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
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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.
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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.
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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
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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
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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.
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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
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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
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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.
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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.
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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.
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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.
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