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STRATEGIC STRATEGIC OUTLINE CASEOUTLINE CASE

Redeveloping theRNOH:

Investing inOrthopaedics

2004

Royal National Orthopaedic Hospital NHS Trust Strategic Outline Case April 2004

CONTENTS

FOREWORD EXECUTIVE SUMMARY ...................................................................................................................... i SECTION 1 : STRATEGIC CONTEXT ............................................................................................1

1.1 Royal National Orthopaedic Hospital (RNOH) ................................................................................. 1 1.2 North Central London Strategic Health Authority (NCLSHA) ......................................................... 4 1.3 Commissioners of RNOH services.................................................................................................... 5 1.4 A new service model.......................................................................................................................... 8

SECTION 2 : HEALTH SERVICE NEED ........................................................................................11 2.1 Health service needs: current service problems and their significance ........................................... 11 2.2 Consequences of not prioritising the scheme.................................................................................. 17

SECTION 3 : FORMULATION OF OPTIONS...............................................................................19 3.1 Overview and endorsements........................................................................................................... 19 3.2 Benefits appraisal.............................................................................................................................. 19 3.3 Financial appraisal............................................................................................................................. 23 3.4 Cost benefit analysis......................................................................................................................... 25 3.5 The preferred option ....................................................................................................................... 27 3.6 Risk assessment................................................................................................................................ 28

SECTION 4 : AFFORDABILITY.....................................................................................................30 4.1 Strategic Health Authority statement .............................................................................................. 30 4.2 Commissioners’ statement .............................................................................................................. 30 4.3 Trust affordability statement............................................................................................................ 31

SECTION 5 : TIMETABLE AND DELIVERABILITY......................................................................33 5.1 Timetable for achieving financial close............................................................................................. 33 5.2 Project management arrangements ................................................................................................. 33 5.3 Deliverability .................................................................................................................................... 34 5.4 Post-project evaluation .................................................................................................................... 35 5.5 Conclusion ....................................................................................................................................... 35

APPENDICES

APPENDIX 1 OB1 FORMS FOR SHORT LISTED OPTIONS

APPENDIX 2 LIST OF SUPPORTING DOCUMENTS (SEPARATELY BOUND)


Finnamore Management Consultants

FOREWORD : THE CASE FOR URGENT REDEVELOPMENT OF RNOH

RNOH is a jewel in the crown of NHS orthopaedics with an international reputation for pioneering treatment and excellence in patient care. The hospital provides a range of specialist orthopaedic treatment that is unique to the NHS, from surgery on the most acute spinal injury or complex bone tumour to specialist rehabilitation for chronic back pain.

Staff at RNOH do a remarkable job by maintaining high standards of care and pushing the boundaries in orthopaedic research, from accommodation that is old, inefficient, inflexible and patently unsuited to modern clinical practice.

This is now unsustainable and refurbishment is no longer a cost-effective option. Redevelopment must be approved urgently. Without new facilities, current levels of service at RNOH will start to decline within two years with a knock-on effect on NHS orthopaedic capacity across the country.

Staff, patients, local people and the Strategic Health Authority are all committed to redevelopment of the RNOH at Stanmore. This Strategic Outline Case sets out the opportunities that redevelopment would deliver for staff, patients, and the NHS as a whole. It explains how redevelopment of the site at Stanmore will allow staff to work more efficiently, with greater capacity for treating more patients and in an environment that fits the hospital’s international reputation and is conducive to the recruitment and retention of first rate clinical staff.

Investment in orthopaedics is needed now, more than ever, with demand for orthopaedic services continuing to rise and waiting times coming under increasing pressure. The development of the Independent Sector Treatment Centre is an important first step towards increasing capacity at Stanmore, but this on its own is not enough. Redevelopment of RNOH is essential if the hospital is to continue to play a key role in the wider NHS and provide a solid foundation for NHS orthopaedics in the future.

Andrew Woodhead, Chief Executive


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EXECUTIVE SUMMARY: KEY POINTS

The Royal National Orthopaedic Hospital (RNOH) is a national centre of excellence with an international reputation for diagnosis, assessment and treatment of neuro-musculoskeletal conditions. It offers an integrated range of clinical, teaching and research services unique in the UK, in partnership with University College London (UCL). Unfortunately, its services are provided from accommodation that is old, inefficient, inflexible and unsuited to modern clinical practice. It is remarkable that such a high quality of service can be provided from such poor facilities. There is an urgent need to rectify this. Following a lengthy period of discussion on the strategic future for RNOH, this Strategic Outline Case (SOC) for redevelopment of the hospital has been prepared.

The SOC sets out a new clinical service model for the RNOH. The model will help ensure:

• Delivery of the NHS Plan and NHS modernisation.

• Sufficient capacity to meet rising demand for services, where orthopaedics is facing disproportionate waiting time pressure locally and nationally.

• Successful partnerships with other organisations to improve patient care across the NHS.

• Support for NHS education and training initiatives and research and development, maintaining relationships with UCL.

In order for the RNOH to deliver the new service model, new accommodation and infrastructure are required. Following a full options appraisal, with patient involvement, a preferred option for redevelopment of the existing Stanmore site has been identified. This requires an investment of £121m (at MIPS 385, excluding optimism bias). Total revenue costs will increase by £16.4m, of which £12.3m is required from NHS commissioners.

Redevelopment of the Stanmore site will provide:

• A modern, patient-focused environment for the continued delivery of clinical, educational and research excellence and a secure future for an NHS centre of excellence, working in partnership with a top performing university.

• A protected elective facility, designed to meet the needs of neuro-musculoskeletal patients, and focused on continued throughput of non-emergency cases.

• Better clinical facilities, capable of accommodating a significant increase in activity, including orthopaedic surgery activity, in line with emerging NHS capacity plans in London and surrounding areas.

• A reduction of the average unit cost of treatment at RNOH from £5,619 (2003/04) to £5,519 (2009/10).

The RNOH has agreed the approach to the redevelopment with key commissioners and the North Central Strategic Health Authority. A process for making the redevelopment affordable has been identified.

With the necessary approvals, the RNOH expects to deliver the redevelopment through the Private Finance Initiative (PFI) and enabling land sales. It would seek to open new facilities in the year 2009/10.


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SECTION 1 : STRATEGIC CONTEXT

1.1 Royal National Orthopaedic Hospital (RNOH)

1.1.1 Service profile

The RNOH is a specialist hospital and is regarded as an NHS centre of excellence. As such, the RNOH offers a service profile unique to the UK, comprising an integrated range of neuro-musculoskeletal health care services:

• Adult joint reconstruction - primary and revision joint replacements and investigations including hip, knee, shoulder, foot and ankle and amputation services. The RNOH is the leading UK centre for cartilage transplantation and has an international reputation in joint replacement.

• Bone tumour and soft tissue cancer services for children and adults - the hospital is one of the national designated centres for endoprosthetic replacement and limb salvage for this rare cancer.

• Medicine and rehabilitation - pain management, complex rehabilitation, rheumatology, and sports injury services, endocrinology and metabolic disorders ranging from osteoporosis to rare brittle bone diseases.

• Spinal surgery and rehabilitation - the RNOH is one of the largest spinal units in Europe, dealing with spinal injuries, back surgery and spinal deformity including scoliosis.

• Peripheral nerve injuries - the RNOH is recognised internationally for services such as child and adult brachial plexus injuries, congenital hand deformity and nerve and tendon transfer.

• Paediatric and adolescent orthopaedics - congenital and acquired deformity, complex joint services and special needs orthopaedics.

1.1.2 Estates

The RNOH is based in two facilities:

• The main RNOH campus at Stanmore – the focus of this Strategic Outline Case (SOC).

• An outpatient facility currently located in Bolsover Street, near Regents Park in central London, which is the subject of a separate business case.

The Trust has recently agreed an estates strategy, available as part of the supporting material to this SOC on request. This sets out risk issues to be addressed and highlights the condition and configuration of buildings which require investment to:

• Support clinical developments, meet service needs and modernise service delivery.

• Meet health and safety and other standards.

• Give better value for money.

• Increase capacity and improve infrastructure.

This SOC is the vehicle for implementation of the Trust estates strategy, as it applies to the Stanmore site.


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1.1.3 Partnerships

The RNOH works with others, including:

Table 1: RNOH partnerships within the NHS

Networks Hospitals

North London - cancer

North central London - critical care

North central London – children’s (in development)

UK-wide (25 centres) - cartilage transplantation (in development)

North central London - orthopaedics (in development)

National Hospital for Neurology and Neurosurgery, Queens Square, London - neuro-spinal and rehabilitation

Great Ormond Street Hospital for Sick Children - paediatric spinal

Royal Marsden and Middlesex Hospitals - bone tumour

Harrow Primary Care Trust - joint chronic pain (psychology) service

Also, as a stand alone Trust, RNOH has entered into NHS service level agreements. Barnet and Chase Farm NHS Trust provides pathology services and general medical and general surgical cover. Past concern over medical “cover” for children has been addressed through a 24-hour on-site paediatric medical service, in partnership with North West London Hospitals NHS Trust.

1.1.4 Education and training

The RNOH makes a major contribution to NHS education and training, both nationally and regionally, as illustrated below:

• Medical: undergraduate training of circa 50 students per annum and postgraduate training of circa 450 doctors per annum. RNOH accommodates the London-wide orthopaedic specialist registrar training programme.

• Nursing: pre-registered students circa 100 per annum and post registered training circa 100 per annum. There is an orthopaedic nursing and spinal injuries diploma/degree programme.

• Therapies: placements for circa 50 students per annum in physiotherapy and occupational therapy.

1.1.5 Research and development

The RNOH, working in partnership with University College London (UCL), makes a major contribution to research and development (R&D) in orthopaedics and has the largest NHS-funded research portfolio for musculoskeletal services in the UK. With the Institute of Orthopaedics and Musculoskeletal Sciences (IOMS, an Institute of UCL), RNOH has a 50-year history of undertaking internationally recognised orthopaedic research. This work has led to new products and processes which are used throughout the NHS, such as an award-winning growing prosthesis for children with bone cancer, autologous cartilage transplantation, the Vapern™ pressure relieving mattress, and various other implanted devices (Stanmore hip, Bayley-Walker Shoulder System).

In recent years, R&D has been peer-reviewed both by the academic sector (IOMS scored ‘5’ in the most recent Research Assessment Exercise) and by the Department of Health (the nine NHS R&D programmes submitted by RNOH were all rated as ‘strong’, the highest rating of excellence). These reviews demonstrate that research on site is of high quality, undertaken by scientists and clinicians with an international reputation.


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R&D at RNOH is organised into research programmes linked to five UCL-led research centres:

• The Clinical Orthopaedics Research Centre improves the functional outcome of joint replacements, metabolic bone disease and spinal surgery.

• The Centre for Biomedical Engineering continues to improve the design of total joint replacements and provides increased scientific understanding of mechanisms that support the philosophy of the ‘ever lasting’ joint.

• The Centre for Musculoskeletal Pathobiology advances strategies for biological repair, regeneration and early genetic classification for diagnosis, prognosis and optimal treatment of skeletal tumours.

• The ASPIRE Centre for Disability Sciences undertakes research into the biomechanics of movement and function, applying this knowledge to enable people with physical impairments to achieve maximum levels of participation and independence.

• The Spinal Research Centre is focussed on research that helps to provide equity of care for people with spinal cord injuries and unlocks opportunity for full integration into society.

RNOH is part of the UCL Clinical Research Network (CRN). The CRN also manages a number of theme networks across five of the NHS priority areas (cancer, ageing, children, stroke, coronary heart disease), and hosts an NHS innovation hub (NCLIH), which helps member Trusts manage and exploit intellectual property.

The scientists and clinicians on the RNOH campus are also members of a number of other research networks, including:

• The National Spinal Injury Research Network.

• Disability Equipment Evaluation Programme of the Medical Healthcare Products Regulatory Authority (MHRA).

• London Neuroscience Group.

• Brite Net – the British Tissue Engineering Network.

• International Standards Organisation.

Membership of these networks ensures that RNOH is at the centre of an active research culture, bringing scientific gains to patients.

The RNOH and the IOMS, in partnership, provide solutions to clinical problems through world-class research and development that provides new strategies for the prevention, diagnosis, treatment and management of musculo-skeletal disease Professor Martin Ferguson-Pell, UCL

RNOH also values links with the commercial sector, which contribute to the research capacity of the RNOH in a number of ways:

• In collaboration with Stryker, DePuy, Stratec, Interpore, Medtronic and Surgicraft, establishing the capacity to investigate the outcomes of spinal surgery.

• Developing a number of new technologies to assess the risks associated with pressure ulcers, which are being commercialised in association with Huntleigh Technology plc and Medical Support Systems Ltd.

• In collaboration with Verigen Transplantation Services Ltd, developing and trialling new techniques to use autologous cartilage to repair damaged knee cartilage.


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• Stanmore Implants Worldwide (SIW) Ltd, a spin-out company of UCL, is unique and ensures that there is a truly collaborative approach to biomedical engineering. Through interactions between surgeons from RNOH and engineers at SIW Ltd, RNOH can inform both the design of custom implants and the development of new concepts for treatment of complex cases.

It is estimated that commercial partnerships have an annual value of close to £1m.

1.2 North Central London Strategic Health Authority (NCLSHA)

1.2.1 SHA strategy

The RNOH is performance-managed by NCLSHA. The SHA has set out its requirements for service modernisation:

• Improving patient safety.

• Improving service effectiveness.

• Making services patient-centred.

• Improving timeliness and access.

• Increasing efficiency.

• Making services more equitable.

This modernisation strategy will support the local delivery of:

• The NHS Plan.

• National Service Frameworks.

These are discussed below.

The NHS Plan and service modernisation

The Government launched the NHS Plan in July 2000. It will deliver sustained investment and modernisation in the NHS, including:

• New facilities, equipment and information and records systems and additional beds – 2,100 for general and acute wards and 5,000 for intermediate care, based on National Bed Inquiry (NBI) studies, investment in rehabilitation and intermediate care.

• Reformed systems – new organisational incentives and performance standards such as Patient Choice and booked admissions.

• Investment in NHS staff – increased numbers of doctors, nurses, therapists and others, including education and training and staff accommodation, plus reform of medical and nursing contracts and responsibilities.

• Improved health and reduced health inequality and reforms for patients including better patient advocacy and representation.

• Reduced waiting times – to a maximum three-month wait for all procedures by 2008.


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National Service Frameworks (NSFs)

NSFs have been prepared to set out clear standards for the provision of NHS care. Though there is no NSF for neuro-musculoskeletal care or its individual components, aspects of some NSFs are of particular relevance to RNOH:

• Elderly people. Services should be arranged to ensure that there is no age discrimination in accessing services, that care is person-centred, and that there is access to rehabilitation as an alternative to prolonged stays in hospital beds.

• Cancer plan. Waiting times for diagnosis and treatment should be shortened. By 2008, no patient should wait longer than one month from referral with suspected cancer to the start of treatment. Service redesign will help to achieve this target, including pre-scheduling and pre-booking of cancer patients.

• Children. Hospitals must be seen as one strand in a seamless mesh of services that are interlocked and interdependent from the perspective of the child and family. Services must be integrated, evidence-based and properly governed, and provided in the right environment.

• Long term conditions. The NSF, when published in late 2004, will have a particular focus on the needs of people with neurological disease and brain and spinal injury.

1.2.2 SHA approvals

The SOC proposes a major redevelopment of the Stanmore site, mainly through a new build programme. The proposal is based on:

• A comprehensive understanding of the strategic context within which the RNOH operates.

• A modern and patient-focused model of patient care, linked to local and national health services strategies, which will help deliver the NHS Plan and other key performance and quality targets.

NCLSHA considers that the redevelopment proposal is strategically sound and in keeping with its modernisation strategy. Redevelopment will not adversely impact on other Trusts and complements both local capacity plans and other developments to develop orthopaedic services in London. Furthermore, it will not be in conflict with plans at other tertiary orthopaedic centres in Oxford, Birmingham and Oswestry.

The RNOH is currently supporting Patient Choice by offering additional orthopaedic capacity, thus demonstrating the Trust’s developing role in meeting local waiting time targets. Some of this additional activity is currently being provided within an existing ward. The RNOH has been selected to host an independent sector treatment centre (ISTC). Initially, the agreement will be for five years beginning December 2004. It will provide for an additional 4,500 adult orthopaedic cases. This will allow the RNOH to increase throughput to meet raising demand, and is the first step in implementing the service model that underpins this SOC.

1.3 Commissioners of RNOH services

1.3.1 Barnet Primary Care Trust (PCT)

The host commissioner for the RNOH is Barnet PCT. However, the catchment population for the RNOH extends across the UK and beyond. As one of five specialist orthopaedic centres in the UK, the RNOH provides supra regional and national services. It also provides some general district orthopaedic services to


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local populations to communities which lie within the North West and North Central London Strategic Health Authorities, and the Bedfordshire and Hertfordshire Health Authority.

Barnet PCT have set out service objectives as a basis for the development, provision and commissioning of services:

• Patient centred, and tailored to the needs of users and carers.

• A focus on quality and patient safety, not just cost.

• Integration of primary, community, secondary, tertiary and special care services (at operational, managerial and strategic levels).

• Accessible services, delivered as near to the patient as possible.

• Ensuring the benefits of critical mass are realised within “hub and spoke” service models, supported by managed networks.

• Services transformation through improving delivery systems, estates and facilities, IM&T and workforce.

• Clinical involvement in rapid assessment and demand management.

This SOC reflects these objectives and the role the RNOH has in delivering them.

1.3.2 Hospital activity

The activity profile for RNOH in the most recent completed business year (2002/03) is summarised in the following table.

Table 2 : Activity 2002/03

Day Cases Elective Non-Elect TotalNHS Adult 1,145 4,197 457 5,799

Adolescent 76 561 107 744 Child 243 514 97 854 All NHS 1,464 5,272 661 7,397

Private 315 603 3 921 Total 1,779 5,875 664 8,318

The RNOH has a mainly (over 90%) elective focus. The nature of hospital activity is summarised below.

Table 3: Referrals & case mix

Referral patterns

• About 55% of referrals are from London commissioners

• About 41% of referrals are from elsewhere in the south and east of England

• About 4% are from the rest of the UK and overseas

Case mix • About 32% are tertiary (hospital-referred) cases of a super specialist nature, cared for on a supra-regional and national basis, for example bone tumour work

• About 51% are other complex/specialised tertiary referrals. This includes multi-revisions, congenital deformity and new techniques such as cartilage transplantation

• About 17% are secondary referrals from GPs. These are general orthopaedic services for a local population, for example arthroscopy and primary joint replacement


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NHS activity growth

National orthopaedic activity (finished consultant episodes) grew by a third through the 1990s. RNOH activity grew by about 83% over a similar period. More recently, RNOH activity increased by 17% in the years 1999 to 2003, while waiting lists grew. Clearly, existing RNOH capacity was unable to meet rising demand. This has begun to be addressed through the Trust’s Patient Choice work and the new ISTC.

With increasing UK life expectancy (to 77 and 82 for men and women respectively by 2015) and a consequent ageing population (15.8% of population aged 60-74 and 7.8 % aged over 75 by 2015) it is likely that demand will continue to rise. Coupled with this is the effect of technological advance, with the world wide orthopaedic implant industry planning for, for example, annual sales growth of hip and knee replacements of between 9% and 14% per annum. Orthopaedics is a major service within the NHS, already experiencing considerable pressures. It is therefore likely that waiting lists and times will remain under significant pressure.

The Local Delivery Plan (LDP) details how the RNOH will meet its targets and service developments. All assumptions and calculations within this SOC are consistent with the assumptions behind the LDP. Activity growth has been agreed with the Trust’s commissioners. Growth estimates take account of:

• Demographic change.

• Past trends.

• Capacity plans.

Commissioners have agreed activity growth to the year 2008/09. This is shown in the table below:

Table 4 : 2008/09 forecast activity

Day Cases Elective Non-Elect TotalNHS Adult 2,304 4,531 548 7,384

Adolescent 117 705 46 868 Child 353 879 37 1,269 All NHS 2,774 6,115 631 9,521

Private 273 1,114 5 1,392 Total 3,047 7,229 637 10,913

Activity

This forecast amounts to a total increase in NHS activity of 31% over the 2002/03 out-turn. Since 2000/01, when the forecasts of activity growth were originally made, they have been measured against actual growth in activity to 2002/03. It was found that actual growth in activity has been consistent with the forecasts. The forecasts are therefore considered robust and necessary to achieve a three month waiting time.

Activity growth assumptions are based on known pressures and initial discussions with commissioners. Currently, no growth in secondary activity is projected, in line with commissioners’ requirements. Forecasts will be reviewed with commissioners in the light of emerging capacity plans and other development proposals during preparation of an outline business case (OBC) following this SOC. In particular, further revisions to 10-year forecasts of activity growth will be agreed.

Private patients

Private patient activity growth of 51%, also shown in the table above, has been based on a separate marketing assessment. This is included in the supporting documents to this SOC.


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1.4 A new service model

Preparation of this SOC follows a number of key strategic reviews of RNOH services. Of crucial importance was a recommendation in 1998 of the then North Thames Region Musculoskeletal Review. The need for sufficient volumes of specialist work (critical mass) and maintenance of an integrated range of services was affirmed. Further work culminated in the then London Regional Office of the NHS Executive asking the Trust to develop this SOC. This work was originally completed in 2002 and the SOC was approved by North Central London Strategic Health Authority (NCLSHA) in December 2002. The document has since been updated for submission in the 2004 national prioritisation.

This SOC shows how the RNOH has developed a service model to underpin investment and overcome current problems (discussed in detail in Section 2). The new RNOH service model enables the Trust to work across organisational boundaries and respond to emerging health needs and health policy. The model reflects current thinking on NHS modernisation, and reflects the Trust’s participation in the Modernisation Agency’s Improvement Partnership for Hospitals. The service model is given in the supporting material to this SOC. Key elements are summarised below.

1.4.1 Overview of the new service model

The diagram below summarises the future RNOH service model.

Figure 1: Overview of service model

Acute Hospitals

Primary Care

Elective Tertiary

Emergency Route

Elective Primary Protocols Booked Admissions/ slots

ASSESSMENT

INDEPENDENT LIVING CENTRE

Short Stay Treatment

Specialisedsurgical and medical services and intensive rehab

Critical Care

Theatres

Homeor Community

Low Dependency beds

Self Care Beds

Telemetry

Telemetry

Telemetry

Virtual Hospital Outreach Networks

Illness Severity

The diagram shows the main organisational components of clinical care. They are discussed in more detail below.

1.4.2 Assessment Centre

The concept of the assessment centre is a multi purpose one-stop centre where patients are reviewed, assessed/ diagnosed, educated booked and scheduled for treatment. Patients will then move on to inpatient or other facilities as appropriate. This will include dedicated accommodation, including the provision of integrated high tech diagnostic facilities.


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1.4.3 Independent sector treatment centre (short stay)

The Trust is part of the Independent Sector Treatment Centre – Local Scheme programme. The ISTC is due to become fully operational in early 2005 and will allow the Trust to delivery the first part of the new model of care in partnership with an experienced international healthcare provider. This centre will accommodate routine elective surgery, offering protocol driven and efficient services to patients requiring day case or short stay treatment. The centre will improve effectiveness and performance and will support national targets to assist in reducing waiting times.

At the end of the initial five year contact it is envisaged that the Trust will take over and manage the ISTC and in the longer term it is anticipated that this element of the service model will be moved in to the main hospital build, avoiding a potential problem of over-capacity when orthopaedic waiting lists have been eradicated. Provision for this is made in the design solution discussed in Section 3. In preparing this SOC, the Trust has considered the consequences to redevelopment if the ISTC did not proceed. Again, the design solution would remain sufficiently flexible to provide additional accommodation. The capital and revenue consequences of this are set out at 3.5.

As part of the ISTC project considerable work has been undertaken to develop referral and discharge pathways. Initially the RNOH produced and agreed pathways with local GPs and PCTs. Meetings are currently being planned with those local social services departments most likely to be affected by quicker discharges. Once these channels of discussion have been established they are expected to continue so that the impact of the whole site redevelopment can be discussed and allow social services to plan their services accordingly.

1.4.4 Specialist medical and surgical services and intensive rehabilitation

Patients who require more specialised inpatient care pathways will be seen in this component of the service model. Treatment will be customised to their needs, generally in acute inpatient wards rather than in the short stay treatment centre. Emergency transfers will all be admitted into these wards. Inpatient beds for complex and specialised patients will focus on the particular needs of patient groups. There will also be a private ward.

1.4.5 Rehabilitation, low dependency and self care facilities

This component includes the provision of beds for patients in post-acute phases of their stay or patients who do not need high levels of nursing care prior to discharge. In addition the self care facility will house patients attending pre-operatively, patients undergoing a course of treatment, and will provide accommodation for clients undertaking reintegration courses with Aspire.

1.4.6 Clinical networks

As a tertiary centre, RNOH recognises that some service should be provided away from the main hospital sites. A clinical network strategy has been developed, as part of the clinical model, to redefine, focus and strengthen links between the Trust and other service providers. The objectives of the strategy include:

• Development of shared referral protocols and clinical pathways.

• Configuration of service locations and sites.

• Dissemination of best practice.


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1.4.7 Capacity requirements

Taking into account the activity growth discussed earlier at 1.3 and the new service model, a projected hospital capacity requirement (bed model) has been generated. This, alongside the current bed complement, is summarised in the table below.

Table 5 : Bed model

Component Type Projected beds

Current beds

ISTC Adult day case 15 0Adult short stay 9 0

24 0

ITU/HDU 18 12Spinal injuries unit (SIU) 40 35Children & adolescents 37 30Acute 62 90

157 167

30 38

211 205

Private 24 20

Grand total 235 225

Step-down, rehabilitation & self-care

All NHS

Complex and specialist inpatient

The table shows that overall NHS bed numbers increase to accommodate increasing levels of activity. As stated earlier, no growth in secondary activity has been assumed. Sensitivity analysis shows that if secondary activity actually fell (say by 25%), a decrease of five beds will be required. This would not affect the sustainability or integrity of the redevelopment.

As a measure of efficiency, it should be noted that a 3% increase in beds is required to deliver a 31% increase in activity. The development of the bed model reflects the NHS standard occupancy assumption of 82.77% overall and general improvements in average length of stay and day case rates, which result from implementation of the new clinical model. The bed model is set out in the supporting material to this SOC.

1.4.8 Summary of service model

The new service model is designed to support and deliver national and local strategies for service modernisation. In doing so, it underpins capital investment. This capital investment will provide additional patient capacity.

The Trust has begun a transition phase, of implementing the new clinical model in advance of the redevelopment. This includes work undertaken through the Improving Partnership for Hospitals to establish clinical modernisation boards. Work with partners outside of the Trust includes agreements to support the planned Edgware Community Hospital, review of consultant job plans and appointments across the broader orthopaedic network, and provision of external support to hospitals with small or single-handed musculo-skeletal services, facing clinical governance or operation pressures.

As well as delivering service modernisation and greater capacity, redevelopment must also address other significant current pressures for change, such as poor estates conditions, workforce recruitment and retention and cost pressures. These are discussed in more detail in the following section.


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SECTION 2 : HEALTH SERVICE NEED

This section describes the ways in which the new service model and redevelopment will deliver patient and other benefits, both locally and nationally, and meet rising service demand. The section is structured as follows:

• Health service needs are discussed and the way the SOC responds to these is described.

• The consequences of a failure to support redevelopment of the RNOH are set out.

2.1 Health service needs: current service problems and their significance

2.1.1 Strategic fit

Local health care strategy has determined that the RNOH will continue to be developed as a specialist neuro-musculoskeletal centre for London, the south and east of England and the UK as a whole. Redevelopment of the RNOH is required to ensure this continuity. Additionally, redevelopment will allow a step change in local orthopaedic capacity, to meet demand (discussed in more detail at 2.1.2).

RNOH already participates in a number of clinical networks. It is part of a national referral network for specialised cases. It has major links with charities, including Aspire National Training Centre, on the Stanmore site. As a stand alone Trust, the development of networks facilitates the development of RNOH services and services in other parts of the NHS. Without investment in the new service model, the ability of RNOH to network more effectively is constrained.

The new RNOH service model reflects the importance of working across organisational boundaries. By working with partner organisations, the RNOH will be better able to respond to emerging health needs and health policy. For example, the distribution of beds across the RNOH, district general hospitals and other institutions may be altered to accommodate new treatments, better discharge planning and shared care models.

Redevelopment of the RNOH will deliver much-needed support for:

• Local orthopaedic capacity.

• Regional and national specialist services.

• Networking between hospitals.

2.1.2 National, regional and local policy imperatives

As discussed in the previous section, there is rising demand for orthopaedic services, both nationally and locally. While 100% of outpatients were seen within 6 months, there were 2,800 patients on the RNOH inpatient waiting list at the end of 2002/03. This exceeded the Trust’s target.

There are also lengthy orthopaedic waiting lists across London and surrounding areas. Of 22,607 London patients waiting over 6 months for in-patient treatment (December 2003), 8,046 (35%) were orthopaedic cases. Of 9,947 London patients waiting 3 to 5 months for inpatient orthopaedic treatment (December 2003), 22% were in the North Central London Health Authority area, and 18% in the North West London Health Authority area. Of 4,615 Hertfordshire patients waiting over 6 months for inpatient treatment (December 2003), 1,427 (31%) were orthopaedic cases.


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Redevelopment of the RNOH will help to address demand and effect a permanent solution to waiting time problems. The RNOH will grow to meet the NHS Plan waiting time targets and the RNOH service model will support fast track diagnosis and treatment and the transfer of post-acute patients into sub-acute beds. This will enable maximum orthopaedic throughput. An increase in beds, particularly high dependency and spinal beds, will improve overall hospital capacity planning. Modern and flexible hospital design will support this.

2.1.3 Better access to services

The RNOH main campus is easily accessed by road, particularly from the M1/M25 motorways and the A41/A1 trunk routes. There is a local bus service connecting to the Edgware Underground station (Northern Line). An NHS minibus service connects the RNOH with Edgware station and the Stanmore Underground station (Jubilee Line), which is less than two miles from the hospital.

Within the hospital campus, there are problems of physical access and functional relationships between buildings. Furthermore:

Both the Commission for Health Improvement (CHI) and the NHS Patient Environment Action Team (PEAT) have raised concerns.

Redevelopment will allow the comprehensive replanning of hospital facilities. Access routes will be purpose-designed and rationalised and will conform to appropriate standards such as the Disability Discrimination Act.

The RNOH has considered the NHS Modernisation Agency’s Access Agenda for NHS capacity in 2008. The service model reflects the need to shift work to primary and community care settings in the longer term. In the shorter term, to 2005, the RNOH service model addresses the need to deliver Choice @ 6 Months and the effective abolition of all waiting lists. The ISTC is an example of early progress towards these targets.

2.1.4 Improved quality of clinical services

The quality of clinical services at the RNOH is high. The hospital offers leading-edge treatment, in keeping with its role as a centre for research and development. However, clinical quality is compromised by poor estates configurations and conditions. Deterioration of service quality is inevitable without investment. The poor configuration and quality of the current RNOH estate leads to a sub-optimal patient experience, and a range of operational constraints. For example, there are no dedicated day case facilities and there are limited (and in some cases poor) diagnostic facilities.

• There are poor quality footpaths and walkways and restricted corridors. This disproportionately affects physically disabled patients, of which RNOH has many. There are a number of steep slopes and ramps that connect departments. Car parks are often situated some distance from buildings, across uneven ground.

• Again, for disabled patients, wheelchair access is very poor, including limited wheelchair access to toilets in the outpatients department. The changing rooms in some areas are too small to be used by people in wheelchairs. The requirements of the Disability Discrimination Act are difficult to achieve.

CHI is concerned that a first rate clinical service that is nationally and internationally known operates in such a poor environment Commission for Health Improvement, 2002


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Redevelopment of the hospital is also required to improve functional relationships between departments. Poor clinical adjacencies lead to a fragmented patient “journey” through diagnosis and treatment. Way finding is difficult. Some patient journeys, for example, for children being taken to theatre, are out of doors.

Service quality will improve, as the clinical model requires new patient pathways with fewer “hand offs” between staff and better clinical adjacencies. Patients will benefit from a multidisciplinary approach to assessment, record keeping, and treatment planning.

Separation of secondary, specialist and rehabilitation elements of Trust services will help to ensure that the service will be delivered around patients’ needs and expectations.

2.1.5 Development of services

This SOC is focused on service development (the reorganisation, improvement and expansion of current services) rather than on developing new services. Clearly, the expansion of capacity will address waiting time problems and the redevelopment itself will provide a built environment which can support a modern service model. As a centre of excellence, RNOH must be able to bring new techniques into clinical practice.

The clinical model that underpins this SOC will bring about better ways of working and greater efficiency. Better organisation of care will support innovative practice.

2.1.6 Training, teaching and research

The NHS human resources strategy is built on four pillars:

• Making the NHS a model employer (for example, through implementation of Improving Working Lives).

• Creating better career paths through a skills escalator.

• Improving staff morale.

• Building people management skills.

Redevelopment of the Stanmore site, underpinned by a new model of care, has taken into account national human resources (HR) targets and initiatives. Redevelopment will provide the required environment in which to meet these targets. A workforce planning group will be established which will develop a transition plan for the workforce. This will focus on:

• Delivery of the HR strategy.

• Delivering the new model of care.

• Developing new competencies.

• Investing in leadership development plans.

• Developing innovative and flexible career pathways for staff.

The Trust achieved Improving Working Lives Practice status in 2003 and is currently working towards Practice Plus. A childcare co-ordinator post has been established to ensure that accessible affordable and good quality childcare is available to meet local needs.


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The Trust is promoting the skills escalator concept to assist with recruitment, career development skill mix and role redesign through NVQs , Learn Direct at ASPIRE, ECDL voucher system, individual learning accounts and the Tree of Knowledge programme. All of these are underpinned by equal opportunities training, study leave policies and staff appraisals. The Trust is working towards the implementation of Agenda for Change.

A characteristic of the RNOH is that medical posts are not difficult to fill, except where they are of an extremely specialist nature. The hospital is noted as particularly attractive to senior medical staff, because of the reputation for clinical excellence. The Trust has implemented changes to the working patterns of junior doctors to ensure compliance with the European Working Time Directive and New Deal and will be 100% compliant by August 2004. However, the Trust will need to employ additional doctors to enable the further reduction to 48 hours in August 2009.

In common with the NHS in London as a whole, the RNOH has a number of problems with recruitment and retention of other key staff. Amongst qualified nursing staff, there was a reported (2002/03) vacancy rate of 14.5% and turnover of 19.2%. Whilst allied health professionals such as physiotherapists are easy to recruit at junior grade, at a senior grade this is more difficult. There are also recruitment problems amongst other professional and technical staff groups, such as operating department practitioners, radiographers and orthotists. Recruitment and retention problems are compounded by the condition of the RNOH estate and the resultant uncertainty about the future.

At RNOH, the retention of staff in the longer term gives cause for concern because of cost of living in the locality. Though a major teaching and training asset to the NHS, RNOH is constrained by outdated training facilities. Education and training facilities are less multi-professional than they could be, which impacts on professional standards and behaviours within the Trust and across the NHS.

A multi-disciplinary learning centre will help develop a supply of well-trained and well-motivated staff for the Trust and the wider NHS. Medical and other training capacity will be expanded, with protected staff time for training. All groups of staff will be educated and trained to a similar model through professional learning, shared rotations with others Trusts, e-education and competency development. Shared facilities will include a cyber café and bio-skills laboratory.

The design of clinical and office accommodation will reflect the need for education and training space. Ward areas will be supported by IT access to learning materials.

Key worker housing will be provided as part of the redevelopment of the Trust site.

RNOH will support the wider NHS through live teaching links, the Web, electronic slides/lecture notes, the National Electronic Library for Health, and the National Grid for Learning. This could include patient learning and orthopaedic training in primary care.

As a major R&D centre for the NHS, investment in new facilities would allow RNOH to do more to:

• Work with UCL to help address NHS priorities in complex musculoskeletal conditions of children (musculoskeletal cancers, spinal deformity); disadvantaged members of society (spinal injury, cerebral palsy); and ageing members of society (degenerative joint conditions, osteoarthritis, cartilage transplantation).

• Benefit the wider NHS in terms of development of best practice, allowing basic biological research to inform clinical research programmes, and by translating clinical research programmes into clinical practice.


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• Reinforce and ensure the quality of UCL research at RNOH by maintaining high standards of peer review, research governance and ethical procedures in the internationally renowned basic and clinical research centres.

The R&D environment will be enhanced by purpose-built facilities, better able to support the interfaces between various research disciplines and between science and clinical practice to allow the early application of more efficient and effective treatment regimes. Development of R&D will be made in collaboration with other research institutions, acting together in networks, and with commercial organisations.

Better research infrastructure will support development of implants for functional restoration, better pain and spasticity control and improved management of paralysis and its sequelae. Cancer priorities will be addressed through increased bone tumour research. Gait analysis will help to reduce falling and so address the needs of older people. The development of tissue engineering techniques will promote the repair, regeneration and replacement of damaged tissues with “biological” implants, improving mobility and reducing disability.

2.1.7 Improved environmental quality

The main hospital campus at Stanmore has a land area of 112 acres and a built footprint of 44,800m². The Trust estate is mostly (61%) over 60 years old and buildings are now considered inefficient and unsuitable for modern health care. Functional relationships are poor. Some wards are of the Nightingale type and there are long patient transfers, partially out of doors, between wards and theatres. Key areas such as imaging are small and poorly located.

In stark contrast to the excellent care received from staff, the fabric of the majority of the buildings at the RNOH is appalling

Patient comment, quoted by CHI, 2002

Buildings cannot be significantly improved without significant financial investment. This environment makes it difficult to provide a service that is efficient and that respects privacy and dignity. Examples of problems are:

• Engineering plant is old and in need of replacement. The electricity supply is barely adequate to support equipment in parts of the hospital. Heating failure led to patient evacuation in January 2001. CHI has reported concern that such problems could compromise patient care.

• The x-ray department is too small, badly located in relation to service users and the floor is uneven.

• The “slope wards” were built in 1938, of asbestos clad construction, for temporary wartime use. The slope is very steep, making transport of patients and equipment difficult. The wards, ten of which are of the Nightingale type, are antiquated and over crowded, with poor facilities, particularly sanitary facilities.

• As recently as August 2002, heavy rain caused floods, boiler failure and the closure of a ward and part of the imaging department.

There is a total backlog maintenance requirement for the Stanmore site of circa £55m overall. An estates survey was carried out in April 2002. Key findings are summarised in the chart below.


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Figure 2: Estates survey results, 2002

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Physical condition (building)

Physical condition (services)

Energy performance

Compliance with standards

Functional suitability

Space utilisation

Satisfactory (condition A or B) Unsatisfactory (conditions C to D/DX)

The chart shows that against six NHS performance criteria, the Trust’s estate was generally unsatisfactory (graded conditions C to D/DX). In summary, the RNOH is:

• In poor condition.

• Energy inefficient.

• Not compliant with health, safety, fire and other standards.

• Functionally unsuitable.

• Space inefficient.

A redeveloped RNOH will create an environment conducive to health care, with modern and patient-focused design set in a healing environment. Improvements will include better privacy and dignity, and single-sex bathrooms. Site redevelopment will retain the human scale of the RNOH (a current strength) as well as support the provision of high technology services.

NHS investment at RNOH should encourage parallel charitable investment, currently constrained by past lack of certainty over the strategic future of the site.

Alongside capital investment in buildings, investment in information management and technology (IM&T) is also required. Information for Health sets out the requirement for Trusts such as RNOH to implement electronic patient records (EPR) to provide 24-hour access to a single patient record. Seamless care will be supported through more efficient information gathering. Currently, RNOH suffers similar information weaknesses as the NHS as a whole such as poor data capture, access and quality. An example of this is inconvenience and disruption to care caused by transferring paper-based clinical notes between Stanmore and Bolsover Street. Lack of electronic reporting of diagnostic examinations has caused delays in patient treatment. The patient administration system (PAS) requires replacement, and CHI has criticised hospital IM&T.

Redevelopment will encompass the infrastructure investment required to support EPR. Cabling will support digital image transfer and shared access to clinical information.


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2.1.8 Effective use of resources

At the end of the 2002/03 financial year the RNOH attained its main financial duties. In particular it achieved income and expenditure balance without unplanned financial support. Despite this satisfactory outturn the Trust faces significant financial challenges in the years ahead, particularly through the planned changes to the NHS financial regime.

The Trust’s income increased by £6m in 2002/03 to £54m. This represents a real terms increase of 7.5%. It is largely due to the opening of a managed care unit in October 2002 and additional clinical activity through London Patients’ Choice.

However, expenditure increased by a similar amount. Staff costs rose by 5% in real terms and costs of supplies and services rose by over 20%. Much of this was due to the increased costs of prosthetic implants, which reflects the high costs of technical innovation in the specialised areas of orthopaedics undertaken. This and the costs of maintaining a deteriorating estate are the main cost pressures facing the Trust.

Financial pressures will be addressed by redevelopment. For example:

• Refined and pooled referral protocols for the ISTC will facilitate more appropriate referral and accurate diagnosis, leading to more clinical efficiency.

• Better pre-operative assessment in purpose designed facilities will lead to fewer cancellations, reducing waste.

• By delivering the new clinical model and providing better diagnostic services, new facilities will support shorter lengths of stay, increased outpatient procedures and day case activity, as well as better scheduling of clinical procedures and theatre time.

• Where necessary, discharge will be into an intermediate care facility rather than into in-patient wards.

• EPR will end duplication of information-gathering.

• Investment in new buildings will reduce expenditure by resolving poor clinical adjacencies and create a modern facility with better energy performance and costs and more efficient space utilisation.

• Improved clinical adjacencies will reduce travelling time for staff and patients.

In the longer term, the Trust must respond to the proposed changes to the flow of funds within the NHS. This will result in NHS Trusts and other providers being reimbursed for the clinical work they undertake at a nationally set tariff (adjusted for geographical variation) rather than on a locally agreed basis. This will set particular challenges for specialist service providers such as the RNOH, for which specialist case mix can make average costs difficult to assess. The Trust currently appears to be a “high-cost” provider in terms of these tariffs. The implementation of the redevelopment described in this SOC will enable the Trust to reduce unit costs and deliver better value for money. This will be measured by comparing the unit costs of the more common secondary activity against the appropriate national tariffs.

2.2 Consequences of not prioritising the scheme

In July 2003 the Trust was awarded a two star rating in the NHS performance assessment. In respect of clinical focus and patient targets, the Trust is in the top band of performance. However, the Trust is in the lowest band of performance in capacity and capability targets.


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This assessment closely reflects and reinforces the health service needs discussed above. Without major investment long term capacity and capability issues can only be partially addressed. Elements of the NHS Modernisation agenda would not be delivered. For example:

• The Trust would not fully implement the new clinical service model, and in the face of rising demand achievement of waiting times targets would be more difficult. In addition, staff retention would deteriorate, and patient care would not be fully modernised.

• Buildings would continue to deteriorate. Patients would continue to suffer from poor access and route-finding, Nightingale wards and poor sanitary arrangements. Staff would suffer from poor accommodation.

• Improvements to education, training, research and development functions and dissemination of expertise would be more piecemeal without investment. Academic benefits to the Trust and the NHS as a whole would be fewer.

• There would be considerable difficulty in significantly improving the Trust’s efficiency and performance.

• Confidence in the Trust would be eroded, affecting key staff, charities, commercial partners and achievement of strategic aims. Non-NHS organisations, such as charities, will be discouraged from investing on the current site.

The Trust would continue to pursue piecemeal investment through extraordinary maintenance and small-scale development. Over time, this would amount to the “do nothing” development option set out in the following section. The gross capital cost of this is £88.9 m (OB1 form at MIPS 385, excluding optimism bias). Clearly, to address this through the Trust block capital allocation of about £1m per annum is not realistic. This approach would not achieve a step change in service delivery, but would merely keep RNOH functioning. Efforts would be focused on dealing with continuing staffing and estates problems at the expense of continued development of a clinical, educational and research centre of excellence. The implementation of service improvements would be undermined.

The RNOH is a centre of excellence with a history of under investment both in capacity and in the Trust’s buildings and facilities. Redevelopment of the RNOH is required to respond to pressures for change:

• Services and facilities must be modernised to meet NHS Plan requirements.

• Activity growth must be addressed to meet rising demand and address waiting times.

• Current estates are wholly inadequate to meet modern health care needs and must be replaced.

• Staff recruitment and retention must be improved.

In financial terms the Trust has managed to maintain its financial equilibrium over the past years through tight budgetary control. However, the costs of maintaining the existing estate are acting as an increasing drain on the Trust’s resources and preventing the development of clinical services that is required to meet the modernisation agenda and the wider needs of commissioners.


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SECTION 3 : FORMULATION OF OPTIONS

3.1 Overview and endorsements

3.1.1 Strategic Health Authority

The North Central London Strategic Health Authority has reviewed the appraisal of options set out in this section of the SOC and confirms that:

• The shortlisted options appraised would be capable of delivering redevelopment of the RNOH.

• The appraisal process was transparent, robust and inclusive of a wide range of stakeholders including patients.

3.1.2 Commissioners

Though the RNOH has a national referral base, the Trust has worked closely with key commissioners in the preparation of this SOC. In particular, the following commissioners contributed to the appraisal of options:

• Barnet, Harrow, Hertsmere and Welwyn & Hatfield Primary Care Trusts (PCTs), which together commission about 30% of Trust activity.

• The National Specialist Commissioning Advisory Group.

The commissioners listed confirm that:

• The shortlisted options are able to support service development and the maintenance of a neuro-musculoskeletal centre of excellence.

• The preferred option will deliver real benefits to patients, staff and the wider NHS.

3.2 Benefits appraisal

A full description of the benefits appraisal process is provided in the supporting documents to this SOC. It is summarised below.

3.2.1 Options long list

In agreement with the then London Regional Office of the NHS, a long list of potential options for redevelopment of the RNOH was generated, as follows:

• A geographical constraint was applied, limiting options to redevelopment on the existing site at Stanmore or relocation to another suitable NHS site in north/west London or in west Hertfordshire. This constraint would support the role of the RNOH as a significant local service provider.

• Suitable NHS sites for relocation should be either a district general hospital or an acute teaching hospital, in order to provide 24-hour support and cover for medical, surgical, paediatric and elderly patients. Additionally, such sites should


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have sufficient development space to allow RNOH to relocate in its entirety, including non-NHS charitable, commercial and academic facilities.

• Relocation strategies to be considered should be of two types; simple co-location on site, with no service integration; or integration with the other hospital on site.

• The Capital Investment Manual (CIM) options of “do nothing”, “do minimum” and “new green field site” should be considered.

The resultant long list is summarised in the table below.

Table 6 : Long list of options

Option* Description

1 Do nothing

2 Do minimum

3A Co-locate at North Middlesex Hospital

3C Co-locate at West Middlesex Hospital

3D Co-locate at Watford General Hospital

3E Co-locate at Hemel Hempstead General Hospital

4A Integrate with North Middlesex Hospital

4C Integrate with West Middlesex Hospital

4D Integrate with Watford General Hospital

4E Integrate with Hemel Hempstead General Hospital

5 Co-locate at University College London Hospital

6 Integrate with University College London Hospital

7 Redevelop at Stanmore

8 New build on a green field site

3.2.2 Options short list

At an options appraisal workshop, which included patient representatives, clinicians, managers and commissioners, the options long list was reduced to a short list for benefits appraisal:

• Option 1, do nothing, was excluded because it would not support the new clinical model. It would be considered in financial appraisal, as a benchmark.

• Options 3A, 3C, 3D, 3E and 5, the options to co-locate with no service integration, were excluded as there was a consensus that to relocate RNOH to another site without seeking to improve services through closer working would be untenable.

* Note: The long list originally contained options 3B and 4B, relating to co-location or integration with Hillingdon Hospital. They were withdrawn from the long list when lack of available land at Hillingdon was confirmed.


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• Option 8, the green field option, was excluded as it was felt to be insufficiently different to the option of redevelopment on the Stanmore site, which would be near-green field in nature. Again however, the option would be financially appraised as a benchmark.

It was noted that emergent strategy in Hertfordshire envisaged a new acute hospital site, encompassing a range of services and a relocated Mount Vernon Hospital. This would create a DGH with added regional cancer and plastic surgery services. Given this, it was agreed to short list and appraise this option rather than the Watford or Hemel Hempstead options (4D and 4E).

The Hertfordshire option was agreed to be likely to score more highly at benefits appraisal than any other DGH option, given its wider and specialist service profile. It could act as a proxy for all DGHs as well as an option in its own right. If it scored highest, other DGH options would then be brought back in to consideration. By this logic, options 4A and 4C were also replaced by the Hertfordshire option, now designated option 4.

(Subsequently, in reviewing the benefits appraisal with NCLSHA, a concern was raised that the option of relocation to Chase Farm Hospital had not been scored and ranked with the others. In fact this option had not been long listed; a decision based mainly on the stated lack of available development land at Chase Farm. However, the SHA advised that emerging changes in redevelopment plans for Chase Farm could in fact give more flexibility and sufficient land could now be made available. Furthermore, it was advised that to exclude Chase Farm but to include the Hertfordshire option (which remained theoretical, with no approved strategy at that time) might be open to challenge. In the light of this advice it was agreed to appraise a Chase Farm option, using the same objectives, benefits criteria and weightings agreed at the main appraisal workshop – see 3.2.3.)

The resultant benefits appraisal shortlist is shown below.

Table 7: Short list of options

Option Description

2 Do minimum

4 Integrate with new Hertfordshire Hospital

6 Integrate with University College London Hospital

7 Redevelop at Stanmore

- Integrate with Chase Farm

3.2.3 Project objectives and benefits criteria

Project objectives and benefits criteria were also agreed by the participants at the appraisal workshop. They were formulated as a means of discriminating between the options. The objectives and benefits criteria were derived from the strategic context, new clinical model and identified health service needs, set out in Sections 1 and 2 of this SOC. The objectives and benefits criteria were weighted, so that the relative importance of each would be reflected in appraisal. A summary of this is shown in Table 8.


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3.2.4 Scoring the short listed options

Those present at the appraisal workshop agreed that all short listed options were capable of supporting the new clinical model. The perceived strengths and weaknesses of each of them were considered against project objectives and associated benefits criteria. The raw and weighted scores, ranking and index of the options were calculated.

For the Chase Farm option, a joint panel of Trust, Barnet PCT and SHA representatives carried out the appraisal. The panel evaluated Chase Farm against the shortlisted options, using the scores from the earlier appraisal workshop as benchmarks.

The results of both the benefits appraisal workshop and the Chase Farm appraisal are summarised in the table below.

Table 8: Option scores

Raw Weighted Raw Weighted Raw Weighted Raw Weighted Raw WeightedCentre of excellence 14.6 3.0 43.8 5.0 73.0 8.0 116.8 8.0 116.8 4.0 58.4Improve quality of clinical care 14.6 3.0 43.8 7.0 102.2 8.0 116.8 9.0 131.4 8.0 116.8Patient centred 13.1 5.0 65.7 8.0 105.1 6.0 78.8 9.0 118.2 8.0 105.1

Protect & increase elective capacity 10.9 6.0 65.7 4.0 43.8 4.0 43.8 9.0 98.5 7.0 76.6Workforce 10.9 6.0 65.7 8.0 87.6 3.0 32.8 9.0 98.5 8.0 87.6Partnership working 10.9 4.0 43.8 7.0 76.6 8.0 87.6 9.0 98.5 7.0 76.6Deliverability/achievability 8.8 6.0 52.6 3.0 26.3 4.0 35.0 7.0 61.3 6.0 52.6Modern estate 8.8 3.0 26.3 8.0 70.1 8.0 70.1 8.0 70.1 8.0 70.1Efficiency 7.3 2.0 14.6 8.0 58.4 9.0 65.7 8.0 58.4 8.0 58.4Totals 100.0 38.0 421.9 58.0 643.1 58.0 647.4 76.0 851.8 64.0 702.2

5 5 3= 4 3= 3 1 1 2 2

-50% -50% -24% -25% -24% -24% - - -16% -18%

Chase FarmOption scores

Variation from top ranked option

Objectives Weight 2 (Do minimum)

Rank

6 (UCLH) 7 (Stanmore)4 (DGH - Herts)

The table shows that by a clear margin, the option to redevelop on the existing RNOH site at Stanmore was preferred in benefits terms.

3.2.5 Sensitivity analysis

Analysis was carried out to assess the degree to which the appraisal result would be sensitive to changes in scores and weights. The benefits appraisal workshop participants had proposed some potential changes to the marks awarded. These were tested, together with some adjustments to the weights of objectives. The result was that the degree of preference for the Stanmore option over other options narrowed, but that the Stanmore option nevertheless remained the preferred option by a clear margin. Sensitivity analysis also changed scores and narrowed margins of preference between the UCLH, Hertfordshire and Chase Farm options. UCLH and Chase Farm were placed equal second while Hertfordshire remained fourth.

A number of adjustments to scores and weights were also tested in order to assess how many such changes would be required to bring the second placed options up to first place. Analysis showed that the Stanmore option would remain in first place by a clear margin unless weightings were adjusted; and extra marks were given to other options against a range of objectives where appraisal workshop scores had been poor; and marks were taken away from the Stanmore option against objectives where appraisal workshop scores had been good. This was not considered to be reasonable or realistic.


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Thus, the Stanmore option remained a robust non-financially preferred option. The degree of preference between the UCLH, Hertfordshire and Chase Farm options was not considered significant.

3.3 Financial appraisal

3.3.1 Affordability

The four short listed options, plus the do nothing and green field comparators and the Chase Farm option, were all subjected to a financial and economic appraisal. The financial appraisal considered all revenue costs associated with each option, including pay and non-pay costs and capital charges:

• Pay and non-pay costs were reviewed and revised to reflect the economies that the Trust would expect to obtain from each site configuration. This includes the savings from support services on shared sites and economies that arise from better functional relationships within the Trust’s operations.

• The capital charges that were included are those that would be incurred in the first full year of operation. These represent the most significant affordability consequences for the Trust’s commissioners. Detailed analysis of the capital charge calculations are attached in a supporting document. These calculations reflect the benefit that accrues to the Trust through the funding of some of its assets from donated money. The calculations assume an average asset life for buildings of 20 years and 10 years for equipment and are based upon capital costs including optimism bias (see below).

The revenue costs of each option are summarised in the table below:

Table 9 : Summary of revenue costs

Current costs Option 1 - Do nothing

Option 2 - Do minimum

Option 4 - West Hertfordshire site

Option 6 - Integration with UCLH

Option 7 - Rebuild

Stanmore

Option 8 - Greenfield site

Chase Farm Option

£'m £'m £'m £'m £'m £'m £'m £'m Total revenue costs

Pay costs 32.3 32.3 36.8 34.9 36.9 36.2 35.3 36.2 Non-pay costs 21.7 21.7 26.4 25.8 26.4 25.8 26.1 26.1 Capital charges 4.2 11.1 12.8 14.2 20.6 12.6 14.4 17.5 Sub-total - RNOH costs 58.2 65.1 76.1 75.0 83.9 74.6 75.7 79.7 Payments to other providers 16.5 - - - - - - Total costs 81.6 76.1 75.0 83.9 74.6 75.7 79.7

Movement from currentTotal costs 23.4 17.8 16.7 25.7 16.4 17.5 21.5 % increase from current 40% 31% 29% 44% 28% 30% 37%

Rank of total revenue cost 6 4 2 7 1 3 5 NHS SLAs 39.9 13.8 12.9 21.8 12.3 13.7 17.7 % increase from current 99% 34% 32% 54% 31% 34% 44%

Rank of increase in NHS SLAs 7 4 2 6 1 3 5

The table demonstrates the total revenue cost of each option and the movement in cost from the existing baseline revenue costs of £58.2m. The do nothing option shows the lowest overall increase in costs within the Trust, but when this is supplemented by an estimate of the payment that would need to be made to other providers for the increased capacity required, option 7 is clearly more affordable. Overall, the Stanmore rebuild option represents the lowest cost, followed by the Hertfordshire option and the greenfield site.


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3.3.2 Economic appraisal

The economic appraisal has considered the overall economic cost of each option. These costs have been discounted at a rate of 3.5% to reflect the effect of the passage of time on the value of cash flows. The costs are net of VAT and capital charges, which are not a true cost to HM Treasury. The economic appraisal considers the capital, revenue, whole life costs of each option, the value of the land retained by the Trust and potential land sale and third party revenue income (e.g. charitable capital contributions and private patient income).

There is significant variation in land values and potential income between options, and in the capital costs of each option. These values are based upon professional valuations, which represent a conservative and consistent view of the cost of each option. They will be reviewed at the time of the OBC to ensure that they continue to be representative of the costs of the options.

Table 10 : Opportunity costs and potential sale proceeds

Option 1 - Do nothing


Option 4 - West

Hertfordshire site


Option 7 - Rebuild

Stanmore


Chase Farm Option

£'m £'m £'m £'m £'m £'m £'mValue of land retained/acquired 27.3 27.3 7.3 41.5 14.3 20.0 11.8 Sale proceeds from disposals

RNOH Stanmore - - 27.3 27.3 13.0 27.3 27.3 RNOH Bolsover Street - - - 9.8 - - -

Net opportunity cost/(benefit) 27.3 27.3 (20.0) 4.5 1.3 (7.3) (15.5)

Capital costs include NHS “consumerism” allowances and are stated at a MIPS of 385. The breakdown of capital costs is shown in the OB1 forms that are an appendix to this SOC and in the OB 2 to 4 forms that appear in the supporting documents. These are summarised in the table below.

Table 11 : Capital costs of options




Option 6 - Integration with

UCLH

Option 7 - Rebuild Stanmore


Chase Farm Option

£'m £'m £'m £'m £'m £'m £'m Excluding optimism bias

Net capital cost 76.8 97.3 125.1 166.8 104.4 123.1 145.8 VAT 12.1 15.4 19.7 25.9 16.4 19.3 22.9 Gross capital cost 88.9 112.7 144.8 192.8 120.8 142.4 168.7

% above do nothing 0% 27% 63% 117% 36% 60% 90%Rank of total capital cost 1 2 5 7 3 4 6

Including optimism biasNet capital cost 84.1 105.6 134.7 187.2 112.0 131.9 166.0 VAT 13.3 16.7 21.2 29.1 17.6 20.7 26.0 Gross capital cost 97.4 122.2 155.9 216.2 129.6 152.6 192.0

% above do nothing 0% 26% 60% 122% 33% 57% 97%Rank of total capital cost 1 2 5 7 3 4 6

Unmitigated optimism bias % 71.9% 74.9% 78.6% 64.9% 80.1% 80.5% 61.3%

Optimism bias is an estimate of the extent to which the costs included in the SOC may have been overestimated. In accordance with the guidance set out in HM Treasury Green Book, an attempt has been made to quantify the effect of optimism bias on the capital costs of each option, and this is illustrated in the table above. Unmitigated optimism bias is therefore integral to both the capital costs and associated capital charges of the options. The detailed calculation of optimism bias is illustrated in a supporting document to the SOC.


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The capital and revenue costs of private facilities are included in this calculation and so too is the private patient income that the Trust expects to receive. To allow direct comparisons between options an allowance of £16.5m has been added to the costs of the do nothing option to allow for the commissioning elsewhere of activity that could not be accommodated at the RNOH in Stanmore. The results of the economic appraisal are summarised in the table below.

Table 12 : Summary of the economic appraisal





Option 7 - Rebuild

Stanmore

Option 8 - Greenfield

site

Chase Farm option

Net present cost (£'m) 1,829 1,710 1,635 1,758 1,663 1,663 1,681 Difference from lowest cost 11.9% 4.6% 0.0% 7.5% 1.7% 1.7% 2.8%Rank 7 5 1 6 2 3 4

Annual equivalent cost (£'m) 70.1 65.9 63.1 67.8 64.1 64.1 64.8 Difference from lowest cost 11.1% 4.5% 0.0% 7.6% 1.7% 1.7% 2.8%Rank 7 5 1 6 2 3 4

The Hertfordshire option appears to offer the best economic solution. This reflects a combination of the following:

• Low site acquisition costs.

• Receipt of sale proceeds from the whole of the Stanmore site.

• The lower costs of building the new hospital in Hertfordshire (reflected in the location adjustment to the departmental costs).

• Reduced running costs of an out of London location (such as lower pay costs).

• The capital and ongoing revenue benefits associated with sharing support services with a much larger acute Trust.

These factors are sufficient to offset the additional capital costs arising from the need to reprovide the treatment centre and the charitable accommodation currently located on the Stanmore site.

Most of the other options are within 5% of this option in terms of value for money. The exception is the UCLH option, because of the high land values and build costs in central London.

The financial appraisal must also be considered in the context of the benefit appraisal for a complete understanding of the preferred option to be obtained. This is discussed below.

3.4 Cost benefit analysis

The cost benefit analysis considers the net present cost of each point of benefit realised under each option. It allows an assessment to be made of the value for money that each option represents. The result of the cost benefit analysis is as follows:


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Table 13 : Cost benefit analysis





Option 7 - Rebuild

Stanmore

Option 8 - Greenfield

site

Chase Farm option

Net present costs (£'m) 1,829 1,710 1,635 1,758 1,663 1,663 1,681

Benefits score N/A 430 615 665 760 N/A 702

Cost/benefit ratio N/A 4.0 2.7 2.6 2.2 N/A 2.4 Rank N/A 5 4 3 1 N/A 2

As this table demonstrates, the Stanmore option requires the lowest investment for the benefits that it generates. The Hertfordshire option, while having the lowest cost, delivers proportionately fewer benefits and is ranked fourth. The Chase Farm Option is ranked second. It would require an increase of 9% in the benefits score of the Chase Farm option, to 769, for this option to become the preferred option. This is not considered likely. The do minimum option is ranked fifth despite the similarity in its costs to the Stanmore option because it delivers much fewer benefits.

It should be noted that the Hertfordshire, UCLH, green field and Chase Farm options would all involve major short-term disruption, in moving RNOH to a new site and having to replace non-NHS buildings such as Aspire. Such disruption could be manifested in terms of recruitment and retention problems and other operational difficulties. These could result in costs additional to those appraised here.


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3.5 The preferred option

Redevelopment of the RNOH on the existing Stanmore site will focus all clinical services into a central building of circa three storeys. Residential development will take place on the western and south eastern boundaries of the site.

The preferred option has particular strengths:

• It is least disruptive to services, being a near-green field development on the existing site. Decanting from old to new accommodation will be simple.

• It is widely supported by patients, staff and the Overview and Scrutiny Committee of the local authority.

The redevelopment will provide a modern, purpose built and patient focused neuro-musculoskeletal facility. Green belt land will be released and reinstated. Functional relationships will be optimised. Access for patients will be excellent. Capacity will be sufficient to deliver the NHS Plan and associated targets.

Redevelopment at Stanmore will be consistent with the direction of Keeping the NHS Local, in that:

• It is supported by patients and their carers.

• No relocation of services is required.

• The Trust will continue to design services in networks and partnerships.

I am often asked to lend my support to various organisations, but never have I had an opportunity to support an organisation to whom I owe such a large debt of gratitude. In my early years I was a long-term patient at RNOH in Stanmore, so I fully understand the importance and necessity of the specialist work they carry out. I am therefore very happy to support the strategic direction of the Trust development plan, and wish them every success in achieving the very best environment and facilities for future generations

Dr Jim Marshall, OBE, Chairman & Managing Director, Marshall Amplification plc

The capital cost of the preferred option is calculated as £121m at MIPS 385, VOP. The forecast out-turn capital cost, at MIPS 480, including optimism bias and projected inflation, is £162m.

As stated earlier at 1.4.3, the Trust has considered the effect of increasing the redevelopment to provide accommodation for a treatment centre, if the planned ISTC did not go ahead. The additional capital cost would be £11.2m, leading to a net increase in capital charges, and therefore revenue costs, of approximately £0.8m.

A development control plan (DCP) has been prepared. The DCP will bring clinical facilities together into a coherent modern hospital, with improved access. Research and other facilities will be nearby. Green belt land will be retained and improved, and will include a disability park. Surplus land will be disposed of for housing, including key worker housing. The DCP is given in the supporting documents to this SOC and the overall development on completion is shown below.


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An Achieving Excellence Design Evaluation Toolkit (AEDET) analysis has been carried out for the preferred option. Some of the key points supporting the analysis are summarised below.

Table 14: Summary AEDET analysis

Functionality

Uses The site, being 112 acres, is easily large enough for the redevelopment.

Access The existing site is accessible. On-site access will be improved through better functional relationships, rationalisation of buildings and the provision of car parking.

Spaces Space planning has been completed in accordance with NHS guidance by experienced international health architects and planners.

Impact

Character & innovation

The main Town Planning constraints on the site relate to height and footprint, in a green belt setting. The preferred option conforms to stated planning requirements. Indeed, these help to reinforce the Trust’s requirement for a welcoming, human-scale environment.

Citizen satisfaction The nature of the site will allow a relatively unrestricted architectural solution.

Internal environment Again, there are no restrictions on the scope for pleasing internal design. As an open site of grass and woodland, there is wide scope for the architect in terms of open views. This is a key strength.

Urban & social integration

The site is not urban. There are good relations with Town Planning authorities. There are no known grounds for concerns over planning permission.

Build standards

Performance There are no constraints on the provision of daylight, fresh air, low noise and thermal comfort.

Engineering The redevelopment will require new engineering infrastructure, to modern standards.

Construction The nature of the site will allow new build to take place without disruption to ongoing hospital operations, with separate contractor access to a secured building site.

Some of the issues raised in this analysis are considered further in Section 5.

3.6 Risk assessment

The preferred option was subjected to a risk assessment by the Trust and its advisers, the results of which are as follows.

Table 15: Risk analysis

Key areas of risk Probability Impact Risk management

Changes in demand

Greater than projection

Medium Medium

Less than projection Medium Medium

Activity forecasts will be reviewed with commissioners following publication of this SOC. At OBC stage, activity forecasts will be firm across all RNOH services.

Financial viability

Failure to achieve planned revenue cost savings

Medium Medium The Trust will continue to seek further opportunities to reduce costs throughout the business case process, and extend capability to generate third party income.


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Key areas of risk Probability Impact Risk management

Approval process

Failure to obtain:

• Public support Low Medium

• Commissioner support

Medium High

• SOC approval Low High

• Bidders through PFI

Medium Medium

• Preferred partner Medium Medium

• Financial close Medium Medium

A continuing programme of public and stakeholder dialogue is under way. In particular, the Trust is working with all commissioners to finalise commissioning intentions in the long term. If a SOC is not approved, the Trust will revert to a “do minimum” scenario of addressing pressing compliance issues, and developing plans for small-scale improvements to services. The redevelopment is deliverable whether procured through PFI or public capital.

Construction

Adverse site conditions Low Medium The site and local utility connections have been surveyed to identify any issues.

Clinical model

Failure to implement Low High There is wide clinical support for the model. The Trust will ensure that ongoing development and dialogue takes place.

Planning

Failure to gain approval

Low High Ongoing dialogue with the planning authorities.

Operational

The new hospital does not perform as planned

Low Medium The Trust will develop a transitional plan for migration to the working practices and performance required in the redeveloped hospital. Design flexibility will allow modification of care processes.

Discussion of the costs of risk and the planning contingency in capital costs is given in the supporting material to this SOC. Further risk analysis will be undertaken for OBC stage. This will include preparation of a risk register. A risk consultant will be appointed for this element of the OBC process.


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SECTION 4 : AFFORDABILITY

4.1 Strategic Health Authority statement

The SHA reviewed and supported this SOC at its meetings of December 2002 and March 2004. The SOC enables the creation of capacity that is required to provide for these volumes of work. This capacity will be available at a lower marginal cost through the redeveloped option than for either the do nothing or do minimum options. The SHA has agreed to help support the process of securing long-term agreement to the redevelopment proposals from the exceptionally large number of commissioners of RNOH services.

4.2 Commissioners’ statement

In developing this SOC, the Trust has worked with three key groups of commissioners:

• Commissioners of specialist services – These commissioners are widely distributed throughout the UK. Individually they commission relatively small volumes of work that can only be provided by the Trust. These commissioners will experience a small increase in their gross costs, which will reflect volume increases and the improvement in the quality of the environment within which patients will be treated.

• Commissioners of secondary services – The overall revenue implications for these commissioners will depend upon future commitments with the Trust. For those who are planning to extend the amount of activity commissioned from the Trust the increase in unit costs of existing activity will be mitigated by the reduction in the marginal costs of additional work.

• Private patients – The Trust has commissioned a review of demand for private work in the redeveloped hospital. The outcome of this review is reflected in this SOC. Any changes in market conditions will be reflected in changes to the design. Private work will more than break even, providing a contribution towards the cost of NHS work.

Affordability has been discussed with commissioners. General agreement to the activity and revenue assumptions used in this SOC has been reached. They are accepted as a reasonable basis for affordability assessments at the SOC stage. In preparing an OBC, commissioners and the Trust have agreed that they will prepare new activity forecasts and agree affordability on a commissioner by commissioner basis, taking into account:

• SHA capacity plans, as they are published.

• A variety of other developments (such as independent sector treatment centres).

• An appropriate balance of secondary and tertiary referrals to RNOH.

• The new proposals for activity and financial flows (discussed below).

The North Central London SHA acknowledges that the SOC is being developed at a time of significant change in Government and public expectations of the NHS. The volume of activity that commissioners will be required to purchase is expected to increase substantially in order to achieve access targets and maintain service levels in the light of an ageing population.

This hospital is a world leader. Therefore the redevelopment has to mirror this … a phoenix out of the ground

HRH Duke of York


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Barnet PCT has reviewed the SOC and has given it support at its board meeting of 31 March 2004. The SOC is consistent with PCT plans and commissioning intentions. Though the redevelopment proposals will not require public consultation, as no service transfers or closures are planned under the preferred option, Barnet PCT will continue to include the RNOH in its plans for patient and public involvement.

Letters of support have been received from the Trust’s commissioners. They are available as supporting documents to this SOC.

4.3 Trust affordability statement

The revenue consequences of this investment will be significant. There is a total increase in revenue costs of £16.4m from the current baseline of the Trust. £12.3m of this would come from NHS commissioners, as is illustrated in the table below.

Table 16 : Activity growth, by commissioner

Value £'000 % total Additional £'000 % growth Final value £'000 % total

Hertfordshire 4,196 10% 855 20% 5,051 10%NSCAG 3,109 8% 359 12% 3,468 7%Barnet 2,059 5% 2,026 98% 4,085 8%Harrow 1,920 5% 292 15% 2,212 4%N Thames Spinal 1,782 4% 624 35% 2,406 5%West Kent 1,743 4% 294 17% 2,037 4%South Essex 1,627 4% 483 30% 2,110 4%Bedfordshire 1,395 3% 396 28% 1,791 3%North Essex 1,367 3% 461 34% 1,828 3%S Thames Spinal 1,321 3% 268 20% 1,589 3%Brent 959 2% 145 15% 1,104 2%Redbridge/Waltham Forest 1,351 3% 370 27% 1,721 3%Enfield 785 2% 170 22% 955 2%Ealing 611 2% 164 27% 775 1%Haringey 589 1% 129 22% 718 1%West Sussex 559 1% 80 14% 639 1%West Surrey 488 1% 164 34% 652 1%Camden 322 1% 51 16% 373 1%Islington 527 1% 84 16% 611 1%Sub-total 26,710 66% 7,415 28% 34,125 65%Others < £500k 13,549 34% 4,876 36% 18,425 35%Total 40,259 100% 12,291 31% 52,550 100%

Forecast contributionCurrent servicesCommissioner

Much of this increase is linked to additional activity, with the balance representing a step change in the quality of existing services, including the development of buildings which are fit for purpose and meet the demands of consumerism. The element of the costs related to activity is consistent with an increase in NHS service level agreement (SLA) revenue income of 5% per year between 2003/04 and 2008/09. It is acknowledged that this is higher than NHS growth of 4.2%, discussed in recent SOC guidance. However, the higher figure is consistent with Department of Health predictions of a 5% to 10% growth in elective surgery over the next five to ten years, given the role of the RNOH as a mainly elective hospital. It is also consistent with rising local demand and waiting time pressures.

The key change envisaged by the document Reforming NHS Financial Flows - Introducing Payment by Results, currently out for consultation by the Department of Health, is the introduction of tariffs based on Health Resource Groups (HRGs). One of the aims of the proposals is to incentivise Trusts to reduce costs in areas


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where they are currently in excess of national tariffs. RNOH is currently showing an overall index score of 149 in the recently published 2002/03 reference costs data, and on this basis the Trust would be viewed as a “high cost” provider. However it has been recognised by the National Casemix Office and other benchmarking organisations that the Trust’s highly specialised and complex orthopaedic activity is not always adequately covered by the current HRG structure. The Trust will address any potential problems this may cause through the OBC stage.

The Trust appreciates the need to reduce revenue costs wherever possible. For example, the following savings have been factored into the SOC financial and economic appraisal:

• Revenue savings arise from the clinical model, and associated improvements in performance, including reductions in length of stay.

• The redesigned hospital has better clinical adjacencies, reducing the amount of time staff spend crossing the site.

• The new service model eliminates the need for more than one recovery area and has co-located theatre space.

• The increased activity levels enable the Trust to improve the cost of its procurement, increasing available economies of scale.

• Better ward configurations and sizes enable staff to supervise patients more effectively.

• The new buildings will be more energy efficient than the current estate.

• There will be lower maintenance costs for the new build than for the existing, old and fragmented estate.

The Trust will continue to seek further opportunities to reduce fixed costs and limit the burden of cost to commissioners to the increase in activity levels. It should be noted that the Trust expects to achieve a 31% increase in activity with only 12% and 19% increases in pay and non-pay costs, respectively. Capital charges constitute half of this cost increase.

The impact of this SOC on the Trust’s finances is consistent with the proposed changes to the NHS financial regime. The average cost per case is set to reduce by 2% overall (from a weighted average of £5,619 for day cases and inpatient episodes in 2003/04 to £5,519 in 2008/09). Therefore implementation of the development described in the SOC will enable the Trust to adapt better to the new tariff.


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SECTION 5 : TIMETABLE AND DELIVERABILITY

5.1 Timetable for achieving financial close

The provisional timetable shown below is based on the assumption that PFI will be the agreed procurement route. The timetable will be tested at OBC stage. For now, it is expected that financial close with a preferred bidder may be reached in 2006/07 and construction may be completed in 2009/10.

Table 17: Provisional timetable

Activity Expected date

SOC approval June 2004

OBC approval December 2004

Outline planning approval December 2004

OJEC advertisement January 2005

Pre-qualification of bidders April 2005

Issue invitation to negotiate (ITN) May 2005

Selection of preferred bidder December 2005

Full business case approval December 2006

Financial close January 2007

Construction – 30 months (end) October 2009

Commissioning of new hospital – 3 months (end) December 2009

5.2 Project management arrangements

In October 2003, a Department of Health Gateway Review team examined the Trust’s project management arrangements. The review noted exemplars of best practice, which include the involvement, and engagement of clinicians in developing the service model. The overall assessment was ‘amber’ with six recommendations to be completed prior to the next Gateway Review. These have been addressed.

The project will be managed in accordance with NHS Capital Investment Manual and PFI Guidance. The delivery of this project will require high quality leadership of the procurement process. A Project Director of appropriate experience, training and seniority has been appointed. A Project Board, reporting to the Trust Board, will continue to take ownership of the project. A number of clinical and other teams support the project board. Project management arrangements ensure that the redevelopment process:

• Focuses on customer/patient needs.

• Values and empowers employees.

• Is committed to performance management.

• Is innovative in approach.

• Is businesslike in operation, with a focus on timeliness, financial monitoring and objectives.

• Works in partnership both internally and externally.

• Is adaptable and flexible to change.


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5.3 Deliverability

In order to ensure that the redevelopment is attractive and deliverable, the Trust has determined the following:

• Redevelopment is on a site already owned by the Trust. The works will be in near green-field conditions. A design solution based on the preferred option has been developed as a public sector comparator. This solution will not inhibit the operational capacity of the rest of the hospital, thus maintaining clinical activity to meet performance targets.

• The preferred option supports the clinical model with key departments appropriately located in relation to each other. The clinical model has been developed by staff and has their enthusiastic support.

• The preferred option does not require the relocation of non-NHS facilities such as Aspire, a modern building designed by Sir Norman Foster.

• Reconfiguration and land disposal as part of redevelopment will create opportunities for key worker housing.

• The preferred option is widely supported, especially by patients and staff. The proposal enables a new hospital to be procured that will meet NHS modernisation requirements. Formal public consultation is not required.

• The development will not conflict with policies relating to the London green belt. The Trust has worked with design teams and local planners to minimise planning risk and produce a deliverable design solution within the affordability envelope. The Chief Planning Officer of the London Borough of Harrow has indicated informal support for the proposal.

• There are no known restrictive covenants or leasehold interests that would prevent the development proceeding. Assessments will be made of subsoil conditions, land contamination and the archaeological position. The Trust also will make an environment assessment of the site, including wildlife and landscape strategies.

• There is sufficient space for decant programmes, contractors’ compounds and temporary car parking etc. Water, sewerage, electrical and gas utility connections will be surveyed.

• The key worker housing proposals are consistent with current Government policies and expressions of policy by the Mayor of London and the Greater London Authority.

• The Trust is working with the London Borough of Harrow environment/travel/transport team on traffic impact analysis.

• The Trust has invested in a strong project management structure, reflecting NHS guidance, good practice elsewhere and the findings of the Gateway assessment.

Based on experience elsewhere, the Trust believes a redevelopment project of this nature will generate considerable interest in the PFI market. The project provides an opportunity to spread risk, deliver a wide range of services and develop innovative solutions for the provision of a mixed health, education and research facility within a single package.


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The Trust also believes that the project will benefit from the exchange and sharing of knowledge and information with other Trusts. Many collaborative links have been established, for example through the Future Hospitals Network.

5.4 Post-project evaluation

Proposals for the evaluation of the redevelopment will be set out in the OBC to follow this SOC. This will include measurement of how successfully a new RNOH has delivered the service benefits discussed in this document.

5.5 Conclusion

Centres of excellence such as RNOH are at the leading edge of change and innovation in the NHS. This can only be sustained through maintaining a synergy of clinical service, education, training and R&D. This SOC demonstrates that there is a significant case for change in the provision of neuro-musculoskeletal services at the Royal National Orthopaedic Hospital:

• Capacity must expand to meet rising demand and address waiting times.

• The current estate is poor quality, expensive to maintain and wholly inadequate.

• Service modernisation is required to deliver an optimum patient experience as well as efficiency.

Approval of this SOC will enable the RNOH to continue as a key NHS asset. Delivery of modernised and patient-focused services is dependent upon a major redevelopment programme to create a substantially new hospital. This cannot be achieved by simply upgrading the current estate or making alterations to the existing service model. The SOC sets out a development proposal that:

• Reflects and delivers the NHS Plan and service modernisation.

• Is widely supported through a rigorous options appraisal.

• Is deliverable and attractive to the PFI market.

Approval to a capital development of £121m (at MIPS 385, excluding optimism bias) is required.


APPENDIX 1

OB1 FORMS FOR SHORT LISTED OPTIONS

STRATEGIC OUTLINE CASE FOR OPTION 1 COST FORM OB1

TRUST / PROVIDER UNIT : ROYAL NATIONAL ORTHOPAEDIC HOSPITAL NHS TRUST

SCHEME: RNOH; DO NOTHING SOC

Option 1

CAPITAL COSTS SUMMARY

Cost Excl. VAT Cost Incl.VAT £ £ VAT £

1 Departmental Costs (from Form OB2) 14,314,373 2,505,015 16,819,3882 On Costs (from Form OB3)

(65%) of Departmental Cost) 9,304,342 1,628,260 10,932,6023 Works Cost Total (1+2) at 385 MIPS VOP 23,618,715 4,133,275 27,751,990

(Tender Price index level 1975 = 100 base)4 Provisional location adjustment (if applicable)

15.00% of Works Cost (b) 3,542,807 619,991 4,162,7994a Sub Total (3+4) 27,161,522 4,753,266 31,914,7894b Cost of Work to Retained Buildings 22,322,881 3,906,504 26,229,3855 Sub Total (4a+4b) 49,484,403 8,659,770 58,144,1736 Fees (c) (d)

(15.00%) of sub-total 5 7,422,660 xxxxxxxxxxxx 7,422,660Non-Works Costs (from Form OB4) (e)

7 LAND 0 0OTHER 500,000 87,500 587,500

8 Equipment Costs (from Form OB2)(54%) of Departmental Cost 7,663,918 1,341,186 9,005,103

9 Planning Contingency 18.0% 11,712,777 2,049,736 13,762,51210 TOTAL (for approval purposes) ( 5+6+7+8+9 ) 76,783,758 12,138,192 88,921,95011 Inflation adjustments (f) 0 012 FORECAST AT OUTTURN BUSINESS CASE

TOTAL (10+11) 76,783,758 12,138,192 88,921,950

Proposed start on site ( M Y ) ( g )

Proposed completion date ( M Y ) ( g )

Cash Flow:- SOURCE £ Year EFL OTHER PRIVATE

GOVERNMENT2003/04

2004/05 1,124,069 1,124,069

2005/06 2,810,173 2,810,1732006/07 3,485,131 3,485,131

2003/08 15,710,590 15,710,5902008/09 24,563,920 24,563,920

2009/10 21,614,197 21,614,1972010/11 13,271,706 13,271,706Later 6,342,163 6,342,163

Total Cost (as 12) above 88,921,950

This form completed by: Martin Hadnutt, James Nisbet & PartnersTelephone No: 023 8023 7717

Date: 23 March 2004

Notes :

(a) On-costs should be supported by a breakdown of the percentage or a brief description of their scope ( form OB3 may be used if appropriate )(b) Adjustments of national average DCA price levels & on-costs for local market conditions

(c) Fees include all resource costs associated with the scheme e.g. project sponsorship,clerk of works etc.(d) Not applicable to professional fee -VAT reclaimable EL (90 ) P64 refers

(e) Non-works costs should be supported by a breakdown & include such items as contributions to statutory & local

authorities ; building regulations & planning fees ; land costs & associated legal fees(f) Estimate of tender price inflation up to current


SCHEME: RNOH; DO MINIMUM SOC

Option 2






15.00% of Works Cost (b) 5,295,782 926,762 6,222,5444a Sub Total ( 3+4 ) 40,600,993 7,105,174 47,706,1674b Cost of Work to Retained Buildings 22,322,881 3,906,504 26,229,3855 SubTotal (4a+4b) 62,923,874 11,011,678 73,935,5526 Fees (c) (d)


7 LAND 0 0OTHER 500,000 87,500 587,500



TOTAL (10+11) 97,291,631 15,374,284 112,665,915



Cash Flow:- SOURCE £

Year EFL OTHER PRIVATE

GOVERNMENT

2003/04

2004/05 1,429,355 1,429,355

2005/06 3,573,388 3,573,388

2006/07 4,431,658 4,431,658

2003/08 19,977,429 19,977,429

2008/09 31,235,236 31,235,236

2009/10 27,399,672 27,399,672

2010/11 16,663,580 16,663,580

Later 7,955,595 7,955,595



Date: 23 March 2004

Notes :

(a) On-costs should be supported by a breakdown of the percentage or a brief description of their scope ( form OB3 may be used if appropriate )

(b) Adjustments of national average DCA price levels & on-costs for local market conditions

(c) Fees include all resource costs associated with the scheme e.g. project sponsorship,clerk of works etc.

(d) Not applicable to professional fee -VAT reclaimable EL (90 ) P64 refers


authorities ; building regulations & planning fees ; land costs & associated legal fees

(f) Estimate of tender price inflation up to current




SCHEME:HERTFORDSHIRE SOC

Option 4






11.00% of Works Cost (b) 8,226,073 1,439,563 9,665,6365 Sub Total (3+4) 83,008,557 14,526,498 97,535,0556 Fees (c) (d)


7 LAND 0 0OTHER 1,000,000 175,000 1,175,000



TOTAL (10+11) 125,096,224 19,712,865 144,809,089



Cash Flow:- SOURCE £ Year EFL OTHER PRIVATE

GOVERNMENT

2003/042004/05 1,775,864 1,775,864

2005/06 4,439,661 4,439,6612006/07 6,592,495 6,592,4952003/08 39,617,260 39,617,260

2008/09 50,980,786 50,980,7862009/10 29,740,977 29,740,9772010/11 11,662,045 11,662,045

Later Total Cost (as 12) above 144,809,089

This form completed by: Martin Hadnutt, James Nisbet & PartnersTelephone No: 023 8023 7717Date: 23 March 2004

Notes :

(a) On-costs should be supported by a breakdown of the percentage or a brief description of their scope ( form OB3 may be used if appropriate )(b) Adjustments of national average DCA price levels & on-costs for local market conditions


(e) Non-works costs should be supported by a breakdown & include such items as contributions to statutory & local authorities ; building regulations & planning fees ; land costs & associated legal fees





SCHEME: UCLH MIDDLESEX SOC

Option 6








7 LAND 0 0OTHER 2,000,000 350,000 2,350,000



TOTAL (10+11) 166,828,296 25,944,934 192,773,230





GOVERNMENT

2003/04

2004/05 0

2005/06 1,092,238 1,092,238

2006/07 7,645,668 7,645,668

2007/08 11,489,869 11,489,869

2008/09 53,435,895 53,435,895

2009/10 69,207,446 69,207,446

2010/11 37,383,072 37,383,072

2011/12 12,519,043 12,519,043



Date: 23 March 2004

Notes :











SCHEME: RNOH RE-BUILD SOC

Option 7 : mips 385 vop








7 LAND 0 0OTHER 1,000,000 175,000 1,175,000


9 Planning Contingency 10.0% 9,495,181 1,661,657 11,156,83810 TOTAL (for approval purposes) ( 5+6+7+8+9 ) 104,446,990 16,396,604 120,843,59411 Inflation adjustments (f) 0 012 FORECAST AT MIPS 385 VOP

TOTAL (10+11) 104,446,990 16,396,604 120,843,594





GOVERNMENT2003/04

2004/05 1,501,936 1,501,936

2005/06 3,754,839 3,754,839

2006/07 5,581,529 5,581,5292007/08 33,596,602 33,596,6022008/09 43,313,542 43,313,5422009/10 24,261,318 24,261,318Later 8,833,829 8,833,829



Date: 23 March 2004

Notes :










SCHEME: GREEN FIELD SITE [ within M25] SOC

Option 8








7 LAND 0 0OTHER 1,000,000 175,000 1,175,000



TOTAL (10+11) 123,052,428 19,331,399 142,383,827





GOVERNMENT

2003/04

2004/05 1,739,799 1,739,799

2005/06 4,349,498 4,349,498

2006/07 6,469,028 6,469,0282007/08 38,971,328 38,971,3282008/09 50,144,977 50,144,9772009/10 29,241,969 29,241,969Later 11,467,229 11,467,229



Date: 23 March 2004

Notes :











SCHEME: CHASE FARM SITE - SOC

Option 9








7 LAND 0 0OTHER 1,000,000 175,000 1,175,000



TOTAL (10+11) 145,824,139 22,919,094 168,743,233




Year EFL OTHER PRIVATEGOVERNMENT

2003/04 0

2004/05 0 02005/06 847,642 847,642

2006/07 5,933,496 5,933,4962007/08 9,279,439 9,279,4392008/09 46,991,993 46,991,9932009/10 60,437,416 60,437,4162010/11 33,237,346 33,237,3462011/12 12,015,900 12,015,900



Date: 23 March 2004

Notes :







APPENDIX 2

LIST OF SUPPORTING DOCUMENTS

DOCUMENT 1 ACTIVITY AND BED MODEL

DOCUMENT 2 PRIVATE BEDS MARKETING ASSESSMENT

DOCUMENT 3 INCOME GROWTH ASSUMPTIONS

DOCUMENT 4 CLINICAL SERVICE MODEL

DOCUMENT 5 BENEFITS APPRAISAL

DOCUMENT 6 OB FORMS FOR SHORTLISTED OPTIONS

DOCUMENT 7 RISK AND CONTINGENCY IN OB1 FORMS

DOCUMENT 8 ECONOMIC APPRAISAL

DOCUMENT 9 REVENUE COST CALCULATIONS

DOCUMENT 10 DRAWINGS AND PLANS FOR PREFERRED OPTION

DOCUMENT 11 DEVELOPMENT CONTROL PLAN

DOCUMENT 12 AEDET ANALYSIS

DOCUMENT 13 LETTERS OF SUPPORT

DOCUMENT 14 GATEWAY REVIEW

DOCUMENT 15 OPTIMISM BIAS CALCULATIONS

DOCUMENT 16 CAPITAL CHARGES

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