Highland NHS Board 28 March 2017 Item 4.8 FIVE YEAR CAPITAL PLAN & INDICATIVE TEN YEAR CAPITAL PLAN Report by Nick Kenton, Director of Finance The Board is asked to: Approve the attached five year capital plan 1 Background and Context Every year NHS Highland is required to submit a Capital Plan to the Scottish Government that sets out our proposed investment in our infrastructure for the coming five years. This year s Plan includes an indicative ten-year look ahead. This Plan is set in the context of the Asset Management Strategy that was approved by the Board in October 2015. The Plan has been scrutinised in detail by the Asset Management Group (AMG), which is content to recommend it to the Board for formal approval. This Plan highlights all proposed capital expenditure on projects that are either planned or in progress. Also included is likely income from other sources such as disposal of assets no longer required. The Plan includes projects funded from traditional public sector capital (provided by the Scottish Government direct) as well as potential projects to be funded by up-front investment from out-with the public sector and paid for from revenue allocations. The plan should be seen in the context of continuing significant constraint on the NHSScotland capital position. Broadly, the Board s capital plan is underpinned by four sources of funding: Formula capital this is NHS Highland s fair share of non-specific capital funding and the Board has discretion over how this is utilised Specific capital funding this is funding that depends on specific Scottish Government approvals, via a business case process Income from the sale of assets Revenue funding this is where funding for an asset is made available via a non-profit distributing arrangement whereby the upfront funding is sourced out-with the public sector and the Board then pays a revenue charge for utilising the asset There is continuing constraint on the first three sources of funding. The formula capital for NHS Highland will be 6.616m for 2017/18. There is no uplift from the 2016/17 amount and considerably less than 16m received in 2010/11 (the final year before resources became increasingly constrained). In tandem with this, the Scottish Government has given a clear steer to boards to address backlog maintenance in their property portfolios. In the last two years the capital programme has very much reflected this guidance and there was commitment made on backlog maintenance of 2m per year to eliminate the high risk areas. This has led to a resultant minimal investment in equipment replacement programmes. The 2017/18 plan has tried to address this with focus on investing in high risk areas within medical equipment and ehealth issues with the limited fund available. 2 Process Followed It is clear that there is insufficient capital to support the asset base as it is currently configured. In order to reach a balanced capital plan it is necessary to adopt a risk management approach that requires a significant degree of compromise across the key capital streams, which are as follows:
Estates / property ehealth Medical equipment Radiology equipment Each stream has a lead officer who was charged with prioritising the requirements according to risk. These prioritised lists were discussed and refined at the Asset Management Group. Through a degree of compromise, it was possible to include most of the top priorities on the plan that were rated as high risk. Some however could not be included in the plan, as in previous years. This will be detailed in the PAMS (Property Asset Management Strategy) document that will come to the board for approval in July 2017 The 2017/18 plan includes 1.3m set aside for estates backlog maintenance, along with reinstatement of 0.9m from 2016/17 keeping this at the agreed minimum of 2m, 1.3m for medical equipment, 1.3m for ehealth and 0.6m for Radiology which addresses all prioritised high risk elements. The Board remains on course to hit the national target of reducing significant and high risk estates backlog maintenance to 10% of the total backlog by 2020. Some priorities for the Board have had to be identified subject to bids to Scottish Government where we are competing for scarce capital with all other boards. This may cause problems going forward if these schemes are not funded, however the plan is reflective of the best that can be achieved with the current level of funding. The Asset Management Group plays a key role in monitoring the position in-year and agreeing amendments to the plan to deal with unanticipated pressures or slippage. There is specific funding in the 2017/18 plan for the continuing Raigmore Critical Care & Theatres refurbishment ( 8.5m) which is on course to complete in 2018/19. As a result of the constraints on publicly funded capital, the Scottish Government has introduced revenue-funding solutions based on non-profit distributing models. The new Tain Health Centre (which opened in 2014) was delivered under one of these models - the hubco model. This year s Five Year Plan includes the redesign projects for Badenoch and Strathspey, Skye, Lochalsh and South West Ross. It is expected that these will be delivered via the hubco model as a bundle to maximise value for money and minimise financing costs, although specific funding for the purchase of the land has been agreed by Scottish Government. Funding for the remainder of the Smarter Office project for Inverness, and the agreed Radiotherapy replacement programme make up the remainder of the 2017/18 funding on the Central funding section. For clarity the funding (and corresponding expenditure) sections shown listed below are still under discussion with Scottish Government and are therefore not guaranteed and are subject to due process (20171/8 figures): The New investments projects Property - 1.45m Investment programmes - HUB/NDP - 2m Proposed ehealth- Schemes over 1.5m - 5.715m 2 Plan The plan attached in appendix A & B below is our current understanding of the funding position for the next 10 years. Although the plan has not previously needed to include a 10 year look ahead it is important that we align the plan with the Board s Asset Management Strategy (AMS). This is to allow more complete planning at government level and to ensure consistency across plans. The plan is a development of last year s plan but includes projects arising from the Inner Moray Firth Master Plan and the other redesign work going on around NHS Highland such as hospital redesign across NHS Highland and some high cost ehealth issues which are all under discussion
with Scottish Government. The plan reflects discussions with Scottish Government regarding the planned new Elective Care Centre in Inverness - one of four locations in Scotland selected to receive funding. Appendix A and B below show the funding and expenditure commitments within the 10 year Capital plan. The plan also includes potential funding for Inverness Primary care premises, we are aware that the population of Inverness is increasing and several developments are in place to further increase housing, we will need to ensure the provision of Primary Care is able to keep pace with this. We also want to be able to address existing concerns in some of the existing facilities. Work is beginning on redesign in Lochaber which may involve a replacement hospital for Belford, subject to due process. We are working with colleagues in Highland & Islands Enterprise and Highland Council to ensure that any impact on health services arising from the impending investment in aluminium processing in Lochaber is understood and planned for. In order to continue to provide quality services we are constantly reviewing the estate and its relevance to the services we deliver from it. In Dunoon and Rothesay we recognise there may be options that would allow us to redesign services that will improve the experience for patients and improve efficiency. This work has started and will be detailed further in the AMS. Work is continuing on the Inner Moray Firth Master Plan and we are in discussion with Scottish Government over how to best present and take forward this important piece of work. Again this will be explained further in the AMS document. It is also incumbent on us to drive every possible efficiency out of the Capital Budget we are allocated, so we are introducing a new process for managing the expenditure that ensures the procurement strategy for each piece of expenditure maximises the use of existing national contracts and early results are encouraging that significant savings can be had without a reduction in quality. This is a challenging plan to deliver, we are having to change the resource profile of the team that is used to deliver most of this work, this is key if we are to grasp the opportunity to get the estate that supports many of our services configured and built to meet the demands of modern healthcare. This will need to be resourced properly and this will be kept under review as the work progresses. As part of this, we are in dialogue with colleagues in NHS Grampian with a view to sharing capital planning resources across the region. 3 Contribution to Board objectives The projects listed in this plan will help to ensure the continuity of services by the planned replacement of equipment and assist the efficiency agenda by delivering the new facilities that the Board needs to modernise its service delivery. 4 Governance Implications Staff Governance There are no particular staff governance issues around the overall Plan, each individual project will have its own staff engagement. Patient and Public Involvement Each project will have appropriate patient and public engagement. Clinical Governance Each project will comply with clinical governance as part of the project delivery.
Financial Impact The capital aspects of the Plan are reflected in the attached schedule. There will be revenue consequences of the Plan these are dealt with on a project-by-project basis in accordance with the business case process. 5 Risk Assessment The individual projects have their own risk assessment and risk governance arrangements. For the significant projects, this will be detailed in the Asset Management Strategy. The risks associated with the backlog in maintenance and equipment replacement will also be in the Asset Management Strategy. The components of this plan (and the items excluded from it) have been subject to a risk assessment process. 6 Planning for Fairness This will help ensure equity of access to patients by improving the sustainability of services in NHS Highland. 7 Engagement and Communication A communication plan is in place to communicate to staff and patients what is planned and appropriate press releases will be prepared at the key milestones to inform the public. Nick Kenton Director of Finance 16 March 2017
Appendix A
Appendix B