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Finance & Business Planning

Trust ‘base case’ forecastsNWL Reconfiguration

Summary document

28 February 2012 – updated 8 March 2012

PAPER 3.2

2

Acute reconfiguration

Phase 1: Base case / ‘do

nothing’ scenario

Phase 2: Review the medium list

of 10-15 reconfiguration options

Phase 3: Detailed evaluation

of 3-4 shortlisted options

▪ Establish normalised

Trust I&E 11/12

▪ Model change in income

– Demand due to

demographic & non-

demographic growth

– Price change due to

Tariff deflator

– QIPP savings

▪ Model change in costs

– Change with activity

– Cost inflation

– Productivity savings

▪ Forecast Trust I&E, and

evaluate against

requirement for 1%-

2.5%1 net surplus by

14/15

▪ Detailed analysis of end state:

– New patient flows (including

travel times to model some

services)

– Shifts in activity and revenue,

and scaling variable costs

– Additional productivity

savings from consolidation

– I&E impact of reduction or

investment in estates

– Capital investments and/ or

cash receipts from disposal

of assets

▪ Submit quantitative assessment

of options for Programme Board

to select 3-4 shortlisted options

for further analysis

▪ Additional analysis:

– Phased reconfiguration

changes and implications

for double running costs

– Year-by-year Trust I&E

– Capacity, estate and

equipment implications

– Year-by-year capital

requirements

– High level implications for

Trust cash flow (in

conjunction with Trusts -

TBD)

– Impact assessment on

patient access (travel

times to closest providers)

▪ Submit quantitative

assessment to Programme

Board

Feb March April

XX Due date

OOH modelling is continuing in parallel through the OOH sub-group – this

will feed back into F&BP group through Phase 2

1 Net surplus of 1% estimated as the absolute minimum for viability, however Foundation Trusts will aim for between 2-3% for ongoing viability and

reinvestment in services, and to meet Monitor’s full set of financial assessment criteria (agreed F&BP board 17th Feb)

3

Summary of the ‘base case’ financial forecasts of Trusts

▪ The acute sector in NWL faces a very challenging period in terms of financial pressures due to a

combination of the current starting position, planned activity and tariff reductions, and the requirement

to meet new standards

▪ These pressures will result in a financial gap by 2014/15 that, in the current site configuration, would

require unprecedented levels of savings to achieve financial viability; in some cases the gap is larger

than the productivity opportunity that either the Trust or peer benchmarks suggest can be delivered

without service reconfiguration

▪ Starting positions (normalised 2011/12 year-end plan) for the seven Trusts as a whole amount to a

£31m deficit (-1.3% net surplus). Two individual trusts are in deficit (NWLH and Imperial), three are

breaking-even (West Middlesex, Ealing and Hillingdon), and two are in surplus (Chelsea &

Westminster and Royal Brompton & Harefield)

▪ The pressures facing Trusts over the coming three years to 2014/15 result in a £332m gap to achieve

1% surplus (taken as the minimum requirement for viability although Foundation Trusts would be

aiming for higher surpluses for reinvestment.) The main factors that contribute to this gap are:

- £54m starting gap to 1% surplus (-£31m deficit, plus £23m to 1% surplus)

- £149m increase in costs from pay and non-pay inflation

- £72m net reduction in income from the combination of tariff deflator and changes to CQUIN

- £21m net reduction in surplus due to demand growth minus commissioner QIPP plans, offset by

assumed reductions in marginal costs

- £17m increase in costs to meet new service standards

- £16m reduction in income due to changes in R&D and education funding

- £5m net reduction in surplus due other factors.

Note: Figures are rounded, which may result in a discrepancy in the totals

4

Forecast commissioning spend and impact of QIPP on acute Trusts

Trust I&E forecasts in ‘base case scenario

Appendix

Contents

1

2

3

- Trust I&E forecasts

- Trust benchmark analysis

5

SOURCE: NWL Commissioning Service Plan 1 Dec 2011, Revised QIPP figures 1 Feb 2012

Gross

savings

381

Change

in non-

comm-

issioning

spend

84

Price

change7

139

Demand

growth4

447

Spend

2011/12

3,576

Spend

2014/15

3,725

Recur-

rent in-

vestment

and re-

tendering

138

Surplus: 1%6

Budget

2014/15

3,772

Change

in non-

recurrent

allocations

123

Change in

recurrent

resource

limit (RRL)

274

Budget

2011/12

3,621

NWL sector commissioning budget, spend, QIPP savings and investment 2011/12 to 2014/15

Commissioner budgets1 Commissioner spend2

1 Total available budget including recurrent and non-recurrent allocations 2 Total spending including commissioning healthcare services and non-commissioning spend

3 Community Health Services (CHS) 4 Based on demographic and non-demographic growth less the £55m per note 5

5 Includes £55m pump priming investment to support out of hospital strategy 6 Commissioner surplus planned to be slightly above 1% (1.2%) due to higher surplus in Brent’s CSP plan

7 Price changes includes tariff (-1.8%pa) and CQUIN (+1% 12/13)

Commissioners need to make £243m savings from QIPP

initiatives over the next 3 years to offset growth and achieve 1%

surplus6

£m

QIPP

Net QIPP savings:

£243m5

Acute & CHS3: -1.8%pa

Acute CQUIN: +1% 12/13

Primary care: 0%pa

1

6

£228 (60%) of these savings are planned to come from the

acute sector

Breakdown of total GROSS QIPP savings by service up to 2014/15

100% =

Revised QIPP Feb ’12

12/13 - 14/15 (3yrs)

33 (9%)

CSP 1 December

12/13 - 14/15 (3yrs)

53 (14%)

430 381

228 (60%)

33 (9%)

294 (68%)

28 (7%)

30 (7%)26 (6%)1

35 (9%)

583

52 (12%)

Last year’s CSP

09/10 - 14/15 (5yrs)

499 (85%)

7 (1%)

4 (1%)

9 (2%) 65 (11%)

’Other’ savings2

Acute

Community

Primary care

& prescribing1

Mental health

& Learning disability

SOURCE: NWL Approved Strategic Commissioning and QIPP plan 2010/11; QIPP database 2011/12 (15th Dec 11)

£m, %

1 ‘Primary & prescribing’ in this year’s CIP includes approximately £18m of prescribing savings

2 ‘Other’ savings cover a range of initiatives including unspecified contractual changes

Note: Figures are rounded, which may result in an apparent discrepancy in the totals

1

7

The total spend on all acute Trusts by NWL commissioners is

planned to decrease from £1.6b to £1.5b over three years

Note: This does not include any assumptions on the level of investment or retendering for new services going to acute Trusts

1 Tariff -1.8%pa; CQUIN +1% in 12/13

Source: NWL CSP 1st December 2011, revised QIPP figures February 2012

£m

228 1,5161,629

2014/15Price

change

(tariff &

CQUIN1)

78

QIPP

savings

Demand

growth

193

2011/12

Net change: -£35m

(2.1% over 3 years)

Spend on acute sector by NWL commissioners, 2011/12 to 2014/15

1

Note: This shows the

total NWL commissioner

spend on acute Trusts.

A subset of this goes to

the NWL Trusts, which

makes up a subset of

their revenue sources

8

Most of the acute savings are planned for non-elective (42%)

and outpatient (37%) services£m, % of total acute savings

228

Other

22 (10%)

A&E

11 (5%)

Elective

14 (6%)

Outpatient

84 (37%)

Non elective

96 (42%)

Total acute

Total acute savings 12/13 to 14/15

Source: NWL CSP 1st December 2011, revised QIPP figures February 2012

1

9

Gross impact of QIPP by acute Trust and POD

1.4

2.1

0

2.9

2.9

1.6

0.9

1.3

3.3

0.8

0

2.4

4.8

1.6

0.6

2.0

10.3

10.8

0

21.5

35.4

12.7

8.5

13.6

Outside NWL Trusts 18.4

5.5West Middlesex

Ealing

Royal Brompton

& Harefield2 0

NWLH 25.7

Imperial 22.8

Hillingdon 9.6

3.6

Chelsea

& Westminster11.5

£m, %

37.0

21.0

0

52.8

78.5

25.8

14.5

35.8

1 QIPP from outside NWL assumed to be proportional to income from outside NWL, except Imperial, where no QIPP was assumed for non-London income

2 Assumes no QIPP savings for Royal Brompton & Harefield due to specialist nature of the work – agreed at F&BP board 17th February 2012

Source: Revised QIPP analysis Feb 2012;

From NWL commissioners

From outside NWL1

Gross QIPP for NWL commissioners, by Trust and POD 12/13 to 14/15

A&EElectiveOutpatient Non elective

Gross savings

32% 22% 5% 14%

Total (incl.

‘other’ services)

97.0 112.7 15.5 13.3 265.3

Base income 11/12 305.9 519.4 326.6 74.3 1,926.0

Savings (%) 18%

Summary for NWL Trusts (excludes Trusts outside NWL, but includes income and QIPP from commissioners outside NWL)

1

-11%

-12%

-14%

-9%

-15%

0%

-15%

Percent of

11/12 income

Percent of 11/12 income

10



Appendix

Contents

1

2

3



11

Context for the ‘base case’ forecasts of Trust income and

expenditure

▪ The ‘base case' forecasts of Trust I&E model changes in Trust income and expenditure

due to major activity, income and cost drivers. The forecasts serve as a baseline

position before evaluating the impact of reconfiguration options

▪ The work focuses on the major drivers of Income and Expenditure and how these may

impact multiple acute Trusts in North West London over the coming years, and so is

necessarily high level. It does not serve as a detailed financial plan for individual Trusts

▪ The modeling assumptions agreed by the F&BP Board represent the best current

estimates for future drivers, and may be refined and superseded by subsequent factors.

Factors that may change include: service contracts negotiated by providers and

commissioners; changes to pay deals; updated planning guidance and tariff changes

from Department of Health, Monitor or NHS London; CCGs refining QIPP plans;

demand growth and cost inflation pressures playing out differently to current

expectations, etc.

▪ The evaluation of Trust viability is based on an minimum requirement of 1% net surplus

up to around 2.5%1 for ongoing viability. Foundation Trusts will plan for the higher figure

in order to generate surpluses needed for the ongoing reinvestment and development

of their services, and to meet Monitor's full set of financial assessment criteria

1 2.5% net surplus is taken as the mid-point of the 2-3% surplus that FTs would aim for as discussed at F&BP Board 17th February

2

12

Full set of planning assumptions for the ‘base case’ modelKey modelling variables

Income

Signed off by F&BP groupCurrent assumption

▪ Demographic growth from PCT CSP, mapped to Trusts based on patient flows▪ Demand growth

▪ 2.0% p.a. non-demographic growth assumed for trusts

▪ -1.8% p.a.▪ Tariff

▪ NWL QIPP scaled up to cover proportion of non-NWL income1▪ QIPP gross savings (non-NWL)

▪ Currently assumed none goes to trust; may be reviewed▪ QIPP reinvestment/retender (NWL)

▪ Revised PCT QIPP▪ QIPP gross savings (NWL)

▪ Currently assumed none goes to trust ▪ QIPP reinvestment/retender (non-NWL)

▪ Trust reported, or 0.0% p.a.▪ R&D and education

▪ Trust reported, or 2.5% p.a.▪ Private (and other non-NHS)

▪ Trust reported, or 0.0% p.a.▪ Other operating

▪ 11/12 plan, normalised income▪ Baseline

▪ Trust reported, or 0.0% p.a.▪ Other non-operating

Cost

▪ 70% for increase or decrease▪ Scale with R&D education

▪ 70% for increase or decrease▪ Scale with clinical income

▪ 70% for increase or decrease▪ Scale with other operating income

▪ 1% 12/13, 2.2% 13/14 onwards▪ Cost inflation – pay (includes drift)

▪ 5% p.a.▪ Cost inflation – drugs

▪ 2.2% p.a.▪ Cost inflation – other non-pay

▪ Confirmed with Trusts▪ Cost of new service standards

▪ Depreciation on current assets declines 1/20th per year. Depreciation on net

increase in assets (Capex-depreciation) over 20 years

▪ Depreciation

▪ 3.5% PDC on average net change in assets over previous

24 months

▪ PDC

▪ 0% p.a.▪ Interests

▪ 11/12 plan normalised costs▪ Baseline

▪ Matches Trust figures on planned savings, capped at the lower of the

benchmark productivity opportunity or 5.4% (equivalent to 20% over 4 years)

▪ Benchmark opportiunity based on 10/11 comparison against peers, +2% p.a.

to reflect improving peer group (see appendix for details)

▪ 4% from 15/16 onwards

▪ Productivity improvement

▪ 18th Jan

▪ 17th Feb

▪ 24th Feb

▪ 17th Feb

▪ 17th Feb

▪ 18th Jan

▪ 17th Feb

▪ 24th Feb

▪ 17th Feb

▪ 24th Feb

2

▪ 22nd Feb

1 Exception is Imperial, where QIPP is applied to proportion of income from other London commissioners, but not to patients coming from

outside London due to specialist nature of work

▪ +1.0% in 12/13; no change other years▪ CQUIN ▪ 2nd Mar

13

Trust I&E forecasts 2011/12 to 2014/15 before

productivity savings

Source: Acute Trust accounts 11/12 (planned normalised position), NWL planning assumptions

Income

Costs before

productivityIncome

Cost saving to

achieve 1% net

surplus3Trust

Imperial

NWLH

West

Middlesex

Ealing

Hillingdon

Chelsea &

Westminster

Royal

Brompton

& Harefield

Costs Net surplus

Current 2011/12 (planned normalised position)1 2014/15 (forecast normalised position)

120.0

287.3

329.9

190.3

909.9

360.2

142.7 142.6

284.3

321.5

190.3

931.5

120.0

380.9

0

0

3.0

8.5

0.1

-21.62

-20.7

853.5

109.9

317.4

128.0

297.2

306.4

172.9

392.0

145.6

317.7

333.5

196.2

982.7

127.2

18.8

23.4

30.1

25.0

137.8

18.3

77.8

-2.4

-5.7

0.1

0.0

0

2.6

1.0

5.2

7.3

4.6

5.4

4.6

3.2

2.8

Required savings

(annual % of 2011/12 cost base)

%

Net surplus 2011/12%2

£m

1 NHS London are currently confirming normalised position fro NHS Trusts

2 The reported underlying position 11/12 for Imperial of -£21.6m is the Trust's view, however there remain a number of risks around this position.

3 1% surplus is the absolute minimum for Trusts in order to be viable; Foundation Trusts would aim for 2-3%

See Appendix for detailed forecasts by Trust

14

3.42.8

3.73.2

5.14.6

5.9

5.7

7.3

4.6 5.1

5.4

7.8

5.2

Trust

Chelsea &

Westminster

Hillingdon

Ealing

Royal Brompton &

Harefield

West Middlesex

NWLH

Imperial

See Appendix for detailed benchmarks by Trust

4.3

5.4

5.2

5.1

5.4

4.6

5.4

Gap to 1-2.5%2

surplus: Annual cost

savings required for

12/13 to 14/15 (%1)

Benchmark

opportunities (used

as upper limit) (%)

1 Savings are reported in terms of the percentage of 11/12 total cost base delivered each year for the three years 12/13 to 14/15

2 Requirement for ongoing viability and sufficient surplus to develop and reinvest in services estimated as 2-3% based on aspiration of current FTs (F&BP board 17th Feb)

4.2

5.4

5.2

5.7

5.4

5.8

4.7

Trust reported2 (%)

Productivity savings per year

▪ For reconfiguration modelling the productivity

savings will be taken as the Trust reported

savings, capped at the benchmark opportunity

▪ The goal of 1% surplus is the absolute

minimum for Trusts in order to be viable;

Foundation Trusts would aim for 2-3%2

▪ These forecasts represent the central case,

with potential downsides:

– Trusts do not deliver these

unprecedented levels of productivity

savings

– Higher pay or non pay cost inflation

– Lower PCT budgets to close their

‘distance from target’ (which would be

passed on to Trusts)

▪ Potential upsides include:

– Higher than expected demand growth, or

under-delivery of QIPP

– Potential for Trusts to bid for investment

in out of hospital services

Savings required

for 1% surplus

%

2 Outputs of the acute ‘base case’ scenarioAdditional savings

needed for 2.5%

surplus

Potential savings

15



Appendix

Contents

1

2

3



16

Income

2014/15

853.5

Other

4.7

Non-NHS

(including

private

patients)

14.0

R&D

and

education

13.5

Tariff

deflator

29.4

Demand

manage-

ment

78.5

(9%)

Under-

lying

demand

55.5

(6%)

Income

2011/12

909.9

Expend-

iture

2014/15

(1%

surplus)

844.9

Re-

quired

savings

for 1%

surplus2

137.8

Expen-

diture

before

savings

982.7

New

service

stand-

ards

3.0

Non-

oper-

ating

costs

4.2

Other

oper-

ating

costs

11.5

Cost

inflation

59.9

Activity

change1

19.0

Expen-

diture

2011/12

931.5

Imperial I&E forecasts in ‘base case’ scenario –

11/12 to 14/15

SOURCE: NWL acute scenario model

2011/12 to 2014/15, £m

2011/12 – 2014/15: underlying income forecast

2011/12 – 2014/15: expenditure forecast

(before productivity savings)

2011/12 – 2014/15 Income bridge

-6%

14/15

853.5

13/14

870.1

12/13

889.2

11/12

909.9

+5%

14/15

982.7

13/14

961.1

12/13

941.5

11/12

931.5

CAGR, %

-2.1

CAGR, %

+1.8

2011/12 – 2014/15 Expenditure bridge

Note: The reported underlying position 11/12 for Imperial of -£21.6m is the Trust's view, however there remain a number of risks around this position.

EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£66.8m

EBITDA

margin

7.8%

Required

saving

£137.8m

Annual %

of 11/12

cost

5.2%

3 IMPERIAL

1 Includes cost impact of changes in NHS activity, R&D and education and non-NHS (including private patients)

2 1% net surplus is regarded as the absolute minimum requirement. Foundation Trusts will plan for higher surplus of 2-3% in order to generate the surpluses needed for the ongoing reinvestment

and development of their services, and to meet Monitor's full set of financial assessment criteria

17

Income

2014/15

317.4

Other

3.4

Non-NHS

(including

private

patients)

0.8

R&D

and

education

0

Tariff

deflator

12.1

Demand

manage-

ment

52.8

(15%)

Under-

lying

demand

24.8

(7%)

Income

2011/12

360.2

Expend-

iture

2014/15

(1%

surplus)

314.2

Re-

quired

savings

for 1%

surplus2

77.8

Expen-

diture

before

savings

392.0

New

service

stand-

ards

5.0

Non-

oper-

ating

costs

0.6

Other

oper-

ating

costs

1.7

Cost

inflation

22.1

Activity

change1

18.3

Expen-

diture

2011/12

380.9

NWLH I&E forecasts in ‘base case’ scenario –

11/12 to 14/15


2011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

-12%

14/15

317.4

13/14

334.7

12/13

350.2

11/12

360.2

+3%

14/15

392.0

13/14

390.1

12/13

384.2

11/12

380.9

CAGR, %

-4.1

CAGR, %

+1.0





EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£28.8m

EBITDA

margin

9.1%

Required

saving

£77.8m

Annual %

of 11/12

cost

7.3%

3 NWLH

18

Income

2014/15

128.0

Other

0.2

Non-NHS

(including

private

patients)

0

R&D

and

education

0.4

Tariff

deflator

5.3

Demand

manage-

ment

21.0

(15%)

Under-

lying

demand

11.0

(8%)

Income

2011/12

142.7

Expend-

iture

2014/15

(1%

surplus)

126.7

Re-

quired

savings

for 1%

surplus2

18.8

Expen-

diture

before

savings

145.6

New

service

stand-

ards

1.5

Non-

oper-

ating

costs

0

Other

oper-

ating

costs

0

Cost

inflation

8.1

Activity

change1

6.6

Expen-

diture

2011/12

142.6

West Middlesex I&E forecasts in ‘base case’

scenario – 11/12 to 14/152011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

-10%

14/15

128.0

13/14

130.2

12/13

137.0

11/12

142.7

+2%

14/15

145.6

13/14

141.8

12/13

141.4

11/12

142.6

CAGR, %

-3.5

CAGR, %

+0.7


EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£13.0m

EBITDA

margin

10.2%

Required

saving

£18.8m

Annual %

of 11/12

cost

4.6%

3 WEST MIDDLESEX





19

Income

2014/15

109.9

Other

0

Non-NHS

(including

private

patients)

0

R&D

and

education

0.4

Tariff

deflator

4.5

Demand

manage-

ment

14.5

(12%)

Under-

lying

demand

9.3

(8%)

Income

2011/12

120.0

Expend-

iture

2014/15

(1%

surplus)

108.8

Re-

quired

savings

for 1%

surplus2

18.3

Expen-

diture

before

savings

127.2

New

service

stand-

ards

4.0

Non-

oper-

ating

costs

0.1

Other

oper-

ating

costs

0

Cost

inflation

7.0

Activity

change1

3.9

Expen-

diture

2011/12

120.0

Ealing I&E forecasts in ‘base case’ scenario –

11/12 to 14/152011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

-8%

14/15

109.9

13/14

111.6

12/13

114.0

11/12

120.0

+6%

14/15

127.2

13/14

122.3

12/13

118.1

11/12

120.0

CAGR, %

-2.9

CAGR, %

+1.9


EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£8.0m

EBITDA

margin

7.3%

Required

saving

£18.3m

Annual %

of 11/12

cost

5.4%

3 EALING





20

Income

2014/15

172.9

Other

0

Non-NHS

(including

private

patients)

0

R&D

and

education

0.9

Tariff

deflator

6.7

Demand

manage-

ment

25.8

(14%)

Under-

lying

demand

14.1

(7%)

Income

2011/12

190.3

Expend-

iture

2014/15

(1%

surplus)

171.2

Re-

quired

savings

for 1%

surplus2

25.0

Expen-

diture

before

savings

196.2

New

service

stand-

ards

2.5

Non-

oper-

ating

costs

0.1

Other

oper-

ating

costs

0

Cost

inflation

11.0

Activity

change1

7.5

Expen-

diture

2011/12

190.3

Hillingdon I&E forecasts in ‘base case’ scenario –

11/12 to 14/152011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

-9%

14/15

172.9

13/14

177.7

12/13

182.5

11/12

190.3

+3%

14/15

196.2

13/14

192.3

12/13

188.4

11/12

190.3

CAGR, %

-3.2

CAGR, %

+1.0


EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£14.4m

EBITDA

margin

8.3%

Required

saving

£25.0m

Annual %

of 11/12

cost

4.6%

3 HILLINGDON





21

C&W I&E forecasts in ‘base case’ scenario –

11/12 to 14/152011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

-7%

14/15

306.4

13/14

309.2

12/13

316.2

11/12

329.9

+4%

14/15

333.5

13/14

325.0

12/13

319.2

11/12

321.5

CAGR, %

-2.4

CAGR, %

+1.2


EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£27.6m

EBITDA

margin

9.0%

Required

saving

£30.1m

Annual %

of 11/12

cost

3.2%

3 CHELSEA & WESTMINSTER

Income

2014/15

306.4

Other

0

Non-NHS

(including

private

patients)

0

R&D

and

edu-

cation

3.0

HIV drug

income3

6.2

Tariff

deflator

3.1

Demand

manage-

ment

35.8

(11%)

Under-

lying

demand

18.4

(6%)

Income

2011/12

329.9

Expend-

iture

2014/15

(1%

surplus)

303.4

Re-

quired

savings

for 1%

surplus2

30.1

Expen-

diture

before

savings

333.5

New

service

stand-

ards

1.2

Non-

oper-

ating

costs

3.1

Other

oper-

ating

costs

0

Cost

inflation3

22.0

Activity

change1

14.3

Expen-

diture

2011/12

321.5



2 1% net surplus is regarded as the absolute minimum requirement. Foundation Trusts will plan for higher surplus of 2-3% in order to generate the surpluses needed for the ongoing reinvestment and development of their services, and to meet Monitor's full set

of financial assessment criteria

3 HIV drug income (assumed to match costs of £39.2m in 11/12) grown at 5%pa to offset impact of 5% cost inflation on HIV drugs

22

RBH I&E forecasts in ‘base case’ scenario –

11/12 to 14/152011/12 to 2014/15, £m




2011/12 – 2014/15 Income bridge

+3%

14/15

297.2

13/14

294.4

12/13

292.3

11/12

287.3

+12%

14/15

317.7

13/14

305.2

12/13

293.6

11/12

284.3

CAGR, %

+1.1

CAGR, %

+3.8


EBITDA

Requirement to

achieve 1% net

surplus 2014/152

£20.9m

EBITDA

margin

7.0%

Required

saving

£23.4m

Annual %

of 11/12

cost

2.8%

3 ROYAL BROMPTON

& HAREFIELD

Income

2014/15

297.2

Other

0

Non-NHS

(including

private

patients)

1.2

R&D

and

education

0.1

Tariff

deflator

11.0

Demand

manage-

ment

0

(0%)

Under-

lying

demand

19.8

(7%)

Income

2011/12

287.3

Expend-

iture

2014/15

(1%

surplus)

294.3

Re-

quired

savings

for 1%

surplus2

23.4

Expen-

diture

before

savings

317.7

New

service

stand-

ards

0

Non-

oper-

ating

costs

0.1

Other

oper-

ating

costs

0

Cost

inflation

18.7

Activity

change1

14.7

Expen-

diture

2011/12

284.3





23



Appendix

Contents

1

2

3



24

Peer groups for benchmarking were selected by TrustsImperial

Specifically selected by

Trust

▪ Barts & The London

▪ Cambridge University

Hospitals

▪ Central Manchester

University Hospitals

▪ Guy's & St Thomas'

▪ King's College Hospital

▪ St George's Healthcare

▪ University College

London Hospitals

West Middlesex &

Ealing

Specifically selected by

Trust

▪ Gateshead Health

▪ Newham

▪ The Hillingdon Hospital

▪ The Lewisham Hospital

▪ The Whittington

Hospital

▪ Homerton

▪ Ealing Hospital

▪ West Middlesex

University Hospital

Chelsea and Westminster

All 'teaching' Trusts

▪ Barts & The London

▪ Brighton & Sussex University Hospitals

▪ Cambridge University Hospitals

▪ Central Manchester University Hospitals

▪ Chelsea & Westminster Hospital

▪ Derby Hospitals

▪ Guy's & St Thomas'

▪ Imperial College Healthcare

▪ King's College Hospital

▪ Leeds Teaching Hospitals

▪ Norfolk & Norwich University Hospitals

▪ Nottingham University Hospitals

▪ Oxford Radcliffe Hospitals

▪ Plymouth Hospitals

▪ Royal Devon & Exeter

▪ Royal Free Hampstead

▪ Royal Liverpool & Broadgreen University

Hospitals

▪ Sheffield Teaching Hospitals

▪ Southampton University Hospitals

▪ St George's Healthcare

▪ The Newcastle Upon Tyne Hospitals

▪ University College London Hospitals

▪ University Hospital Birmingham

▪ University Hospital of North Staffordshire

▪ University Hospitals Bristol

▪ University Hospitals Coventry & Warwickshire

▪ University Hospitals of Leicester

Hillingdon

Small ‘multi-site' Trusts

▪ Mid Staffordshire

▪ Trafford

▪ Warrington

▪ Winchester & Eastleigh

Royal Brompton & Harefield estimate

savings at 4.3% per annum (average

over 12/13 to 14/15), rather than use

benchmarks

NWLH Trust

Specifically selected by Trust

▪ West Hertfordshire

▪ East & North Hertfordshire

▪ Barking Havering &

Redbridge

▪ Epsom and St Helier

▪ Taunton and Somerset

▪ University Hospitals

Coventry and Warwickshire

▪ University Hospital of North

Staffordshire

▪ Heatherwood and Wexham

Park Hospitals

▪ County Durham and

Darlington

▪ Royal Cornwall Hospitals

3

25

%

Results of benchmarking analysis – opportunity

for cost saving 2011/12 to 2014/15

Previous

benchmarks1

NA

NA

NA

5.4

5.0

5.4

5.4

Saving opportunity

2010/11 (CAGR)

+2% p.a. capped at

5.4%

+2% p.a. capped at

5.4%

Updated benchmarks 2010/11

5.4

4.3

5.2

5.4

4.6

5.4

5.1

N/A

4.6

3.2

4.4

2.6

5.5

3.1

Trust

Chelsea & Westminster

Hillingdon

Ealing

Royal Brompton & Harefield

West Middlesex

NWLH

Imperial

Upper quartile peer

Trust

Nottingham

Warrington

Newham

Trust plan

Newham

North Staffordshire

Cambridge

Figures to be used in

'base case' scenario

See following pages for detailed analysis by Trust

3

1 Productivity benchmarks undertaken by NHS London during 2011 and shared with NHS Trusts, based on

2009/10 performance

26

Productivity metrics and benchmark comparisons

1 Bed day opportunity estimated at £150/day. Reapportioned to other cost categories in the model (Medical – 10%, Nursing – 52%, ST&T – 13%, Non-clinical – 9%, Clinical

supplies – 16%)

2 Adjusted for differences in HRG mix, specialties and elective / non-elective inpatients. Daycases excluded from analysis

3 MFF adjustment for clinical income

4 Pay adjusted for London weighting

IMPERIAL

SOURCE: FIMS 10/11, Annual Reports 10/11 , HES 10/11 annualised, ERIC 10/11

Category Metric Adjustments

ALOS1Casemix adjusted average

length of stay2

Medical payMedical WTE per £1m clinical income MFF3

Medical pay per medical WTE Pay adj.4

Nurses payNurse WTE per 1,000 bed days

Nursing pay per nurse WTE Pay adj.

ST&T payST&T WTE per £1m clinical income MFF

ST&T pay per ST&T WTE Pay adj.

Non-clinical payNon-clinical WTE per 1,000 bed days

Non-clinical pay per non-clinical WTE Pay adj.

Drugs & clinical

supplies and

services

Drugs & clinical supplies and services

per £1,000 clinical income

MFF

Other variable

costs

Laundry cost per bed day

Cleaning costs per bed day

Catering costs per patient per bed day

Units

Days

WTE

£k

WTE

£k

WTE

£k

WTE

£k

£

£

£

£

Trust

4.1

3.0

92.4

7.9

41.9

2.1

48.9

5.5

33.9

340.1

5.1

24.3

12.7

Matching

peer at top

quartile

threshold

3.0

2.5

90.2

7.7

40.0

2.8

34.4

5.3

31.1

324.0

5.3

30.6

8.4

Matching

average

of top 3 peers

4.4

2.3

95.6

8.8

41.9

3.1

34.6

6.8

29.3

278.5

5.6

26.3

8.2

Top quartile

on each

metric

4.3

2.5

89.9

7.6

40.9

2.7

35.7

5.3

31.1

295.6

5.0

23.8

9.1

Figures used to inform target

3

Benchmark calculations account for income, ST&T WTE and pay costs

related to ST&T services that Imperial provides for Chelsea & Westminster

27

Units: £m, %

IMPERIAL


Category

Matching average of top 3

peers

Current operating

cost 11/12

Matching peer at top

quartile threshold

(Cambridge)

Top quartile on each

metric

Savings (% of total costs) -9% -7% -9%

Savings (3-year CAGR) -3.1% -2.4% -3.0%

Medical pay -29 (-18%) -29 (-18%) -31 (-19%)161

Nurses pay1 -24 (-14%) 0 (0%) -8 (-5%)167

ST&T pay -6 (-9%) 0 (0%) -4 (-5%)68

Non-clinical pay -12 (-13%) 0 (0%) -11 (-11%)98

Drugs & clinical supplies

and services

-13 (-7%) -35 (-18%) -26 (-13%)195

Other variable costs2 0 (0%) -1 (-5%) -2 (-10%)19

Cost categories not

benchmarked3

n/a n/a n/a222

Total4 -85 -65 -81929

Cost reduction opportunity

Note: Length of stay opportunity estimated at £150/day. Note that ALOS is assumed to stay at current rate or move to target, whichever is shorter. Impact on costs is

apportioned to other cost categories in the model (Medical – 10%, Nursing – 52%, ST&T – 13%, Non-clinical – 9%, Clinical supplies – 16%)

1 Nursing WTE level capped at minimum of 8 nurse hours per occupied bed day

2 Other variable costs include catering, cleaning and laundry, data as of 10/11 HEFS

3 Cost categories not benchmarked include: other clinical pay (due to inconsistency in reporting), premises, establishment cost and non-operating costs (PDC, interest,

depreciation, etc.)

4 Total Trust expense used to arrive at net surplus

Estimated savings if Trust matches top performing peersFigures used to inform target

3

Benchmark calculations account for income, ST&T WTE and pay costs

related to ST&T services that Imperial provides for Chelsea & Westminster

28


supplies – 16%)




HILLINGDON


Category Metric Adjustments Units Trust

Matching

peer at top

quartile

threshold

Matching

average

of top 3 peers

Top quartile

on each

metric

ALOS1

Medical pay

Nurses pay

ST&T pay

Non-clinical pay

Drugs & clinical

supplies and

services

Other variable

costs

Casemix adjusted average

length of stay2

Medical WTE per £1m clinical income

Medical pay per medical WTE

Nurse WTE per 1,000 bed days

Nursing pay per nurse WTE

ST&T WTE per £1m clinical income

ST&T pay per ST&T WTE

Non-clinical WTE per 1,000 bed days

Non-clinical pay per non-clinical WTE






MFF3

Pay adj.4

Pay adj.

MFF

Pay adj.

Pay adj.

MFF

Days

WTE

£k

4.3

2.7

84.7

4.0

2.2

113.0

3.9

1.9

117.8

4.0

2.2

88.6

WTE 5.8 5.4 5.2 5.2

£k 41.1 43.3 45.6 39.7

WTE 1.4 3.0 2.6 1.9

£k 43.7 33.8 37.2 33.8

WTE 5.0 4.1 4.2 3.8

£k 30.3 30.7 27.4 28.1

£ 210.9 146.4 136.6 156.8

£ 3.6 3.5 4.1 3.6

£ 17.0 16.1 15.0 14.2

£ 8.3 10.3 9.6 6.6

Productivity metrics and benchmark comparisonsFigures used to inform target

3

29

HILLINGDON

Units: £m, %


Category


peers

Current operating

cost 11/12


quartile threshold

(Warrington)


metric


Savings (% of total costs) -15%-12%-9%

Savings (3-year CAGR) -5.3%-4.1%-3.2%

Medical pay -5 (-16%)-2 (-6%)0 (-1%)34

Nurses pay1 -6 (-17%)-2 (-7%)-3 (-7%)37

ST&T pay 0 (-4%)0 (-5%)0 (-4%)10

Non-clinical pay -8 (-31%)-6 (-25%)-5 (-19%)24


and services

-8 (-27%)-11 (-37%)-10 (-32%)30

Other variable costs2 -1 (-16%)0 (-1%)0 (0%)4

Cost categories not

benchmarked3

n/an/an/a51

Total4 -29-23-18190






depreciation, etc.)



3

30


supplies – 16%)




CHELSEA


ALOS1

Medical pay

Nurses pay

ST&T pay

Non-clinical pay

Drugs & clinical

supplies and

services

Other variable

costs


Matching

peer at top

quartile

threshold

Matching

average

of top 3 peers

Top quartile

on each

metric


length of stay2














Days 4.2 4.6 4.4 4.1

WTE 2.3 2.4 2.6 3.3

£k 90.0 93.0 92.5 89.7

WTE 5.75.45.76.7

£k 40.840.8 39.3 47.0

WTE 2.4 2.3 2.5 2.7

£k 34.7 42.1 45.5 38.5

WTE 4.1 3.5 4.1 4.6

£k 29.4 32.2 28.3 38.2

£ 234.7 205.0 257.0 271.9

£ 3.4 3.1 2.7 3.9

£ 18.8 16.9 18.6 22.5

£ 7.17.5 7.4 6.3

MFF3

Pay adj.4

Pay adj.

MFF

Pay adj.

Pay adj.

MFF


3

Benchmark calculations account for:

1) HIV/GUM services provided by Chelsea & Westminster by removing the associated income, WTE, activity, beddays and costs

when comparing against peers

2) Excludes unqualified nurses (245.4 WTE and £6.9m pay cost based on the Trust-reported budget) and NICU nurses (126.4 WTE

and £5.9m pay cost assuming average cost per WTE) for comparison with peers. However, these costs are included in the reported

‘Current operating costs 11/12’.

3) Updated figures for Nurse and ST&T London weighting (provided by Trust 27th Feb)

31

CHELSEA

Units: £m, %

Category


peers

Current operating

cost 11/12


quartile threshold

(Nottingham)


metric




Medical pay -14 (-28%)-12 (-25%)-9 (-18%)49

Nurses pay1 -11 (-19%)-13 (-22%)-13 (-21%)59

ST&T pay -4 (-19%)-1 (-7%)0 (-1%)19

Non-clinical pay -7 (-28%)-9 (-35%)-8 (-30%)26


and services

-6 (-14%)-11 (-25%)-2 (-5%)45

Other variable costs2 -0 (-10%)-1 (-16%)-1 (-12%)4

Cost categories not

benchmarked3

n/an/an/a46

Total4 -43-48-33250






depreciation, etc.)



3


Benchmark calculations account for:

1) HIV/GUM services provided by Chelsea & Westminster by removing the associated income, WTE, activity, beddays and costs

when comparing against peers

2) Excludes unqualified nurses (245.4 WTE and £6.9m pay cost based on the Trust-reported budget) and NICU nurses (126.4 WTE

and £5.9m pay cost assuming average cost per WTE) for comparison with peers. However, these costs are included in the reported

‘Current operating costs 11/12’.

3) Updated figures for Nurse and ST&T London weighting (provided by Trust 27th Feb)

32


supplies – 16%)




EALING



Matching

peer at top

quartile

threshold

Matching

average

of top 3 peers

Top quartile

on each

metric

ALOS1

Medical pay

Nurses pay

ST&T pay

Non-clinical pay

Drugs & clinical

supplies and

services

Other variable

costs


length of stay2














Days

WTE

£k

WTE

£k

WTE

£k

WTE

£k

£

£

£

£

MFF3

Pay adj.4

Pay adj.

MFF

Pay adj.

Pay adj.

MFF

4.6

3.6

69.5

9.1

29.5

2.4

31.4

3.6

28.8

225.2

4.8

17.0

4.0

3.9

2.9

85.7

6.2

52.4

1.5

44.9

4.4

37.1

138.7

7.3

31.5

4.2

4.3

2.7

93.4

5.5

45.3

2.0

38.1

3.6

34.2

172.9

4.5

20.7

6.1

4.3

2.5

81.8

5.7

40.0

1.5

34.6

3.6

29.6

166.7

4.2

17.0

4.6


3

33

EALING

Units: £m, %


peers

Current operating

cost 11/12


quartile threshold

(Newham)


metric


Category



Medical pay -5 (-19%)0 (-2%)-1 (-5%)24

Nurses pay1 -7 (-20%)-4 (-13%)-3 (-10%)33

ST&T pay -3 (-35%)0 (-6%)-2 (-19%)8

Non-clinical pay 0 (-1%)0 (-1%)0 (-3%)13


and services

-6 (-27%)-5 (-25%)-9 (-42%)21

Other variable costs2 0 (0%)0 (0%)0 (0%)3

Cost categories not

benchmarked3

n/an/an/a17

Total4 -20-11-15120






depreciation, etc.)



3


34


supplies – 16%)




WEST MIDDLESEX


Matching

peer at top

quartile

threshold

Matching

average

of top 3 peers

Top quartile

on each

metric

ALOS1

Medical pay

Nurses pay

ST&T pay

Non-clinical pay

Drugs & clinical

supplies and

services

Other variable

costs















MFF3

Pay adj.4

Pay adj.

MFF

Pay adj.

Pay adj.

MFF

length of stay2 Days 4.2 3.9 4.5 4.3

WTE 3.2 2.9 2.4 2.5 £k 80.6 85.7 94.2 81.8

WTE 5.8 6.2 5.5 5.7 £k 38.9 52.4 52.4 40.0

WTE 1.5 1.5 2.1 1.5 £k 36.8 44.9 44.8 34.6

WTE 2.8 4.4 4.8 3.6 £k 34.5 37.1 30.3 29.6

£ 207.9 138.7 157.4 166.7

£ 6.1 7.3 4.0 4.2 £ 11.0 31.5 24.8 17.0 £ 5.1 4.2 8.3 4.6


3


35

WEST MIDDLESEX

Units: £m, %


Category


peers

Current operating

cost 11/12


quartile threshold

(Newham)


metric


Medical pay 29 -2 (-6%) -4 (-13%) -6 (-20%)

Nurses pay1 31 -1 (-3%) 0 (-1%) 0 (0%)

ST&T pay 7 0 (-4%) 0 (0%) 0 (-4%)

Non-clinical pay 14 0 (-1%) 0 (0%) 0 (0%)


and services

23 -8 (-35%) -6 (-24%) -4 (-20%)

Other variable costs2 3 0 (0%) 0 (0%) 0 (0%)

Cost categories not

benchmarked3

37 n/a n/a n/a

Total4 144 -11 -9 -11

Savings (% of total costs) -8% -7% -7%

Savings (3-year CAGR) -2.6% -2.2% -2.5%






depreciation, etc.)



3

36

Note: All figures are from 2009/10

1 Bed day opportunity estimated at £150/day. Reapportioned to other cost categories in the model

(Medical – 10%, Nursing – 52%, ST&T – 13%, Non-clinical – 9%, Clinical supplies – 16%)


NWLH

SOURCE: FIMS 10/11, Annual Reports 10/11 , HES 10/11 annualized, ERIC 10/11

Category Units Trust

Matching

peer at top

quartile

threshold

Matching

average

of top 3 peers

Top quartile

on each

metric

ALOS1

Medical pay

Nurses pay

ST&T pay

Non-clinical pay

Drugs & clinical

supplies and

services

Other variable

costs

WTE 2.3 2.1 2.2 2.9 £k 99.9 101.6 91.6 91.6

WTE 5.5 5.5 5.5 6.7 £k 41.1 41.1 41.4 47.2

WTE 2.0 2.1 2.0 3.3 £k 48.6 45.5 40.9 41.2

WTE 3.3 3.9 3.3 5.6 £k 31.3 34.3 28.9 20.2

£ 198.5 191.0 190.0 238.8

£ 3.8 4.6 4.0 4.3 £ 19.9 17.3 16.2 24.1 £ 6.8 8.6 6.3 3.1

Days 4.7 3.9 3.8 3.9

Metric









Drugs & clinical supplies and services per £1,000 clinical

income





length of stay2


3

37






depreciation, etc.)


NWLH

Units: £m, %

SOURCE: FIMS 10/11, Annual Reports 10/11 , HES 10/11 annualized, ERIC 10/11

Category


peers

Current operating

cost 11/12


quartile threshold (North

Staffordshire)


metric




Medical pay -16 (-23%)-13 (-18%)-9 (-13%)71

Nurses pay1 -23 (-26%)-23 (-27%)-23 (-27%)87

ST&T pay -15 (-38%)-11 (-29%)-12 (-30%)39

Non-clinical pay -7 (-19%)-2 (-5%)-5 (-13%)35


and services

-13 (-20%)-13 (-20%)-11 (-17%)63

Other variable costs2 -1 (-16%)0 (-3%)0 (-3%)8

Cost categories not

benchmarked3

n/an/an/a78

Total4 -76-63-59381


3

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