It Transformation Project Plan by pba43968

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									                                                                                                 ITEM: 4

MEETING: Trust Board
         15 November 2006

TITLE: Transformation Project Update


SUMMARY:

The attached paper updates the Transformation Plan which was issued to the Strategic Health Authority on
10 October 2006. This update includes a progress report on action taken in response to the Deloittes
external review carried out in August and finalised in September.

 As the Trust has been reporting a forecast out-turn of breakeven, which is a variance of £1.3m from plan
(the 1% surplus required by the NHS London financial strategy). For this reason, and because of the year-
to-date position, the Trust has been asked to submit a financial recovery plan to demonstrate the potentiality
for restoration of the position to the original planned surplus. This report will be submitted to the SHA fulfil
that requirement.

The latest update of the CIP/income position indicates a shortfall of approx £1m on identified schemes (see
appendix 2.) Proposals for bridging this gap are set out on page 8 of the plan along with an overall risk
assessment of the total programme.

The year to date position and full year effect on individual schemes is work in progress and will be
reconciled to the performance indicated on the ledger and set out in the Finance Report. In the light of the
continued risk around the savings/income target, it has not been possible for month 7 to report a forecast
out-turn of the required surplus. Improved financial performance in September and October appears to
demonstrate turnaround, but this needs to be sustained and developed into future years before the Board
can be confident that the Trust has achieved the necessary financial management and control to form the
basis of an application for Foundation Trust status. It is also not yet clear whether the impact of the in-
house transformation team is sufficient to provide assurance to the SHA that external support from one of
the major turnaround firms in the private sector is not required.

There will be further detailed review of the financial position at the meeting of the Finance and Performance
Committee on the 6 December to which all non-executive members will be invited.

ACTION: For discussion


REPORT FROM: Susan Sorensen, Director of Strategy and Performance


SPONSORED BY: David Sloman, Chief Executive


Financial details supplied/checked by: Trish Donovan, Deputy Director of Finance
(Name of finance officer)                           Eleanor Hillier, Transformation Team Financial Analysit


Recommendations contained within this paper have been checked for compliance with
relevant statute and regulations/directions/policy as follows:

(Relevant law/direction etc.)         None applicable
(Name)
The Whittington Hospital Transformation Plan



Stage 1 - Cost improvement and income generation plan 2006/07




                  V3.0    8 November 2006
                                                                  The Whittington Transformation Project
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   Contents
                                                      Page


   Background                                         3

   Transformation Project Initiation                  5

   Project structure and methodology                  6

   Cost/Service Improvement project management        7

   CIP/SIP 2006/07                                    8

   Corporate Monitoring                               9

   Longer term sustainability                         10




Appendices

1. CIP Project Data Items

2. Cost Improvement and Income Generation Programme 2006/07

3. Cumulative I&E performance and Year End forecast




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Background
The Whittington achieved its target to break even in both 2004/05 and 2005/06. This followed three years of financial deficits resulting in a
cumulative deficit against the breakeven duty of £3.5m at March 2004. CRL and cash targets have been consistently met over the period.
Performance over the last five years in shown below. It should be noted that external non-recurrent financial support virtually ceased from
2005/06, having been significant prior to that year.




                                                                             2001/02   2002/03    2003/04    2004/05      2005/06
                                                                              £’000     £’000      £’000      £’000        £’000

               Income                                                         99,084   105,099    110,694     127,524     131,498

               Operating surplus/(deficit)                                     3,847      2,832      (850)      4,123        2,760

               Net interest receivable/(pay)                                      71         79        150        330          308

               Dividends payable                                               3,910      3,899      2,700      2,455        3,048

               Retained surplus/(deficit)                                          8      (988)    (3,400)      1,998            20

               Prior year adjustment and transfers between reserves            1,182      (939)          0           0            0

               Income & expenditure reserve (per Balance Sheet)                3,726      1,799    (1,601)        397          417

               Breakeven cumulative position (Accounts note 23.1)                890       (98)    (3,498)     (1,500)     (1,480)




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A savings target of £6.5m was met in 2005/06 of which £2m was estimated to be non-recurrent. The underlying deficit in 2005/06 was
assessed at £3.3m. Additional cost pressures and adverse income changes arose for 2006/07 which resulted in an opening savings/income
generation target of approx. £10m. These pressures included, inter alia, the impact of:

   ! the anticipated service commencement of the first phase of the new facilities provided under the PFI together with the Managed
     Equipment Service for Imaging

   ! the revised tariff, in particular the tiered tariff for non-elective activity;

   ! the full year effect of Agenda for Change;

   ! significant increase in energy prices.


The opening Cost Improvement Programme (CIP) and Service Improvement Programme (SIP) identified targets to the required value.
Components of the overall programme were grouped as:

   ! Impact in 2006/07 of the headcount reductions agreed in 2005/06

   ! Schemes which had been included in the external work carried out by Green & Kassab under a contract with the North Central London
     SHA

   ! Individual directorate targets (including those associated with Trust-wide schemes)

   ! Central schemes


 However, monitoring information in the first quarter indicated that targets were not being met, and a comprehensive risk assessment in July
2006 indicated a shortfall of around £2.5m in clearly identified schemes. In addition, in August, Trust was notified of a reduction in the
previously assumed MPET income, amounting to £935k for the Whittington, plus the decision that RAB reversals would not be implemented.
This increased the overall savings target to £11m (8% of turnover) and indicated a shortfall of £3.5m.




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Transformation Project Initiation
In early September, the Executive Team agreed a number of immediate additional controls on both pay and non-pay expenditure. These were
communicated to all staff on 8 September. Discussion took place on the need for a formal “turnaround” project and meetings were arranged
with other north central turnaround sites and with Keith Pringle at the SHA.


 It was recognised internally that the Whittington, while not part of the DoH turnaround programme, could utilise aspects of the turnaround
process and technology. The term transformation was adopted as an alternative to turnaround as this echoed the objective of developing
transformational leadership which had already been adopted by the Trust.


A paper recommending the establishment of a Transformation Team and the identification of resources to take this work forward was taken to
the meeting of the Trust Board on 20 September, following an Executive Team away day.


The Trust Board agreed to the establishment of the project and the Transformation Team and would give further consideration to the
commitment of additional resources. This would be dependent on the outcome of analysis and assessment of the ability of the Trust to deliver
its short and longer term financial targets within existing resources including the Deloittes due diligence exercise commissioned by the SHA.

The project was launched at the Chief Executives regular Trust-wide briefing on 28 September and communicated throughout the
organisation through the established cascade briefing process. A poster campaign was launched on the 6 November there will be regular
bulletins via the intranet, email and the publication of the Link. All members of staff have been invited to contribute ideas for efficiency gains
and to express interest in participating in the work of the Transformation Team.




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Project Structure and Methodology
Key Personnel


Role                     Name                   Substantive post                    Accountable to

Project Sponsor          David Sloman           Chief Executive                     Trust Board

Project Director         Susan Sorensen         Director of Strategy &              Chief Executive
                                                Performance
Transformation Team                                                                 Project Director
                         Fiona Elliott          Divisional Manager, Medicine

                         Deborah Tymms          Head of Nursing, Operations

                         David Emmerson         Assistant Director, IM&T


                         Jean Jeffery           Project Manager, Medical Staffing

                         Eleanor Hellier        Senior financial analyst

                         Lanre Fatuga           Business Support Manager
                                                Finance & Strategy/Performance

Part-time secondments    John Baglivi           Head of Procurement                 Fiona Elliott (TT driver)

                         Jon Green              Assistant to CEO                    Project Director




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CIP/SIP Project Management
All projects identified within the overall programme have been entered on to a database recording a number of financial and non-financial data
items and indicators. These are set out in Appendix 1.

The following key principles have been applied to the management and monitoring of the programme:


   ! Each project has an Executive Team lead who is accountable to the Chief Executive for delivery which will be monitored on a weekly
     basis

   ! Each project has a Transformation Team (TT) driver, co-driver and operational project manager

   ! The current year and full year effect of the schemes will be taken out of budgets

   ! A monthly profile of savings will be assessed for each project

   ! A rolling risk assessment will be undertaken as part of the monthly monitoring process

   ! The Director of Strategy and Performance will report on a monthly basis to the Finance & Performance Committee, a formal sub-
     Committee of the Trust Board. This will in turn report to the full Board at its bi-monthly meetings.


Weekly monitoring

Information on the current state of each project held on the database will be updated by the TT driver and issued to the accountable Executive
Team member on the Friday of each week. The ET member will provide a progress report and action plan by close of play the following
Monday which will form the basis of a discussion with the Chief Executive and Director of Strategy and Performance following the weekly ET
meeting each Tuesday morning.




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CIP and SIP for 2006/07
The attached CIP/SIP plan (Appendix 2) is the up-to-date statement of where the Trust is at in terms of the 2006/07 plan. The plan issued on
10 October 2006 indicated that the Trust has identified approx. 150 schemes which if successfully implemented would deliver the target
performance (£1.3m surplus) for 2006/07.        Individual schemes were assigned to members of the Transformation Team who are working with
the operational project leads to drive the implementation programme.

Financial progress is reassessed on a monthly basis. The month 6 analysis indicated that the total anticipated savings achievable in 2006/07
from the current schemes amounts to £9.96m. Of this, the £2m non-recurrent target was assessed as being amber rated and a further £0.4m
representing the variance from the target to date is red risk rated. A further £1m needs to be identified to bridge the gap and restore the
planned surplus. Potential sources and risk ratings are listed below:


Source of saving/income                                               £k       Recurrent/Non-recurrent                      Risk rating

Further slippage on PFI unitary payment                             350              Non-recurrent                              Green

Additional capitalisation of works                                  100              Non-recurrent                              Red
Over-recovery of SLA income based on 6                              200               Recurrent                                Amber
months                                                              200              Non-recurrent                             Amber

Release of unutilised provisions                                    150              Non-recurrent                               Red


In summary, of the £11m savings/additional income required to deliver a surplus of £1.3m, £8.9m is considered safely achievable, £1.4m is
amber risk-rated and £0.7m is red risk rated. The profile of total risk assessment since July, including the Deloittes external review, is set out
below.




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Risk rating       Trust Self Assessment         Deloitte’s external review         Trust reassessment                 Trust reassessment
                         July 2006              August/September 2006                 October 2006                      November 2006
                          £k            %                 £k              %               £k          %                      £k          %

Green                  7,345              68           4,135               38          8,714             79                8,946                  81

Amber                                                  3,300                30         1,000               9               1,400                  13

Red                    3,506              32           3.400               32          1,300             12                  650                   6

Total                 10,851             100          10,835               100        11,014            100              10,996                 100



Management Information for monitoring corporate performance
The Executive Team and Trust Board are using a number of performance indicators to supplement and drill down from the overall financial
position. Examples of these include:

   ! Summary of Department of Health quarterly Productivity Metrics

   ! Analysis of overall contribution of individual specialties mapped against volume growth/decline

   ! Ward productivity indicators – cost per occupied bed day

   ! Weekly analysis of workforce indicators

   ! Weekly analysis of non-pay commitments




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Longer Term Sustainability
The next stage of the Transformation Plan will be to extend the programme over the next three years to feed into the Trust’s Long Term
Financial Model in preparation for moving towards Foundation Trust status.

The Deloitte’s external review identified six key actions to secure the achievement of financial sustainability. Progress against the action points
to date is as follows:

Action Mile
       stone                                                         By        Progress
       ID
1            Identify and implement additional CIP to                Oct       Revised plan submitted 10 October indicating £11m
             replace programm though undeliverable by                          savings/additional income. Clinical involvement via medical
             the Trust.                                                        director and divisions
       1.1   Brainstorm match any difference between
             agreed value and plan value including clinical
             input
       1.2   Select preferred option                                 Nov       Plan presented and approved at Trust Board seminar October
       1.3   Develop and resource plan for delivering                Nov       Transformation Team established including additional external
             savings scheme                                                    support
       1.4   Deliver and monitor scheme                              Nov       Weekly monitoring by CEO. Monthly monitoring by Financ &
                                                                               Performance Committee. Bi-monthly to Trust Board
2.                Identify and implement additional CIP to                     Total amount of £935k assessed as additional CIP, which
                  account for the potential reduction in MPET                  increased to £11m. See actions above.
                  central bundle funding
3.                Clarify with SHA the level of capital charges
                  on the Highgate Wing
         3.1      Discuss with NHS London                            Oct       Case presented but issue not resolved.
4.                Devise new PMO arrangements for CIP
                  delivery to ensure delivered on track              Oct
         4.1      Identify issues with current programme
                  management approach                                          Establishment of Transformation Project agreed




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Action Mile
       stone                                                      By      Progress
       ID
       4.2   Identify current best practice                       Nov     Contact made with several turnaround sites. Discussions with
                                                                          Keith Pringle. Attendance at NHS Confederation seminar.
5.              Manage the transfer of services to the new
                PFI building in a timely manner to ensure no
                loss of income.
        5.1     Refine existing transfer plan and schedule        Sept    Completed. Dedicated director lead . Project plan regularly
                                                                          reviewed by Executive team
        5.2     Ensure plans have sufficient buy in and project   Sept    Commissioning Steering Group meets weekly. Designated leads
                management support                                        for each area.
        5.3     Manage transfer                                   Oct     Delayed to November because of delayed handover. Transfer of
                                                                          imaging commenced.
        5.4     Transfer services                                 Oct     See above.
6.              Develop a marketing plan to ensure the Day
                Care Centre can fill capacity
        6.1     Identify level of expected capacity               Oct     Activity models continuously updated
        6.2     Brainstorm ideas for filling capacity             Oct     List of potential services agreed at Hospital Management Board
        6.3     Select preferred options and develop
                implementation plan                               Oct     Negotiations commenced for Ophthalmology.
                                                                          Plans to bid for bariatric services.

The action plan will be updated on a monthly basis and reported to the Finance and Performance Committee.




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