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									                                                             Agenda              8
                                                             item
                                                             Paper               C
                                                             Number

                 Manchester PCT Board Meeting –1st October 2008

Report of:                                    Director of Finance


Paper prepared by:                            Director of Finance/Associate Director


Signed off by Director:                       Director of Finance


Date of paper:                                17th September 2008


Subject:                                      Financial Report for Month 5 August
                                              2008/09

Background papers and links to                Achievement of financial duties
priorities/objectives:


Implications for Access and Inclusion:        None identified


How does the proposal contribute to           Not applicable for this report
reducing health inequalities?


Purpose of the paper:                         See below


Action/decision required:                     The Board is asked to note the financial
                                              position to date and the forecast for the
                                              year and approve the recomendations




Director of Finance                                 1                                Final
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Prepared for a meeting of the Board on 1 October 2008                   23 September 2008
                                       MONTH 5 FINANCIAL REPORT

Introduction
                                                                                                          st
1. The purpose of this report is to inform the Board of the financial position of the PCT for the period 1 April
             st
   2008 to 31 August 2008 and the latest forecast for the year. The report shows that the PBC and some PCT
   budgets are under considerable stress and action is now required to limit the level of overspending.

2. Also included as an addendum to this report is an update on PBC budgets, including confirmation of the
   outturn in 2007/8 by hub, which has an impact on their budgets in 2008/9. The Board is asked to approve the
   recommendations contained in the addendum.

3. Summary of key financial indicators:-

              i)         Revenue Position
                      Annual Plan      Annual Forecast                Year to date
                        ST
                      31 August           2008/09           Plan         Actual       Variance
                          2008
                         £000’s               £000’s        £000’s       £000’s        £000’s
                        905,141              903,141       376,544      375,710         (834)

              ii)        Capital Position
                      Annual Plan      Annual Forecast                Year to date
                      st
                    31 August 2008        2008/09           Plan         Actual       Variance
                         £000’s            £000’s          £000’s       £000’s         £000’s
                         2,748             2,748           1,145         1,101          (44)

              iii)       Debtor's Analysis
                               Total                             Number of days
                              £000’s     Current              1-30           31-60              60 plus
                                        (not due)
                                         £000’s              £000’s          £000’s             £000’s
           NHS            3,970            422               1,035           1,000              1,513
         Non NHS          6,439           1,124              2,302           1,429              1,494
           Total         10,409           1,635              3,337           2,429              3,007
            %                             15.71              32.06           23.34              28.89
                 Excludes accounting accruals

              iv)        Creditors Analysis
                                     Total                   Number of days
                                    £000’s      Current     0-30      31-60           Over 60
                                               (not due)
                                                £000’s     £000’s      £000’s         £000’s
                       NHS         9,363          233       2,241       1,432          5,457
                     Non NHS       7,615          882       1,823       1,244          3,666
                       Total       16,978        1,115      4,064       2,676          9,123
                        %                       6.56%      23.94%      15.77%         53.73%
                      Excludes accounting accruals




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             v)      Better Payment Practice Code – Non NHS
       Non NHS                              Total                      Paid within 30 days
                                      £000’s      No         £000’s       %         No          %
              Current month           9,533     4,292         7,886     82.7       3,183       74.2
               Year to date           73,519    21,098       62,539     85.1      14,311       67.8



             vi)     Better Payment Practice Codes – NHS
 NHS                                        Total                      Paid within 30 days
                                       £000’s     No          £000’s      %         No          %
            Current month             52,477      141         52,128    99.3         83        58.9
             Year to date             228,609    1,387       219,833    96.2        716        51.6

Income and Expenditure 2008/09
                                                                           st
4. The following table summarises the financial position of the PCT to 31 August 2008 and the forecast outturn
   for the financial year. A more detailed analysis is provided in Appendices 1a, 1b, and 2.

                                                 Year to date                        Forecast outturn
                                      Budget       Actual     Variance          Budget    Actual    Variance

 Hubs Accountability

 North                                 58,365       61,166        2,801         140,076    147,141         7,065
 Central                               55,434       54,626        (807)         133,041    131,087       (1,954)
 South                                 47,507       49,133        1,627         114,016    118,154         4,138
 PCT Block Back                           821          843           22           1,970      2,324           354
 Sub total Hubs                       162,126      165,769        3,643         389,103    398,706         9,603
 PCT Commissioners
 Accountability
 Commissioners - Purchase of
 Healthcare                            91,802       90,373       (1,429)        220,325    224,371         4,046
 Mental Health Pool                    43,743       42,162       (1,581)        104,983    105,333           350
 NHS Funded Nursing Care                1,663        2,618           955          3,992      3,492         (500)
 Primary Care                          28,849       28,512         (338)         69,204     68,628         (576)
 Other Primary Care                    12,623       13,002           379         30,721     31,175           454
 Management                            10,417       10,722           305         25,747     25,747             0
 Hosted Services & Networks               945          945             0         10,414     10,414             0
 Reserves                              23,518       21,090       (2,428)         50,653     35,821      (14,832)
 Sub total PCT Commissioners          213,561      209,423       (4,138)        516,039    504,981      (11,058)

 Manchester Community Health

 Provider Costs                         41,065      40,726        (339)          96,903      96,356       (547)
 Provider Services Income               40,208      40,208            0          96,903      96,903           0
 Total Provider Services Net               857         518        (339)               0       (547)       (547)
 Total

 Total Resource Limit                 376,544      375,710        (834)         905,141    903,141       (2,000)

 Total Resource Limit +               378,641      377,807        (834)         910,175    908,175       (2,000)
 Non Discretionary




 Director of Finance                                 3                                          Final
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Key Risks and Opportunities

5. Provider Service Agreements, which are mainly in the domain of the PBC budgets, are showing considerable
   cost pressure, particularly within Direct Access services, largely stimulated from the moves by trusts to
   develop cost and volume charging using indicative tariffs in 2008/09. Other key pressures include HIV and
   drugs & devices, the latter being excluded from service contracts because of the low volumes and high risk
   nature of the expenditure. North hub is currently predicting a potential £7m overspend if no action is taken
   and South PBC is forecasting more than a £4m overspend on the same basis. Central hub is forecasting a
   £1.5m underspend.

6. The figures reflected are based on month four SLAM. Up to month four the view within the finance department
   was that it was too early to draw conclusions from quarter one SLAM reports, but further work to validate the
   information has convinced finance managers that the figures are accurate and action is now required to
   mitigate the impact of the pressures on the overall PCT budget.

7. Within this report I have been able to show that the PCT overall will be able to achieve its financial targets, but
   this does not absolve PBCs and PCT budget holders from their responsibility to control their budgets. The
   EMT has considered the financial position and is in the process of agreeing with PBC and PCT budget
   holders action plans to mitigate the levels of overspend being experienced.

8. A large part of the overspend within acute trusts is due to risks which were not anticipated at the start of the
   year. If it does not prove possible to mitigate the impact of the overspends recurrently, the PCT will be forced
   to reconsider the deployment of resources to the IHiM programme. Therefore, the EMT has asked for plans to
   be developed quickly so that IHiM decisions can be confirmed. In the meantime, it is recommended that only
   £7m worth of IHiM schemes are committed recurrently and these should be the top priority schemes
   approved or recommended by the Business Case Committee to the end October 2008 that are to be funded
   from IHiM. A detailed assessment of the position is underway as it is known that some lower priority IHiM
   projects have already been approved. The schemes should be released once it can be shown they are
   affordable next year.

9. Similarly, it is also recommended that PBCs review any developments planned for 2008/9 that are not self
   financing and discuss with the PCT Director of Finance whether or not they should proceed this year,
   depending on the findings of the investigations and plans to mitigate the level of overspending.

Hubs’ Accountability

10. NHS Provider Service Agreements the YTD over-spend against budget includes: contractual over-
    performance of £4.7m and other variances (based on month three and four SLAM data):
                                                                                      £m
       Central Manchester & Manchester Children’s Trust                                3.7
       Pennine Acute Hospitals Trust                                                 (0.9)
       University Hospital of South Manchester                                         1.5
       Other providers                                                                 0.4
          Sub total                                                                     4.7
       Productive wards accruals                                                       0.6
       Variance on opening secondary care contract values and total budgets            0.7
          Total                                                                         6.0

11. The variance on opening secondary care contracts occurred because the budgets approved in April
    anticipated some contractual values that subsequently had to be settled for a higher sum.

12. Significant service cost pressures include: Pathology Direct Access; PbR drug and device exclusions (CMMC
    and UHSM – largely stimulated via moves to cost / volume charging and tariff changes in 2008/09); and HIV
    services (CMMC).

13. PBC colleagues continue to support the management accounts team in challenging provider information,
    particularly with regards to PbR exclusions and pathology tests.


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14. NCA expenditure to date is under-spent against budget by £543k. This reflects the low volume of NHS
    invoices as reported last month, however, this still remains an area that is difficult to forecast but outturn is
    expected to be broadly in line with plan by 31 March 2009.

15. Prescribing year end estimated out turn is based on information that is provided by the prescription pricing
    authority. There is a high level of uncertainty about the trend in this area due to the changes within
    prescription prices in 2008/09, therefore the forecast could move significantly in future months.

PBC Hub Projections

16. PBC Hub projections and commentaries are included in Appendix 3. Given the trends outlined in this report it
    is clear that the hubs will have to work closely with the PCT to develop further plans to mitigate the level of
    overspending.

PCT Commissioning Accountability

17. CHC costs forecast an outturn of additional pressures of up to £4.1m. The causes for this overspend together
    with a performance management system to monitor expenditure are currently being investigated.

18. Other commissioning - clinical audit recharges (service lead commissioned by Bury PCT) will result in a full
    year overspend of £648k.

19. The relevant PCT managers have been tasked to develop plans to address the variances reported in
    paragraphs 12 and 13.

Management

20. There is a small overspend of £305k year to date, however as previously reported the forecast is that
    expenditure will be contained within budgets by the year end.

Reserves

21. The total reported reserves include:-
           £15m has been set aside for IHiM and based on the number of business cases approved so far
               and the time required to get schemes up and running it is likely that only half this amount will be
               spent this year. The PCT can also forecast an underspend on other reserves, including the £5m
               contingency reserve.
           £24m for in year allocations, including a £8m payment to CMMC.

Improving health in Manchester / Business Cases
                                                                                         th       th
22. Since the last Board meeting, the Business Case Committee met on both the 17 and 18 September and
    approved eight more business cases. A number of these are covered by a separate paper as they exceed the
    250k limit of the business case committee. The impact on IHIM funding is a recurrent annual commitment of
    around £6.5m.

Manchester Community Health

23. The position is cumulatively an under spend of £339k with the forecast outturn position for the full year of
    £547k below budget. A detailed report on MCH will be presented to the November meeting of the Board.




  Director of Finance                                 5                                       Final
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  Prepared for a meeting of the Board on 1 October 2008                          23 September 2008
Balance Sheet
                                                           st                      st
                                                        31 March 2008            31 August 2008
                                                           £000’s                    £000’s
       FIXED ASSETS                                              84,008                     81,987

       CURRENT ASSETS                                               54,819                     34,824

       Creditors                                                  (77,027)                   (53,949)

       TOTAL ASSETS LESS CURRENT                                    61,799                     62,862
       LIABILITIES

       Debtors: Amounts falling due after 1 year                      3,930                      3,930
       Provisions for liabilities and charges                       (2,295)                    (1,125)

       TOTAL ASSETS EMPLOYED                                        63,434                     65,667

       TOTAL TAXPAYERS EQUITY                                       63,434                     65,667


Capital

24. The detailed capital report is shown in Appendix 5. I.T Projects are well ahead of budget due to commitments
    made in 2007/08 carried forward into 2008/09. Backlog maintenance spend is also ahead of the budget
    profile. Most of the other schemes have not yet started. Manchester PCT has requested approval by the SHA
    of a £2m revenue to capital transfer to cover the costs of the high risk estates projects that were put on hold
    earlier in the year until a funding source could be identified and the equitable access projects.

Debtors

25. Non NHS debtors have increased in July/August and this is mainly due to a single debtor organisation.
    Meetings have been held with that organisation and a follow up is arranged. £2.4m out of a total of £4.2m
    owing was received in September.

Creditors – Better Payment Practice Code

26. Appendix 6 shows the better payments practice figures for both NHS and non NHS creditors. Non NHS
    payments are below the 95% target and as expected returning invoices to suppliers for failure to quote a
    purchase order number (in line with the use of purchase orders policy) had a detrimental impact on these
    figures over the last couple of months. The value of invoices paid on time over the last 3 months has
    averaged 85% (compared to 88% the previous months). Once the backlog of invoices returned to suppliers
    for failure to quote a purchase order is cleared there will be a steady improvement in the statistics. It should
    also be noted from the creditor analysis that the Non NHS creditors over 60 days balance has reduced from
    £5.4m to £3.6m.

27. On payments to NHS bodies in value terms the 95% target has been exceeded for the last 3 months.
    However, the number of invoices in numbers terms is below target, although this has improved over the last
    three months as the process for the authorisation of non-contract activity invoices has now been revised.

Cash

28. Appendix 7 shows the PCTs cash position. The PCT has under drawn on its cash profile by £10.2m this is for
    a number of reasons, being payments to creditors, Prescription Pricing Authority and Personal Dental
    Services which were below the level anticipated.

Whole Time Equivalents

  Director of Finance                                 6                                       Final
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  Prepared for a meeting of the Board on 1 October 2008                          23 September 2008
                                                                            Total
                                                                             Pay      Agency     Agency
                                Funded          Actual                     Costs       Costs     as % of
   Directorate               Establishment       WTE         Variance     (£000's)    (£000's)     Pay
   Provider Services                  2,018       2,000             18      28,236        910     3.22%
   Commissioning                        398         340             58        6,440       122     1.89%
   Sub Total PCT
   Services                           2,416         2,340            76     34,676      1,032
   Hosted                                19            16             3        506         39      7.71%
   Networks                              14            14             0        234          2      0.85%
   Grand Total                        2,449         2,370            79     35,416      1,073

Conclusion

29. As highlighted in the report a number of risks are emerging. Action is required to ensure that the recurring
    resources for the IHiM are not consumed by overperformance on acute trust activities. The detailed plans are
    not yet available as this is the first time that the Board has been apprised of the emerging financial trends.
    The same can be said for PBC and PCT managers. Therefore, the Board is asked to note that in this report it
    has not been possible to provide the answers and further work will need to be undertaken to assess the
    recurring nature of the pressures being experienced.

23. The Board is also asked to approve the recommendations made in the addendum to this narrative in relation
    to PBC budgets. The impact of the recommendations has not been incorporated into the figures above
    because they have not yet been approved by the Board. Should the Board approve them, the budgetary
    adjustments will be included in the month six reports.

  Recommendations

24. The Board is asked to approve the recommendations contained within the main finance report and also the
    addendum on PBC budgets attached. In summary the approvals required are:
          That £7m worth of IHiM schemes (not the full £15m) are committed recurrently until such time that it
             can be shown that they are affordable from 2009/10 onwards (paragraph 8)
          That PBCs review development plans for 2008/9 that are not self funding and discuss with the PCT
             Director of Finance whether or not they should proceed this year (paragraph 9)
          That the adjustments to PBC budgets brought forward from 2007/8 are: a supplement of £1.121m
             for south hub, being 70% of the underspend achieved last year; £0.382m reduction to Central hub,
             being the overspend incurred last year; and £0.739m, being a proportion of the overspend incurred
             by north hub last year.

25. The Board is asked to note that using the methodology outlined in the addendum there have been some
    minor changes to hub budgets shown in Appendix 1a




  Director of Finance




  Director of Finance                                 7                                     Final
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  Prepared for a meeting of the Board on 1 October 2008                        23 September 2008
                                                           Annex 1
                  Budgets for Practice Based Commissioning for 2008/09

Introduction
    1. The initial budget for the PCT was presented to the Board on the 2nd April. The accompanying
       paper together with the resource allocation policy was approved. Within these documents, it
       established the initial resource available to PBC and it was agreed that a further paper was
       required to establish individual hub budgets and to describe the methodology used in
       calculating these budgets.

Baseline budget
   2. The principle was established within the resource allocation policy, previously agreed by PBC,
       that the baseline budget would be based on the recurring budget for 2007/8.

   3. Budgets for primary care, specialist commissioning, DAAT and management costs will be
      retained by the PCT, and for 2008/9, as set out in the PBC accountability framework, the
      budgets for community services, pooled budgets such as mental health and learning
      difficulties, and continuing care will not be devolved to hubs. This is in order to allow time to
      develop service level agreements, and an understanding of activity. However, it is expected
      that hubs may wish to influence developments within these areas.

   NHS Provider Services Agreements
   4. These budgets have been calculated using the recurrent position at month 9 2007/8 uplifted
      by inflation of 2.3%, in line with national guidance, and then reduced by funding included to
      cover non-recurrent 18 weeks targets. This establishes the recurrent baseline figure for
      2008/9.

   5. At practice level, the recurrent position is an amalgam of activity data apportioned on basis of
      activity in 2nd half of 2005/6 and 1st half of 2006/7 as per national guidance, and weighted
      capitation on the balance of the contracts that are not activity based. It is recognised that
      during the year we need to start monitoring contracts at practice level based on actual usage.
      This may mean that in future we set the non-activity based budget in a different way.


   6. The resource allocations policy set out that there would be a differential allocation of former
      non-recurrent waiting list money of £8m to the hubs to recognise that Central hub is currently
      under target. This split has been agreed at :

               Central hub - £4m
               South hub -            £2m
               North hub -            £2m

   7. IHIM Pressures amounting to 8,089k has been apportioned to PBC hubs to fund pressures
      within secondary care such as the impacts of PBR road-testing, coding changes, PBR loss of
      support and breast screening programme extension. With the exception of breast screening
      extension of 75k, the other costs are recurrent and will be apportioned across hubs in
      accordance with their share of historic budget relating to each provider.

   Non-contracted activity and non-NHS services
   8. The recurrent budgets from 2007/8 have been uplifted by inflation of 2.3%. During 2008/9,
      work will be undertaken by hubs to understand who utilises these services and to develop a
      better way of apportioning the budgets for 2009/10. A recurrent budget of £355k has been
      added to cover the pressure for the Health Protection Agency.

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   Prescribing
   9. The methodology used for setting prescribing budgets has been used for several years. It
      involves splitting the practice population according to age and sex, applying prescribing units
      to each category and coming up with what is effectively a target prescribing budget (an
      ASTRO PU budget). Actual outturn based on the forecast at month 9 is then uplifted by 8%
      inflation to calculate a projected figure. The actual budget for each practice and consequently
      hub, is then set based on an amalgam of 50% (last year 40% target and 60% outturn) of each
      of these budgets, thereby effectively moving practices towards their true prescribing budget
      based on ASTRO PUs.

   10. Included as part of the IHIM pressures was a recognition that during 2007/8 the prices of
       category M drugs was reduced and in order to reflect the full-year impact a reduction of
       £4,000k was made to hub budgets. This has been pro-rated on the basis of budgets within
       each hub.

   Investment fund for PBC
   11. During the LDP process for 2007/8, an amount of £3,000k was allocated recurrently to the
       hubs. For 2008/9 this amount has been uplifted by 2.3%. This has been split based on
       weighted population:
              Central hub         £1,178.8k
              North hub           £1,122.6k
              South hub           £ 767.5k

   12. Each hub will need to review their commitments from 2007/8 and vire any recurrent funds to
       the appropriate budget.


   Hub accountability payments
   13. Historically, guidance from the DOH established an amount of £0.95p per patient being the
       amount to be funded recurrently by the PCT to ensure sign-up by practices to PBC and a
       further £0.95p to act as a reward for participating in the hub specific local enhanced service.
       This second element was to be funded from savings generated by reform within the hub. This
       year, the total amount payable to practices to compensate them for meeting the requirements
       of their accountability agreement with the hub is £2.00 per patient (increased to cover
       inflation) with 50% or £1.00 being funded from hub savings and £1.00 by the PCT. Each hub
       has paid an amount of £0.50p on sign up by practices to the agreement with the balance to be
       paid on achievement of each component of the scheme.


   Management costs
   14. The PCT will continue to fund an appropriate structure to support PBC. However, the costs of
       each steering group will be met as a call on in-year savings.


   Savings 2007/8
   15. Where hubs generated savings in 2007/8 net of management costs and incentive scheme
       reward payments, 70% of this will be added to their budgets non-recurrently following
       completion of the year-end accounts.

   16. It is worth noting here that, due to the methodology employed above, in line with the Resource
       Allocation Policy, hubs have effectively kept 100% of recurrent savings within their baseline.
       This principle was identified in the allocation policy as one of the means by which the PBC
       accountability to manage pressures associated with the same budgets might be met.

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Prepared for a meeting of the Board on 1 October 2008                 23 September 2008
   Next steps
   17. The above paper together with appendix 1 establishes the hub budgets for 2008/9. Hubs will
       now need to work independently to understand how these budgets will meet the commitments
       for 2008/9 by splitting the agreed contract values for our providers across the hubs, and
       including other recurrent commitments made using the investment funding from 2007/8.




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Prepared for a meeting of the Board on 1 October 2008              23 September 2008
                                                                                              Annex 2

                     Methodology used for setting practice budgets 2008/9


   NHS Provider Services Agreements
      1) Practice budgets have been set starting with the 07/08 secondary care contract figures
         split to practices using the same proportion as actual activity in the second half of 05/06
         and the first half of 06/07. This activity split at HRG level was the baseline established in
         national guidance in 2006.

        2) For non-activity based budgets, these have been set using weighted capitation
           percentages. This ensures consistency with last year. However, this will be reviewed in-
           year to establish a methodology based on actual usage for next year’s budget setting
           process.

        3) The difference to agree to 07/08 budget has been maintained as an investment resource
           at hub level and not been apportioned to practices.

        4) Inflation of 2.3% has been applied.

        5) An adjustment has been made to reduce the budget for non-recurrent 18 week funding of
           £4m apportioned on the same basis as the baseline budgets.

        6) IHIM pressures around secondary care have been apportioned on the same basis as the
           baseline budgets at each Trust.

        7) The investment fund of £8m has been apportioned to hubs but not to practices as this
           resource will need to be used by hubs to meet the 18 week target and for any other hub-
           specific investments.

  Non-contracted activity and non-NHS services
      8) The recurrent budget from 2007/8 has been used as the starting point for each practice

        9) Inflation of 2.3% has been applied.

        10) A Recurrent budget of £355k has been added to cover the pressure for the Health
            Protection Agency. This have been apportioned in line with baseline budgets.

   Prescribing
       11) Using the PPA outturn projected at month 9 for each practice, this was reduced for high
          cost drugs and inflation applied of 8%.

        12) The high cost drugs have then been added back.

        13) Practice populations were split into age bandings, prescribing units were applied to
            calculate a target budget for each practice

        14) Calculate the difference between the two figures and adjust for 50%

        15) This establishes a budget at practice level which is based on 50% target, and 50%
            outturn.



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Director of Finance                                 12                Final
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PBC Hub Projections                                                         Appendix 3

For secondary care contracts the majority of spend is now allocated to hubs using actual spend by practice at
each provider. Block contract arrangements for each provider have been apportioned on a weighted capitation
basis and with the providers’ assistance Finance will be looking at using different methods over the following
months. For Month 5 we have used the Month 3 positions from providers and moving forward we will continue
to use the most up to date detailed information we receive.

North Hub

The North Hub continues to reflect an over spend principally derived from NHS Provider Service Agreements
and Prescribing costs.

The Hub is proactively trying to reduce referrals into secondary care and GP Practices have been encouraged
to send referrals to Manchester Surgical Centre resulting in an increase in North patients being seen at the
Centre.

It is anticipated that with the provision of a MSK Service in the North, allowing on site diagnostic of treatment,
more patients will be referred to the Centre. The logistics are currently being arranged for the Service to be
available in the North.

Progress is currently being made with PSA, ARAS and ECHO business cases that will further facilitate in
reducing referrals to secondary care. At the same time the under spend on PBC commissioning will increase.

Prescribing costs for the North PBC Hubs continue to be a risk and as outlined in last months report, work is
being undertaken to manage prescribing costs although the full effect will not be seen for a few months.

Central Hub

The Trust SLAM report for Month 4 shows an over-performance of £4.9 million against a Plan value of £125.9m.

However, the Plan excludes PFI uplift on non-PBR and rehab activity. Taking this into account the over-
performance would reduce.

However, the key areas of ‘real’ over performance are currently being monitored and investigated by the HUB.

Initiatives

The Central contracts this year assume efficiencies and deflections from ECG, Echo, PCEC Stream, Rectal
Bleeds and Minor Surgery initiatives.

At this early stage in the year, these forecasts remain in place with the exception of Assessment beds where
reduced activity is occurring and this is currently under review.

In addition to these initiatives, there are a large number of reforms that are also anticipated to make a positive
contribution towards the hubs performance.

South Hub

Contract monitoring

The South hub has been working on Part C of the contract with their main provider - UHSM. The main focus
has been on Pathology costs as well as PBR exclusive high cost drugs and devices.

Currently the PCT is overspending on pathology and these steps will make the whole payment process more
efficient.

Planned care


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South hub will be reviewing the assumptions incorporated within the contract plans for minor surgery over the
next few weeks against the actual activity. This was an initiative that commenced in June and assumed
diversions from secondary care of around 1700 minor procedures. A rectal bleed service to be implemented
within the community is currently going through procurement.

South is also working on a follow up anti-coagulant service where we are negotiating a reduction in tariff for
follow ups and are currently scoping different models of delivering the service in a community setting. Once this
process is complete, a business case will be prepared.

Another area of potential reform is trauma and orthopaedics where we are currently undertaking a peer audit of
T&O referrals as part of the larger Trauma and Orthopaedics reform and Coaching work being led by South
PBC across both central and south health economy. The audit has been completed and is being analysed. The
results of the audit will be presented to the October PBC quarterly event and proposals will be worked up into a
business case for service redesign, determining the newly commissioned service to be based in primary care.

Urgent care

Urgent care initiatives including additional community beds commissioned jointly with UHSM previously
approved will be evaluated over the next month to assess their impact on hospital admissions and excess bed
days. In addition, the steering group has recently approved a series of projects around urgent care.

Other

The hub generated savings for 2007/8 which have not yet been approved and consequently have not been
included in these figures.




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                                                      ADDENDUM


                                      Practice based commissioning budgets


1.   The initial budget for each of the hubs together with a resource allocation policy was presented and approved
     by the Board in April 2008. The resource allocation policy established the principle that the recurrent budgets
     from 2007/8 would be rolled forward and adjusted for pressures identified by the IHIM process and a differential
     allocation to each hub for waiting list money. The detail of how these apportionments were implemented across
     each hub and then down to practice level is documented in annexes 1 & 2. The detailed calculations are
     available for Board members and hubs through Kym Green

2.   In addition, the resource allocation policy outlined the policy of hubs receiving 70% of any savings generated in
     a year on a non-recurrent basis in the following year.

3.   By amending both budget and actual for each hub to reflect a more accurate method of apportioning both the
     non-elective threshold and A&E attendances in line with the 2008/9 methodology the position of each hub is as
     follows:

            South hub                Savings                  £1,601k
            Central hub              Overspend                £382k
            North hub                Overspend                £2,289k

4.   The policy for hubs to receive 70% of the previous years’ savings needs to be implemented in 2008/9 and an
     amount of £1,121k for south hub needs to be added non-recurrently to their budget.

5.   The PBC commissioning framework presented to the Board in January 2008 outlined that PBC commissioners
     must balance their budgets over a 3 year period, though it is best practice to balance annually. Where an
     overspend is anticipated, a recovery plan needs to be agreed with the PCT. The PCT also has a responsibility
     to provide management support, timely data and financial information in order for the hubs to predict their likely
     position at year end and undertake appropriate steps to avoid overspends.

6.   I am not convinced that the PCT provided sufficient support in 2007/8 to identify financial problems and facilitate
     hubs to take remedial action in good time, especially in the north and therefore I am recommending that the
     PCT Board limit North hub’s exposure to £0.739m. Central hub’s exposure should remain at £0.382m and
     South should retain savings of £1.121, being 70% of £1.601m. The overall impact on the PCT of this set of
     recommendations is neutral.

7.   In future each PBC hub’s allocation should be adjusted in line with the policy agreed at the April 2008 Board,
     that is, to have a non-recurring reduction should the hub overspend in the previous year and receive 70% of any
     surplus that was achieved in the previous year.

Recommendation

8.   The Board is asked to approve the recommendations made in this addendum.




Director of Finance




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