Southport and ormskirk hospital nhs trust

SOUTHPORT & ORMSKIRK HOSPITAL NHS TRUST FINANCE COMMITTEE MEETING 25th SEPTEMBER 2006
DIRECTOR OF FINANCE REPORT
FOR THE PERIOD ENDING 31st AUGUST 2006
FINANCIAL POSITION
Once again this report is based on the provisional operational budget of a £5m “in year” deficit. The Trust is still unable to adopt a formal budget whilst we await the outcome of the Corporate Financial Turnaround Strategy which was submitted to NHS North West at the end of July. A meeting has taken place with a finance representative from NHS North West to discuss the planning detail but formal sign off of the plan has not yet been agreed. Once the plan has been ratified by NHS North West then a full budget will be presented to the Trust Board for approval. In the meantime the Trust is working to a provisional operational budget of an “in year” deficit of £5m. The financial performance at the end of August is an overspend of £1m against the deficit of £5m. This performance represents a significant improvement on the operational plan. The majority of SLAs have now been agreed and activity performance for those services covered within PbR is encouraging. This is examined in more detail further on in the report. Appendix 1A contains the high level Income & Expenditure Account for the month with an extra section under 'memorandum' to show the true income and expenditure performance in year after adjusting for the carried forward deficit. Oper'nal
CURRENT MONTH
YEAR TO DATE
Budget Actual Variance Budget Actual Variance
£000 £000 £000 £000 £000 £000
130,750Sub-Total Income
150Interest receivable
Deficit Interest charge
130,900Total Income
A more detailed breakdown of income is provided in Appendix 1B. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 PCT SLA income for the first four months of the year is £44.1M and this has been accrued to budget. The majority of SLA agreements have now been agreed and activity plans finalised. There remains an element of risk against the base budget for Chorley PCT and Liverpool PCTs. These have been identified in section 1.6. Section 1.3 outlines performance to date against the provisional plan, but no income accruing from overperformance has been brought into the financial position reported this month. Specialised Services income of £7.2M relates to spinal injuries and all of the SLA’s have now been signed off. There is no financial risk attached to this source of income as the SLA’s are constructed so that any under or overperformance is not felt until the following year under the 3 year rolling average agreement. Other income from patient care has overachieved by £66,000 in month. £17,000 of this is extra private patient income following a drive within the surgical group to attract extra work. Additional RTA income has generated a £54,000 overperformance. The interest receivable budget is £150,000 for the full year. At month 5 we have already received £191,000 from this source. Although this income is non recurrent it will assist the Trust in delivering the minimum overspend in 2006-07. SLA Performance
The majority of our income is derived from PbR activity. At the end of July the Trust
has overperformed on activity within PbR producing a net surplus of £1.1M (see table
below).
PbR Performance to 31st July 2006 after outpatients to daycases reclassifications

Cumulative Activity
Cumulative Value
Budget Actual Variance
Budget Actual
Variance
Total Elective
Non Elective
Total Outpatients
The current activity levels shown above for daycases, which have significantly overperformed, include the reclassification of procedures performed in outpatients that can legitimately be charged as daycases under PbR (mainly scope work). Whilst this income will not be forthcoming in 2006/07, PCTs have been informed that the Trust will be charging the national tariff from 2007/08 in line with other acute providers’ current arrangements. As such, the table above does not reflect the true level of income that the Trust could receive in 2006/07. However, I will continue to provide the committee with this information so that the future income streams of the Trust can be assessed. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 In order to assess the forecast income from PbR in 2006-07 the above table has
been restated below to adjust for the reclassification of day cases back into
outpatients.

PbR Performance to 31st July 2006 before outpatients to daycases reclassifications

Cumulative Activity
Cumulative Value
Budget Actual Variance
Budget Actual
Variance
Total Elective
Non Elective
Total Outpatients
Despite this reclassification elective day cases are marginally overperforming. Some of this is a reflection of the national policy drive to move more procedures from inpatients to day cases. Elective inpatient activity is below plan by 18% producing a £580,000 deficit. A large portion of this is due to an underperformance in Orthopaedics, particularly the provision of joint work. This has been partly due to the Charnley theatre being closed for essential maintenance. This was reopened in September and the Surgical Group are being instructed to bring the activity back into balance for each PCT through the Performance meetings. Outpatient activity is overperforming against the provisional plan across a number of specialties. Outpatient Procedures are above plan. Considerable work has been undertaken to capture all of the work that is now being performed and this has resulted in an increase in this area. The work has always been captured as an outpatient episode but the procedures performed in addition to the episode can now be charged to PCT’s irrespective of whether it was a primary, secondary or tertiary procedure. This is in line with the PbR technical guidance and is chargeable at 100% national tariff. Although the final detail of the SLA’s has not been signed off for all PCT’s the Trust has secured additional funds for the activity going through A&E. This has reduced the risk associated with these SLAs. I have taken the opportunity to increase the plan to reflect the agreed extra investment and, despite this, the Trust is performing at a higher level. In summary, the Trust is overperforming to date in 2006/07 by £1.1M. The chargeable element of this is £692K, although none of this overperformance has been reflected in the August I&E report as yet. The majority of the £682K is recoverable against the 3 main PCTs. Appendices 1D, 1E and 1F provide a further breakdown. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 Expenditure budgets have under spent by £245,000 in month as depicted below. Once again pay under spends are the main factor. Even with recovery planning and posts withdrawn from the vacancy freeze the Trust is still delivering an under spend on pay. Non pay is beginning to show an over spend and this will be closely monitored to understand how much of this is due to overperformance. Oper'nal
CURRENT MONTH
YEAR TO DATE
Budget Actual Variance
Budget Actual Variance
£000 £000 £000 £000 £000 £000
EXPENDITURE
90,512 EXPENDITURE 10,390
245
828
Pay budgets are underspent in month by £322,000, continuing the trend from June. This represents a 4% under spend in month. Details of variances by staff group are identified at Appendix 1C and a subjective summary is provided below. Medical staff costs are under spent this month by £80,000. This is driven by consultant vacancies and a reduction in agency usage with the introduction of new rotas giving prospective cover in most areas. Nurse staff levels record 75 WTE vacancies in August. This is a reduction of 5 WTE from July and this staff group is now contributing £517,000 to the under-spend to date. Vacancies are currently being held for two reasons. Firstly, the new student intake in September and secondly, the next ward closure as identified in the recovery plan. The Director of Nursing has agreed to hold the vacancy level to deliver a saving of £380k in 2006-07and we have now achieved this. Professionals Allied to Medicine are also under-spent, driven by 5 WTE vacancies. The professional and technical staff line is £13,000 under-spent in month. This is due to the reclassification of pre registered pharmacists from PTB to pharmacist (£22,000) backdated to April. The classification issue with nursing is still causing an over-spend in this area, although there is a genuine overspend in theatres, this is now reducing following the theatre review where sessions are being withdrawn and will continue to be monitored closely. Admin & clerical is underspent in month by £38,000. Once again, this is due to maternity leave and vacancies Trust wide. Ancillary staff has underspent this month by £13,000. 6 vacancies are currently in the process of being filled but not covered by any bank or overtime. This brings the overall overspend on ancillary down to £10,000 as the facilities director was requested to deliver. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 This area is £50,000 over spent in month and details are provided at Appendix 1C. Supplies & services clinical are overspent by £8,000 in August and the majority of this relates to drugs Premises and fixed plant is over-spent by £15,000. This relates to the energy centre and water & sewage are contained within the Facilities group report. Services from other NHS bodies is overspent by £20,000. This relates to pathology tests from The Royal and Lancashire Teaching Hospital and is detailed in the Corporate Services Group report. Depreciation is overspent in month £27,000. This is due to the revaluation of the SGI site as previously reported. It is highly unlikely this budget can be brought back into balance due to the SGI disposal being scheduled towards the end of the financial year. If the SGI is disposed of before 31 March 2006, this will limit the impact of this overspend. There are no other material movements. Appendix 2A provides an analysis of each CSG’s performance in both income and expenditure. Following on from Appendix 2A are appendices from each of the groups outlining performance to date and any associated risks. Three groups are reporting over spends in the month of August (Facilities £5k, Finance £5k and Nursing £7k). All efforts should be made to deliver under spends wherever possible in order to achieve a reduction in the provisional deficit of £5m. Any groups that are delivering under spends will be expected to continue this performance in future months. Each director will present their respective groups performance (refer to Appendix 2B onwards). The reported I&E position at August excludes the risks identified in the table below. If any of these risks materialise then these will further affect the monthly I&E position. These risks should also be considered in the light of the current overperformance on services covered by PbR. The following risks have been revised since July:- 1. Send away pathology test costs are increasing with an estimated £45k over-spend. 2. Following receipt of the 1st quarters invoice EEG/EMG referrals have now been revised down to £12k. 3. Elective activity needs to be increased to meet the targets; this will mean an increase in non pay (£20k) which is currently in balance. 4. Six months funding for the clinical practice placement facilitator has been received and it is assumed that the funding will be received for the second half of the year reducing the risk to zero. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 5. Recovery Plan risk will reduce in line with performance each month and now reflects the actual amount achieved. Description of Significant Risks
Total Level of Risk
(M)edium
£000’s
Theatre sessions not reduced wef 1.8.06-agency Clinical Practice Placement Facilitator funding the DHA West Lancashire PCT Income loss re non-elective threshold Recovery Plan at £5.2m will not deliver in year Additional elective activity required to meet targets increase in non The above risks need to be taken into consideration against both the current and forecast financial performance. AGENDA FOR CHANGE
Appendix 3 reflects the progress to date in assimilating staff onto the new Agenda for Change pay structure. Although not all posts have been banded at the budgeted band, it is still anticipated that there are sufficient funds in the reserve to cover the final 10.53% to be assimilated.
3. RECOVERY
The Trust continues to make good progress against this target with £4.7M actioned in 2006/07 (FYE £5.4M) (see Appendix 4A). It is imperative that the remaining schemes are delivered as soon as possible to maximise the potential in year savings. The groups are identifying the CRES for 2007/2008 and where possible these are being actioned in 2006/2007. Appendix 4B highlights those areas that are still to be actioned in this financial year and the associated risk of achieving those schemes. It should be noted that the full year effect value will increase substantially once the redundancies and vacancy freeze have been actioned fully.
4. BALANCE
_______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 This report brings together all aspects of the balance sheet – fixed assets, stock, debtors, cash, creditors, provisions and reserves into one detailed monthly overview report. A full balance sheet is attached as appendix 5A. The Trust’s asset base has decreased in month by £368k. As very little capital is currently being spent, depreciation is far out-weighing any additions and so therefore we are seeing a reducing asset base. However, once the capital programme comes into full swing I am forecasting an overall rise in the Trust’s asset base. The forecast asset base at year end is £154.2m. It should be noted that discussions are on-going with NHS North West to ensure that the benefit of £1.5m identified in the capital plan for the part transfer of Southport General Infirmary to Merseycare is achieved. A full stock analysis is shown in appendix 5B. This shows a minor stock reduction of £13k. However within the overall reduction there are some increases and decreases within stock categories namely pharmacy and baclofen pump stock. Work is on-going with the pharmacy stock. The increase in baclofen pump stock is due to a bulk purchase of pumps to realise a 15% price saving by ordering 10 at once. Two areas continue to show no stock movement – building/engineering and ward stocks and therefore a mid-year stock-take is recommended. Stock reductions continue to be some way short of the year end final closing target of £1.5m and further work is required in this area. Total debtors (including road traffic accident claims > 1 year) have reduced from £6.1m in July down to £5m in August. The bulk of the reduction has been around NHS debtors. This has been a combination of significant invoice payments and contract payments. The drive to get SLAs signed off is helping to reduce the level of NHS debt. The total debtor figure of £5m is made up of outstanding invoices, road traffic accident claims, prepayments (mainly lease and maintenance payments), recharges and accruals. Appendix 5C details the ageing profile of outstanding invoices and shows continued improvement in debt collection. However, with the imminent PCT reconfigurations, it is likely that the value of outstanding invoices will increase as we ensure that we are fully up to date with billing. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 The Trust continues to run with high cash balances and are utilising this resource to invest in the National Deposit Facility at the Treasury on a 7 day rolling cycle. The large amount of interest in August is a combination of July’s bank interest (credited to our account in August) and 4 weeks worth of interest through the National Deposit Facility. Appendix 5D contains a detailed cashflow forecast. The pay cash profile has been re-assessed and I have been able to further reduce the loan requirement down to £1m. Creditors have decreased from £13.2m in July to £11.7m in August. This is a combination of a reduction in accruals (see provisions paragraph below) and the fact that Southport & Formby PCT are now starting to deduct £2m of residual debt over an 8 month period. The dividend provision relates to the Trust Debt remuneration payment due in September of £2.6m. The Trust has 3 main provisions for future liabilities – early retirement (£982k), employer/public liability (£64k) and agenda for change (£951k). No significant movement in reserves this month. The I&E reserve continues to worsen due to the in month actual deficit of £146k. Better Payment Practice Code The Better Payment Practice Code requires the Trust to aim to pay all undisputed invoices by the due date or within 30 days of receipt of goods or a valid invoice, whichever is later. At the end of August 2006, 81% of non NHS invoices and 88% of NHS invoices were paid within the Trust terms. 5. CAPITAL
The capital programme was adopted by the committee in July. Appendix 6A contains the details of the 3 year programme. The main areas of risk in terms of funding are the land sales. A planning application is to be submitted in October for the redevelopment of the SGI for mental health services and residential properties. It is estimated that this will conclude in January 2007. The contract for the sale of the land at the SDGH site to Oak Apple is currently being drawn up. The residences full business case is expected to go to the October Board meeting for approval. This has been agreed by the SHA who do not require the FBC. _______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006 Final formal approval for the vacation of the SGI site from NHS North West is imminent. Once received, then plans are in place to deliver within the agreed timeframe. Progress on each scheme is identified at Appendix 6B with details of progress to date. If all schemes perform to plan the Trust will be able to offer up brokerage of £1m at the end of the year. 6. FINANCIAL
The Trust continues to operate to a provisional in year budget deficit of £5m until NHS North West have agreed the revised financial plan. The debt management strategy has been actioned by the previous SHA and both the I&E and cash effects of this have been delivered. Due to the change in personnel at the old SHA/NHS North West, the Trust is seeking formal documentation concerning the write off of the final £2M cumulative debt in 2007/08. This is to be funded by Southport & Formby PCT (soon to become Sefton PCT) because they did not contribute to the original debt management strategy due to their financial difficulties. All of this strategy is predicated on the NWSHA accepting the revised financial plan submitted at the end of July. I&E performance is extremely encouraging although it must be remembered that this still represents an overspending position, albeit much lower than the £5m plan. Whilst major savings have been made against the Recovery Plan the groups must deliver the rest of the plan as soon as possible to maximise the current year effect and assist the Trust in minimising the overspend. Activity within PbR is overperforming and discussions are taking place with PCTs concerning how this overperformance is to be managed. However, given the level of overperformance in activity and the I&E performance to date, the Trust is revising its year end projection to £3.6M net off the £2m deficit carried forward. The risks identified in section 1.6 above have been reflected in this forecast. Despite this encouraging performance, all groups need to continue to deliver further underspends where possible so that the debt going into 2007-08 is kept to a minimum.
Colin Throp
Director of Finance and Performance
_______________________________________________________________________________________ Finance Committee Report for the period ending 31st August 2006

Source: http://www.southportandormskirk.nhs.uk/downloads/Trust%20Board/Director%20of%20Finance%20Reports/2006/08%20DoF%20Aug%2006.pdf