Understanding RCHT’s Finances

Royal Cornwall Hospitals NHS Trust

666,321 ÂŁ32

Finances

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RCHT’s

Total patient contacts

Bu dg e

Understanding

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Over half a million patient contacts =10,000 Planned inpatients Planned daycases Emergency admissions Emergency Department & Urgent Care Centre attenders

Understanding Royal Cornwall Hospitals NHS Trust’s Finances This document is designed to give a high-level understanding of the Trust’s finances. It explains where the Trust’s income comes from, how it is spent and why savings are required.

All values in this document relate to the 2012-13 financial year and detail can be found in the Trust’s accounts here:

ACCOUNTS

Further information sessions will be provided in February 2014 for individual teams. However, if you would like more information on this document or would like to see more information included, please contact any of the following individuals who will be happy to attend a team meeting to discuss the document and the financial challenges facing the Trust:

Divisional Finance Managers ■ James Ellis – Clinical Support Services and Cancer ■ Lisa Rodda – Women, Children and Sexual Health plus

Corporate and Hotel Services ■ Gary Edgson – Medicine and ED ■ Tanya Trethewey – Surgery, Theatres & Anaesthetics

Annual Accounts 2012-13 As each year passes the need to generate savings both increases and becomes more challenging. As well as providing information on how income is earned and spent, this document also sets out why savings are required. This will help readers to understand that savings are required in order to offset increases in pay and reductions in income, and that investments made, or unexpected costs incurred, increase the need for savings.

3 Royal Cornwall Hospitals NHS Trust - Understanding Finances

Kim Hitchens – Head of Financial Management Karen Jarvill – Deputy Head of Financial Management Adam Wheeldon – Acting Director of Finance

Royal Cornwall Hospitals NHS Trust - Understanding Finances 4

How the Trust generates income (£m) ■ Payment by results income

203.5

■ Non-Payment by results income

76.5

■ Education and Training

13.3

■ CITS, HR and payroll

8.1

■ Other patient related income

2.7

■ Other income

19.1

The majority (61%) of income is spent on staff pay What the income is spent on (£m) ■ Pay

192.4

■ Non-Pay

101.9

■ Depreciation and interest 19.3 ■ Surplus

9.8

The Trust has £24m in debt. £2.2m is repaid each year and so this much surplus is required to meet this commitment. £27.5m had been repaid by 31 March 2013.

Historic debt (£m) 60 50 40 £m 30 20 10 0 New loans

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

Year

5

Royal Cornwall Hospitals NHS Trust - Understanding Finances

Royal Cornwall Hospitals NHS Trust - Understanding Finances 6

There are 4,709 whole time equivalents meaning that 8.3 million hours are worked each year. Every 0.5% in sickness absence results in 42,000hours of lost time and costs or saves £1m.

90% of the pay bill relates to direct contact with patients.

62% relates to doctors and nurses.

How pay costs are made up by group of staff (£m)

50

38.2

40

30.1

£m 30

20.0

20

18.5

13.6

8.4

10 0 Nursing

Consultants

Prof & Tech

Admin & Clerical

Junior Medical Staff

Senior Manager

Ancillary

Hours lost (thousands)

60

450 400 350

12,000

300

8,000

250 200

6,000

150

4,000

10,000

100 50 0

2,000 3%

3.5% 4% Hours lost

The different elements within the pay bill (£m) 140

Non-pay costs (£m)

141.1

35

120

30

100

25

£m 80

£m 20

60

15

31.1

20

10

6.7

5.0

2.9

1.9

1.5

1.2

1.1

0 Pension Unsocial Kernow Agency Locums -flex

Oncall

Add Overtime Drs Hours

5

7 Royal Cornwall Hospitals NHS Trust - Understanding Finances

20.6 13.5 7.6

6.5

5.6

5.0

4.0

3.5

2.8

2.3

1.7

0

M ed &

Basic

28.9

Dr u Su gs r g Co ntr Equi p ac tS Se erv rvi ice ce s sR ec eiv ed Ins ura Ot he nce rn on pa y Ut ilit ies

40

0

53% of the £102m non-pay costs relate to drugs, blood and equipment. £6.5m is spent on clinical negligence insurance.

£20m (10%) of the pay bill relates to costs other than basic pay.

160

4.5% 5% Cost of absence

Cost to the Trust (£000)

Cost of sickness absence

63.5

De Bloo Tra bt Ex d ve pe l& n Su ses b Pa sis tie nts tanc e Ap pli an ce Dr s es sin gs

70

Royal Cornwall Hospitals NHS Trust - Understanding Finances 8

£11.8m of savings are required each year just to stand still. Any savings not delivered in one year would need to be made up in the following year. For 2013-14, this amount stands at £4m.

The Trust’s assets (land, buildings, equipment etc.) are worth £172m. The Trust spends c£15m each year to improve or replace assets, including approximately £1m donated from charitable funds.

Capital expenditure (£000) 6,427

7,000 6,000

£000

5,000 4,000

3,071

3,154

3,000 2,000

1,453

972

1,000 IT

Medical Equipment

Clinical Site Development Plan

£m 4.4 1.7

Incremental pay point increases Increase in cost of Utilities Drug cost inflation (that we don’t receive income for) Cost of goods and services - inflation

1.5% 8% 8% 2.5%

2.6 0.2 0.6 2.3

£4m shortfall in savings from 13-14 Savings required to stand still

0 Estates Maintenance

Why savings are required Getting paid less for the same work (1.5% tariff deflator) Pay award - if 1%

% change each year 1.5% 1%

4.0 15.8

Other

Why £15.8m of savings may be required in 2014-15

The Trust pays 71,000 invoices per year with the Division of Clinical Support Services and Cancer generating nearly half of all invoices.

Nearly 95% are paid on time.

Invoices paid in 2012-13

0.0 (2.0) (4.0) (6.0) £m (8.0)

9 Royal Cornwall Hospitals NHS Trust - Understanding Finances

■ Anaesthetic and Theatres

5907

(10.0)

■Diagnostic, Theraputics and Cancer

34441

(12.0)

■ Medicine and ED

4549

■ Non-clinical

2883

■ PFES

14332

■ Surgery

7698

■ Women, Childrens and SH

2133

(14.0) (16.0) (18.0) Getting Pay award Incremental Increase in Drug cost paid less - if 1% pay point cost of inflation for the same increases utilities (that we work (tariff don’t receive deflator) income for)

Cost of £4m shortfall Savings goods and in 13-14 required services to stand inflation still

Royal Cornwall Hospitals NHS Trust - Understanding Finances 10

This is an absolute minimum During the year the Trust will need to incur costs in relation to operational issues (e.g. increased capacity to deliver RTT targets) and so should set aside funds for this.

Understanding

RCHT’s

Finances Royal Cornwall Hospitals NHS Trust

Some cost increases are difficult to control (i.e. Clinical Negligence Scheme for Trusts payments) and result in the need for additional savings.

Many departments and services identify additional investments that could be made to improve or develop the services we provide.

However, the amount of funding available to the Trust is limited and is reducing. Cost control and efficiency are therefore vital, as is the need to consider how investments in other areas (both within the Trust and in the health community) could help improve quality and deliver savings need to be considered.

All staff within the Trust need to understand their budgets and take responsibility for operating within these and contributing to savings plans.

The RCHT 2018 Team can support you in developing savings plans, as can your Management Accountant and Divisional Finance Manager.

11 Royal Cornwall Hospitals NHS Trust - Understanding Finances

Royal Cornwall Hospital Truro Cornwall TR1 3LJ Tel: 01872 250000 St Michael’s Hospital Trelissick Road Hayle TR27 4JA Tel: 01736 753234

West Cornwall Hospital St Clare Street Penzance TR18 2PF Tel: 01736 874000