Evidence submitted by Kensington and Chelsea
PCT (Def 57)
This memorandum has been produced by Kensington
and Chelsea PCT (KCPCT) in response to the inquiry being conducted
by the Health Select Committee into NHS Deficits.
The following individuals have been requested
to attend the evidence session on 22 June and will therefore be
available to answer any questions the committee may have on this
submission, or any other aspect of their inquiry:
| Andrew Kenworthy | Chief Executive
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| Martyn Everett | Director of Recovery
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In order to give the committee some background into KCPCT,
attached to this memorandum is an overview of the size and scope
of our operations and a brief financial history. It also gives
a summary of the key findings in PricewaterhouseCoopers Public
Interest Report issued in April 2006, a full copy of which is
enclosed. 24
Also enclosed is a copy of the Turnaround Plan 2006-09 which
was presented to, and approved by, the Strategic Health Authority
on 30 May 2006. [24]It
is due to be presented to the KCPCT Board for final approval on
20 June. The plan sets out in more detail the financial position
of the trust and the savings initiatives that have been identified
to bring the Trust back into financial balance.
For ease of reference, a bullet point summary has been included
which sets out brief answers to some of the issues specifically
listed in the committee's terms of reference.
BACKGROUND AND
HISTORICAL PERFORMANCE
Introduction
— Kensington and Chelsea PCT was formed on 1 April
2002 to serve a population of c190,000, covering the Royal Borough
of Kensington and Chelsea. The PCT was formed from four predecessor
NHS organisations.
— The PCT has 80 GPs within 44 practices.
— KCPCT has a large estates portfolio including:
— St Charles Hospital site;
— learning disabilities centre;
— numerous health care centres/GP surgeries.
— St Charles hospital was built in 1881 and was
originally a hospital for the sick and poor but has been in use
as an NHS hospital since 1948. Central and North West London Mental
Health Trust occupy approximately one third of the site. The remainder
provides a range of facilities for inpatient, rehabilitation and
community services, including four wards, Minor Injuries Unit,
palliative care centre, pharmacy and head office. Some 70% of
inpatient care is for non KCPCT residents. The site also houses
a number of services for other NHS organisations, including NHS
Direct.
— The PCT provides the following health services
to the local community in Kensington and Chelsea:
— Community Nursing ie district nursing, specialist
nursing, school nurses & health visitors;
— Therapy Services including: physiotherapy,
speech & language therapy, podiatry, occupational therapy,
dietetics & nutrition and osteopathy;
— Children's Services including: children's
community nursing teams, child health surveillance;
— Primary care/General Practitioner (GP) services
from 44 General Practices and NHS Dentistry from 22 practices;
— Learning Disability Services including: community
learning disability team, adult residential unit (planned short
break unit, emergency unit, crisis unit);
— Older People's Services including: 61 rehabilitation
beds (of which only 18 are used by KCPCT patients), 73 continuing
care beds and community care services;
— Palliative Care—caring for people with
advanced life threatening illnesses, at the 17-bed Pembridge Palliative
Care Centre (of which KCPCT use only three) and providing specialist
nurses in the community;
— Minor Injuries Unit—15,615 attendances
in 2005-06, of which 7,689 related to KCPCT residents;
— Neuro-Rehabilitation Services—providing
care and therapy for patients who have had a head injury or stroke;
and
— GP Co-op providing out of hours general practice
care.
— Key acute and mental health providers are:
— Chelsea & Westminster Hospital (£31.2
million SLA 2006/07);
— St Mary's Hospital, Paddington (£21.9
million SLA 2006/07);
— Hammersmith Hospital (£14.7 million SLA
2006/07); and
— CNWL Mental Health (£31.2 million SLA
2006/07).
Historical financial position
— The PCT has underperformed financially since its
inception and has breached its Revenue Resources Limit (RRL) in
each of the last three years:
| 2002-03 | 2003-04
| 2004-05 | 2005-06
| |
| RRL under/(over) spend | £0.7m
| £(8.7)m | £(11.6)m
| £(7.2)m |
| Under/(over) spend as % of RRL | 0.3%
| (3.7)% | (4.3)% | (2.8)%
|
Source: Audited accounts 2002-03, 2003-04 and 2004-05;
2005-06 outturn
— 2003-04 audited accounts showed an overspend of
£1.6 million. However, a prior period adjustment of £7.1
million was made to the accounts during the 2004-05 audit. This
related to invoices that had not been recorded correctly in the
accounts, either because they had not been recorded on the PCT's
ledger or because they were in dispute between the PCT and the
other health bodies.
— Of the total overspend c80% has been due to overspends
against commissioning budgets.
— According to PricewaterhouseCoopers Public Interest
Report, there were three principal reasons for underperformance:
— significant failure in systems of corporate
governance, particularly financial:
— inappropriate commissioning budgets were set;
— poor and incorrect budget monitoring so preventative
measures could not be taken in time;
— operational activity data and financial management
information was not linked, which could have identified risks
to budgets and adverse trends in actual expenditure;
— staff were not deployed according to the level of
commissioning expenditure risk;
— poor co-operation between the Commissioning and Finance
departments;
— high levels of estate holdings and underutilised
infrastructure; and
— failure to recover the full cost of providing
estate services to other local health bodies.
In addition the cost of providing a number of community services
on behalf of other health bodies was also not fully recovered.
Actions undertaken to address underperformance in 2005-06
— As a result, management have taken a number of
steps to address the consistent financial underperformance:
— Interim chair appointed in July 2005;
— Andrew Kenworthy appointed Chief Executive
in September 2005;
— David Avis appointed interim Financial Director
in April 2005;
— The interim chair has reviewed governance,
with the following objectives:
— undertake a board level review of current governance
arrangement, perceptions and attitudes;
— review the PCT's corporate objectives and ensure these
are risk assessed;
— develop mechanisms to support delivery of objectives
and ensure appropriate reporting to the Board;
— develop an effective assurance framework;
— The Chief Executive has reviewed management
arrangements and has made the following changes:
— commissioning and finance department combined and
strengthened, with improved data validation;
— a new role of Director of Performance Management and
Primary Care has been created;
— The Chief Executive is working with managers
to embed the following principles:
— ensure that the financial impact of decisions is understood
by all staff ("finance is everyone's business");
— make decisions, see them through and performance manage
them;
— emphasis on detail and challenge;
— continue to concentrate on relationship management
with stakeholders;
— achieve full cost recovery on provider services;
— The interim Financial Director has improved
routine financial controls, restructured the finance department
and strengthened the finance team. He has also improved the financial
reporting;
— External consultants appointed to review demand
management procedures and initiatives; and
— Martyn Everett appointed to lead the turnaround
process in April 2006, supported by Deloitte. A Chartered Accountant
with initial experience with PriceWaterhouseCoopers, more recently
in industry, as Deputy Chief Executive of an international group,
dealing with the challenges confronting the UK manufacturing sector,
particularly business restructuring and turnarounds.
SUMMARY
Size of the deficit
— Brought forward deficit at 1 April 2006 of £26
million.
— In year deficit in 2005-06 of £7.2 million,
which was broadly inline with the control total set by the SHA.
— Base budget for 2006-07 showed a deficit of £10.1
million, after 3% topslice of £7.6 million, but before savings
initiatives.
Savings initiatives
— Full year effect of the savings initiatives identified,
£14.9 million.
— In year effect of savings, due to the timing of
implementation, £9.9 million.
— One off costs arising from the initiatives, £0.4
million.
— Further savings of some £5 million-£7
million per annum are possible from rationalising the estate.
The options are still being evaluated and would be subject to
consultation and financial support from the SHA, to fund the associated
one off costs.
Turnaround team
— Work commenced mid April 2006.
— Led by an independent turnaround director, full
time until mid July and part time until the end of October.
— Assisted, until mid June, by a team of two from
Deloitte's, supported by specialist consultants in a number of
areas.
— KCPCT senior managers seconded full time to the
team, comprising, associate director bedded services/pharmacy,
head of clinical governance, finance special projects and head
of nursing practice development.
— Total estimated external cost of £0.4 million.
— KCPCT fully agrees with the findings of the recovery
team. It believes the recovery plan is robust, achievable and
sets a clear strategic direction over the next three years.
Reasons for the deficit
— Main cause of the deficit was poor management
and a lack of financial controls, prior to the appointment of
the current senior management team during 2005. This is evidenced
by the enclosed Public Interest Report which is summarised in
Appendix 1 and resulted in the resignations of the previous Chair,
Chief Executive and Finance director.
Consequences of the deficit
— In the short term a number of the savings will
be difficult but will not affect our core services. In the longer
term it is our belief that this is an opportunity to improve patient
care, and allow the trust to generate resources which can be reinvested
into primary and community services for the future.
— Staff reductions arising from the plan are as
follows:
wtes
Redundancies 73
Cancellation of vacant posts 31
104
— KCPCT received a 3% reduction in growth monies
for 2006-07. This was to create a London wide fund which aims
to help the NHS in London to achieve balance in 2006-07. The plan
assumes that this topslice of £7.6 million is not returned
until at least 2009-10, but that there are no further topslices
in either 2007-08 or 2008-09.
Period over which balance should be achieved
— Recurrent monthly surplus forecast from 1 October
2006.
— In year balance achieved in 2006-07.
— Cumulative deficit fully repaid in 2008-09.
Martyn Everett and Andrew Kenworthy
Kensington and Chelsea PCT
June 2006
24
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