NHS Board Meeting 1 February 2012 Paper 16 NHS Board Meeting Wednesday 1 February 2012 Subject Minutes of the Finance Committee Purpose To report to the Board Recommendation To receive the draft Finance Committee Minutes of 5 December 2011 1. Background 1.1 Committees of the Board should submit approved and draft minutes to the Board. 2. Current situation 2.1 Attached are the draft minutes of 5 December 2011. 3. Conclusion 3.1 The Board is asked to receive the minutes. Derek Lindsay, Executive Director of Finance 4 January 2012 1 of 11 Finance Committee Monday, 5 December 2011 at 0930 hours Meeting room one, Eglinton House, Ailsa Hospital Present: Professor Bill Stevely (Chair), Councillor Hugh Hunter, Non Executive Director Mr Derek Lindsay, Executive Director of Finance Mr Stephen McKenzie, Non Executive Director Ms Gillian Watson, Non Executive Director In attendance: Mrs Michele Caldwell, Director of Pharmacy (for item 14) Mr Jim Crichton, Director of Primary Care and Mental Health Services (for item 7), Dr Allan Gunning, Executive Director of Policy, Planning and Performance (for Dr Hatton), Mrs Jean Hendry, Healthcare Manager, Communities and Partnership (for item 9), Mrs Fiona McQueen, Executive Director of Nursing (for item 16) Mr Stuart Sanderson, Assistant Director of Finance, Planning and Efficiency (for item 5, 7 and 8), Mr John Wright, Executive Director of Information and Clinical Support Services (for item 5, 10 and 11) , Mrs Karen Houston, Executive Assistant (minutes) 1. Apologies for absence 1.1 Received from Mr Martin Cheyne and Dr Hatton (Dr Gunning representing). 2. Declaration of interests 2.1 No interests declared. 3. Minutes of meeting held on 6 September 2011 3.1 The minute was agreed as an accurate record proposed by Stephen McKenzie and seconded by Hugh Hunter. 4. Matters arising template 4.1 Pan public sector agreement for gas and electricity but not one for water. This had been flagged at a national level and will be taken forward via National Services Scotland. 2 of 11 4.2 Achievement of efficiency savings 2011/12. Committee noted the paper provided by Derek Lindsay and the good progress which had been made towards efficiency savings in 2011/12. Integrated Care & Emergency Services (ICES) and Integrated Care and Partner Services (ICPS) target was less than 2% efficiency savings whilst Mental Health Services and Information and Clinical Support Services (ICSS) will meet 4% efficiency savings. 4.3 Stephen McKenzie sought clarity around the use of the word overspend. Derek Lindsay clarified that whilst some areas have an overspend against their allocated budget, that there were plans agreed at Directors’ Team to counteract these. An example of this would be that directors as a team have accepted that within the areas of accident and emergency as well as care of the elderly services there will be an overspend so, as a team, other directors have agreed to ensure an underspend in their areas to counteract this. An area for concern highlighted in the paper was around primary care prescribing however this would be covered in more depth later on the agenda. 5. Non Profit Distribution Model (NPD) 5.1 Following on from the Board workshop on 9 November 2011, an update had been requested in relation to the NPD model and how this differs from the Private Finance Initiative model (PFI). There are many similarities. The NPD model is revenue funded with the NHS Board paying for the facility by means of an annual unitary charge. There are however a number of principles which differentiate NPD from the traditional PFI model: a cap on private sector returns no dividend bearing equity for shareholders any operational surpluses generated by the project company will be returned to the public sector. 5.2 There are also a number of differences in the procurement process. In the case of NPD, a Pre Qualifying Questionnaire (PQQ) is issued to the market under OJEU, to identify potential suppliers (likely to be a consortia of companies). Following the establishment of an initial shortlist of suppliers (normally between 3-5) a Competitive Dialogue process is undertaken to clarify the client’s requirements and to allow the bidders to develop their recommended solutions. 5.3 In order to minimise the risks to the Board, the Project Team have been involved in early talks with other Boards which have experience of using the NPD model, e.g. Tayside and Sick Children’s Hospital in Edinburgh, in order to capture their knowledge and experience. Subject to Board and Scottish Government Health Directorate (SGHD) approval of the OBC, technical, financial and legal advisers will be appointed to assist the Board in taking the project forward to FBC stage and financial close. Practical experience of the NPD model including Competitive Dialogue will therefore be an important criterion in selecting the Board’s advisers. 5.4 The recently completed Gateway Review 2 Process which involved external scrutiny of the Outline Business Case and provided the Board with an Amber rating provides assurance to the Board that the programme to date, is on a sound footing. 3 of 11 5.5 In response to a question about the possibility of obtaining public funding, it was explained that due to a 35% reduction in public capital funding for the Scottish Government (SG), the Board has been advised by SG that the Non Profit Distribution Model was the only option available. Gillian Watson pointed out that not taking the scheme forward was the other option. The Committee agreed that this was the case but that the previous decision by the Board to proceed was justified by the benefits which would be realised. 6. Scottish Government Funding for NPD 6.1 Members noted the letter from Derek Feeley at SGHD which provided the basis for the Scottish Government contribution to the unitary charge. Given the significance of this, the Committee asked that written assurance be provided by Scottish Government that this would continue for the thirty years of the contract. It was noted that this would be a binding contract, the terms of which would essentially fulfil this requirement. 7. Refreshed Outline Business Case – North Ayrshire Community Hospital (NACH OBC) 7.1 Members were asked to consider the content of the revised Outline Business Case and approve its resubmission to the Board. 7.2 A two page summary was distributed to members (this would also be submitted for the Board members at their meeting on 7 December 2011) and outlined the process thus far: Since submission to SGHD at this time last year, the decision was delayed due to lack of capital. SGHD advised that, whilst supportive, the scheme was not affordable from public capital therefore the NPD route should be explored. A thorough review of the clinical brief had been undertaken which had resulted in the decision to reduce to 206 beds instead of 253 beds in the original OBC. The original scheme cost (£75 million) had been reduced and if progressed by public capital would have cost £68 million) but was now being proposed via NPD route which had VAT and other optimism bias benefits (total value of capital works including refurbishment element £59 million). Refurbishments, ie in the Horseshoe Building and the refurbishments at Ailsa Hospital would be public capital funded with the new build element being procured via the NPD route. Savings would be found in terms of workforce, estates for sale and clinical and non-clinical costs. 7.3 The NPD route would incur a unitary charge of circa £6.2 million per annum, however around 80% of this would be funded via SGHD with the Board meeting the balance and this would last for the duration of the contract. 7.4 Stephen McKenzie queried the use of schematics being included within the OBC refresh and questioned whether this could potentially limit creativity which companies could provide or perhaps stifle innovation. Jim Crichton confirmed that innovation should be encouraged and that whilst the clinical teams had informed the 4 of 11 existing schematics that innovation would be embraced. Stephen McKenzie voiced caution around vested interests which could lead to inflexibility, however Stuart Sanderson confirmed that the whole process allowed the pathways / flows, room sizes etc to be reviewed. 7.5 Gillian Watson raised a concern that the posts not required ended up in a redeployment pool and would not then release savings. Jim Crichton assured that the four to five year period prior to the planned opening, should allow enough time for the redeployment process to be worked through and staff turnover during this period would also help. This would be recorded on the Risk Register and would be managed. 7.6 Bill Stevely congratulated all those involved and asked the Finance Committee to recommend to the Board for approval. This was supported by the Committee. 8. Capital Improvement Plan (CIP) 8.1 Members were asked to note the baseline position and consider further update for the outcome from the NACH OBC Refresh. 8.2 Stuart Sanderson highlighted that slippage was incurred because of delays in the capital programme, for NACH and Building for Better Care. Dependent on which funding route, the three options were outlined below: Appendix 3 “baseline position”, Appendix 4 “NACH OBC refresh – traditional capital funding” and Appendix 5 “NPD funding route”. 8.3 Hugh Hunter queried whether the levels of capital receipts were deliverable. Stuart Sanderson advised that these were detailed based on advice provided by the Valuation Office, however the property market was uncertain at this point in time. A contingency had therefore been set aside in the event that sales were not realised. 8.4 The additional projects added in 2011/12 and 2012/13 were a health and safety improvement notice for Crosshouse Hospital, refurbishment for renal, and changes in layout in a dermatology ward. 8.5 Finance Committee noted the update on the baseline position for the forthcoming Local Delivery Plan and update for NACH OBC Refresh. 9. Ayr Community and Outpatient Services Review 9.1 Members were asked to approve the six Standard Business Cases. Jean Hendry had chaired the group based on service need in relation to community and outpatient services in Ayr. 9.2 The proposal was for the Board to sell and realise the assets of Heathfield Clinic and Heathfield House in Ayr, Miller Road Clinic in Ayr and Boyd Street Clinic in Prestwick. The review had been identified through the updated Estates Strategy with the need for rationalisation of existing premises to reduce maintenance cost and release capital assets. Some of the properties were no longer fit for purpose in 5 of 11 relation to current service demands and did not meet some of the Glennie requirements on decontamination. 9.3 The Ayr Hospital extension is proposed to be a two storey build on the left hand side of the approach to the Ayr Hospital building and will be for dental and outpatient services. 9.4 In relation to the public consultation, Stephen McKenzie voiced that the communication of these changes would require careful consideration and should be localised and targeted rather than one generic document. Jean Hendry underlined that and advised that the public engagement plan had been drawn up with the public engagement team. The key issues had been around transport and parking therefore these had been taken account of in the business cases. 9.5 Gillian Watson queried how developing and moving outpatient services to hospital sites sat with the Estates Strategy looking to localise services into the community as well as “Your Health – we’re in it together” and other national guidance. Jean advised that the business cases propose to move some services to alternative community settings whilst some would move to the local Ayr hospital site based on the clinical feedback from the review process. 9.6 The proposals are supported by the Capital Projects Programme Board and revenue consequences were noted as cost neutral therefore the Finance Committee approved the six Standard Business Cases. 10 Girvan Community Hospital – Energy Costs 10.1 John Wright spoke to the paper and highlighted that a non compliant meter had being installed by the sub contractor therefore the wind turbine did not qualify for RooFit incentives in 2010/11. This decision was being appealed and discussions with OFGEM were ongoing. A report would be forthcoming once negotiations were complete. A fully compliant meter has now been installed and RooFit incentives for 2012/13 will be realised. 10.2 John Wright updated Finance Committee members that the possibility of installing wind turbines at Ailsa and Ayr Hospital sites was being explored. 10.3 Figures will be forwarded to Gillian Watson and Bill Stevely outwith the meeting outlining on how many days the wind turbine had been able to generate electricity in 2010/11. Action : John Wright Finance Committee noted the report. 11. Procurement 11.1 KPMG Report Committee noted the report and key recommendations. 11.2 NSS Report John Wright advised the Committee that there had been a recent Procurement Capability Assessment (PCA) audit on 15 November 2011. NHS Ayrshire and Arran had moved from a rating of Competent to Improved in the assessment. In 6 of 11 terms of the National Delivery Centre (NDC) total spend had increased from around £6.2 million to £7.2 million per annum with 70% of orders placed through Pecos using controlled catalogues. The use of manual buying orders had ceased since July 2011. 11.3 Actions from the recommendations had highlighted good progress and improved performance. Key performance indicators (KPIs) have been developed to measure Procurement performance and these will be reported on to Directors’ Team. Once the PCA Audit is approved John agreed to submit a regular report to Finance Committee on the Procurement KPIs. Action: John Wright 11.4 Stephen McKenzie queried the extent of collaborative working with local authorities. John advised that the Shared Services Project Board included senior managers from the three local authorities and that he represented the NHS Board. John agreed to report back to the Finance Committee on the joint working initiatives that have been considered to date. Action: John Wright 12. Cost Book Information 2010/11 12.1 The national Cost Book had been issued in late November 2011. The paper to Committee showed the inpatient cost per case by specialty by site, compared to Scotland, peer group and last year. A list of best value reviews which have been completed throughout 2010/2011 was noted. From this initial analysis it would appear that geriatric medicine, gynaecology and long stay specialties appear to be high cost and therefore would be areas to focus early best value reviews for 2012. 12.2 Derek highlighted that Dr Sandy Gosh, Clinical Director in Care of the Elderly was currently leading on a piece of work looking at the difference between Ayr / Crosshouse for general and geriatric medicine and the Change Fund allows for a shifting of the balance of care in relation to this piece of work. 12.3 In response to a question from Hugh Hunter, Derek Lindsay confirmed that the review would take cognisance of the fact that the Change Fund was for a fixed period of three years and thereafter there was an expectation of hospital beds closing to fund the investment in the community. 12.4 Stephen McKenzie queried the 98% daycase activity for ophthalmology. This was recently investigated following the production of this information which revealed that the total beds for ophthalmology in NHS Ayrshire and Arran were only four since the vast majority of ophthalmology work was done on a daycase basis. 12.5 Finance Committee agreed that geriatric medicine, gynaecology and long stay specialties were areas for best value reviews. 13. Financial Management Report for seven months to 31 October 2011 13.1 Derek Lindsay presented the financial management report for seven months and outlined that slippage on Change Fund and a projected £5 million overspend on prescribing were the main issues. The summary of expenditure for each directorate 7 of 11 along with overspends and underspends were highlighted and the reasons for these. 13.2 Finance Committee noted the financial position and risks identified for the seven months to 31 October 2011 in relation to the projected outturn of £3 million as agreed in the Local Delivery Plan. 14. Prescribing overspend update (April to August 2011) 14.1 Michele Caldwell delivered a presentation to committee members outlining the pressure on the primary care prescribing budget. Specifically the volume of items prescribed and dispensed had increased by more than projected resulting in a £3 million year to date and growing overspend. 14.2 Investigation indicates that this is mainly due to activity increases in non part 7 proprietary medicines that have a higher unit cost compared with generic medicines. 14.3 Michele highlighted the prescribing scorecard that is being developed to help pin point variances in prescribing. She reported that the prescribing advisers are focussing on practices with growth and costs higher than the Ayrshire average. Michele also highlighted that caution was always needed when looking at figures in isolation from other factors and that higher costs may be rational. 14.4 It was noted that the ratio of prescribing advisers to practices in NHS Ayrshire and Arran is lower than in NHS Greater Glasgow and Clyde where prescribing costs have fallen considerably. If additional resources were felt to be relevant in managing the overspend further then a stated case would be brought forward for discussion with director colleagues. 14.5 Other areas discussed included : The active promotion of generic prescribing. Guidance in the Joint Formulary indicates that hospital and general practice prescribers should prescribe generic medicines initially with patient reviews taking place annually. Wastage on medicines in terms of hoarding, management of medicines in nursing homes (which is being reviewed in association with the Change Fund in year), supply frequency, especially for new items. Michele highlighted that a big area of waste concerns non-compliance with associated lack of outcome and clinical benefit. General practitioners have suggested that prescriptions for some big spend items could be added to the controlled drug prescriptions awaiting authorisation by a doctor. These get a higher level of scrutiny than standard repeat prescriptions. Committee also noted that some anticipated cost reductions from patent expiries have not yet been realised due to the timing of the patent changes. 14.6 The Finance Committee noted the work being carried out by the Pharmacy and Medicines Utilisation Team to identify the reasons behind the increase in volume and cost and the work being carried out by the prescribing advisers within general practices. 8 of 11 14.7 Michele advised that consideration was being given to the potential benefits the Covalent Performance Management system could bring in terms of benchmarking prescribing information in the future. 15. Medicines Resource Group (MRG) cost pressures for 2012/13 15.1 Members were asked to consider the draft funding package for prescribing in 2012/13. The paper provided to members was a summary of the full paper which had been discussed at a Medicines Resource Group meeting that morning. Michele drew members’ attention to Figure 1 within the paper which outlined NHS Ayrshire and Arran prescribing costs 1997 - 2012 and showed a steady rise. 15.2 The MRG was recommending a recurring increase of £6.6 million for the Primary Care Prescribing budget, and £4.35 million for secondary and tertiary care medicines. 15.3 The four main cost pressures for 2012/13 were noted as: high cost medicines which treat relatively small numbers of patients in secondary / tertiary care, unprecedented growth in the volume of prescribing in primary care, underestimate in the rate and type of prescribing volume growth in 2011/12, and two specific new treatment options recommended by the Scottish Medicines Consortium (anticoagulation and hepatitis C) with high revenue implications. 15.4 Finance Committee noted the starting point and advised that at the next Board meeting Michele should deliver some of the presentation delivered at this meeting. Michele would also advise Board members what further actions / resources pharmacy department require in order to get back on track. A development session with the new Board members regarding the complexities surrounding the prescribing budget would be set up as soon as possible. Action: Michele Caldwell 16. Clinical Resource Group (CRG) Prioritisation 16.1 Fiona McQueen updated that from the ranked list, a line could be drawn at proposal eight or nine. East Ayrshire Council had confirmed that funding would continue to be provided by them for 2012/13 regarding the child protection post. 16.2 Finance Committee discussed proposal eight, (bariatric surgery) and Fiona McQueen confirmed there had been a change in number of patients, not just consumables. Patient categories would also be restricted. National guidance in relation to weight management service is expected soon. NHS Ayrshire and Arran does not currently provide a full package of weight management service. 16.3 Stephen McKenzie highlighted the importance of being able to evidence how cost effective services were when going out to public consultation. 16.4 Finance Committee noted the prioritisation outcome; noting again that access targets were required to be met. 9 of 11 17. Pay and supplies cost pressures 17.1 Members were asked to consider categories of cost pressures for 2012/13. It was recognised that most of these costs were unavoidable due to national pay negotiations, or high inflation on supplies. 18. Required efficiency savings / cuts for 2012/13 18.1 Members were asked to recommend that the focus of consultation with the public should be on developments and cuts required in order to fund them. Derek Lindsay updated that the uplift for 2012/13 will be around £5.8 million. Therefore around £15 million efficiency savings / cuts would be required in order to reach the target of £21 million “unavoidable” cost pressures. 18.2 With a 4% efficiency savings target in 2011/12, Appendix 1 showed that some directorates did reach this target, however Integrated Care and Emergency Services (ICES) and Integrated Care and Partner Services (ICPS) achieved less than 2%. Progress on 2012/13 savings is slow for frontline directorates. 18.3 Bill Stevely sought clarity on the specifics of the public consultation. An update will be provided by Fiona McQueen in relation to events and outputs sought and noted that the dates have been arranged for January 2012. Action: Fiona McQueen 19. Evidence of Health and Sport Committee 19.1 Evidence submitted to the Health and Sport Committee was noted. Stephen McKenzie queried the transfer of healthcare from Scottish Prison Services without a sufficient transfer of budget meaning that a significant proportion of the health uplift in 2012/13 has to be used to meet new costs to the NHS budget. Derek Lindsay had also attended the external Finance Committee of the Scottish Parliament in Largs on 7 November 2011 where he gave evidence on the draft Scottish Budget and where again the impact on NHS Ayrshire and Arran was highlighted. 20. Scotland’s Public Finances 20.1 Finance Committee members noted the report by Audit Scotland. 21. AOCB 21.1 Bill Stevely suggested that when planning for future meetings perhaps a special meeting should be called when discussing Outline Business Cases, or Full Business Cases. 21.2 Also consideration should be given to splitting the agenda whereby core business would be dedicated a set timeframe and thereafter any directors / managers required to attend would be provided with a suitable time slot. 10 of 11 22. Date of next meeting 22.1 The proposed date for the next meeting had been suggested for March 2012, however this proved unsuitable and was subsequently arranged for Monday 12 March 2012 at 1330 hours. Future dates would be arranged as soon as possible. 11 of 11
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