Ref. No.: 20071257
HEALTH REPORTSubject: / DHB UNAUDITED FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2007
Date: / 31 July 2007 / File Ref: / HC07-16-2
Attention: / Hon Pete Hodgson (Minister of Health)
Copy to: / DHB Chairs and DHB Chief Executives
Treasury – State Sector Performance Branch
Crown Health Financing Agency
Department of Prime Minister and Cabinet
Deputy Commissioner, States Service Commission
Director-General of Health
Deputy Director-General Corporate Services
PURPOSE OF HEALTH REPORT
This report presents a summary of the unaudited financial performance of the District Health Board (DHB) sector for the year ended 30 June 2007 based on data provided by the DHBs in monthly financial templates.
TIMING IMPLICATIONS
Priority:
/ Routine / Semi-Urgent(5 Days) / Urgent
(3 Days) / 24 Hour
/ þ
Executive summary
The DHB sector financial performance for the year ended 30 June 2007 resulted in a sector surplus of $4.2M compared to a planned deficit of $30.3M. This represented a $34.5M favourable variance against plan. These results are unaudited and are subject to revision.
21 DHBs have approved District Annual Plans (DAPs) for the 2006/07 financial year.
financial implications
Nil
COMMUNICATIONS
Once this report has been signed by the Minster the report will be posted on the Ministry website, exclusive of any paragraphs containing free and frank advice. The address at the Ministry’s website for locating this information is as follows: http://www.moh.govt.nz/dhbfp and select DHB Financial Performance Reports.
Recommendations
The recommendations are that you:
(a) note that the DHB sector financial performance for the year ended 30 June 2007 resulted in a net surplus of $4.2M that was $34.5M favourable to plan / Yes/No(b) note that all DHBs currently have approved District Annual Plans for the 2006/07 year. / Yes/No
(c) note that the Minister is to highlight any paragraphs he does not want to be posted on the Ministry’s website / Yes/No
(d) refer this report to the Minister of Finance for his information / Yes/No
Anthony Hill
Deputy Director-General
Sector Accountability and Funding Directorate
MINISTER’S SIGNATURE:
DATE:
Contact for telephone discussion (if required)
Direct Line After Hours / Suggested First Contact
John Hazeldine / Finance Manager / 04 496 2396 / 027 271 3218 / 1
Bridget Hesketh / DHB Financial Monitoring – Team Leader / 04 496 2409 / 2
Graeme Rule / DHB Financial Monitoring – Senior Advisor / 04 496 2445 / 3
REPORT
Background Information
1. This report provides a summary of the unaudited financial performance of the District Health Board (DHB) sector for the year ended 30 June 2007 and shows a net year to date (YTD) surplus for the sector of $4.2M. This is $34.5M favourable to the planned $30.3M deficit.
2. Tables and appendices have been compiled from rounded data and may not necessarily cross add.
Consolidated Statement of Financial Performance ($'000)30 June 2007
Year to Date / Full Year
Actual / Phased Plan / Variance / % Variance * / Plan
$ '000 / $ '000 / $ '000 / $ '000
TOTAL REVENUE / 10,030,032 / 9,654,903 / 375,128 / 3.9% / 9,654,903
Operating Costs
Personnel Costs / 3,569,720 / 3,490,290 / (79,431) / (2.3%) / 3,490,290
Outsourced Services / 332,619 / 247,043 / (85,577) / (34.6%) / 247,043
Clinical Supplies / 865,530 / 833,721 / (31,809) / (3.8%) / 833,721
Infrastructure/Other Supplies / 1,050,730 / 1,002,368 / (48,361) / (4.8%) / 1,002,368
Subtotal / 5,818,600 / 5,573,422 / (245,178) / (4.4%) / 5,573,422
Payments to Providers
Personal Health / 2,868,659 / 2,767,362 / (101,296) / (3.7%) / 2,767,362
Mental Health / 390,215 / 403,407 / 13,192 / 3.3% / 403,407
Public Health / 6,635 / 2,279 / (4,355) / (191.1%) / 2,279
Disability Support Services / 901,480 / 900,810 / (670) / (0.1%) / 900,810
Maori Health / 40,245 / 37,882 / (2,362) / (6.2%) / 37,882
Subtotal / 4,207,232 / 4,111,740 / (95,492) / (2.3%) / 4,111,740
TOTAL EXPENSES / 10,025,832 / 9,685,162 / (340,670) / (3.5%) / 9,685,162
NET RESULT / 4,200 / (30,259) / 34,459 / 113.9% / (30,259)
FTEs at end of period / 51,031 / 50,109┼ / (921) / (1.8%) / 49,903┼┼
Avg Annual Cost Per FTE ($) ** / 71,440 / 69,941 / (1,599) / (2.3%) / 69,941
Case Weighted Discharges - Inpatients / 536,003 / 529,311 / 6,692 / 1.3% / 529,311
Case Weighted Discharges - Daypatients / 89,585 / 76,609 / 12,975 / 16.9% / 76,609
Total Case Weighted Discharges *** / 625,588 / 605,920 / 19,667 / 3.2% / 605,920
Note:
* The % column shows the year to date variance as a percentage of phased plan.
** The cost per FTE is calculated by dividing the annualised YTD Personnel Costs by the average YTD FTEs.
*** Figures provided in the monthly financial templates. West Coast DHB data has been removed.
┼ Planned FTE as at 30 June 2007.
┼┼ Average FTE for the year
3. The above table summarises the unaudited Statement of Financial Performance for the sector for the year ended 30 June 2007.
4. Total Revenue for the period is $375.1M (3.9%) favourable to plan. This is due mostly to additional revenue received by the sector for the government rollout of lower fees for the 45-64 age group.
5. Expenditure in Personnel Costs is $79.4M unfavourable to plan (2.3%). Total Full Time Equivalents (FTEs) are 1.8% greater than plan, whilst the average consolidated cost per FTE is 2.3% greater than plan.
6. Outsourced Services reflect an unfavourable variance to plan of $85.6M (34.6%). The majority of this unfavourable variance ($48.2M) is attributable to outsourced medical staff (Medical, Nursing, Allied Health and Support Personnel) which is indicative of the increasing costs for health personnel across the sector, and the inability of the sector to recruit and retain permanent staff. Outsourced Clinical Services are $25.4M unfavourable to plan, whilst outsourced management costs (personnel and contracted services) are unfavourable by $12.0M.
7. Appendix 1 to this report shows the net results by arm for each DHB year to date as at 30 June 2007.
· Thirteen DHBs reported operating surpluses.
· Eight DHBs reported deficits of which six had planned for deficits.
· Four DHBs returned unfavourable variances to plan:
o Capital & Coast DHB reported the largest unfavourable variance at $26.0M. The unfavourable variance is primarily in the Provider arm ($27.2M). The main contributors to the unfavourable variance in the Provider arm results is due to proceeds from the sale of land in Porirua not being realised in the 2006/07 financial year ($12.7M), personnel costs ($2.2M unfavourable), outsourced services ($8.7M unfavourable) and clinical supplies ($4.0M unfavourable). The DHB has been moved to Intensive Monitoring on the Monitoring and Intervention Framework (MIF), and the Ministry is working closely with the DHB to address the issues.
o Hawke’s Bay DHB reported an unfavourable variance of $9.7M, due primarily to the proceeds from the sale of the Napier Hill site not being realised in the 2006/07 year. The approved DAP for the DHB included the proceeds from the land sale, as well as an underlying deficit of $6.0M which the DHB has managed to reduce significantly with a deficit of $3.6M returned.
o West Coast DHB also reported an unfavourable variance of $3.2M, reported primarily in the Provider arm ($5.4M unfavourable); this variance is due mainly to outsourced medical personnel ($3.1M unfavourable) as the DHB has extreme difficulty in recruiting and retaining medical staff and is highly dependant on the use of more expensive locums. The Ministry has initiated a project in conjunction with the DHB to address the issues being faced by the DHB. The DHB has been moved to Performance Watch on the MIF.
o Tairawhiti DHB reported an unfavourable variance of $1.3M. Total revenue for the DHB was $4.3M better than planned, this was however, offset by expenditure being $5.6M unfavourable to plan. The unfavourable expenditure variance is attributable to increased expenditure on Personal Health ($1.8M); Outsourced services, which are unfavourable to plan ($1.5M) due to the cost of additional locums to provide extra clinics and operating sessions to improve performance against ESPI's, and partly due to the escalating costs of outsourcing; and total personnel costs which are unfavourable to plan by $1.3M; this was due, in part, to additional payments for leave cover and partly to longer time frames to action service changes.
· Seventeen DHBs returned favourable variances to plan.
o The following DHBs, without cyclical deficits, returned favourable variances greater than $3.0M:
§ Otago DHB reported a favourable variance of $10.4M. The favourable variance is predominantly due to savings realised in IT expenditure, and an under spend in Mental Health services.
§ Auckland DHB reported a favourable variance of $8.3M, and demonstrates ADHBs commitment to living within their means. The favourable variance YTD is primarily due to a favourable variance in the Funder arm resulting from the recognition of additional revenue from the six monthly wash up of IDF funding, the back payment of Aged Residential Care revenue and a profit on the sale of interest rate swap instruments and the late start of strategic initiatives offset by additional PHO expenditure and additional Home Based Support expenditure.
o The following DHBs, who have cyclical deficits approved in their DAPs, returned favourable variances greater than $3.0M:
§ Nelson Marlborough DHB reported the highest favourable variance ($14.2M). Lower than planned expenditure is primarily due to a delay in the start of new initiatives in all service areas plus the wash-up for year to date Mental Health service provision by the DHB Provider arm. The DHB is managing savings for the commencement of their building project; however they are 7.2% ahead of plan on the delivery of CWD.
§ Waitemata DHB reported a favourable variance of $8.5M. The surplus contains $8.3M of timing differences where the 2007/08 budget contains the expenditure while the 06/07 actual result contains the relevant revenue.
§ Counties Manukau DHB reported a favourable variance of $7.1M due to increased revenue received ($31.3M) offset by increased expenditure of only $24.2M.
§ Bay of Plenty DHB reported a favourable variance of $5.9M due in part to an improved forecast IDF wash-up at year end as a result of the impact of strikes on IDFs.
§ Taranaki DHB reported a favourable variance of $4.5M. The main contributory factor to the surplus is in Personal Health, with net IDF outflows being favourable for the year and contributing nearly $3.0M to the overall Funder surplus.
§ Lakes DHB reported a favourable variance of $4.0M due to YTD revenue being $5.7M favourable, of which revenue from ACC was $1.6M favourable, whilst expenditure was marginally unfavourable to plan ($1.7M).
§ Canterbury DHB reported a favourable variance of $3.2M primarily due to gains on property sales finalised in June 2007.
§ Southland DHB reported a favourable variance of $3.2M. The favourable variance is primarily due to the Funder arm reflecting a favourable variance.
8. Appendix 2 separately presents the results of the Funder arm payments to its own Provider and Governance arms, and payments to other providers. Payments to other providers include payments for IDF Outflows. On average DHBs distribute slightly more than 50% of their Funder arm to other providers (inclusive of IDF outflows).
§ West Coast DHB is an outlier in the Funder arm distribution of revenue to their own Provider arm as the DHB is “the provider” for the area. There are very few alternative providers for services in the West Coast and therefore the DHB plans and reports much less in terms of payments to other providers.
§ The tertiary DHBs also appear to be outliers (with approximately 60% being paid to their provider), however if the impact of IDF outflows is excluded, of which they have very little, the tertiary DHBs are more in line with the sector.
9. The report reflects both the dollar variance and any shift in expenditure pattern between a DHBs’ own Provider arm and other providers. Overall both revenues to and payments made by the Funder arm exceed plan, revenues by $330.0M (3.8%), payments to the DHBs’ own Provider arm by $132.4M (2.8%), and payments to other providers by $95.5M (2.3%). The increased revenue being indicated by the DHBs is in line with the additional funding for PHO’s.
10. Appendix 3 shows Provider arm expenses as a percentage of revenue. This allows for comparison of cost structures on a common basis. DHBs individually analyse results to identify potential strengths and weaknesses against other DHBs of comparable size and communities of interest. Within the Provider arm net results range from West Coast DHB with the highest deficit at 17.9% of revenue to Otago DHB with the highest surplus at 2.7% of revenue. In dollar terms Auckland DHB reports the highest deficit at $41.1M and the Otago DHB has the highest surplus at $7.1M. The majority of DHBs are reflecting deficits against their Provider arms; however this is offset by surpluses being carried against the Funder arms.