, consequences and opportunity costs 4. supports the delivery of world class commissioning 5. provides better value for money In the financial circumstances, investment can only be considered in the context of invest to save, with investment repaid in Year Value for Money Approach to Use of Resources The strategy will be delivered by improving our understanding of how we use our resources, and what health gain outcomes are achieved, and through demonstrably maximising the use of its resources. Resource utilisation decisions and comparisons will be used increasingly to prove value for money or supporting investment decisions. Value for Money Approach To ensure all decision makers adopt a value for money approach to expenditure /investment decisions, a Value for Money policy (Appendix 4) has been developed to guide budget holders, GP networks, finance team and PMO. Programme Budgeting Programme budgeting seeks to give a greater understanding of what we are getting for the money we invest in the NHS. Historical PCT data allows the review of its expenditure by programme budgeting category (PBC) area and consider where it has a higher or lower national/cluster index score Programme budgeting is a useful tool to begin discussions with clinicians about expenditure and the nature and efficiency of the services commissioned Regular review of the result of programme budgeting will inform decisions of investment and disinvestment. Expenditure v Health Outcomes In delivering financial and health priorities, it is increasingly important to understand the relationship between expenditure and health outcomes. The Right Care programme Spend v Outcome analysis attempts to correlate relative expenditure levels with relative outcome levels across commissioners. Understanding the quadrant of high investment and low outcomes is critical to unlocking efficiencies in the system. This annual analysis has been generated for several years. Although there will be data quality issues, the analysis never the less provides clear lines of investigation. 4.7 Action, Monitoring, Control, Review & Revision The CCG s Financial Strategy has been developed after an assessment of Croydon PCT s financial background, current position and consideration of the impact of policy, priorities and influences of the context in which the CCG operates. Version Draft - October 2012 Page 28 of 52

29 4.7.2 The Financial Strategy by its nature will require continuous review and update and will be formally reviewed on a six monthly basis by the CCG s Finance Committee. Version Draft - October 2012 Page 29 of 52

30 4.8 Financial Strategy Action Plan Task Executive Lead For Completion by: Review and update Financial Governance mechanisms, Standing Orders, Sub-Committee Terms of Reference, and Delegation of Authority for CCG Authorisation Influence use of 2011 Census data to inform resource allocation and running cost targets to maximise resources. Develop Communications & Engagement Strategy Prepare GP Network Financial Reporting arrangements and identify Senior Finance resource to support each network. Mike Sexton (CFO) October 2012 Mike Sexton (CFO) October / November 2012 Mike Sexton (CFO) SWL CSU Communications Team Mike Sexton (CFO) October/ November 2012 November 2012 Increase establishment in PMO by 1 WTE Mike Sexton (CFO) November 2012 Agree KPIs and SLA for delivery of Financial Offer from SL CSU. Agree implementation of ISFE to deliver robust systems and processes by April Mike Sexton (CFO) November 2012 Establish Finance Committee for (subject to timing of appointment of Lay Members) Development and Delivery of Financial Awareness/ Efficiency and Probity (Counter Fraud / Anti-Bribery) Training for Senior Managers and Clinical Leaders QIPP Plan (VFM, best value, benchmarking, health ambition, spend v outcome) including programme of service review. Prepare & Implement QIPP Plan (2013/ /16) Mike Sexton (CFO) Mike Sexton (CFO) Stephen Warren (DoC) Mike Sexton (CFO) Stephen Warren (DoC) Mike Sexton (CFO) December 2012 On going (Internal and OD support to clinicians) December 2013 January 2013 Prepare Integrated 2013/14 Revenue & Capital Budget Mike Sexton (CFO) March 2013 Version Draft - October 2012 Page 30 of 52

31 5. Context - Health Care Policy & Strategy 5.1 Key to the Financial Strategy is the financial health of the NHS generally and London in particular. Policy decisions, which impact on the financial environment are challenging, as they are outside of the CCG s control. 5.2 The 2010 Public Spending Review sought to restore balance to public finances by In this context, health was protected from expenditure cuts with real growth, but was required to deliver 20bn of efficiency savings over that four year period to fund growth in demand and to support improvements in quality and outcomes. Key levers will include for example Continuously improving workforce productivity; Applying best practice throughout the NHS in the management of long term conditions; Driving down inconsistencies in admissions and outpatient appointments; and A 33% cut in the administration budget. 5.3 However, due to lower than expected economic growth, the target for restoring balance to public sector finances has been moved out by two years from 2015 to Whilst the 2012 Budget was silent on the NHS over this period, the best case scenario is a prolonged period of minimal growth, the downside being funding reductions. In either context, the savings challenge is in excess of the original 20bn. 5.4 The drive continues to be to deliver productivity gains at both individual and organisational level and across whole systems. Productivity has joined quality to form the foundations on which the NHS will face the current and forthcoming pressures on public spending. For CCGs it will mean commissioning more cost effective forms of care so patients do not have to receive expensive hospital care and for providers, doing more for less, or even for the same, will mean reducing unit costs. 5.5 For the past five years, London PCTs have operated a Medium Term Financial Strategy (MTFS) where PCT have invested in a collective fund to tackle historic debts across London. The contributions from the PCTs were based on existing prior year 2% top slice. In more recent years the emphasis has shifted to managing transition risks. In the last two years, South West London PCT cluster has used the 2% top slice non-recurrently for the following: To support financially challenged organisations To pump-prime service redesign (e.g. Better Services Better Value, NHS 111, Long Term Conditions), and To fund system transition costs. The 2012/13 NHS Operating Framework strongly indicates a preference for such an arrangement to exist in 2013/14. However it remains to be seen if it will be mandated. 5.6 The 2012/13 Operating Plan confirmed tariff inflation as 2.5%, net uplift of - 1.5%, which assumes that a cash releasing efficiency target of at least 4.0% will be delivered by NHS providers. Version Draft - October 2012 Page 31 of 52

32 5.7. The Public Sector inflation pay award to 2012/13 has been a pay freeze except for those on the lowest pay bands. A 1% increase in pay is anticipated for 2013/14, but is yet to be formally agreed. The Agenda for Change pay scheme also allows for pay progression, which is a particular pressure for Providers. Version Draft - October 2012 Page 32 of 52

33 6. Financial Background Croydon PCT 6.1 HISTORICAL FINANCIAL PERFORMANCE The PCT was formed in 2002, and up to and including 2009/10, had a sound track record of delivering against financial targets However, in Summer 2011, anomalies were identified in the 2010/11 financial position resulting in the external auditors agreeing a prior period adjustment of 27.8m in respect of 2010/11. Expenditure in 2010/11 had been higher than originally understood, and the resultant recurring financial challenge began to be addressed in 2011/12. The situation is the subject of the Ernst & Young Report (May 2012) which can be accessed on the following link: %20report%20into%20NHS%20Croydon.pdf The Ernst & Young Report (May 2012) outlines a number of recommendations (governance, financial management, staff training, etc) that all PCTs in London have been asked to review, address and report against. Going forward, the CCG will need to ensure that the recommendations continue to be addressed by the new organisations in the system, in particular the South London Commissioning Support Unit An overview of Croydon PCT s financial position and achievement against its financial duties, over the last four years, is reflected in the table below. Financial Year/Target Revenue Resource Limit Duty Capital Resource Limit Duty Cash Limit Duty True & Fair View Opinion VFM Opinion 2009/10 3.4m surplus Target Met Target Met Unqualified Unqualified 2010/11 5.5m surplus Adjusted by 27.8m PPA Target Met Target Met Unqualified Unqualified 2011/12 0.8m surplus Target Met Target Met Unqualified Qualified The Value for Money Opinion was qualified in 2011/12 as a consequence of the identified underlying deficit For 2012/13, the month 6 report highlights significant risk from acute growth, continuing care restitution payments, and some elements of QIPP delivery. The summary scorecard for 2012/13 is summarised below. The Month 6 summary financial position is included in Appendix 2. Version Draft - October 2012 Page 33 of 52

34 m QIPP Savings Draft Financial Strategy 2012/13 & Beyond The PCT has delivered the following QIPP/efficiency programme over the last four years. In light of the issues identified in 2011/12, the scope of the programme has been stepped up from 2011/ m 25.0m 20.0m Croydon PCT QIPP Delivery Net QIPP Target 25.0m Net QIPP Actual 22.0m 18.4m 16.8m 15.0m 10.0m 5.0m 1.3m 1.3m 4.4m 4.1m 0.0m 2009/10 Outturn 2010/11 Outturn 2011/12 Outturn 2012/13 M6 Forecast 6.2 USE OF RESOURCES Croydon PCT currently spends 595.6m on a mixture of commissioned services, around 75% of which will transfer to the CCG, but 25% of which will transfer to Croydon Council and the NHS Commissioning Board. The composition of the historical expenditure profile is as follows: Community Health Services 6% 2011/12 Expenditure (Audited) Other Healthcare 5% A&E 2% Primary Care 22% Mental Illness 9% Learning Difficulties 1% General and Acute 51% Maternity 4% Version Draft - October 2012 Page 34 of 52

35 6.2.2 A historical review of expenditure shows a significant increase in acute expenditure between 2010/11 and 2009/10. This was contained in 2011/12 with further planned growth in 2012/13. There has also been a reduction in total community expenditure in line with agreed efficiency targets on the transfer of community services to Croydon Health Services in 2010/11. However the drivers for acute growth are complex, with no single driver standing out. The reduction in MH/DAAT/LD line relates to the transfer of Learning Disability (LD) services to the local authority in 2011/12. Nevertheless, there were increasing pressures in the preceeding years Programme Budgeting and Marginal Analysis The PCT s expenditure profile under programme budgeting analysis (which tracks expenditure on disease areas) is reflected in Appendix 2 with a further comparison against cluster averages. The Right Care analysis on programme budgeting data highlights: Highest areas of expenditure: Mental Health, Circulatory diseases and Maternity Highest variance in expenditure: Maternity, Health Individuals and GI system Low Outcome/High expenditure: Health Individuals, Maternity, disorders of the blood Version Draft - October 2012 Page 35 of 52

36 Further analysis indicates high spend on non-elective care, and high investment in prevention and promotion with no apparent impact on acute expenditure. 6.3 CURRENT PROFILE OF ACUTE SERVICES The pie-chart below shows the profile of acute expenditure across point of delivery headings. Key: A&E = Accident and Emergency, OP = Outpatient, EL =Elective, CC = Critical Care, DA = Direct Access Diagnostics, HCD = High Cost Drugs, PTS/LAS = Patient Transport Service/London Ambulance Service The market share of Croydon s commissioning expenditure is dominated by Croydon University Hospital (CUH) (52%) but with significant expenditure at surrounding hospitals Epsom & St Helier Hospitals, St George s Healthcare, Kings Healthcare and Guy s and St Thomas Hospitals. CUH attracts 67% of A&E activity and 62% of outpatients, and 76% of direct access diagnostics. Version Draft - October 2012 Page 36 of 52

37 Key: CUH = Croydon University Hospital, GST = Guy s and St Thomas KCH = Kings Healthcare, RMH = Royal Marsden, ESH = Epsom & St Helier, STG = St George s Healthcare, SLH = South London Healthcare, It should be noted that under Payment by Results (PbR) framework, nonspecialist acute services provided by St George s, Kings Healthcare and Guy s and St Thomas, are charged to the CCG at a premium, compared to the charge from Croydon University Hospital, to reflect higher pay and nonpay costs (e.g. London Weighting) in providing the same care. (Refer to on Market Forces Factor) Since 2009/10 there has been an emerging patter of increased expenditure at non-local specialist providers. In the context, CUH sees reducing relative market share. An element of this pattern will relate to changes to the stroke and trauma pathway. The table below highlights the key shits in expenditure from 2009/ /12. Version Draft - October 2012 Page 37 of 52

38 APPENDICES Attachment 08

39 APPENDIX 1: 5 YEAR FINANCIAL PROJECTIONS 1.1 BASE CASE - SUMMARY OUTPUTS Total QIPP Challenge over 3 years (2013/ /16) is 39m or 13m pa over the three years. 1.2 BASE CASE ASSUMPTIONS Version Draft - October 2012 Page 39 of 52

40 Attachment BASE CASE DETAILED OUTPUTS 5 Year Financial Plan - PCT Non CCG Adj CCG Only CGR CAGR 2011/ / / / / / / / / /17 Audited Plan Variance Rec. FOT Plan Recurring Projected Projected Projected Projected 000s 000s 000s 000s 000s 000s 000s 000s 000s 000s % % Resources Recurrent 551, , ,560 (106,960) 460, , , , , % 2.8% Non Recurrent - Annually Allocated 0 22,722 22,722 (22,722) Non-Recurrent 44,648 4,949 4, ,949 4,949 4,949 4,949 4, % 0.0% Total Resources 595, , ,231 (129,682) 465, , , , , % 2.8% Total Resources (%) 2.6% 2.8% 2.8% 2.8% Expenditure CCG Total Acute 298, ,128 9, ,161 (3,857) 303, , , , , % 2.9% Total Out of Hospital Care 111, , ,657 (4,982) 102, , , , , % 3.8% Total Mental Health LD 60,110 59, ,579 (1,049) 58,530 61,021 63,651 66,437 69, % 4.3% Total - Other 17,633 9,979 3,967 13,946 (2,881) 11,065 11,391 11,726 12,073 12, % 3.0% Sub-Total CCG 486, ,343 13, ,343 (12,769) 475, , , , , % 3.3% NHS Commissioning Board Transfer 100, , ,603 (109,603) Local Auuthority Transfer 7,365 7, ,310 (7,310) Reserves Contingency (0.5%) 0 2,975 2, ,975 5,338 5,824 6,324 6,838 Transition Fund (2%) ,453 9,722 9,998 10,282 Sub-Total Reserves 0 2, , ,975 14,792 15,546 16,322 17,120 Total Expenditure 594, ,231 13, ,231 (129,682) 478, , , , , % 4.0% 3.4% 3.0% 3.7% 3.8% Net Position 838 (0) (13,000) (13,000) 0 (13,000) (26,646) (28,373) (33,913) (39,868) Control Total Surplus ( 000s) ,776 4,910 5,048 5,190 QIPP Challenge to Meet 1% Surplus Target 13,000 31,422 33,284 38,961 45,058 QIPP Driver comprises Re-establish 2% transformation fund 9,453 Re-establish 1% surplus 4,776 Prior Year QIPP Challenge 13,000 31,422 33,284 38,961 Additional In Year QIPP Challenge 4,192 1,862 5,678 6,097 Total QIPP Challenge 31,422 33,284 38,961 45,058 Note: Value of 1% Risk = 4,727 4,861 4,999 5,141

41 Attachment DOWNSIDE - SUMMARY OUTPUTS Total QIPP Challenge over three years (2013/ /16) is 60.9m, or 20.3m pa over the three year period. 2.2 DOWNSIDE - ASSUMPTIONS

42 2.3 DOWNSIDE CASE DETAILED OUTPUTS Attachment 08

43 Attachment 08 APPENDIX 2: PROGRAMME BUDGETING AND ATLAS OF VARIATION 1. BACKGROUND 1.1 Programme budgeting seeks to give a greater understanding of what we are getting for the money we invest in the NHS. It is a retrospective appraisal of a PCT s expenditure with the view of tracking future expenditure in the same programmes or disease area. PCTs collect information on how much is spent on disease areas rather than just recording how much is spent on primary care staff and salaries, drugs, or different types and amounts of hospital procedures. 1.2 The latest available data is the 2010/11 programme budgeting information. The 2011/12 data was submitted to the Department of Health in September 2012, with programme budgeting and SPOT analysis to be released early A significant degree of the variation in the amount the PCT spends on different diseases can be explained by: age, need profile of the population, and the cost of local services. However once these are taken into account some stark differences remain in the amount of resources different CCGs spend on different diseases. 1.4 The collection of programme budgeting information is based on commissioning spends and provider returns reconciled to the audited annual accounts. In turn, provider returns are based in part on local reference costs and national pricing (Payment by Results). 1.5 The development of accurate programme budgeting is a process that will require refinement over a long period and year on year improvements are expected in both the process and outcomes of programme budgeting. This analysis is further supplemented by the atlas of variation which highlights unwarranted variations in outcome across the NHS. 2. CROYDON ANALYSIS 2.1 The analysis is taken a stage further by developing a correlation between expenditure and outcomes. This is summarised in the attached SPOT analysis (Spend and Outcomes analysis). The Right Care analysis (attached) on highlights: Highest areas of expenditure: Mental Health, Circulatory diseases and Maternity Highest variance in expenditure: Maternity, Health Individuals and GI system Low Outcome/High expenditure: Health Individuals, Maternity, disorders of the blood 2.2 The following analysis benchmarks expenditure (per 100,000 population) in these categories in comparison with other similar CCGs (London Suburbs cluster) and compares CCGs against a cluster average comparator. The clusters group health areas based on similar characteristics.

44 Attachment 08

45 Version Draft - October 2012 Page 45 of 52

46 APPENDIX 3: 2012/13 Financial Position 1.1 Summary Financial Position Version Draft - October 2012 Page 46 of 52