governing body (public) meeting - bexley ccg · governing body (public) meeting . acute contracts...

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DATE: 25 July 2013�

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Title Financial Performance Update as at Month 2

Recommended action for the Finance Sub Committee

That the Governing Body:

• DISCUSS & NOTE the Month 2 (May) financial position and forecast outturn detailed in this report which shows the CCG meeting the required 1% surplus;

• DISCUSS & NOTE the key risks and cost pressures identified to achieving the surplus control total in 2013/14 and the management actions being taken to address and mitigate these risks;

• NOTE the programme and running cost allocations available to the CCG and the costs to date;

• NOTE the month 2 actual reported performance against the key national finance targets.

Executive Summary

At month 2, the CCG reported a surplus of £737k against a plan for £721k. Running costs remain within the required allocation at this stage in the year. The required 1% surplus of £2,569k has been set aside in reserves. In month 2, it is being forecast that this will be achieved in 2013/14. The CCG is already under performing against the BPPC targets which is of concern so early in the year and steps are being taken to address this. The financial outlook at this point in the year assumes full utilisation of available reserves and contingencies and delivery of the QIPP programme as currently forecast. Whilst overall the position is as expected at month 2, there are risks to the forecast outturn position which are explored in the body of the attached report. QIPP data on achievement to date is not yet available but initial feedback from project managers is that this remains on target to be achieved. Identification of additional QIPP continues to be sought to mitigate any under-performance.

ENCLOSURE: E (ii) Agenda Item: 70/13

Governing Body (Public) Meeting

Acute contracts have been broken even as the initial indication that there may be significant over-performance was reviewed and a number of issues remained outstanding or required further clarity. These are discussed in the acute part of the report. The uncertainty made the reporting of this over-performance subject to significant challenge and therefore not robust enough to report at this stage.

Which objective does this paper support?

Patients: Improve the health and wellbeing of people in Bexley in partnership with our key stakeholders

People: Empower our staff to make BCCG the most successful CCG in (south) London

Pounds: Delivering on all of our statutory duties and become an effective, efficient and economical organisation

X

Process: Commission safe, sustainable and equitable services in line with the operating framework and which improves outcomes and patient experience

Organisational implications

Key Risks (corporate and/or clinical)

As detailed in the report, there are a number of risks which may affect the ability to achieve the financial targets. The main ones being acute performance, the impact of the specialist commissioning reconciliation, QIPP delivery and the settlement of the continuing healthcare claims.

Equality and Diversity

N/a

Patient impact

N/a

Financial

At this point in the year, the CCG is predicting to achieve the 1% surplus with a number of risks identified. In order to qualify for any quality premium payment, it is a pre-requisite to have achieved this target.

Legal Issues

N/a

NHS constitution N/a

Consultation (Public, member or other)

N/a

Audit (Considered / Approved by Other Committees / Groups)

This paper has not been to any other committee but will be reported to the Executive Management Committee and Governing Body.

Communications Plan N/a

Author

Julie Witherall Head of Finance and Business

Clinical Lead Dr S Deshmukh

Executive Sponsor Theresa Osborne Chief Financial Officer

Date 20th June 2013

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Financial Performance Update as at Month 2 (May) 2013/14

1. FINANCIAL KEY INDICATORS 2013/2014

Table 1 below sets out the statutory targets for the CCG, and progress to date, on which the CCG will report to the Department of Health, at the year end, in its Annual Accounts and Annual report.

Table 1: Key Indicators 2013/14

Target Forecast Outturn

Var

% Var Indicator

M2

Movement from

previous

CCG Statutory Targets:

Achieve 1% control total (Programme) £2,569k £2,569k £0k 0

Achieve Financial Balance – Revenue (Programme)

£0 £2,569k £2,569k 0

Remain within Running costs allocation

5,660 5,660 0 0

Public Sector Payments Compliance – by count (number)

95% 94.47% (0.53)% Public Sector Payments Compliance – by value

95% 98.83% 3.83%

KEY: Significantly Below Target (over 3%)

Marginally Below Target (Between 1% and 3%)

On or above target or less than 1% below target

Reduction in Performance from last period

Same performance as last period =

Improvement from last period

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2. HIGHLIGHTS

• Surplus of £737k reported at month 2 against a plan for £721k. Running costs remain within the allocation at this stage in the year.

• The required 1% surplus of £2,569k has been set aside in reserves. In month 2, it is being forecast that this will be achieved in 2013/14.

• The financial outlook at this point in the year assumes full utilisation of available reserves and contingencies and delivery of the Quality, Innovation, Productivity & Prevention (QIPP) programme as currently forecast. Whilst overall the position is as expected at month 2 there are risks to the forecast outturn position which are explored in the body of the report.

• QIPP data is not yet available but initial feedback from project managers is that this remains on target to be achieved.

• Acute contracts have been broken even as the initial indication that there may be significant over-performance was reviewed and a number of issues remained outstanding or required further clarity. These are discussed in the acute part of the report. �

3. BUDGETS A summary of the 2013/14 budgets showing the approved opening budgets and any movements to 31st May are shown in table 2 below. The month 2 budgets shown equal the expected allocations shown further on in the report, which is as anticipated at year end. The resources shown are net of miscellaneous income that the CCG receives for the goods/services it provides to other organisations. The total allocations reflect the resource

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limit that the CCG receives from the Department of Health. During the month there have been some minor budget adjustments to correct the initial budget as budget holders have been identifying areas for review. Table 2: 2013/14 Budget Summary

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4. CCG ALLOCATIONS

Further to the baselining exercises which were carried out in the summer of 2012, the CCG received its 2013/14 allocation just before Christmas. This is the figure that the CCG’s net spend will be measured against when reviewing its achievement of financial balance. The allocation was made up as follows: £’000 Initial programme allocation 251,148 Inflation/growth 5,776 Running costs 5,660 Total resource 262,584 The programme allocation plus inflation cannot be used to fund any overspend in running costs. However, any underspend in the running cost allowance may be used to fund the programme costs of the CCG. Since these allocations were received, some further adjustments have been advised and agreed with NHS England. The allocations at month 2 are therefore as shown in the table below: Table 3: Month 2 (May) and final expected CCG Allocation

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Month Description Allocation

Initial Initial Allocations (251,148,000)

Initial 12/13 growth (5,776,000)

Initial Running Cost Allowance (5,660,000)

Initial Allocations (262,584,000)

Month 2 Allocation (262,584,000)

Anticipated London baseline Adjustment IATs v28 407,000

Anticipated Specialised Commissioning additional adjustment 7,338,000

Anticipated GP IT (658,000)

Anticipated 2012/13 Surplus return (2,574,000)

Anticipated Prop Co - adjustment (456,000)

Month 2 Allocation ��

Month 2 Ledger ��

Assurance has been received that reductions to the CCG’s allocations in respect of specialist commissioning will be cost neutral. This includes the additional deduction of £7.3m shown in the table above.

5. CAPITAL RESOURCE LIMIT (CRL)

At present, the CCG has not been issued with any allocation in respect of capital and as it will hold very few, if any, fixed assets once the Care Trust ‘s opening balances have been distributed, it is not envisaged that any capital will be required. Capital may however be allocated for primary care IT, which the CCG is managing.

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6. 2013/14 MONTH 2 (MAY) FINANCIAL POSITION Table 4 summarises the financial position, at category of care level, for the CCG at Month 2 (May). Development work is ongoing to amend the reporting so that it can be reported at Directorate level from month 3. However, the national IFRS / SBS system is extremely limited and the CCG will need to work within the nationally set parameters. Table 4: Summary financial position by category of care – May 2013 0��1��

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The CCG is reporting a surplus of £737k as at month 2 compared to a plan figure of a surplus of £721k. There is an underspend of £730k against the programme budgets which are the non-running cost budgets i.e. spend on healthcare, and an underspend of £7k against the admin budgets which represent the CCG’s running costs. The CCG must not utilise any programme budgets on running costs and so it is important that there is an underspend or breakeven position on the admin budgets. These are being constantly reviewed. A forecast outturn of a surplus of £2,569k is also being reported at this stage in the year. This has been confirmed to the local performance team in an abridged FIMS return which was approved by the Chief Financial Officer and Chief Officer and is attached at appendix 1 for information. The month 2 position includes an £88k overspend on the project managers and additional staff supporting the delivery of the QIPP schemes which is being offset by the use of the 2% non-recurrent headroom. The CCG has always planned to pay for these non-recurrent costs from this resource.

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To achieve the required surplus position as at month 2, two months surplus and two months of the 1% contingency have been released which is what would be expected at this stage in the financial year. Additionally, there are small areas of underspend, mainly where staff are not yet in post. The majority of the other budget lines have been broken even as invoices have either not yet been received or there is currently no indication that there is any overperformance. This is not unusual at this stage in the year and at month 3 it is expected that there will be additional information to support the financial position being reported.

7. SUMMARY OF MAIN VARIANCES

Mental Health YTD Variance £0 FOT £0 The CCG has not yet received the month 2 contract monitoring reports from the two main mental health providers, SLAM and Oxleas. The financial position has therefore been reported at the contract value i.e. break-even. A number of accruals have been incorporated into the month 2 position due to a delay in receiving the invoices relating to the CCG’s other mental health providers. This has in part been due to the implementation of the new financial ledger system, ISFE, which has required providers to address invoices differently. Any which are incorrectly addressed are being returned and revised documentation requested. As a result of the above, the mental health cost centres are therefore currently forecast to breakeven at year end. Acute YTD Variance £0 FOT £0 There is an early indication of an overspend position of up to £1.5m at month 2, after phasing of SHLT activity. However, there are many items that are still uncertain and a decision has therefore been made to report break even with the intention of resolving many of these items prior to the reporting of month 3. The uncertainties are as follows:

• For most of the contracts, an agreed value and phasing has not yet been agreed, and

many of the contracts remain unsigned;

• No invoice validation or challenges have been made on the data due to the patient

identifiable information issue;

• The emergency threshold has not been assessed (this is a rule which requires that a

provider receives payment of 30% of the tariff income once they have exceeded the

baseline tariff income value for emergency admissions);

• The maternity risk has not been assessed (in 2013/14 maternity pathways were

introduced and they mean that new pathway currencies meant some new services

were assigned national prices. This required providers to collect data and so to

mitigate the financial impact of the new payments providers and commissioners were

asked to share potential gains and losses;

• Unbundled diagnostics risk share not assessed (in 2013/14 some tariffs for diagnostic

imaging were unbundled and providers and commissioners were permitted to share

the risk between any financial gains or losses resulting from the unbundling);

• Quality related KPIs and sanctions have not been applied (18 weeks, cancer waits);

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• There has not been a validation of the data to ensure that the CCG is not being

charged for any specialist activity;

• Planning credit applied in relation to emergency readmissions is an interim value only

and may change.

Due to the circumstances mentioned above, the forecast outturn therefore assumes that acute contracts will break even. This position will be re-assessed at month 3. Primary Care YTD Variance £(6)k FOT £0 The prescribing budget is the main budget under this directorate and has been broken even at month 2 as no data for this financial year has yet been received as it is produced approximately two months in arrears. However, based on the final outturn position for the previous financial year, which has now been received, there is currently nothing to indicate that the budget will overspend at year end. A slight underspend of £6k has been recorded against the staff in the Medicines Management Team. This is being investigated further to assess the cause. Continuing Care (CHC) Variance £(18)k FOT £0 The financial position has been informed by the CHC Team using their detailed activity database. A small underspend of £18k against the CHC Adult Fully Funded cost centre is anticipated as at month 2. This underspend is not anticipated to continue and a breakeven position has been forecast for year end. Community Health Variance £1k FOT £0 These contracts are at breakeven in month with the exception of Long Term Conditions which has an overspend of £1k reported at month 2. The contracts are forecast to break even at year end. However, there is an outstanding issue regarding recovery of the UCC overnight income which needs to be resolved at a national level. This has been caused by the prevention of the use of patient level data which in the past has been used to substantiate the invoices raised. Other £(706)k FOT £(2,569)k It is anticipated that the 1% surplus of £2,569k will be achieved. The forecast cost for the QIPP support staff of £528k is expected to be offset by the release of an equal sum from the 2% non-recurrent headroom to cover this expenditure. All other areas are expected to achieve break even at this early stage in the year. Corporate £(7)k FOT £0 This directorate represents the CCG expenditure against the running cost allowance. The CCG is currently operating within the allowance but this area will be kept under review. This is particularly important as final property costs are not yet known. There are minor variances at cost centre level most notably the £15k underspend against the commissioning cost centre which can mainly be attributed to staff vacancies. Continuing Care Retrospective Review Claims In the books of the Care Trust a provision was made for the impact of the circa 300 claims in respect of continuing healthcare. It is expected that when the Care Trust’s opening balances are allocated that the CCG will get this provision transferred to it. It therefore remains

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important for the CCG to monitor progress against the claims, as any shortfall is likely to be payable from the CCG’s allocation. The finance department is continuing to work closely with the continuing care team to assess the potential financial liability. Updates are provided on a regular basis and the best, worst and most likely cases for the various categories of case are calculated. Latest calculations show that the most likely impact of the claims received is now £6,176k, which is lower than the provision made at the end of the year. However, the worst case position is still substantially higher than the provision made. In order to arrive at the potential liability figures, percentages have been assigned to the likelihood of them coming to fruition. Going forward we have made a decision to ensure that a percentage of the claims going to the ombudsman are included in case a decision is made against the organisation. The other variable in the calculation is the number of weeks that it is expected would be paid. For many cases this is not known at this stage in the process. An average of the number of weeks, where this is known, has been used in this case. These numbers will continue to be regularly refined but are the best estimates available at present.

8. RUNNING COSTS Within the ledger, there are a number of cost centres which are mapped as administration and where the running costs must be coded. Currently the ledger is showing a small underspend of £7k on running costs against the allocation of £5,660k. However, as a result of IFSE/SBS limitations, there is no mechanism to allocate the GP IT income, received through the allocations, against the admin cost centres which would reduce even further the running cost spend. There are a number of other adjustments that would also be required when the ledger issues are resolved. Currently, we are maintaining these adjustments off ledger by means of spreadsheet. Advice is being taken on how these items can be correctly reflected in the ledger as this is one of the measurable performance targets for the CCG.

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9. RISKS Even at this early stage in the financial year, there are a number of risks in delivering the 1% surplus per the balanced financial plan submitted. The main risks and the potential impact on the financial achievement are shown in table 5. These risks are continually reviewed and adjusted and the impact on the financial position monitored as they crystallise or circumstances become clearer. The most likely case position is as shown in the reported forecast outturn income & expenditure position.

Table 5: Best, Most likely, worst case risks ��

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10. 2013/14 QIPP / SAVINGS PLANS

QIPP of £12.1m, with a risk assessed value of £10.9m, has been identified to secure sufficient savings to meet the 1% surplus control total. To ensure robust governance around the RAG rating of the QIPP schemes, a multi-disciplinary/agency panel was formed. The panel initially met on 21st January 2013, reconvened, as agreed, on the 24th April 2013 and will meet again at the end of October 2013 to validate the self-assessments of project managers, presented monthly on the Implementation & Monitoring forms, discussed at the 1:1 meetings.

The format of the report for QIPP delivery is under development at the time of writing this report, pending notification of external reporting requirements. This is to ensure that an efficient process can be formulated which will satisfy both internal & external criteria, without causing an excessive amount of manual manipulation of data. This will be in line with the KPMG recommendations made during their recent audit report. Month 2 QIPP performance data is not available so cannot be tabulated at this stage. However, the April and May PMO 1:1 meetings with project managers did not highlight any of the schemes as being rated red regarding progress Table 6 shows a summary of the 2013/14 QIPP schemes and planned and latest RAG rating.

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Table 6: Summaries 2013/14 QIPP schemes

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11. FINANCIAL MANAGEMENT

Better Payment Practice Code (BPPC)

Target

One of the CCG’s national targets is to ensure that at least 95% of NHS and non-NHS trade creditors are paid within 30 days of receipt of the invoice. Performance against this target is regularly reported to the local performance team, and the annual cumulative figure for the year is published in the Annual Accounts and Annual Report.

Table 7: Better Practice Payment Code (BPPC) performance

Combined cumulative NHS and Non-NHS performance by count has already fallen below the 95% level as at month 2. This has been caused by the deterioration in performance in timely approval of Non-NHS invoices. As this is one of the measurable targets for the CCG, this needs to be addressed to ensure that the target is met and does reduce further. Budget holders are constantly being asked to approve invoices in a timely manner or if there is a problem with the invoice to place it on hold until the issue is resolved. Budget holders have also now been asked to refer invoices to the local finance team if they are unclear who should approve it as opposed to sending it back to the central CSU team. It is hoped that this will also speed up the approval process. The local finance team will continue to reinforce this message to budget holders during their regular budget meetings.

Cash Management

Cash Limit

The CCG has not been formally issued with a cash limit and so the working assumption has been that this will be equal to the allocations issued to the CCG as detailed above. As soon as further information is available this will be reported to the Governing Body.

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Cash Drawings

Table 8 below shows the year to date cash drawings to Month 2 compared to the planned drawings for the same period. The cash plan anticipates the cash limit at the end of 2013/14 which has yet to be issued as explained above.

Table 8 Planned and actual cash drawings

Actual

Cash

Drawings

2012/13

Planned

Cash

Drawings

Cumulative

Actual

Cash

Drawings

Cumulative

Planned

Cash

Drawings

Cash

Balance

£m £m £m £m £m

April 18.000 18.000 18.000 18.000 2.892

May 18.500 18.500 36.500 36.500 4.228

June 14.000 50.500

July 16.500 67.000

August 19.850 86.850

September 19.850 106.700

October 19.850 126.550

November 19.850 146.400

December 19.850 166.250

January 19.850 186.100

February 19.850 205.950

March 19.827 225.777

Total 36.500 225.777 36.500 225.777

The month end cash balance has been unacceptably high for the 2 months to date which is a concern. The first month’s cash drawdown was based upon an initial cash flow which was prepared in early March before any of the SLA values had been agreed, and in order to ensure all providers were paid was likely to have been slightly on the high side. Unfortunately, when the cash drawdown for May was required to be submitted the April cash position was volatile and so a decision was made by the Commissioning Support Unit (CSU) to request a similar amount. Once the April month end cash position was known, it was too late to make any adjustments to the May value. An effort was made to reduce the cash value in May and whilst the balance increased by £1.3m from the April position, it had been expected to be higher. Discussions with the CSU have taken place and work is ongoing to bring the balance down for June onwards. Although this will not be the case for June, the aim is to reduce the balance to no more than £150k in future months.

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Debtors and Income Collection

Table 8: Aged Debtors Position

Position as

at 30 April

2013

Position as

at 31 May

2013

£ £

Under 1 Month 787 564548

1-2 Months 0 8431

2-3 Months 0 0

Over 3 Months 0 0

Total 787 572978 In month 2, invoices were issued for services provided by the CCG for the months of April and May 2013. As many as possible have now been linked to a periodic income register which will ensure that invoices are raised on a monthly basis going forward. Debtors will continue to be pursued to ensure timely payment.

Statement of Financial Position

The Statement of Financial Position has not been presented here. At present it is not meaningful as no opening balances have yet been transferred to the CCG and are unlikely to do so until September 2013.

12. RECOMMENDATIONS

Members are asked to:

• DISCUSS & NOTE the Month 2 (May) financial position and forecast outturn detailed in this report which shows the CCG meeting the required 1% surplus;

• NOTE the details of the 2013/14 allocations (programme and running costs) received and expenditure to date;

• DISCUSS & NOTE the key risks and cost pressures identified to achieving the surplus control total in 2013/14 and the management actions being taken to address and mitigate these risks;

• NOTE the month 2 forecast performance against the key national finance targets.

Appendix 1

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Appendix 2

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GLOSSARY OF TERMS APMS ALTERNATIVE PRIMARY MEDICAL

SERVICES BPPC BETTER PAYMENT PRACTICE CODE BSU BUSINESS SUPPORT UNIT CAMHS CHILDREN’S AND ADOLESCENTS

MENTAL HEALTH SERVICES CCG CLINICAL COMMISSIONING GROUP CHC CONTINUING HEALTHCARE CIP COST IMPROVEMENT PROGRAMME CLUSTER NHS SOUTH EAST LONDON CRL CAPITAL RESOURCE LIMIT CSS COMMISSIONING SUPPORT SERVICE FIMs FINANCIAL INFORMATION MONITORING

RETURNS FOT FORECAST OUTTURN GMS GENERAL MEDICAL SERVICES GSTT GUY’S & ST THOMAS’ NHS FOUNDATION

TRUST HRG HEALTH RESOURCE GROUP LHNT LEWISHAM HOSPITAL NHS TRUST LSCG LONDON SEPCIALIST COMMISISONING

GROUP KCH KING’S COLLEGE HOSPITAL NHS

FOUNDATION TRUST KPCA KENT PRIMARY CARE AGENCY KPI KEY PERFORMANCE INDICATOR NCB NATIONAL COMMISISONING BOARD NHSL NHS LONDON PCT PRIMARY CARE TRUST PMO PROGRAMME MANAGEMENT OFFICE PMS PRIMARY MEDICAL SERVICES PPA PRESCRIPTION PRICING AUTHORITY QOF QUALITY OUTCOME FRAMEWORK RTT REFER TO TREATMENT QIPP QUALITY, INNOVATION, PRODUCTIVITY

& PREVENTION RRL REVENUE RESOURCE LIMIT SLA SERVICE LEVEL AGREEMENT SLHT SOUTH LONDON HEALTHCARE NHS

TRUST TSA TRUST SPECIAL ADMINISTRATOR YTD YEAR TO DATE

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