Agenda Item 06 Enclosure KPCT/09/232
NHS KIRKLEES Report To:
FOI Exemption Category
Bryan Machin Executive Director of Finance
Key Points to Note:
Financial targets achievable but meeting control total subject to significant risk. A full discussion of the level of risk for 2009/10 will be held at the Board Meeting.
Finance and Performance Committee
The Board is asked to note the forecast financial position and the financial risk. Further updates will be provided to the Board at its forthcoming meeting. The Board is asked to confirm its commitment to achieving financial targets by minimising all avoidable expenditure.
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NHS Kirklees Board December 2009
Bryan Machin Executive Director of Finance
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NHS Kirklees Report to Board December 2009
1. Purpose of this Report The purpose of this report is to update the Board on NHS Kirklees’ forecast financial performance for 2009/10, including associated risks, and to advise the Board on action being taken to manage those risks. 2. Overall Revenue Position At the end of November I am forecasting that the PCT will achieve the control total agreed with the SHA and the requisite year end surplus of £2.9m. However, as the Board are already aware that position will not be achieved without significant management action by the PCT and co-operative management across the whole Kirklees health economy. 3. Significant Budget Variances There remain significant pressures on acute contracts, in particular as a result of overtrading reported by our two main providers, Calderdale & Huddersfield NHS Foundation Trust and Mid Yorkshire Hospitals NHS Trust. Constructive working with CHFT has led to a reduced forecast overtrade and this is reflected in the forecast of £3.3m. This has increased by £700k this month, mainly due to an increase in the year to date expenditure for October, on which the forecast is based. Although October was expected to be a high month, the degree of increase was higher than that anticipated. Further discussions are being held with the Trust at an operational and strategic level to achieve a common view on the trading position and to agree an approach to the management of that position to the year end. The forecast outturn of £2m over trade with MYHT reflects the PCT’s optimism that the scrutiny of the trading reports being done by the PCT will lead to a reduction in the Trust’s income expectation to the level forecast by the PCT. There are also significant pressures in other acute contracts with Bradford Foundation Trust, Sheffield Teaching hospitals, Leeds Teaching Hospitals, and Barnsley Foundation Trust. NHS non-contracted activity and independent sector activity are also showing significant pressures. In addition the forecast out-turn for KCHS is now showing an over spend of £500k. This is due to pressures on translation services, implementation costs of System 1, and additional school nursing costs. If these positions continue at the rates seen so far this year then this will result in NHS Kirklees missing its planned surplus by £6.7m. However, it is felt that this can be managed over the remainder of the financial year by: •
Reviewing and challenging the validity of the monitoring information received from acute providers;
Co-operative management across the Kirklees health economy; and
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Management action to reduce expenditure in other areas.
The main variances are summarised in Table 1 below, along with a brief explanation for each. Table 1: Summary of Main Forecast Variances Description
Sept 2009 £000s
CHFT – SLA
This position has worsened by £700k from the previous month. The forecast is based on YTD information for month 7 and this shows a higher level of spend. October is usually a busy month and this is factored into the forecast. However, the actual increase was higher than anticipated resulting in the increase reported.
Mid Yorks – SLA
This is similar to the previous month.
Leeds Teaching Hospitals – SLA
The majority of the over spend relates to critical care price increases and in year over trades (although this is based on month 3 information). The position is improved by £200k since the previous month due to more clarity about funding arrangements for the Bexley Wing and children’s top ups.
Bradford FT £330k, Sheffield Teaching £425k, and Barnsley FT £1.3m, noncontracted NHS activity £965k, independent sector £200k. These broadly in line with previous months and work continues to address them.
The final agreed SLA for YAS is higher than planned for and reflects the higher than anticipated settlement for 2009/10.
Based on latest information. This position has moved downwards since the previous month for presentational reasons. Low secure mental health services which are now part of the consortia arrangements are included in here for the first time and are under spending by £660k. They were previously included in the line below
The main areas of overspend are Continuing Care £1.5m and Out of Area Treatments £0.9m. These are partly offset by under spends on free nursing care (£610k), and other specialist services (£700k). The position has moved upwards since the previous month mainly due to the presentational change explained in the line above.
2009/10 inflation lower than estimated in the plan
Primary Care Prescribing
The PPA has issued a forecast outturn for 2009/10 of approximately £170k over budget which is a reduction from the previous month.
This reflects volume increases in year and increased up take of medicines usage reviews. This variance was previously included in the ‘Other budgets’ line below and is now reported separately for transparency.
This relates to staff vacancies in across a number of Directorates and lower nonpay costs in areas such as external recruitment and legal.
Corporate Services Investment Schemes
This reflects the current estimate of slippage against agreed investment schemes.
And this is due to translation services £175k and action has been taken to address this, System 1 implementation costs £125k, additional school nursing £190k.
Other smaller variances.
This is the balance remaining in the contingency reserve.
NHS Kirklees’ required surplus to meet the agreed control total for 2009/10.
Continuing challenge to and work with Acute Trusts and Management Action to reduce expenditure.
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4. Financial Risk Analysis In forecasting the financial position there are a number of factors that need to be considered where there is a risk that expenditure may change from that currently forecast and these are summarised below. •
Acute Contracts – The trend in contract performance indicates that the current over-trades are likely to continue throughout the year unless our challenges are successful Leeds Teaching Hospitals – there are unresolved issues relating to the SLA for 2009/10 and the financial impact of these once agreed. Our current forecast is based on a ‘neutrality’ arrangement being agreed across West Yorkshire whereby we only pay the same as we would have paid last year for the same level of activity. Specialised Commissioning Group - The major risk on SCG expenditure (of which 78% is for acute services) relates to the issues at LTHT and the financial impact once baselines are agreed. Primary Care Prescribing - Prescribing expenditure and forecasts are volatile and can change significantly in year. Continuing Care, Mental Health and Learning Disabilities Specialist Treatments – A recent change in the guidance relating to Continuing Health Care may have an impact on expenditure in these areas. Work is underway to asses the impact of this guidance.
Work continues to firm up the likelihood of these risks and steps taken to manage them or to identify contingencies to offset those which cannot be managed. The risks of increased expenditure and of delivering mitigating actions will be discussed at the Board meeting. In addition to the continued scrutiny of the SLA position on our two main acute contracts the expenditure controls reported last month remain in place. All possible means of reducing revenue expenditure are being explored. 5. Year to Date Position The year to date financial position of NHS Kirklees is an over spend of £900k. The year to date position includes the year to date impact of the variances highlighted in Table 1 above. It does not reflect the year to date impact of the trading queries still outstanding with our acute providers. 6. Conclusion on Financial Performance 2009/10 I am still able to forecast that the PCT will achieve a surplus of £2.9m for 2009/10 and therefore meet its control total of £6.9m. However, the risk of non-achievement is still greater than at any time since the PCT was established. Achievement of our revenue target will only be possible if NHS Kirklees is able to successfully challenge the contract performance information received from acute providers. We have a constructive relationship with both of our acute providers which I am hopeful will result in an ability to manage risk to financial performance this year. The Board and all parts of the PCT
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recognise the seriousness of the situation and it is vital that everyone continues to bear down on avoidable costs. 7. Cash NHS Kirklees is forecasting to manage its cash position within the available cash limit. 8. Public Sector Payment Policy NHS Kirklees has paid 95% of invoices by number and 92% of invoices by value to the end of August 2009, which is consistent with the previous month. Work continues to improve performance throughout the year. 9. Capital As at November forecast capital expenditure is £5.6m which is in line with the revised funding available.
10. Summary Performance against Key Statutory Duties/Targets Financial Duties /Targets
Forecast Financial Duty Achieved
Achieve financial balance by containing revenue expenditure with the PCT’s revenue resource limit.
Meet SHA’s revenue control total target
Achieve financial balance by containing capital expenditure with the PCT’s capital resource limit. Recovery of full costs on provider activities.
To manage cash payments within the PCT’s cash limit
☺ Public Sector Payment Policy
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11. Summary The Board is asked to note the forecast financial position and the financial risk. Further updates will be provided to the Board at its forthcoming meeting. The Board is asked to confirm its commitment to achieving financial targets by minimising all avoidable expenditure.
Bryan Machin Executive Director of Finance December 2009
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