Evidence submitted by West Sussex Health
Scrutiny Committee (Def 38)
1. INTRODUCTION
1.1 This submission is made by the Health
Scrutiny Select Committee of West Sussex County Council.
1.2 We also draw your attention to the following
relevant submissions to your Select Committee that have been made
under separate cover:
(a) A joint submission made by the Chairmen
of Overview and Scrutiny Committees for the south east of England
which highlights the anomalies and inequalities of the current
funding formula, particularly the shortcomings of the current
formula in adequately reflecting the cost of healthcare provision
to the very elderly.
(b) A submission by Laura Moffatt (Member
of Parliament for Crawley), which focuses on the Surrey and Sussex
Healthcare NHS Trust: the size of its deficit, the reasons for
the deficit and the effect on care to the population in the north-east
of West Sussex.
1.3 This submission focuses on the financial
state of the NHS organisations in West Sussex and explores the
possible implications for service delivery due to the very high
levels of deficit in the county. In particular we feel that:
(i) The current funding formula does not
adequately represent the structure and needs of our community
and creates an unfair and disadvantageous profile of the county,
particularly because it does not take adequate account of the
following factors:
(a) Additional costs associated
with rurality
(b) Pockets of deprivation
(d) Regional cost variations
(e) Rapid population growth.
(ii) Turnaround has had a disproportionate
cost and has added a very significant financial burden on West
Sussex NHS organisations in the county as we have three Turnaround
Teams in West Sussex which have cost in excess of £1.5 million.
Whilst the appointment of these teams was approved by central
government and whilst their costs will in the long term be covered
by the resulting savings in annual expenditure, it will have no
impact on the underlying deficit. Further impact on the annual
expenditure is unlikely to be realised within the very short timeframe
set by central government, particularly given the expected reduction
in funding from central government in future years. The government
must take ownership and responsibility for the plight of these
organisations. Whilst clearly there are efficiencies to be made,
in large part the failings in these trusts has been a direct result
of poor and contradictory policy making over the last 10 years
by the government. The government has committed huge figures to
the NHS—it is only right and equitable that that money should
be spent in a way which will make a real difference. These turnaround
costs should be born by central government. Asking for such costs
to be borne locally will simply delay the benefit of the turnaround,
demoralise further NHS staff and put at risk the timely implementation
of the governments new vision for the NHS.
(iii) The historic (accumulated) deficits
in the county are so high that the relevant organisations stand
no chance of repaying the debt in the medium to long term (let
alone within the three to five year break-even period) based on
their current and likely future funding allocations.
(iv) There is no capacity with the West Sussex
health economy to allow for "dual running" of services
as we make the transition from acute services to more focus on
community-based services in line with the recent White Paper "Our
health, our care, our say". This could result in the population
of West Sussex being severely disadvantaged.
2. THE SIZE
OF THE
DEFICITS IN
WEST SUSSEX
2.1 The deficit position of West Sussex
health organisations is a significant issue across the whole of
the West Sussex health economy. Of particular concern is the fact
that four acute trusts in West Sussex have predicted end-of-year
deficits totalling £76,141,000 (including one trust with
the highest deficit in the country—the Surrey and Sussex
Healthcare NHS Trust with a predicted deficit of £40,834,000).
2.2 Three Public Interest Reports have been
published over the past year for NHS organisations in the county:
— Surrey and Sussex Healthcare NHS
Trust (March 2005).
— Royal West Sussex NHS Trust (June
2005).
— The entire Surrey and Sussex Health
Economy (December 2005) in which the Audit Commission said:
"I have issued this public interest report
as I am concerned about the financial position of the Surrey and
Sussex health economy. Although Surrey and Sussex is not alone
in facing a significant financial deficit, as at October 2005
NHS trusts and PCTs are predicting a collective deficit of £75
million by 31 March 2006. Unless this deficit is effectively addressed,
it is likely to impact on services provided to patients. Whilst
in some parts of the economy there have been longstanding financial
difficulties, the financial position of many NHS bodies in Surrey
and Sussex has either not improved or deteriorated over the past
three years. There are an increasing number of organisations in
deficit, and in some the financial position has got substantially
worse. The health economy also faces a serious cash shortfall
which will potentially impact on service delivery. "
2.3 Table 1: Surrey and Sussex 2005-06
predicted out-turn as at month 12 and the finance plans for 2006-07:
(source: Surrey and Sussex SHA Board paper—24
May 2006)
[West Sussex trusts are denoted by bold,
italicised typeface]
| Trusts | 2005-06 Predicted
Out-turn
| 2006-07 Plan |
| £000's | £000's
|
| NHS Trusts: | |
|
| Ashford and St Peter's | -7,560
| 2,500 |
| Brighton and Sussex University
| -11,290 | -20,643
|
| East Sussex County Healthcare | 1,330
| |
| East Sussex Hospitals | -4,864
| -4,500 |
| Royal Surrey County Hospitals | 276
| 0 |
| Royal West Sussex | -13,394
| -23,838 |
| South Downs Health | 2,457 |
301 |
| Surrey and Borders Partnership | 70
| 0 |
| Surrey and Sussex Healthcare |
-40,834 | -60,102
|
| Surrey Ambulance Service | 257
| -502 |
| Sussex Ambulance Service |
129 | 234
|
| West Sussex Health & Social Care*
| 2,089 | |
| Worthing and Southlands | -10,623
| -11,000 |
| Sussex Partnership* (from April 2006)
| | 801 |
| NHS Trusts total: | -81,957
| -116,749 |
| West Sussex NHS Trusts total |
-73,923 | -114,548
|
| PCT's: | |
|
| Adur, Arun and Worthing | 2,549
| 0 |
| Bexhill and Rother | 589 |
0 |
| Brighton and Hove City | 21
| 0 |
| Crawley | 121
| 0 |
| East Elmbridge | -5,782 |
-10,000 |
| East Surrey | 756 | 0
|
| Eastbourne Downs | -7,217 |
-12,676 |
| Guildford and Waverley | -2,037
| -22,507 |
| Hastings and St Leonards | 1,539
| 0 |
| Horsham and Chanctonbury |
-590 | 0
|
| Mid Sussex | -1,969
| 0 |
| North Surrey | 0 | -9,000
|
| Surrey Heath and Woking | 0
| -6,300 |
| Sussex Downs and Weald | -3,994
| -4,600 |
| Western Sussex | 77
| -4,452 |
| PCT's total: | -15,937
| -69,535 |
| West Sussex PCT's total | 188
| -4,452 |
| SHA | 12,238 | 62,313
|
| All health organisations | -85,656
| -123,971 |
| All West Sussex health organisations
| -73,735 | -119,000
|
| | |
* West Sussex Health and Social Care Trust merged with trusts
in East Sussex and Brighton & Hove to form the Sussex Partnership
NHS Trust with effect from 1 April 2006.
2.4 The finance plans for 2006-07 show the whole health
economy in Surrey/Sussex making a £124 million deficit. The
situation is therefore escalating.
2.5 Brighton and Sussex University Hospitals NHS Trust
will fail to meet their 3year breakeven position this year.
The SHA is still formally considering whether to extend the break-even
period to five years.
2.6 Table 2: The four trusts with the highest
deficits in West Sussex:
(source: Surrey and Sussex SHA Board paper—24 May
2006)
| Historic
Debt
local press
reports
April 2006)
| In-year
Debt
2005-06 | 2005-06
debt as %
of budget
| Planned
Support
2005-06 | 2006-07
Planned
Deficits
|
| £ | £
| £ | £ | £
|
| Royal West Sussex NHS Trust* | 15.5m
| 13.4m | 15% | 6m
| 23.8m |
| Surrey and Sussex Healthcare NHS Trust* |
20.0m | 40.8m | 30%
| 17m | 60.1m |
| Brighton and Sussex Univ Hospitals NHS Trust*
| 10.0m | 11.3m | 3%
| 10m | 20.6m |
| Worthing and Southlands Hospitals NHS Trusts
| 0 | 10.6m | 8%
| | 11m |
| Total | 45.5m |
76.1m | | 33m
| 115.5m |
| | |
| | |
* 3 Trusts have DoH Turnaround Teams in place to recover the
financial position. Worthing and Southlands have in the past managed
to breakeven, but this year has seen them go into deficit. They
have appointed their own Turnaround Team to focus on problem areas.
2.7 Table 3: Deficits over the past three years:
(source: The Audit Commission Public Interest Report—Dec
2005)
| 2002-03 | 2003-04
| 2004-05 |
| Royal West Sussex NHS Trust* | 1.3m
| 3.5m | 15.5m |
| Surrey and Sussex Healthcare NHS Trust* |
0 | 4.2m | 30.7m
|
| Brighton and Sussex Univ Hospitals NHS Trust*
| 0 | 7.9m | 10.0m
|
| | |
|
* 3 Trusts with DoH Turnaround teams in place to recover the
financial position.
2.8 The Department of Health agreed a deficit of £40
million for 2005-06 but this has been overspent. The overall Surrey/Sussex
health economy is forecasting a deficit of £85.6 million
for 2005-06. This is after £50 million support from the SHA
and a non-recurrent allocation of £5.6 million from the impairments
fund held by the NHS bank. Without this support the deficit would
have been £141.2 million.
2.9 The deficits are substantial in relation to the 2005-06
budget. Surrey and Sussex Healthcare NHS Trust have a deficit
that is almost 30% of their budget for the year. The situation
has deteriorated over the past three years with little scope for
financial recovery and breaking-even. Potential funding changes
could exacerbate the situation further.
2.10 Long term financial problems have existed but the
actions taken to date have not been sufficient to improve the
situation. Financial recovery and service improvement plans have
not been delivered, many have relied on short-term solutions rather
than taking a longer-term strategic view. There does not appear
to be enough finance capacity to manage the plans. However, other
targets are being achieved which shows finance targets have been
given a lower priority.
3. THE REASONS
FOR THE
DEFICITS
3.1 The reasons for the deficits are many and complex,
but the following paragraphs detail some of the reasons for the
high level of deficits in the county. Reasons given by independent
consultants in their review of Surrey and Sussex (Sustainable
Services for Surrey and Sussex (S4)—July 2005) are:
— based on weighted population Surrey and Sussex
overspends on healthcare. This is a result of higher than average
levels of activity and high unit costs in some areas.
— trusts may not be operating optimally—low
day case rates, high bed capacity and longer than average lengths
of stay.
— high spending in primary care which is not offset
by lower spending in secondary care.
3.1.1 It is thought locally that the main reasons for
deficits are low historic reference costs, pay settlements, target
achievements and local management arrangements.
3.1.2 In future years Payment by results (PbR) will impose
national tariffs which will benefit those trusts with lower than
average reference costs. PbR will result in competing demands
of acute and primary trusts as they will have a differing focus.
One will want to increase throughput to gain maximum income whilst
the other will want to control expenditure. This will impact on
the financial position of organisations and impact on the deficit
situation.
3.1.3 Pay modernisation has had an adverse effect on
trusts' financial position, especially in respect of Agenda for
Change and the new Consultant Contract. The high cost of temporary
agency or bank staff has remained a real problem for most trusts
in the county.
3.1.4 Cost pressures have not always been fully funded
or planned (eg pay awards to doctors and nurses and other health
staff, expensive drugs and the use of new technologies).
3.1.5 Efficiencies have not always been delivered (eg
reduced length of stay, too many delayed transfers of care, insufficient
numbers of day cases etc.)
3.1.6 Plans have been difficult to achieve as "silo
working" often exists in acute trusts. There is often a lack
of communication between departments which means managers are
faced with competing demands, which are difficult to meet.
3.1.7 Many acute trusts in West Sussex are based on multi-site
premises. This may result in higher than average building maintenance,
some duplication of services and increased staff and travel costs.
Hard decisions may be necessary to close sites, but this will
obviously not be popular.
3.1.8 Some trusts have had to pay for private sector
facilities (eg the Sussex Partnership NHS Trust).
3.1.9 Poor cost control and budget management.
3.1.10 Surrey/Sussex also has higher than average referrals
from GP's. This could indicate a population that is better informed
and therefore more able to demand better/quicker care.
3.1.11 Other causes of deficits include higher drugs
costs and longer lifespans.
3.2 The Audit Commission made the following recommendations
in order to control the deficit situation (Public Interest Report—Dec
2005):
— develop and deliver robust, integrated plans across
the whole health economy. This may include making radical changes;
— improve financial recovery planning and forecasting;
— strengthen performance management.
4. FUNDING ALLOCATIONS
UNDER THE
CURRENT FUNDING
FORMULA
4.1 Table 4: Per Head Funding Allocations 2007-08
(source: Department of Health)
| PCT | 2007-08
revenue
allocation
(£000's)
| % increase | Allocation
per head of
population
(£'s)
| Over/under
England
average
(£'s)
| Position in
table
(x/314) |
| England | 70,354,697 |
9.4 | 1,388 | |
|
| West Sussex: | |
| | | |
| Adur, Arun & Worthing | 328,196
| 8.2 | 1,491 | 103
| 76 |
| Crawley | 141,706 | 9.5
| 1,245 | -143 | 228
|
| Horsham & Chanctonbury | 133,792
| 9.9 | 1,094 | -294
| 300 |
| Mid-Sussex | 165,638 | 8.1
| 1,222 | -166 | 244
|
| Western Sussex | 264,691 |
8.2 | 1,454 | 66 |
97 |
| Highest per head allocation: |
| | | |
|
| Islington | 363,928 | 8.0
| 1,956 | 568 | 1
|
| Lowest per head allocation: |
| | | |
|
| Wokingham | 155,932 | 8.7
| 1,068 | -320 | 314
|
Notes to Table 4:
|
| | | |
|
— 3 out of 5 PCTs are below the average allocation
per head of population for England.
— 3 out of 5 PCTs are in the bottom half of the
table in relation to allocation per head of population.
— 3 PCTs have a below average percentage increase
in allocation.
4.2 The below average funding allocations to Crawley,
Horsham and Chanctonbury and Mid-Sussex result in substantially
lower funding. For example if Horsham and Chanctonbury were funded
at the English average they would receive £36m extra funding.
They therefore have less to spend which has a knock-on effect
throughout the whole health economy, which is exacerbating the
deficit situation further.
4.3 Some NHS Trusts may face competition from other providers
(eg Independent Treatment Centres) which could result in future
loss of income.
4.4 Income streams will become more volatile in the future
due to Payment by Results and practice-based commissioning. This
will make it even more difficult to re-pay deficits. The 2006-07
year has experienced greater financial uncertainty due to the
late notification of accurate tariffs which has resulted in problems
producing financial plans.
4.5 In relation to the application of the current funding
formula and its adverse impact on health organisations in the
south-east of England, we would draw your attention to the submission
made by the Chairmen of Overview and Scrutiny Committees for the
south east of England mentioned on the first page of this memorandum.
5. THE FINDINGS
OF THE
TURNAROUND TEAMS
5.1 Royal West Sussex NHS Trust has identified £8.8
million savings as part of its Turnaround Plan, but the turnaround
plan was only approved by the Department of Health last week,
so it is too early to say if the team has proved value for money
and/or the findings are correct.
5.2 Brighton and Sussex University Hospitals NHS Trust
has announced £10 million savings over the next year, £18.6
million savings in 2007-08, as part of its Turnaround Plan, but
in March 2006 the Trust was still overspending by £1 million
per month. The Trust requires £50 million new revenue by
2008-09 to cover a £34.5 million deficit that year.
5.3 Surrey and Sussex Healthcare NHS Trust announced
in May 2006 that they had identified £20.9 million savings,
but in May 2006 the Chief Executive informed us that the Trust
was still running an overspend of £1.5-£2 million per
month (as against an overspend of £3.2 million per month
in the summer of 2005). He added that the Trust would need to
operate at a surplus of £5 million pa over 20 years to repay
their current debt. The Trust borrowed £60 millon at the
end of 2005 to pay staff and will have to pay £2.7 million
in interest payments alone this year on all their borrowings.
5.4 Worthing and Southlands Hospitals NHS Trust's plan
has not yet been finalised.
5.5 The costs of the turnaround teams are detailed below:
— Royal West Sussex NHS Trust—around £500,000
(quoted by Andrew Tyrie in a press release).
— Brighton and Sussex University Hospitals NHS Trust—we
do not have the actual cost but the SHA has made a £2 million
spend to save contribution.
— Surrey and Sussex Healthcare NHS Trust—£697,896
(Gary Walker quoted in BBC News website report on 11 May). Laura
Moffatt, MP's view is that this is value for money as the Turnaround
Team have "stemmed the leaking of money" and that "the
savings within the first month exceeded the Team's costs significantly".
5.6 The striking feature is that each of the Turnaround
Teams has a different approach. However, a common theme is job
losses to be realised through re-grading and natural wastage with
few actual redundancies. Length of stay is a major focus for some
but not all trusts. New revenue workstreams have been identified
as pivotal by the Royal West Sussex Trust and the Brighton and
Sussex University Hospitals Trust. Estates strategy is a key capital
realisation by the Royal West Sussex Trust and the Brighton and
Sussex University Hospitals Trust. Cultural change is being managed
in different ways although each trust has a formal programme.
6. THE IMPLICATIONS/CONSEQUENCES
OF THE
CURRENT DEFICIT
POSITION:
6.1 The current financial position of West Sussex health
organisations has already started to have the following impact
on healthcare organisations and service provision:
6.1.1 The following job cuts have been announced over
the past few months:
— Surrey and Sussex Healthcare NHS Trust—400
job cuts (300 temporary and bank staff with 100 redundancies,
mainly in management, admin, and clerical grades, but some nursing
and frontline staff could be among those to go).
— Brighton and Sussex University Hospitals NHS Trust—325
job cuts, but most are likely to come through natural turnover,
retirement or voluntary redundancy.
— Royal West Sussex NHS Trust—200 posts by
2008-09, but every effort will be made to minimise redundancies
although this may regrettably be necessary for some posts if no
suitable alternative options are available.
The SHA believes that job losses in West Sussex will be minimal
and that any redundancies will probably arise from management
reorganisations. They say that clinical redundancies are unlikely,
as numbers will be reduced by removing long-term vacant posts
and a significant reduction in the use of agency and bank support.
6.1.2 Serious cash shortfalls have been experienced which
will affect service provision in terms of ability to pay for goods
and payroll.
6.1.3 As a social care commissioner and provider, the
County Council is concerned that:
— NHS organisations in the county have withdrawn
funding from pooled budgets as a direct result of their deficit
position. In West Sussex £455,000 was withdrawn from pooled
budgets in 2005-06 and £247,000 was withdrawn in 2006-07.
The five PCTs in West Sussex chose to use these monies from their
Learning Difficulty Development Funds (LDDF) to offset against
their overspends rather than invest in developments to improve
services to users. 96 people remain in long-term health provision
and the LDDF could have supported the development of alternative
accommodation for a number of these individuals.
— £2.1 million was outstanding to the County
Council from the NHS as at 17 May 2006 (including £0.611
million relating to transactions before 2006).
6.1.4 Some trusts believe that the financial challenges
within the local health economy have impacted on their ability
to implement National Service Framework standards in the timescales
envisaged. The vast majority of these services have been resourced
by recycling existing resources.
6.1.5 Some of the acute trusts' capital programmes in
West Sussex have been top-sliced (eg Worthing & Southlands
Hospitals NHS Trust has had its capital programme reduced from
£3 million to £2 million). It should be noted that the
capital programme pays for equipment such as scanners etc. as
well as buildings, so this could have a dramatic effect on service
delivery.
6.1.6 The Sussex Partnership Trust states that "the
Trust has not been in receipt of large amounts of new investment
for service improvement over recent years, although, services
have been modernised to some extent. Any arbitrary reductions
in funding would undoubtedly lead to a closure of services currently
provided".
6.2 We believe that the current financial crisis in the
West Sussex health economy will have potentially very damaging
consequences for health services in the county in the immediate
future and beyond. We are aware of the following issues which
will become increasingly important over the next year or so:
6.2.1 The SHA will be carrying out a strategic review
of all health services in the area, particularly the "settings
of care" which will be subject to public consultation later
in the year (probably in the autumn). This review will have huge
repercussions for acute services and the development of more community-based
services. We believe that there will be no financial capacity
to "double-run" these services while the transition
takes place: it is likely that acute services will shut to release
money to fund services in the community or the worst case scenario
is that the money released will be absorbed by the deficit.
6.2.2 Concerns have been raised by local PPIFs that the
new PCT for West Sussex (which will replace the current five PCTs)
will not be adequately funded to introduce locality working and
be able to support GPs sufficiently to enable them to make the
most of developments in Practice Based Commissioning —starting
with a deficit puts them at such a huge disadvantage.
6.2.3 The Strategic Health Authority (SHA) allocates
growth monies to PCT's each year. This equates to approximately
9% of their allocations. Six percent of the growth monies is used
to fund inflationary increases in salaries, drugs etc. The SHA
has decided to top-slice the remaining 3% from each PCT to distribute
across those organisations in deficit to try and even up the situation.
Those PCT's in deficit will therefore receive the additional funds
whilst those in surplus won't. The SHA is effectively reducing
the cash allocations to some PCT's but so that no organisation
is disadvantaged extra capital allocations will be made. The top-slicing
exercise will ease the deficit situation but will not be enough
to solve the substantial problems being faced.
7. CONCLUSIONS
7.1 In summary we do not believe that the current government's
response to the financial problems of its residents of West Sussex
is adequate or moral. Promises that have been made to improve
—not worsen—health provision has not been met. Worse,
tax payers money has been squandered with no benefits—even
in sight. The on-going debt of the trusts cannot realistically
be resolved in isolation.
7.2 This government has to take responsibility for and
ownership of the failings of the health economy of which it has
had stewardship for the last 10 years. This government must as
a matter of extreme urgency:
— revisit a highly flawed funding formula, which
blatantly favours residents of the country where this labour government
sees its voting heartland. A simple and honest analysis of the
numbers would show this to be true—and such an analysis
should be done;
— pay the costs nationally of all turnaround teams—and
then hold to account the trusts receiving the turnaround advice
to deliver;
— waive the historic deficits and cease forthwith
charging these trust bodies interest on these sums which is not
only immoral but entirely counter productive;
— develop, consult on and deliver a properly thought
through strategy and business plan to move our health economy
to one which provides better and more accessible health provision
in the local community while continuing to deliver best in class
acute care when and where it is really needed.
Anne Marie Morris
Chairman, West Sussex Health Scrutiny Select Committee
6 June 2006
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