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Opportunities South Warwickshire NHS Foundation Trust

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					South Warwickshire NHS
   Foundation Trust
          Finance Update
Council of Governors 24th May 2012
      Purpose of this Presentation
• Update on Financial matters of the Trust

  –   2011/12 performance
  –   2012/13 update on plans
  –   Opportunities and Threats (from a Finance
      perspective)




                                                  2
       Financial Performance 2011/12

• The Trust ended 2011/12 with a financial surplus
  of £3.0m, £1.0m better than the plan
• The Trust maintained a financial risk rating of
  Level 3 during the year
• Audit of Accounts is nearly complete for 2011/12,
  no matters of interest to report
• We repaid an extra £1m of longstanding debt –
  which leaves only £1m outstanding at the end of
  the 2011/12

                                                      3
      Income and Expenditure
                                                              Quarter 1 Quarter 2 Quarter 3 Quarter 4 This Month                      Full Year
                                                               Actuals    Actuals    Actuals    Actuals Budget Actual       Variance Budget Actual         Variance
                                                                £000s      £000s      £000s      £000s £000s      £000s     £000s     £000s      £000s     £000s
Income from activities (Note 1)                                   46,304     46,465     46,784     47,762 15,850 16,645           795 183,621 187,316          3,695
Other operating income (Note 2)                                    4,894      4,046      4,100      4,351     655     1,715     1,060 16,101 17,392            1,291
Operating expenses (Note 3)                                      -49,732    -49,083    -49,254    -51,651 -16,318 -18,181      -1,863 -195,840 -199,720       -3,880
OPERATING SURPLUS/(DEFICIT)                                        1,466      1,429      1,630        462     187       179        -8      3,882     4,988     1,106
Cost of fundamental reorganisation/restructuring                        0          0          0         0       0         0         0          0         0         0
Profit/(loss) on disposal of fixed assets                               0          0          0       -97       0       -97       -97                  -97       -97
SURPLUS/(DEFICIT) BEFORE INTEREST                                  1,466      1,429      1,630        366     187        82      -105      3,882     4,891     1,009
Interest receivable                                                    47        48          53        49      21        25         4        250       197       -53
Interest payable                                                      -34       -39        -34        -26     -11       -10         2       -134      -132         2
Other finance costs - unwinding of discount                           -13       -14        -19        -29      -4       -14       -10        -53       -75       -22
Other finance costs - change in discount rate on provisions                                                     0         0         0          0                   0
Other finance costs - interest payable on leases                       -3         -3          6        -3      -1        -3        -2        -12        -3         9
SURPLUS/(DEFICIT) FOR THE FINANCIAL YEAR                           1,463      1,421      1,637        357     192        81      -111      3,933     4,878       945
PDC Dividends payable                                               -492       -501       -492       -370    -164       -63       101     -1,967    -1,855       112
RETAINED SURPLUS/(DEFICIT) FOR THE YEAR                              971        920      1,145        -13      28        18       -10      1,966     3,023     1,057

      The table above shows year by quarter and forecast. The key point to note is that the
      full year picture is £1.1m ahead of budget.

      The budgeted and actual surplus in month 12 was low. This was because the Trust
      committed unspent funds to spending on quality initiatives, maintenance and
      equipment in month 12 on a one-off basis, to make best use of the surplus and secure
      a stronger position for 2012/13.                                                  4
Key Financial Performance Indicators
KEY FINANCIAL PERFORMANCE INDICATORS                           Full
[All figures are in £k, favourable variances are positive]     year       Comments

I&E surplus actual vs. budget                                    1057 Overperformance only partly offset by costs

Income actual vs. budget                                         4985 Overperformance with all main commissioners

Pay costs actual vs. budget                                       694 Agency costs in Medicine offset by vacancies elsewhere

Non-pay costs actual vs. budget                                 (4575) One-off discretionary spend supporting next year; overspends
                                                                       on ICES, wheelchairs, consumables
Cash plus investments vs. original forecast                      7500 Large amounts of PCT cash - will fall sharply in new year

MONITOR RISK RATINGS                                         Q1           Q2           Q3           Q4           Full year Comments
                                                             actual       actual       actual       actual       actual


Underlying performance rating                                         2            2            2            2          2 In line with plan
[Earnings from operations compared to income]

Achievement of plan rating                                            5            5            5            5          5 In line with plan
[Earnings from operations compared to budget]
Financial efficiency rating

[Returns on assets and surplus compared to income]                    4            4            4            4          4 In line with plan
Liquidity rating
[No. of days expenditure covered by net liquid assets                 3            3            3            3          3 In line with plan
 and available financing facility]

Overall rating                                                        3            3            3            3          3 In line with plan
                                                                                                                                              5
    Financial Issues: Income and SLA
          Position Performance
• The full year overperformance on income from healthcare activities is
  £3.7m which consists of:
    –   NHS Warwickshire £2.0m (see below)
    –   Other PCTs £1.0m
    –   Specialised Commissioning £0.3m
    –   Non-Contract Activity and others £0.4m

• The full year overperformance of other operating income was £1.3m

• NHS Warwickshire year end settlement is agreed as an overperformance
  of £1.8m which is set out below
    – £1.3m       Non elective activity
    – £0.4m       Non-PbR activity
    – £0.3m       Integrated Community Service Equipment Store (ICES)

                                                                          6
Detailed Financial Commentary
• Income was £5.0m over budget in 2011/12. The key variance
  (£3.7m) related to overperformance on NHS contracts.
• Emergency and Support Services overspent against budgets.
• The Trust achieved a Cost Improvement Programme (CIP) of
  £5.6m in 2011/12, £0.5m behind plan.
• The Trust has used its year to date surplus to fund additional one-
  off expenditure e.g.
   –   Trolleys in A&E, Assessment Unit
   –   Disposable curtains (averts infection risks)
   –   Syringe drivers in Community Services
   –   Beds & mattresses, maintenance costs and IT purchases


• This maintains quality and puts us in a stronger position for next
  year.
                                                                        7
Divisional variances from budget, full year outturn

                                                      Full year forecast


4,000

3,000

2,000
  £'000




1,000                                                                                                       Full year forecast


          0
              Income from    Emergency   Elective   Integrated    Support   Corporate   Other   Financing
                activities
-1,000

-2,000

                                                     Division




The additional income


                                                                                                                                 8
      2011/12 Cost Improvement
            Commentary
• The Trust achieved £5.6m cost improvements
  in 2011/12.

• Some were not achieved:
  – Medical agency procurement through a company
  – CIPs on E-rostering
  – Locum junior doctors

                                                   9
Cash, Statement of Financial Position and Capital
• The Trust’s balance sheet fell in March due to the revaluation of our
  land and buildings by the District Valuer.

CASH
• Our actual cash balance at the end of March 2012 was £19.3m.
  This was £5.2m higher than forecast in February.
• Our rolling 12 month cash flow position has been reviewed and we
  now expect a cash position of around £7m in March 2013. This is
  better than expected.

CAPITAL
• The Trust spent £7.0m on its capital schemes during 2011/12, the
  key schemes to highlight are:
   – £4.2m on Operating Theatres
   – £0.9m on A&E and Orthopaedics.

                                                                     10
Current year cash and investments
                       2011/12 cash and investments, actual vs. forecast
         25000

         20000
                                                                           Cash and investments, actual
         15000
 £'000




                                                                           Cash and investments, original forecast
         10000
                                                                           Cash and investments, current forecast
          5000

             0
                 Apr May Jun   Jul   Aug Sep Oct Nov Dec Jan Feb Mar
                 11   11  11   11     11  11 11   11  11  12  12 12
                                        Month




This graph shows that a healthy cash / investments balance was maintained
                           throughout 2011-12



                                                                                                                     11
Capital expenditure, allocations and year to date
   CAPITAL EXPENDITURE

   Capital scheme                               Allocations          Expenditure 2011/12
                                                    £'000                  £'000
   Brought forward schemes from previous year                                         -47
   Radiology server capacity                                    47                     33
   A&E/Orthopaedic Clinic Reconfiguration                      908                   891
   Nicol Unit                                                  147                   143
   Single Sex Accomodation                                      34                     32
   Theatres Refurbishment                                     4222                  4194
   Essential Maintenance                                       346                   350
   IT Programme                                                793                   445
   Salix Loan repayment / carbon reduction                     200                   203
   Medical equipment replacement                               311                   710
   Other                                                       134                     89
   Unallocated                                                 124
   TOTAL                                                      7266                  7043

   The Trust spent £7.0m in 2011/12 on its capital projects and also
   identified some one-off expenditure which benefits front line services
   e.g. ETG machines, Bariatric Bed, ECG machines.



                                                                                            12
Contract and Financial Update 2012/13
• Contract Income some £1.5m more than outturn
• NHS Warwickshire, investment in community services;
   – Health visiting , Community Emergency Response teams
   – Wound care support to patients in primary care
• Contract Risks & opportunities: risks are mitigated by notional sum
  £2.0m
• Plan for Financial Risk Rating of Level 3: surplus of £2.0m
• Cost improvement/ Quality innovation, productivity target - £7.0m in
  2012/13 which is 3.5% of Turnover
• Commissioner related Quality, Innovation, Productivity target - £4.0m
• Total Health Economy challenge: £11.0m which is 5.5% of Trust
  turnover
• Expect to complete the repayment of long standing loan: £1.0m


                                                                          13
 Financial Strengths and Weaknesses
         Strengths                           Weaknesses

• We have a commercial arm:         • Size of organisation - £200m
  SWFT Clinical Services Ltd          turnover / 3000 stafff
• 4 years of financial balance –    • Physical size of organisation –
  strong foundations for the
  future                              means little capacity to
                                      respond to growth in demand
• Low reference costs,
  especially in elective services   • Reliance on one key
• Low turnover of senior              commissioner
  management – depth of             • No specialist service within
  experience within the               Trust portfolio to exploit the
  organisation                        market


                                                                    14
    Financial Opportunities and Threats
       Opportunities                                        Threats
•   Develop new business opportunities:     •   South Warwickshire is a small to
    SWFT Clinical Services Ltd                  medium sized Health organisation -
•   Transfer of Community Hospital assets       £202m turnover not quite large enough
    – some £12.3m means that we can             to have financial future resilience
    invest wisely in these services         •   Nicolson (Permanent Secretary of
•   Integration of Community Services           Health) - £20bn challenge. 5.5% Cost
    securing this investment whilst             Saving requirement over next 3 years
    acknowledging divestment in Acute       •   As economy recovers, inflation will rise
    services                                    – but Trust prices will fall
•   Acquisition/ Integration with George    •   Monitor becoming the economic
    Eliot Hospital                              regulator in terms of prices
•   Clinical Commissioning Plans            •   Increasing elderly population in South
•   Develop new form of contract which          Warwickshire
    acknowledges unique risk sharing        •   George Eliot Hospital - needs full due
    model for Acute/ Community Services         diligence (£, operations, clinical
                                                governance)


                                                                                       15

				
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