Slide 1

Budget 2014/15West London CCG

1

Contents

The purpose of this paper is to present the Governing Body with the updated budget for the CCG for 2014/15. The paper comprises:

PageSection 1 - The medium term financial position3The CCGs opening position4A summary of the 10 year financial model5

Section 2 - Summary budgets 2014/157Summary Budgets 2014/158Contract negotiation update12Risks and uncertainties14Impact of the NW London financial strategy15

Section 3 - Programme budget for 2014/1516Summary budgets17Detailed budget by programme area18Reserves and investments23QIPP25

Section 4 - Running costs26

Section 5 - Conclusion and next steps28

Section 1 medium term financial position

3

The CCGs opening positionThe financial plan for 2013/14 set out a budget that would deliver:A surplus of 20,155kAn underlying (recurrent) surplus of 25,424k.

At month 9, the forecast year end position for 2013/14 is:A surplus of 29,612kAn underlying (recurrent) surplus of 34,338 k.

The financial position has improved in year because of a combination of the successful delivery of QIPP schemes, some unutilised budgets following PCT disaggregation, investment slippage and the lack of need to utilise the contingency budget.

This very strong position needs to be viewed in the light of the CCGs funding position. NHS England has published target capitation budgets which tell us how much funding we should be receiving, based on the assessed need of the local population. West Londons funding is 85m higher than the target funding for the CCG. NHSE has indicated through the funding allocations for 2014/15 and 2015/16 and its further planning guidance that CCGs who are over capitation, as we are, should only expect resource increases in line with inflation over the next few years. This has therefore been reflected in our 5 year planning. The allocations are shown below.

4

Summary of the 10 year modelA 10 year planning model has been produced for the CCG. The purpose of undertaking longer term financial planning is to demonstrate the impact of decisions taken for 2014/15 on the future finances of the CCG, so that we can give due regard to the longer term financial viability. This includes determining what we can afford to spend recurrently and what we can only afford to spend non recurrently (i.e. one off expenditure).

The graphs below illustrate this. The first graph shows the do nothing scenario, where we make no savings or investments in new services and allow expenditure to continue in line with existing trends. The second graph shows the financial model on which the 2014/15 budget is based. In this graph, the investment budget is split between investment that we can make recurrently and investment that we can make non recurrently. The third graph uses the same QIPP and investment figures overall, but all investments are now recurrent.

Graph 1 do nothingGraph 2 current financial plan Graph 3 all investments recurrentThe graphs demonstrate that:Without a savings plan each year, the CCG will move into deficit in the futureWhile we can afford to make significant investments if we understand our recurrent position, we would quickly move into deficit if we spend all the money recurrently.

Summary of the 10 year model (2)The tables below summarise the first 5 years of the model. The first table shows the overall income and expenditure position. The second table shows how much of the surplus is recurrent and how much is non recurrent.

The recurrent surplus is the underlying position of the CCG. The underlying position gradually reduces over time to approximately 2% of the CCGs recurrent resource allocation, and then stabilises at this level. The reduction in the recurrent position allows the CCG to manage the movement towards the capitation funding level while still being able to invest in out of hospital services.

It should be noted that these figures assume a very large increase in expenditure in 2014/15 and that this higher level of expenditure is maintained. In practice this would be very hard to achieve while still ensuring value for money in the use of public funds.

Section 2 Summary budget 2014/15

7

Summary budget 2014/15The summary budget is shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The planned surplus for 2014/15 remains consistent with the surplus delivered in 2013/14. The detailed sections on programme and running costs explain the key movements year on year.

Update on budget changesThe changes in the summary budget from the budget presented to the March governing body are shown in the table below.

The changes since March reflect the contract agreements that have been reached to date, and the North West London financial strategy, as agreed by governing body in March

Underlying positionThe summary budget includes both recurrent and non recurrent (one off) expenditure. In some areas we are able to make decisions about whether to commit recurrent income to recurrent or non recurrent expenditure. Spending some of our recurrent income for non recurrent purposes allows us to maintain a strong underlying surplus. The table below sets out the how we have committed our funds within the overall budget.

The underlying (recurrent) position of the CCG is planned to be a surplus of 28,498k at the end of 2014/15

Bridge analysisThe graph and table below shows how we have committed our new resources during 2014/15.

Contract negotiation positionAs at 29 April the CWHHE CCGs have reached contract agreements with the following trusts:

Chelsea and Westminster NHS Foundation TrustImperial College Healthcare NHS TrustNorth West London Hospitals NHS TrustThe Hillingdon Hospitals NHS Foundation TrustWest Middlesex University Hospital NHS TrustRoyal Brompton & Harefield NHS Foundation TrustMoorfields Eye Hospital NHS Foundation TrustKings College Hospital NHS Foundation TrustLondon Ambulance Service NHS Trust (including HART)Central London Community Healthcare TrustWest London Mental Health NHS Trust

Contract agreements remaining outstanding include:

Central and North West London Foundation TrustUniversity College London Hospitals NHS Foundation TrustOther out of North West London trusts.

Several of the contracts that have been agreed are block contracts with performance incentive payments built in. The purpose of this contracting approach is to provide stability during the time of transition to the future acute hospital configuration set out in Shaping a Healthier Future, while also putting in place the appropriate incentives to deliver the necessary clinical transformation. As these contracts contain limited in year risk for commissioners, they have been agreed at a higher value than would have been the case if a PbR contract had been agreed. We are still seeking to reach agreement with CNWL, one of our key providers. Once these are agreed the level of risk will need to be reviewed.

12

Agreed Contracts The WL CCG agreed contract figures as at 29 April are shown in the table below:

13

Current risks and uncertaintiesThe risks and uncertainties currently identified are:

1) External System Risks

On going 2014/15 contract negotiationsUncertainty of allocations beyond 2015/16Unresolved PCT disaggregation issue regarding specialised commissioning and the impact on CCG allocation and expenditure.Lack of clarity on property costs - again this is a PCT disaggregation issue that has not been finalised.Integrated single financial environment not fit for purpose whilst on the face of it this is not a financial risk, the difficulty in providing budget holders with accurate statements could pose a financial risk.Continuing care restitution payments the planned NHS England approach to top slice CCG allocations to fund these payments, rather than utilising brought forward provisions, could create a material cost pressure.Potential further pressure on the SAHF budgetRisk of provider underdelivery against national targets (e.g., 18 weeks RTT)

2) Internal RisksDelivering the full QIPP programme.Implementation of the better care fund.Reduction in levels of running cost allocations in subsequent years.

The agreement of block contracts with some providers mitigates much of the in year risk associated with the delivery of the QIPP programme. However, achieving QIPP is critical to improving the underlying position of the CCG and to ensuring that a balanced budget can be set for 2015/16. Internal monitoring will therefore continue based on actual activity and ignoring the block arrangements.

14

Financial StrategyThis updated budget reflects the funding agreed as part of the North West London financial strategy agreed by the governing body in March, which resulted in the transfer of a net 6.4m of recurrent funds and 11.8m non recurrent funds from West London into other CCGs, in recognition of the over capitation position of West London and the under capitation position of other CCGs, and the need for them to invest in out of hospital and primary care services to deliver Shaping a Healthier Future. The overall impact of these transfers has been a reduction in the West London surplus for 14/15 of 3.3m, with the remainder being funded from reserves.

15

Section 3 Programme budgets

16

Programme budget 2014/15The summary programme budget is shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The key movements between years for each contract are explained in the detailed slides that follow.

It should be noted that some contracts have not yet been agreed and that those that have been agreed are not yet reflected in the budgets. The budget figures are therefore indicative and subject to change as contracts are signed.

Acute budgetThe acute budget is shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The key movements are explained on the next slide.

Acute (2)The key movements between years for each contract are explained below.

The lmperial College and ChelWest contracts with West London CCG are the agreed block contracts

The contract settlement reserve has been removed following the agreement of block contracts with the key providers

The other acute budget includes a contribution from reserves of 4m towards the 14/15 contract settlement

The other reserves include 860k acute non demographic reserve partially offset by 453k unidentified QIPP

It should be noted that some of the smaller out of area contracts have not yet been agreed. The budget figures are therefore indicative and subject to change as contracts are signed.

Mental Health budgetThe MH budget is shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The key movements between years for each contract are explained below.

The CNWL contract with West London CCG has not yet been agreed, and the budget figures are expected to increaseThe other MH contracts increase by 2.8m, driven by cost pressures (including 0.6m increase in spot placements, 0.5m step down of MH secure clients from NHSE, and 0.4m additional S117 clients and transition cases)

It should be noted that some contracts have not yet been agreed, including the CNWL contract. The budget figures are therefore indicative and subject to change as contracts are signed.

Community budgetThe community budget is shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The key movements between years for each contract are explained below.

The CLCH contract with West London CCG increases by 0.4m in 2014/15; this is the agreed contract amount

The other Community budget increases by 3.5m, driven by QIPP investments (1.7m), the rollout of the Community Cardiology service from QPP to K&C (1m), and the rollout of the MSK service to QPP (0.6m)

It should be noted that some contracts have not yet been agreed. The budget figures are therefore indicative and subject to change as contracts are signed.

Other programme budgetsThe other programme budgets are shown in the table below. This is reconciled to the forecast outturn for 2013/14 so that planned movements in expenditure can be seen.

The key movements between years for each contract are explained below.

The Continuing Care budget increases by 1.0m in 2014/15, driven by increased activity (including 0.6m physical disabilities) and the Primary Care budget increases by 2.6m, driven by 2m investments in primary care

There is a Contingency of 0.5% for 2014/15 and Headroom of 2.5%

34.0m increase in Other budgets including WL CCG investments and reserves for the North West London Financial Strategy. Investments are discussed further on the following slides.

Reserves and investmentsThe budget includes the following reserves and investments:

The investment reserves set out above include the impact of the NWL financial strategy.

Further detail on the planned investments is set out on the next slide.

InvestmentsInvestment plans identified to date for 14/15 total a maximum of 15.1m. These are summarised in the table below. Work is continuing to refine the investment plans, to identify any overlaps between schemes, and to risk assess the schemes for slippage.The CCG is in the process of reviewing and approving each proposal using prioritisation criteria including the funding arrangements and the investment plan will be monitored throughout the year by the Investment Task Force.

Aside from the CCG investment pot, there are several other potential funding sources for these investments depending on alignment with our strategic priorities. These include: BCF pump priming funds, PM Challenge Fund, NWL non-recurrent 2.5% headroom fund (Part A of NWL Financial Strategy), and scheme slippage.

QIPP plan 2014/15

The QIPP plan for the year is shown below. This has been reflected in budgets.

Section 4 Running Costs

26

Running costsAt a national level, the total running cost budget has been frozen for 2014/15, and then reduces by 10% in 2015/16. The link between running costs and population has been maintained this means that the total national running cost budget has been divided by the total population to derive a new spend per head, reducing from 25 per head in 2013/14 to 24.73 in 2014/15 and 22.07 in 2015/16.

Running cost budgets are pooled across the collaboration. At the collaborative level, there is a small increase in the running cost budget for 2014/15 of 400k. For West London, there is a small increase of 188k.

Budgets for running costs are currently being finalised but will not exceed the total funding available. A high-level view of the budgets is set out below, with some narrative about the key movements between 2013/14 forecast outturn and 2014/15. The table also shows an estimate of the saving that will be required in 2015/16. Across the Collaborative the saving requirement is c. 250k and the West London share is 59k.

20134/142014-152015-16FOT '000Movement '000%Budget '000NarrativeMovement%Budget '000 CCG Pay 1,581775%1,658 Includes FYE of post recruited late and budget for average 3% increments. 503%1,708 CCG Non-Pay 934(265)-28%668 Reduces due to non-recurrent spend taken out (0)0%668 CSU charge 2,817(70)-2.5%2,746 Agreement to reduce cost by 5% in months 7 - 12 (211)-7.7%2,535 Collaborative recharge 37017748%547 Charged in line with affordability (111)-20%436 Less programme recharges (101)(25)24%(125) Increases in line with pay costs plus additional programme recharge identified (4)3%(129) Reserves 0244244 Uncommitted reserve (244)0 Savings 000 Split based on allocation (59)(59) Total - Running costs 5,6015,7385,159

Section 5 Conclusion and next steps

28

Conclusions The budgets presented in this paper were originally agreed at the March governing body, and have been updated to reflect agreed contracts and the North West London Financial Strategy

The CCG has a strong underlying position by spending a large proportion of its reserves non recurrently it can protect itself against medium term risk as funding levels are reduced

The main acute contracts with Imperial and ChelWest have been agreed as block contracts, thus removing much of the in-year risk around contracts.

The Governing body is asked to;

Approve the budgets

Next stepsThe next steps are to:

Finalise contract negotiations with CNWL and the remaining out of area providersEnsure all QIPP and investment plans are robust and move into implementation

Appendix 1 - assumptions