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Financing the future HSC –achieving sustainability?

Julie Thompson – Senior Director of Finance, DoH NI

Owen Harkin - Vice Chair of HFMA and Director of Finance, NHSCT

The Story so FarDHSSPS

Policy & Strategy

£4.5+bn

HSCB & PHACommissioning,

performance and planning£4+bn

Other HSC Providersincluding:

HSCB, PHA, BSO &Voluntary Organisations

NI Trusts5 HSC Provider Trusts & NI

Ambulance ServiceDelivery of services

£3+bn

Family Health Services£1bn

Progress to Date

£400m+

Total cash and productivity savings targets for HSC Trusts

From 2010/11 – 2014/15

£130m+

Efficiency savings targets for Pharmacy from 2010/11 – 2013/14 with the

implementation of the Pharmaceutical Clinical Effectiveness Programme strategy

Evidenced by:

Hospital EfficienciesLength of Stay Savings Unit Cost Savings

General Medicine - 30% - 26%

General Surgery -11% - 1%

Trauma & Orthopaedics -9% - 9%

Savings in Average Length of Stay (inpatient days) and costs per Finished Consultant Episode (FCE) from 2009/10 to 2013/14

Community EfficienciesActivity Increases Unit Cost Savings

District Nursing +13% -15%

Health Visiting +8% -13%

Physiotherapy +49% -10%

Speech & Language +21% -10%Therapy

Activity (contacts) and unit cost savings (costs per contact) in 2013/14 compared to 2009/10

Evidenced by:

Activity Based Funding

Hospital reference cost comparisons v England

still show scope for improvement, but do

demonstrate a significant improvement to

2013/14

19%

11%

The cost variation of NI reference costs

compared to England has reduced from circa 19% in 2009/10 to 11%

in 2013/14 – an improvement of over £50m in cash terms

Hospital Improvements

Day Case Rates Increased from 74.2% (2010/11) to 77.8% (2013/14)

Outpatient DNA (Did Not Attend) RatesReduced from 10.4% (2010/11) to 9.1% (2013/14)

Source: NISRA Annual HSC Statistics

Other Improvements

Domiciliary Care lower cost provision

(Expenditure increases have been managed to 3% in real

terms compared to an increase of 8% in activity (domiciliary hours of care) from 2009/10 to 2013/14)

Management of corporate spend

(Real terms reduction in Hospitals overhead spend from

2009/10 to 2013/14)

Trends

HSC Services - shift in expenditure:

Hospital Services -4%

Community & Personal Social Services +4%Expenditure as % of total Trusts’ spend in 2013/14 compared to 2009/10

Hospital Services transition:

Inpatients -2%Outpatients +6%Day Cases +7%

Movement in real terms expenditureby Patient Class from 2009/10 to

2013/14

Community & PersonalSocial Services

Movement in real terms expenditure from 2009/10 to 2013/14 reflecting the

transition to community / home settings

GP Direct Access Services +87%Supported Living +56%Direct Payments +50%

Personal Social Services

Movement in activity delivered from 2009/10 to 2013/14:

Residential Care -6%Nursing Home Care +7%Domiciliary Care +8%

18% increaseIn real terms expenditure for A&E services

from 2009/10 to 2013/14

44% increase(additional £53m)

In real terms Drugs expenditure from 2009/10 to 2013/14

The Financial ChallengeGoing Forward

3.8

4

4.2

4.4

4.6

4.8

5

5.2

5.4

2015/16 2018/19 2021/22 2014/25

£bn

Financial Year

Funding (Flat in Real Terms) Funding (Flat in Cash Terms) Projected Spend (in Real Terms)

NICON Priorities

• Ring Fenced Transformation Budget with stable 4-Year Funding agreement;

• Public Debate on Public Funding models;

• Commitment that HSC retains any additional funding made available to NI via NHS uplifts;

• Continue to improve and innovate to drive efficiency, via new ways of working, making best use of resources, workforce & technology, making tough choices to invest differently

Financing the Future HSC –Achieving Sustainability?

Julie Thompson

Senior Finance DirectorDepartment of Health

Financial Context

• NI continues to receive more in Budgets thanit pays for in taxation.

• The economy is more reliant on the publicsector than other areas of the UK.

• The DOH budget approximates to £5 billion per year on services – almost half of the public sector budget.

DOH Budget Settlement Profile

BudgetSettlement

2012/13

£m

2013/14

£m

2014/15

£m

2015/16

£m

2016/17

£m

Current Expenditure 4,447.6 4,569.2 4,659.4 4,751.4 4,880.1

% Uplift 1.5% 2.7% 2.0% 1.9% 2.7%

Capital Expenditure 325.4 224.8 200.5 213.4 232.6

DoH Budget as % of NI DEL

40%

41%

42%

43%

44%

45%

46%

47%

48%

49%

50%

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

DoH Budget as % of NI DEL

Linear Trend

DOH Budget vs Other Departments

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Other Depts

DOH Budget

Linear (Other Depts )

Linear (DOH Budget)

However we face demographic pressures which will place further strain on key services, especially health....

1700

1750

1800

1850

1900

1950

2000

2050

NI Population

Budget 2016/17

• Protection for health and social care

• Degree of protection for policing budget

• Unprotected baselines faced 5.7%

reduction

• Departmental outcomes ranged from

-5.7% for DAERA to +2.7% for DoH

Post June Monitoring

We will have to identify substantial savings in order to supplement the additional budget

allocation

The budget for 2016/17 is still exceptionally

challenging for DOH

IF DOH and its ALBs are to

deliver services within the available budget....

Reform Agendais

critical

Capital Programme

SIGNIFICANT DEMANDS

ON CAPITAL BUDGET

ICT investment needed to

support reform

Mental health

reform –Bamford progress

Acute Site investment for service

delivery targets

PCC centres–SIP identifies

26 Hubs costing £350m

– £400m

£240m investment pa

Budget 2016

Multi-year Budget, which

will link directly to the

PFG

Resource DEL 2017-20

Capital DEL 2017-21

Draft budget by Autumn

2016

Will support more medium term

financial planning and enable more effective planning by the Trusts and

other bodies

Ministerial Priorities

To radically reform health care services to

ensure it delivers affective outcomes for people with a focus on early intervention and

prevention

To continue to deliver services to the most

vulnerable

To address the immediate challenges affecting patients and

staff in our acute services

To champion mental health

To reduce health inequalities to enable everyone to have the

same chance of living a long and healthy life no matter where they live

To develop all-island networks to tap into the benefits that All Ireland health and social care

approaches bring

These priorities are set within the context of the outcomes focussed draft Programme for Government Framework 2016-21, including:

HEALTH PFG OUTCOMES

We care for others and we help those in

need

We have high quality public

services

We enjoy long, healthy active

livesWe give our children and

young people the best start in life

We have a more equal society

We have more people working

in better jobs

Key issues moving forward

THE FINANCIAL CHALLENGE

Capital

Transformation Restructuring

Bengoa

Savings

Service Developments

Elective Care

Inescapable Pressures

Early thoughts on potential implications of Brexit

• Mobility

• Recruitment

• Professional regulation

Workforce Issues

• Exchange Rate

• Procurement

• Impact on European funding currently received

Funding

• Quality and Safety

• Medicines Safety

• Public Health

• Children’s Issues

Regulation

Closing Thoughts

• Delivery of substantial reform to the health service is key

• Short term action to be balanced with longer term change

• All to contribute – a task for the Executive as a whole

• Sustainability is key

Owen Harkin

Vice Chair, HfMA NI

Director of Finance, NHSCT

Demographics- 5% increase in Population

- 21% Increase in > 65s

Pay & Inflation- Pay & Price Inflation- National Living Wage- Nat Ins / Pensions

Service Pressures / Developments

Specialist HospitalDevelopments- Children with disabilities- Looked after children- Adult safeguarding- Resettlements- Health Promotion- Out of hours

HSC PRESSURES /INVESTMENTS REQUIRED

Long term conditions

DiabetesCOPDAsthmaStrokePalliative Care

New technologies

Electronic Care RecordTheatre & bed management

systemsCancer patient pathwaysElectronic PrescribingTelecare, telemonitoring

Increasing Complexity

- Co-morbidities- Dementia- Later in life pregnancies

New NICE approved drugs & growth in

existingIncluding:Cancer, HIV, MS & Biologic therapies

Pressures Facing HSC TrustsWorkforce

- Medical StaffingShortages

- Nurse Recruitment &Retention

- Social Care / AHP Staff

The Financial Challenge .....

• Reducing Costs in the system

Creating High Performing Organisations, Improving Efficiency and Productivity

• Taking Costs out of the system

New Service Models, Focus on Outcomes

and Safety, Disinvestment linked to Effectiveness

Michael Porter –Value • Use of expensive physicians and skilled staff for less skilled activities • Delivering care in over-resourced facilities • −E.g. routine care delivered in expensive hospital settings • Over-provision of low- or non-value adding services or tests • −Sometimes to follow rigid protocols or justify billing• Low utilization of expensive physicians, staff, clinical space and

equipment, partly due to duplication and service fragmentation • Process variation that reduces efficiency without improving

outcomes• Focus on minimizing the costs of discrete services rather than

optimizing the total cost of the care cycle• Lack of cost awareness in clinical teams

There are numerous cost reduction opportunities that do not require outcome trade-offs, but will actually improve outcomes

INPUTS TO CORE PROCESSES

STAFFSUPPLIES

EQUIPMENT

CORE PROCESSES AND OUTPUTS

TO

IMPROVE QUALITY AND

OUTCOMES

WHERE HEALTHCARE DOF’S GO TO REDUCE COSTS

WHERE OTHER INDUSTRY DOF’S GO TO REDUCE COSTS

Value- Different Approach Required

Patient

Consultants Cost

Junior Doctors Cost

Nursing Cost

Therapist Cost

Health Care support Worker

Significant Variation in Input Cost Output / Outcome

The Relationship of Cost to Outcome in Health

This wide variation in input costs to outputs is not seen in any other industry or sector anywhere in the world which is why its easy to destroy value in Health by reducing input costs in isolation …….

Questions&

Open Discussion

Owen.Harkin@northerntrust.hscni.net

Julie.Thompson@health-ni.gov.uk