Enclosure 3 Trust Board Meeting – 7th October 2010

1. Enclosure 3 Trust Board Meeting – 7th October 2010 FINANCE REPORT for the period ending 31st August 2010 (Month 5)

2. Section One- EXECUTIVE SUMMARY

3. Section Two – Expenditure - Pay PAY • Month 5 Pay overspend £511k, across all staff groups. Efficiencies required to cover the pay award continue to be the main cost pressure. • Pay cost in Month 5 was £15.1m, the average for months 1 to 5 was £15.3m • Pay control totals were allocated to divisions during August . The June pay spend of £15.4m was taken as a base against which to allocate run rate reductions of £350k per month. In month 5 the pay cost exceeded the control total by £41k, a reduction in pay cost of £313k against the June level. • Key initiatives to reduce the level of nursing spend are in process of being implemented, these include reducing bank shift duration, changing working patterns and contracting for hours to be worked over a given period rather than fixed weekly hours. Divisional lead nurses have led these reviews to ensure quality and service levels are maintained. • When considering the reduction in run rate it should be noted that some of the initiatives described above will begin to impact on pay spend in September and October and so further reductions linked to these can be expected over the next two months. • Within the month 5 pay spend £131k non recurrent items have been identified. After adjusting for these the underlying pay spend is just below £15m. AGENCY • Month 5 agency costs decreased to £571k (July £654k). This is equivalent to 56 wte. • The in month agency spend per wte is 10.2k. The month 4 average was £9.3k. • Agency costs in all areas other than consultants show a reduction on the month 4 figure. • The consultant increase is largely in Radiology where the appointment of a locum radiologist is predicted, by the division, to reduce reliance on external reporting of films/scans and reduce waiting list expenditure with radiologists. The current forecast spend reduction is £13k per month . • Non clinical agency staff spend shows a £14k reduction on the month 4 level. This is predominantly in agency usage in facilities for housekeepers

4. Section Two – Expenditure – Pay – Medical Staffing • Medical Staff overspend £323k (July £237k). Agency overspend within this is £263k which as reported previously is due to the premium cost of providing cover to ensure continuity and safety of service and compliance with EWTD requirements. • In July 559 shifts were filled. Of these 88 (16%) were internally covered, the balance of 471 (84%) were filled by agency. For 2009/10 the average was 652 shifts with the agency cover averaging 511 (78%). • Medical staff agency cover costs have seen a slight reduction in August to £448k (£495k in July). • The graphs opposite show the trend in medical staffing expenditure over the 12 months. The graph shows that the cost of directly employed and locum have remained even. However, since September 2009 the reliance on agency to cover Deanery vacancies and EWTD rota gaps is clearly illustrated. In September 2009 agency was 19.8% of the total medical staffing spend, in August 2010 this has risen to 20.4% • Following the August rotation the fill rate for training posts has substantially improved. This has reduced reliance on medical agencies, for longer term posts, and had a favourable impact on pay run rate. • Managers are currently assessing the potential impact and risk linked to agency reliance following the October rotation.

5. Section Three - Cash • Closing cash balance of £1,938k is an increase of £1,893k on the prior month • EBITDA shortfalls (YTD £1,621k) and the requirement to make capital expenditure payments have been managed through creditor payments within working capital. • The Trust is liaising with the SHA to assist in accelerating cash allocations and payment of +60 day invoices from the local PCT’s to improve the BPPC. • Revised forecasting procedures are in place. There were significant cash outflows in the first quarter 2010/11 due to the completion and timing of large capital projects (including decontamination offsite solution). • Increase in cash balance to fulfil PDC payment obligation of £2,528k to DH payable 17 September 2010.

6. Section Four – Forecast Outturn – FIMS Month 5 • The forecast outturn submitted as part of the Month 5 FIMS return is a £2.6 million surplus in line with original plan. Assumptions are: • PCT QIPP schemes delivered in line with agreed plan levels of activity from August to March. • Shropshire County PCT non elective activity overperformance continues (after accounting for QIPP schemes) • Month 5 pay run rate continues after adjusting for non- recurrent items • Pay run rate reductions including confirmed schemes and medical agency cost reductions phase in from month 6 • CIPs at 74% of target • Additional posts (£1.2m) offset with additional run rate reductions • Emergency threshold adjustment is reimbursed (£0.9m) • Non pay inflation continuesto be managed as in previous years

7. Section Five - Improvement Programme The summary position is as follows: • IP target for 2010/11 is £6.8 million. • At Month 5 £0.894m has been delivered against a target of £1.197m. This equates to 75%. Against the revised forecast of £1.103m delivery equates to 81%. • The current forecast outturn assumption is that delivery will be at 74% (£5m) • A more detailed report is presented separately to the Finance & Performance Committee.

8. Section Six - Financial Risk Rating • The diagram above illustrates the Trust position in each metric of the FRR against the full year plan position and illustrates the in-month deterioration against each of the metrics. • The Trust is currently underperforming in each area. • Risk rating of 2. • Deterioration in each of the FRR performance metrics. • Liquidity metric shows rating of 1. Increased cash balances offset by increasing net current liabilities. Cash balance growth due to planning cash holdings to ensure Trust is able to meet PDC Dividend payment in September. • Performance below plan continues to impact on the liquidity position

9. Section Seven- Activity and Income Inpatient Performance: • Total elective and day case activity was 101 spells below plan in August. This has given rise to an income under-recovery of £276k in August. • Overall Day Cases show an over performance of 4 spells in August. Over performance in Day Case is reported in Gastroenterology, Ophthalmology, Clinical Haematology, Gynaecology and Clinical Oncology this is offset by underperformance in all other specialties. • Backlog activity validated to 31st August is 891 spells in surgical specialties • Elective inpatient activity was 105 below plan in August. Under performance is reported in all specialties other than Paediatrics, • Non elective activity is 128 spells above plan in August. General Medicine being the main area of over performance. Reported income has been adjusted to reflect the emergency threshold tariff adjustment, this has reduced reported income by £897k. Non elective activity in total including maternity is £307k above plan in August • Maternity activity is below plan 32 spells in August Outpatient Performance: • In August outpatients were 2 attendances above plan (1,756 July) the income over recovery for the five months is £1,427k. • In August new outpatients are 740 attendances above plan and 1329 attendances below the July level. This includes Outpatient Procedures over performance in the month of 1,039. The underlying new outpatient activity is 299 below plan.New attendances notably show under performance in Orthopaedics, Oral Surgery, Orthodontics, Dermatology and Geriatric Medicine. • Outpatient Procedure activity is significantly above plan in Orthodontics, Oral Surgery, Dermatology and Obstetrics. This partially offsets underperformance in new outpatients. • Backlog activity validated to 31st August is 1,532attendances in surgical specialties • Follow up outpatients are 737 attendances below plan and 1709 attendances below the July level. Accident and Emergency • A & E attendances are 207 above plan in August (880 YTD). In month activity analysis shows RSH 53% and PRH 47%, income shows RSH 52% and PRH 48% split.

10. Section Eight - Expenditure – Non-Pay and Finance Costs • Non pay shows an overspend of £340k in month. All non-clinical non-pay expenditure requisitions continue to be reviewed and scrutinised for validity and necessity before being approved. • The Divisional Report highlights specific areas of non pay over spend including: • Cancer/ Oncology/ Haematology drugs offset, by income recovery • Theatres Orthopaedic products, hip, knee and trauma related. Use of specific implants, under review. • Increased demand for blood products in Medical specialties. • Patient Transport Costs, offset by income. • Finance costs are £2k underspent in August. Forecast outturn is in line with plan.

11. Section Nine - Debtors • Trade debtors have increased by £274k compared to prior month with a reduction in accrued revenue of £258k. Total debtors have therefore increased by £16k. • Shropshire County PCT +60 days decreased by £67k. The +60day category has been escalated and raised at the recent local FD meeting with little impact and/or movement. The key invoices still outstanding are £363k for EPO drugs and £141k for a disputed balance of cardiac catheterisation (part payment of £203k received in month of May). FD is due to write to PCTs with possible involvement with the SHA. • Telford and Wrekin PCT +60 days category shows an increase of £128k and is represented by the continued ageing of + 30 day category. The 3 main invoices outstanding are; £201k relating to Month 12 2009/10 Herceptin; £15k that refers to Nuffield activity – the credit team are working with Contracts and Performance to resolve and £22k relating to Lucentis injections. Recent communication indicates the Herceptin amount of £201k will be paid 15 September 2010. The over-performance invoice of £212k within current category will be paid 8 September 2010. • Herefordshire +60 days relates to month 12 forecast out-turn. All but 1 of the 8 PCTs have agreed with the year end position. This is worth a net gain of £66k. • Of the other debtors outstanding £34k has been referred to a specialist collection agency with appropriate provisions for write off made based on expected collection success. • £56k in respect of an overseas visitor with no means to pay is shown in line with DH guidance – this debtor has been provided for in full.

12. Section Ten – Creditors (Non NHS) • Table 1 summarises the non-NHS creditor payment performance for the cumulative prior year, month 5 and year to date position. The graph shows the prior year by month with current month position. • The Better Payment Practice Code stipulates a target of 30 days. • Increase in monthly compliance position due to prioritisation of non-NHS payments. The current cumulative compliance is on par with month 5 and is 31% for volume and 55% for value. • Table 2 summarises the actual payment performance in the month.

13. Section Ten – Creditors (NHS) • Table 1 summarises the non-NHS creditor payment performance for the cumulative prior year, month 5 and year to date position. The graph shows the prior year by month with current month position. • The Better Payment Practice Code stipulates a target of 30 days. • The cumulative compliance position at Month 5 is 23% for volume and 37% for value. • Table 2 summarises the actual payment performance in the month.

14. Section Eleven - Capital • The Capital Programme for 2010/11 has been revised to £7.7m, based on internally generated funds only. • Only £222k of capital funds remains available. • CT Scanner PRH – temporary CT Scanner currently in use. Planned date for new CT Scanner to be operational is 25 October 2010. • Decontamination Project – delay in commissioning of equipment due to utility upgrades not being completed as agreed. PRH service move will be on completion of works and commissioning. RSH service move planned for Mid-Spring 2011. • Theatres Air Handling Scheme – works to complete theatre 1 air plant currently being undertaken. Once theatre 1 air plant becomes operational, then installation works of theatre 2 air plant will commence. Estimated operational date for theatre 2 is 27 September 2010.