Finance Report NHS Cumbria by erin.natividad

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									BOARD MEETING                                         AGENDA ITEM: 7
1 DECEMBER 2010




MEETING           Board Meeting

DATE              1 December 2010
AGENDA ITEM       7
TITLE OF REPORT   Finance Report October 2010
                  (Month 7)
BOARD ACTION
REQUESTED         FOR INFORMATION




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                                  CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                        AGENDA ITEM: 7
1 DECEMBER 2010


EXECUTIVE SUMMARY
The attached report provides the Board with a summary of the financial position for
the PCT for 2010/11. There are a number of key issues that are noteworthy:
      The PCT has already set a budget for 2010/11 to deliver a £1 million
       surplus. With the latest agreement of the Board, this has been revised to
       a break-even requirement. The Board is faced however, with a £12 million
       cost pressure created by the outcome of adjudication to in 2010/11 and
       hence has been reporting a forecast deficit of £11 million, as reported at
       month 6. The Board is committed to contributing to the mitigation of this
       deficit through agreement to further schemes as they identified and
       supported by the Clinical Senate.
      Following agreement at the last Board, The PCT is still working to the
       agreed break-even position, but now projecting a deficit of £9 million for
       2010/11 as shown at Appendix 1. The key issues are:
   1. The PCT planned a balanced budget pre-arbitration with a cost improvement
      programme of £17 million. This is forecast to be achieved in-year.
   2. The PCT identified “in-year” cost pressures of circa £3 million over and above
      the baseline budget and has identified further cost improvements to ensure the
      budget position is achieved.
   3. The Board has committed to contribute to the financial gap, created by the
      adjudication process, of £12 million with realistically deliverable proposals. To
      date, the following actions have been identified to reduce the “gap” by £3
      million:
   a) Reduce the target surplus to nil from £1 million
   b) £500,000 of lodgement returned from the SHA
   c) There has been a reduction in the national drug tariff for GP prescriptions from
      1 October 2010 that is forecast to reduce the cost of prescriptions by in excess
      of £1 million.
   d) Further contractual savings of £400,000 on non-NHS contracts have been
      identified.
       In addition to addressing the current year issues the PCT is working
       collaboratively with NCUHT to ensure the delivery of Closer to Home.
       This approach is to be achieved through extensive clinical ownership and
       is being facilitated through the joint appointment of a specialist in system
       reconfiguration.
      The PCT is currently working with Cumbria Partnership Foundation Trust
       (CPFT) to manage the transfer of provider services from the PCT and is
       providing information to support the due diligence process to allow a
       smooth transition from 1 April 2011.


What are the implications for the following:-
Financial         See above
implications

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                                                 CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                             AGENDA ITEM: 7
1 DECEMBER 2010

Risk                  The key risks are outlined in the body of the report.
assessment
and mitigation
Legal             The PCT has a significant number of equal value claims relating to
                  predecessor organisations. At this stage the PCT considers that it
                  is not possible to make any sort of reliable estimate of the likely
                  outcome of these claims.
Workforce         There are no direct workforce issues in the report, other than the
                  issue regarding equal value claims noted above.
Equality and      There are no direct issues relating to equality and diversity within
Diversity         the report.
Public            The purpose of the report is to provide the patients and the public
engagement        on the PCT’s financial position and use of resources.
Partnership       The PCT’s accounts for partnership arrangements (e.g. pooled
                  funds) in line with generally accepted accounting principles.
Communication The information contained in this report was used to report to the
                  SHA and DOH for the month 6 financial monitoring return.
State where this paper has been discussed or agreed prior to the Trust Board ie
committees etc
The financial position was discussed at the Clinical Senate, Senior Management
Team and Resources Committee.
What are the next steps?
The on-going management of financial resources continues to be a key priority for
NHS Cumbria.

Public Engagement Matrix
Level      Informatio Consultatio            Community       Capacity           Empowermen
           n Giving   n                      Involvemen      Building           t
                                             t
Evidence    Sharing of       People’s        Mechanism       Skills/knowledg    Partnership or
            information      views and/or    s in place in   e/ resources       other
            in order to      experience      order to        being              agreement
            increase         sought and      secure lay      transferred to     with
            awareness        taken into      participation   support            accountability
                             account                         community or       transfer
                                                             condition
                                                             groups
                  

Which Cumbria PCT objective does             Insert    Reference or Standard number,
this paper support?                          Tick
To work with others to improve health           
for the people of Cumbria
To make best use of all available               
resources
To achieve core standards and targets           

Director Sponsor                      John Critchley, Director of Resources
Presented By                          John Critchley, Director of Resources
                                                                                            3
                                                      CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                     AGENDA ITEM: 7
1 DECEMBER 2010

Contact Details   charles.welbourn@cumbriapct.nhs.uk




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                              CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                         AGENDA ITEM: 7
1 DECEMBER 2010

                FINANCIAL REPORT OCTOBER 2010 (MONTH 7)

1.    INTRODUCTION

1.1   The purpose of this paper is to provide the Board with a summary of the
      forecast financial performance of the PCT for the financial year 2010/11.The
      report considers performance against all key financial duties for the financial
      year.

1.2   It is important to note that financial performance is an integral element of the
      PCT’s business, and that financial performance reporting at Board level is now
      becoming embedded with all other performance targets. Nevertheless, the
      PCT’s challenging but stabilising financial position continues to be scrutinised
      by the Resources Committee.


2.    KEY FINANCIAL PERFORMANCE INDICATORS

2.1   PCTs have a number of key financial duties that can be summarised below,
      along with forecast performance:
                     Financial Target             TARGET FORECAST
                                                          POSITION
       The PCT’s Operating Costs should not                 £9 M
       exceed the revenue resource limit. (i.e. “   Nil    Deficit
       break-even” position)
       PCT operate within the agreed cash limit            Nil           Nil
       Operate within the notified capital resource     £1,898K       £1,898K
       limit
       Compliance with “Better Payment” practice          95%           95%
       code
       Full Cost Recovery of Provider Services             Nil           Nil


2.2   A summary of the position against each of the targets is considered in the
      following paragraphs. The majority of focus is on the “break-even” duty as this
      is the largest area of risk facing the PCT. The break-even and associated
      cash position are both shown as “red” owing to the risks associated with the
      outcome of adjudication.

2.3   The Board should note that the financial plan shown in Appendix 1 is
      consistent with budget set for the financial year approved in March and re-
      confirmed by the Board at the September meeting. The PCT has agreed to
      work closely with the system reconfiguration specialist to address the
      adjudication outcome as best as it able during the year while continuing close
      discussions on the issue with the SHA.


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                                                  CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                                AGENDA ITEM: 7
1 DECEMBER 2010

3.        REVENUE BREAKEVEN DUTY

3.1       Appendix 1 shows an updated budget position to reflect the changes noted
          below, and also the “year-to-date” position at October. Specifically it reflects
          the financial pressure arising from the adjudication process which in fact is still
          being discussed with the SHA.           The position therefore shows an overall
          overspend of £6 million to date and the PCT is forecasting an £9 million deficit
          at the end of the year compared to a planned break-even (i.e. a reduction from
          the original target of £1 million surplus).


          Revenue Resource Limit:
3.2       The updated revenue resource limit is set out in Table 1 below and comments
          on the significant resource changes from September are noted below. In
          addition, Appendix 1 shows a further anticipated allocation of £500,000 being
          the return of the residual lodgement of funds as notified to the SHA.

          Table 1 Revenue Resource Limit
                                                                     Non-
          Resource Limit                                 Recurring Recurring
                                                           £'000     £'000   Total £'000
          Resource limit per month 6 report                826,916    19,105   846,021

          Re-enablement linked to hospital discharge                       701        701
          Funding for NCUH (temporary cash allocation)                   5,500      5,500
          Sundry Funding                                                    73          4
          Forecast Marginal rate clawback                                (198)       (198)

          Total Resource Allocation                        826,916     25,181     852,097

         The re-enablement funding is additional funding from the DOH to support
          discharge from hospitals. The principles behind this funding are entirely
          consistent with “Closer to Home” strategy and the service investments made to
          implement this strategy.
         The funding for NCUHT is a temporary cash advance and it should be noted
          that the PCT acts purely as a paymaster for this transaction.
         The forecast marginal rate clawback represents the forecast return of funds to
          the SHA at 70% of tariff for emergency activity over contract. This is in
          accordance with the contractual arrangements established in the 2010/11
          Operating Framework. The only material contract to which this applies is
          Newcastle Hospitals as emergency activity is below plan at both local
          providers.
          Primary Care Services
3.3       The following issues are noteworthy in terms of the Primary Care position:
             The most recent Prescription Pricing Authority (PPA) forecasts now include
              an assessment of the impact relating to the reduction in the drug tariff from
              October for “category M” drugs. The overall saving on prescribing and
              pharmacy costs is forecast at around £1 million and the impact is reflected
              in the reduction of the forecast deficit to £9 million.

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                                                         CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                        AGENDA ITEM: 7
1 DECEMBER 2010

         The position on GMS/PMS (GP services) and dentistry both show small
          surpluses to date principally owing to timing differences between payments
          and budget profiling. However, the PCT has identified potential non-
          recurring slippage in both budgets to support the management of in-year
          cost pressures.
         The management of the ophthalmic contract is now a direct responsibility
          of the PCT rather than being “non-cash” limited, and actual spend in the
          first six months is consistent with expenditure pattern in 2009/10.

      Secondary Care Services
3.4   The PCT’s contractual proposals with both NCUHT and UHMB reflected the
      £12 million of planned activity reductions through “Closer to Home” initiatives
      and payments in line with best clinical practice, to include proposals such as
      reduced payments for:
           Procedures specified as being of lower clinical value
           Arrangements where no clinical procedures carried out
           “Zero-day” length of stay
           Re-admission to hospital within 14 days of discharge.

3.5   The PCT is forecasting an overspend of around £12 million on the NCUHT
      contract following adjudication (which as yet is not signed). However, it is
      noteworthy that underlying activity at month 6 is actually below the PCT’s
      contracting plan by over £2 million.

3.6   The UHMB contract is now agreed and signed. The early months have shown
      some activity pressures but the underlying trend data suggests a relatively
      small overspend projection (around £1.7 million) for the year, with the forecast
      extracted from month 6 data being similar to that for month 5. (For example,
      South Lakes locality is taking action to increase the throughput of patients at
      Westmorland General to improve the efficiency of the two community wards
      directly managed by locality GPs and reduce cost.)

3.7   The position on NHS contracts outside Cumbria shows an overspend of
      around £2 million, with notable over-performance at Newcastle Hospitals (PBR
      activity and high cost drugs), Central Manchester, Wrightington and
      Lancashire Teaching Hospitals.       The PCT, led by the Clinical senate, is
      actively reviewing the areas where cost pressures are presenting to develop
      mitigating actions where possible, in particular mapping increases in
      consultant to consultant referrals.

3.8   The Learning Disabilities Pooled Fund budget reflects both the PCT’s
      contribution to the Pool and the transfer of resources to Cumbria County
      Council under the ”Valuing People Now” initiative (£15.8 million), the latter
      which is paid in June as reflected in the budget profile. Some potential
      financial risks have been identified within the pool and an efficiency plan has
      been developed to mitigate the risk, concentrating on both “high cost”


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                                                 CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                        AGENDA ITEM: 7
1 DECEMBER 2010

       individual packages and identifying system efficiencies.     Current forecasts
       suggest a breakeven position for the PCT.

3.9    The PCT is experiencing some pressures to date on high cost packages and
       continuing care as shown in Appendix 1. The PCT has undertaken formal
       reviews in line with a new contracting structure on patients in care homes and
       this has yielded a saving of £232,000 in 2010/11 (FYE £335,000).
       Nevertheless, the PCT continues to experience volume related cost pressures
       in the number of patients eligible for continuing care. Hence, a policy on
       further cost saving measures is being taken to the Clinical Senate for
       consideration. The PCT is also working in conjunction with Cumbria
       Partnership FT to identify specific patients and actively “repatriate” them to
       local services at lower cost. The PCT has established weekly meetings with
       CPFT to ensure the project delivers through more assertive case management
       and has identified further suitable cases for repatriation. Nevertheless, cost
       pressures are still arising from new patients presenting with complex mental
       health needs. Hence, the year-end position is not forecast to change
       significantly from that reported at September and August of around £850,000.

3.10   The PCT is showing a year-to-date overspend of £53,000 in Other Care.
       Again, all areas of expenditure are being investigated to assess mitigating
       actions to reduce costs.




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                                                 CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                          AGENDA ITEM: 7
1 DECEMBER 2010

       Provider Services
3.11   The PCT provider is showing a minor under spend at month 7 which is
       attributable to some slippage in the cost improvement programme off-set by
       the impact of non-recurring actions (e.g. vacancy control) to manage the
       position.
3.12   The PCT has a significant number of equal value claims relating to
       predecessor organisations. The PCT still considers, after receiving up-to-date
       legal advice on the current status of the claims, that it is not possible to make
       any sort of reliable estimate of the likely outcome of these claims. Hence, the
       issue continues to be treated as an unquantifiable contingency for accounting
       purposes.
3.13   The PCT is actively working with Cumbria Partnership Foundation Trust in line
       with the project plan to ensure the financial aspects of the transfer will comply
       with the requirements of the due diligence process and Monitor. Advice from
       the DOH relating to the transfer of fixed assets (i.e. land and buildings) is still
       awaited and therefore it is still assumed that these assets will be retained by
       the PCT.
       Corporate Services & Capital Charges
3.14   The position is a year-to-date underspend of £2,000 on allocated budgets.
       This area remains forecast to achieve a breakeven position and work is being
       undertaken to ensure this exercise also delivers the planned reduction in
       management costs
       Planned Investments
3.15   The budget reflects the residual investments identified in the budget including
       “pass through” costs of ring-fenced allocations to provider organisations. The
       Clinical Senate has agreed not to make any new investments owing to the
       level of financial risk in the system, and hence a saving for the year is forecast.
       Planned Cost Improvements
3.16   The original planned cost improvements are embedded in the budgets
       reported at Appendix 1.          However, the PCT has also identified further
       schemes to address in-year cost pressures of around £3 million, and reduce
       the forecast overspend to £9 million. In addition, the PCT has engaged a
       specialist in system reconfiguration (with NCUHT) and is working through new
       opportunities that may contribute to in-year and recurring savings in a co-
       ordinated way. The Clinical Senate have asked and now have further schemes
       to discuss and agree in order that further progress can be made in mitigating
       the financial gap, these measures are likely to be non recurrent in nature
       Table 2 below shows the overall level of achievement (and forecast) of cost
       improvement schemes, and highlights the expected shortfall of £9 million.
       Nevertheless, the PCT continues to seek further opportunities to reduce the
       deficit in year and is in active discussions with the SHA.

       Table 2




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                                                   CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                                       AGENDA ITEM: 7
1 DECEMBER 2010


                                            CRES Run Rate 2010/11

                    35000
                    30000
                    25000               Cumulative
                                        Plan
                    20000
                  £'000
                    15000
                    10000
                     5000
                        0
                             1   2      3      4     5     6  7  8     9     10 11 12
                                                           Month


4.    LOCALITY FINANCIAL PERFORMANCE

4.1   Table 3 presents how the year-to-date and forecast position presents at a
      locality level. The overspends reported at Cumbria level also translate to
      localities (especially the impact of the adjudication on the costs of acute
      activity) in terms of both year-to-date and forecast out-turn level given nearly
      60% of the budgets are devolved. Table 3 below shows the summarised
      position for each locality in terms of “gross position” and then also the impact
      of the funding adjustments as the localities move towards fair shares. It should
      be stressed detailed locality information lags behind the overall PCT financial
      information as data and costs need to be disaggregated down to GP practice
      then consolidated to locality level. Hence, the information on Table 3 has still
      to be adjusted for October’s information.

      Table 3
                            Allerdale       Carlisle      Copeland    Eden       Furness    S Lakes    Total
           Locality
                              £000           £000           £000      £000        £000       £000      £000
      Year-to-date
      (Under)/Overspend          359               726         843         505      (340)       501        2,594
      "Fair share" Impact         79               (73)       (158)        204      (363)       311            0
      In-year Position           438               653         685         709      (703)       812        2,594
      Forecast 10/11
      (Under)/Overspend          462          1,869          1,804     1,447          34        550        6,166
      "Fair share" Impact        135           (166)          (271)      407        (727)       622            0
      Forecast Out-turn          597          1,703          1,533     1,854        (693)     1,172        6,166



5.    ACHIEVEMENT OF THE CASH LIMIT & BALANCE SHEET

5.1   The PCT manages cash in line with the approved Treasury management
      policy. However, the current “system” risk in the local economy, the PCT’s
      challenging income and expenditure position is also likely to have cash
      consequences in addition to the revenue consequences. The PCT has
      flagged up to the SHA that unless further cash is available or the revenue gap
      can be reduced then the only way that cash can be managed is by delaying
      payment of creditors in March. Comprehensive cash forecast for the remainder
      of the year will be presented to the Resources Committee in December.
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                                                              CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                       AGENDA ITEM: 7
1 DECEMBER 2010


5.2   The accounts for 2010/11 will be compiled in accordance with International
      Financial Reporting Standards (IFRS) and revised accounting policies have
      been approved by the Audit Committee. While this potentially has an impact
      for eLIFT schemes that will be evaluated as part of the appraisal process it is
      noteworthy than schemes only appear on the balance sheet on occupancy, so
      there will be no impact in 2010/11.


6.    CAPITAL RESOURCE LIMIT (CRL)

6.1   The PCT has received confirmation of additional capital funds of £650,000
      being available to address backlog maintenance so increasing the CRL for
      2010/11 at to £1,898,000. A schedule of works is being developed and this
      work will be undertaken with eLIFT Cumbria in line with contractual
      arrangements for “partnering” services. The PCT is also continuing to seek
      additional exchequer capital to support the Cockermouth scheme, based upon
      previous discussions with the Department of Health.

6.2   The PCT was planning to undertake a property “swap” for Orton Lea CDC with
      CPT taking some property at Penrith used exclusively for mental health
      services at no gain or loss. However, this has been put on hold until the DOH
      issue further guidance on the transfer of assets associated with the
      “Transforming Community Services” programme.


7.    PERFORMANCE AGAINST BETTER PAYMENT PRACTICE CODE

7.1   The better payment practice code requires the PCT to aim to pay all valid
      invoices by due date or within 30 days of receipt of a valid invoice, whichever
      is later. The PCT aims to achieve this target for 95% of both the number and
      value of invoices paid and year-to-date performance is shown in Table 4
      below.

      Table 4
          Better Payment         Number of Bills Value of Bills
           Practice Code           Paid Within    Paid Within
                                    Target %       Target %
                                 Oct-09 Sep-09 Oct-09 Sep-09
      Target                      95.0% 95.0% 95.0% 95.0%
      Non-NHS Creditors           93.3% 92.8% 98.4% 98.4%
      NHS Creditors               94.8% 96.8% 98.7% 98.6%
      All Creditors               93.5% 93.2% 98.6% 98.5%

7.2   The PCT is still running slightly below target in the number of non-NHS
      invoices processed within terms although the position has again improved in-
      month. The PCT is comfortably achieving target on the value of invoices
      processed within terms. However, it should be stressed that if the revenue


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                                                CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                         AGENDA ITEM: 7
1 DECEMBER 2010

       (and hence cash) deficit is not resolved then inevitably performance will
       deteriorate towards the end of the year.


8.     FINANCIAL PLANNING

8.1    The PCT continues to update the medium-term financial plans to reflect
       changing financial conditions. The current key issues will be considered in the
       next iteration of the financial plan that is being prepared to support the
       2011/12 planning round against the on-going parameters of 2% recurring
       financial balance:
        The recurring impact of the projected cost pressures identified in the current
         year;
        The balance of recurring/non-recurring savings to be identified to address
         these challenges, and the “full-year” impact of these actions.
        The likely changes owing to the CSR (public sector pay freeze, changes to
         VAT and national insurance, tariff inflation/deflation, etc). The NHS
         Operating Framework for 2011/12 is expected in mid-December.
        The impact of Transforming Community Services on overheads and assets
         following the transfer of services from 1 April 2010.
        The need to generate the target management cost savings in line with the
         targets set by the DOH and SHA to reinvest in frontline services.



8.2    In addition, the financial planning for 2011/12 will also need to reflect the
       further devolution of resources to localities, and also the impact that this has
       on relative resources compared to “fair share”. The impact on GP locality
       commissioners is a key element of the PCT’s financial planning and therefore
       will be undertaken as an integral element of the process.


9.     USE OF RESOURCES

9.1    The Audit Commission has confirmed that for 2010/11 they will not be
       undertaking any use of resources work other than that required to reach their
       VFM (value for money) conclusion. Hence, they will no longer be required to
       provide an annual scored judgement relating to their local VFM audit work.
       Instead the results of all local VFM audit work and the key messages for the
       PCT will be included in the annual governance report and annual audit letter.


10.    RECOMMENDATIONS

10.1   The Board is asked to NOTE the contents of the report and support the on-
       going actions currently being undertaken as part of the TCS and Service
       Reconfiguration agenda.
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                                                  CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                         AGENDA ITEM: 7
1 DECEMBER 2010




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                  CUMBRIA TEACHING PRIMARY CARE TRUST
BOARD MEETING                                                                                   AGENDA ITEM: 7
1 DECEMBER 2010

                    Appendix 1: NHS Cumbria Summary Financial Analysis

                                               YEAR-TO-DATE                              FORECAST YEAR END
                                           (7 months to 31-Oct-10 )
   MONTH 7                            BUDGET       ACTUAL       VARIANCE           BUDGET        ACTUAL       VARIANCE
                                       £'000        £'000         £'000             £'000         £'000         £'000
REVENUE RESOURCE LIMIT
Recurrent Resource Limit                                                  -         (826,917)     (826,917)           -

Non-Recurrent Resource Limit                                              -          (25,180)      (25,680)       (500)

TOTAL Revenue Funding Available                -            -             -         (852,097)     (852,597)       (500)

PRIMARY CARE
Prescribing                             60,197       59,898           (299)         102,033       100,433        (1,600)

Dental                                  10,364       10,371              7            17,760        17,560        (200)

GP Services                             42,187       41,803           (384)           74,798        73,498       (1,300)

Opthalmic                                2,761         2,701           (60)            4,640         4,540        (100)

TOTAL PRIMARY CARE                     115,509      114,773           (736)         199,231       196,031        (3,200)

SECONDARY CARE
NHS Providers                          272,270      279,809           7,539         464,205       478,226        14,021

Learning Disabilities Pooled Fund       20,492       20,492               -           23,920        23,920            -

Packages of Care                        24,059       24,070             11            41,157        42,012         855

Other Care                              12,102       12,155             53            20,761        20,875         114

Reserves                                       -            -             -                 -             -           -

TOTAL SECONDARY CARE                   328,923      336,526           7,603         550,043       565,033        14,990

Provider Services                       39,533       39,407           (126)           68,429        68,429            -

Headquarters                            16,290       16,288              (2)          28,311        28,311            -

Planned investments & Recovery Plan      2,514         1,738          (776)            5,083         3,752       (1,331)

TOTAL EXPENDITURE                      502,769      508,732           5,963         851,097       861,556        10,459

TOTAL (SURPLUS)/DEFICIT                502,769      508,732           5,963           (1,000)        8,959        9,959

Revised Target                                                                            0        8,959        8,959




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                                                                      CUMBRIA TEACHING PRIMARY CARE TRUST

								
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