Evidence submitted by Southend University
Hospital NHS Foundation Trust (Def 54)
1. INTRODUCTION
This paper provides some background information
on financial management at Southend Hospital in the context of
the Health Select Committee considering the deficits in the NHS.
Southend Hospital has a sound track record of financial management.
2. BACKGROUND
Southend Hospital is an Associate Teaching Hospital
providing general and acute services to approximately 330,000
people living in south-east Essex and cancer, ophthalmology and
orthodontic services to approximately 650,000 people of south
Essex except Brentwood.
Southend Hospital is the only acute trust in
south-east Essex and is largely co-terminus with the existing
two local PCTs (Castle Point and Rochford and Southend). It also
has good working relationships with the other three PCTs in south
Essex and social services.
NHS Trust status was achieved from 1 April 1991
and Foundation status from 1st June 2006. The hospital's turnover
for 2006-07 is approximately £195 million.
3. FINANCIAL
PERFORMANCE
Southend Hospital has an excellent history of
achieving its financial duties in every year since 1991-92. An
income and expenditure surplus has been achieved in every year
except 1993-94 and 1994-95 when deficits occurred through "below
the line" adjustments for the losses on disposal of fixed
assets.
The following surpluses have been achieved in
the last four years:
| £000s |
| 2002-03 | 4 |
| 2003-04 | 57 |
| 2004-05 | 17 |
| 2005-06 | 524 |
| |
Those surpluses have been achieved with little or no planned
external support and with limited use of revenue to capital transfers
in the first 2 of those years.
A surplus of £5.2 million is planned for 2006-07. This
sum largely arises from the gain from the full implementation
of Payment by Results (PbR).
4. FINANCIAL MANAGEMENT
There a number of reasons why Southend Hospital has achieved
its financial duties. These include (in no order of significance):
— Strong leadership from both the Board and Executive
Team with a clear focus on finance.
— Strong finance team with 10 qualified accountants.
— Relatively low staff turnover (both in Finance
and elsewhere) providing a good foundation of experience and knowledge.
— Good internal working relationships between budget
holders and finance with regular monthly activity and performance
reviews with each directorate.
— Excellent working relationship with all its commissioners
and stakeholders and in particular the two local PCTs.
— Low reference cost index of 91 providing a tariff
gain from PbR.
— Good financial risk management and systems of
internal control.
— Achievement of cost improvement programmes in
every year with a significant number of savings being recurrent.
— Investment in modern financial systems.
— Flexibility over the majority of pay costs with
local terms and conditions (before Agenda for Change).
— Low asset (mainly buildings) cost base. Vast majority
of services are provided on a single hospital site.
— Strong cash position and good cash management
processes.
— Good control over demand management and activity
plans.
However the Hospital recognises that it needs to continue
to improve its financial management particularly as an FT and
with PbR and will be:
— Development of clear links between income and
expenditure at directorate level and the improved identification
of cost drivers.
— Identification of clear productivity gains.
— Development of an accountability framework and
reviews of the scheme of delegation.
— Improvements to cash and treasury management systems.
— Development of longer term financial strategies
and plans.
5. CONCLUSIONS
The sections above provide a very brief overview of the background,
financial management and performance at Southend Hospital. Good
financial management is an on-going process, dealing with today's
issues, forecasting and planning for the future.
Clearly lessons learnt are transferable from one NHS organisation
to another but solutions to financial deficits often relate to
resolving local issues.
Brian Shipley
Director of Finance, Southend University Hospital NHS Foundation
Trust
15 June 2006
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