Governing Body Meeting 17 December 2015 Agenda Item 12

Title of paper / Great Yarmouth & Waveney Clinical Commissioning Group Finance Report November 2015
What the Board is being asked to decide or approve / (1)  To note the month end (November 2015) financial position for 2015/16
(2)  To note the 2015/16 Quality Innovation Productivity and Prevention (QIPP) savings achieved year to date (YTD)
EXECUTIVE SUMMARY:
·  The 2015/16 YTD revenue position for GYW CCG is a deficit of £1.81m which is under plan. This position is due to activity above plan with acute providers and the impact of expert determination on the James Paget University Hospital (JPUH) contract.
·  The outcome of expert determination has resulted in an additional full year cost pressure to the CCG of £2.16m. This is not currently reflected in the forecast outturn positon, but instead has been included in the risks outside of the forecast.
·  A number of other significant risks have been identified that sit outside the forecast. Currently, the CCG does not have sufficient levels of mitigation to fully offset the cost pressures arising from the expert determination and these other risks. As such a full year risk adjusted deficit of £2.60m has been reported to NHS England.
·  The outcome of the expert determination and materialisation of the risks currently sitting outside of the forecast will have a significant impact on the CCG’s ability to achieve its planned financial targets. A Financial Recovery Plan (FRP) is being developed to bring the CCG back on target to achieve a breakeven position at year end.
·  The significant risks in the local health system for 2015/16 that may impact on financial targets are increased acute activity above current levels, increased prescribed drugs costs and activity, high cost mental health packages and increasing continuing healthcare costs.
·  The 2015/16 QIPP savings target is £12.6m of which £12.3m has been embedded within budgets. As at month 8, the CCG reported £4.56m of savings which is £2.46m under the planned YTD target of £7.03m.
·  The outcome of the expert determination has impacted on the CCG’s ability to deliver the planned QIPP savings associated with the JPUH contract. Mitigations to offset the shortfall are being considered as part of the FRP.
·  A key indicator of an organisation’s financial health and sustainability is the underlying financial position. The CCG’s forecast revenue position includes both recurrent and non-recurrent income and expenditure. The underlying financial position is the CCG’s forecast revenue position based only on recurrent income and expenditure and eliminates the effect of non-recurrent transactions.
·  An underlying surplus of 2% of recurrent allocation is recognised as a financially sustainable position. Of concern at this time is that the CCG is currently forecasting a year end underlying surplus of £0.20m which is only 0.1% of the CCG’s recurrent allocation. This forecast has been adjusted to include the impact from the expert determination and additional acute activity.
Risks attached to this proposal/initiative:
Finance and performance:
·  High financial risk if QIPP target is not achieved.
·  High financial risk if demand management QIPP initiatives are unsuccessful in reduction of secondary care activity and if 2014/15 QIPP savings prove to be non-recurrent in 2015/16.
·  Demand activity pressures within the health system are not managed effectively through implementation of QIPP alongside any changes in care pathways thus increasing financial risk going forward.
·  Insufficient mitigations available to fully offset additional risks.
Reputation:
·  High risk if statutory duty is breached by the CCG not remaining within the 2015/16 financial year revenue limits.
·  If financial risks are not managed in 2015/16 then the credibility of CCG going forward may be compromised alongside its financial viability for the future.
Resource implications :
None
Sponsor / Zoe Pietrzak
Report Author / Lisa Bell
Job Title / Senior Financial Accountant
Date / 11 December 2015

1.  EXECUTIVE SUMMARY

1.1.  The CCG has planned to achieve a breakeven position at year end instead of the nationally defined 1% surplus and this reflects the challenging financial environment that the CCG faces in 2015/16. The YTD revenue position is a deficit of £1.81m, which is below plan. A more detailed analysis for November 2015 is shown at Appendix 1.

1.2.  The expert determination on the JPUH contract has been concluded. The outcome of this process has resulted in an additional in year cost pressure to the CCG of £2.16m. This has not been reflected in the month 8 forecast outturn position but has instead been included in the risks outside of the forecast position. These are detailed at Appendix 4.

1.3.  Currently, the CCG does not have sufficient levels of mitigation to fully offset the cost pressures arising from the expert determination and the other risks outside of the forecast should they materialise. Consequently, a full year risk adjusted deficit of £2.60m has been reported to NHS England at month 8.

1.4.  The outcome of the expert determination and materialisation of the risks currently sitting outside of the forecast will significantly impact the CCG’s ability to achieve its planned financial targets. A Financial Recovery Plan (FRP) is being developed to bring the CCG back on target to achieve a breakeven position at year end.

1.5.  As at month 8, £4,561k of QIPP savings have been reported which is £2,465k below the YTD target of £7,026k. This is due to the impact of expert determination on the savings linked to the JPUH and slippage on some of the other schemes.

1.6.  The forecast underlying surplus as at month 8 is £0.20m and includes the impact from the over activity in the acute trusts. The current forecast represents 0.1% of the planned recurrent revenue resource and is significantly below 2% which is recognised as a more financially sustainable position.

2.  FINANCIAL TARGETS

2.1.  The CCG has a statutory duty to maintain expenditure within the revenue resource limit (RRL) set by the Department of Health (DH) and a duty to remain within its allocated Maximum Cash Drawdown (MCD) for the year.

2.2.  In accordance with national planning guidance the CCG would usually expect to set a target of 1% surplus at year end. However, owing to the challenges facing the CCG in 2015/16, a target breakeven position has been set and agreed with NHS England.

3.  REVENUE RESOURCE LIMIT

1. 

2. 

3. 

3.1.  The CCG’s initial resource allocation was £316,920k and included £5,038k for running costs. The CCG received additional funding in November as follows:

2015/16 Revenue Resource Limit (October 2015) / 318,028
CAMHs Transformational Funding / 334
2015/16 Revenue Resource Limit (November 2015) / 318,362

4.  CASH LIMIT

4.1.  The CCG has received notification of its indicative 2015/16 MCD. This represents the cash available for the CCG to spend in this financial year. The MCD is £321m and is reflected in the cashflow forecast shown at Appendix 2.

5.  STATEMENT OF FINANCIAL POSITION

5.1.  Appendix 3 shows the Statement of Financial Position (SOFP) for the CCG reflecting its assets and liabilities as at:

-  30 November 2015 (actual outturn position)

-  31 March 2016 (2015/16 forecast outturn position)

6.  REVENUE POSITION

6.1.  The YTD financial position is a deficit of £1,812k and reflects the YTD over performance with the CCG’s main acute providers and the impact of expert determination on the JPUH contract. Appendix 1 shows the actual spend against year to date budgets within the programme areas. More detail on the key variances is shown in section 7.

7.  OPERATIONAL DELIVERY

7.1.  Norfolk and Norwich University Hospital (NNUH). Based on month 7 data, the YTD overspend of £729k is due to increased elective activity (backlog clearances in trauma and orthopaedics and skin cancer treatments), increased non elective emergency admissions and increased pathology activity. A full year overspend of £886k is currently forecast.

7.2.  James Paget University Hospital (JPUH). Based on month 7 activity data, the YTD overspend of £2,382k reflects over performance in elective, outpatients and day case activity and the cost pressure arising from the expert determination outcome. Discussions are underway with the JPUH to bring activity levels back to plan. A full year overspend of £1,339k is currently forecast.

7.3.  Other Acute. The YTD overspend of £153k is due to the impact of increased expenditure outside of contract. A full year overspend of £200k is currently forecast.

7.4.  Private Providers. The YTD overspend of £95k is due to increased non NHS non contract activity. A full year overspend of £150k is currently forecast.

7.5.  Acute Drugs. The YTD underspend of £362k is due to reduced non tariff drugs spend with the JPUH and NNUH. A full year underspend of £543k is forecast.

7.6.  Other Mental Health Services and Learning Difficulties. The YTD overspend of £119k is due to an increase in the number of individual high cost packages. A full year overspend of £200k is currently forecast.

7.7.  Ambulance Trust. Based on month 7 activity data, the YTD underspend of £77k is due primarily to a reduction in the number of ambulance journeys. An underspend of £150k is currently forecast for year end.

7.8.  Other Commissioning. The YTD underspend of £242k is due to a change of responsible commissioner liability, which has resulted in reduced funded nursing care expenditure and savings on non-clinical budgets. An underspend of £917k is currently forecast at year end and includes further predicted savings across the other commissioning activities.

7.9.  GP Prescribing. The YTD overspend of £530k is due to the impact of non-recurrent prior year expenditure that was underestimated in the 2014/15 year end position and in year cost pressures arising from increased volume and pricing. The YTD position reflects expenditure to date against the CCG profiled budgets based on the prior year actuals. The forecast outturn position of £600k overspend also includes data from the national prescribing forecasting model.

7.10.  Activity Data. Below are activity graphs showing data for A&E, Non Elective, Outpatients and Elective activities. The data is analysed by ‘point of delivery’ for JPUH and NNUH combined, showing the monthly/cumulative comparisons of:

·  2015/16 actual and planned activity (to October 2015)

·  2014/15 actual activity

·  2013/14 actual activity

Cumulative to October 2015, total A&E activity is 2% under the combined plan. Individually, JPUH is under plan and NNUH is over plan.

Cumulative to October 2015, total Non-Elective activity is 1% over the combined plan. Individually, JPUH activity is to plan, however, YTD it is 2% lower than 2014/15. NNUH activity is over plan.

Cumulative to October 2015, total Outpatient activity is 15% over the combined plan. Individually, JPUH is over plan and NNUH is under plan. Action has been taken with JPUH to understand the increase in activity levels YTD.

Cumulative to October 2015, total Elective activity is 9% over the combined plan. Individually, JPUH is over plan and NNUH is over plan. Action has been taken with JPUH to understand the increase in activity levels YTD.

8.  UNDERLYING POSITION

8.1.  The underlying financial position is the CCG’s forecast outturn position based on recurrent resources and expenditure. It eliminates the effect of non-recurrent transactions and reflects the CCG’s revenue position based on its normal recurrent operating activity. This is a key indicator of financial performance and will be monitored closely throughout the year.

8.2.  The forecast underlying surplus at month 8 is £0.20m. The forecast includes the impact from the expert determination, which has been recognised as non-recurrent expenditure. The graph below shows the month on month movement of the underlying surplus against the plan target of £3.37m:

9.  BETTER CARE FUND

9.1.  The Better Care Fund (BCF) is a national initiative introduced in 2015/16 to facilitate closer integration between health and social care. It operates in the form of a pooled fund arrangement with contributions from CCGs, Local Authorities and District and Borough Councils.

9.2.  The CCG has a pooled fund arrangement with Norfolk County Council (NCC) and Suffolk County Council (SCC). The CCG’s contribution to the fund in 2015/16 equates to £15.5m. Of this amount approximately £11m will be funded from the current CCG baseline of which £8m will fund currently commissioned services and £3m will support the implementation of the Care Act and other Local Authority based services.

9.3.  The principal objective of the BCF is to establish integrated working arrangements across nationally defined core work streams. Plans have been developed and agreed between the CCG, NCC and SCC and include £3.7m of savings. In order to mitigate any shortfall in savings, a risk share agreement has been negotiated between the CCG and both county councils. The total financial risk to the CCG if the savings are not achieved is £2.275m, however, this risk has already been mitigated within the CCG’s forecast outturn position.

9.4.  The CCG has established a BCF project management office (PMO) to identify potential savings schemes and monitor and report progress.

10.  2015/16 QIPP PERFORMANCE

10.1.  The QIPP savings plan is reviewed each month for actual savings delivered on QIPP schemes identified. A report detailing the progress to date against identified QIPP schemes for 2015/16 is presented separately to the Governing Body.

10.2.  A high level summary of QIPP achievement to date is detailed below:

10.3.  As part of the actions in place to recover the CCG’s recurrent financial position back to a 1% surplus by 2016/17, the CCG has established a dedicated QIPP delivery team to ensure that the schemes and processes are successfully embedded and delivered and any mitigating actions are identified.

10.4.  The CCG’s forecast financial position at year end is dependent on the full achievement of savings identified in the QIPP plan. Non achievement of these savings will impact the CCG’s ability to meet its financial target at year end.