Financial Management for Budget Holders

1. Financial Management for Budget Holders January 2015

2. Contents • An overview of NHS Structure • Who we are and what we do • An overview of NHS Finance • Budget holder responsibilities • Budgeting • Forecasting • Interpreting Finance, Establishment, Nominal roll & Group Finance reports • Raising Purchase Orders and Authorisation Limits • Cost Improvement Programme (CIP) • Audit • Overview of Contracting and Commissioning • Overview of Payment by Results (PbR) • Overview of Service Line Reporting (SLR)

3. An overview of NHS Structure

4. Who we are and what we do Chief Finance Officer Gail Nolan Deputy Chief Finance Officer Susan Rollason Director of Performance & Programme Management Office (PPMO) Jonathan Brotherton Associate Director of Finance Operations Antony Hobbs Associate Director of Finance Contracting and Service Line Reporting Craig Cook Head of Financial Planning Jonathan Gamble Associate Director of Private Finance Initiatives Steve Noon Associate Director of Finance Corporate Services & Financial Governance Alan Jones Contracting, Commissioning and Costing Teams Private Finance Initiatives (PFI) Team Financial Planning Team Financial Management Teams Performance & Programme Management Team Financial Services Teams

5. An overview of NHS Finance Do you know……. • The age of the NHS? • How many employees work in the NHS? • The size of the NHS budget? • How many organisations are in the NHS? • What UHCW’s total budget is? • How many patients are treated by the NHS in a 36 hour window? http://www.nhsconfed.org/resources/key-statistics-on-the-nhs

6. Budget Holder Responsibilities • Understand and manage your budget • Keep finance managers up to date with developments and issues • Identification of efficiencies (CIP) & cost pressures • Participate in budget setting and forecasting • Validate financial information (e.g. nominal roll, establishment, reports) • Operate within financial policies

7. What is aBudget? • It is a ‘plan’ or envelope of resources required to deliver an agreed level of output. • Usually the first year of an agreed 3-5 year plan and are determined by the amount of income a Trust earns. • Budgets allow improved financial planning and monitoring of performance against the plan. • A typical financial plan includes: - Pay budget (£’s and WTE) - Non Pay budget - Income target

8. What is a Forecast? “The use of historic data to determine the direction of future trends.” Benefits • Provides a forward look of resources & spend • To identify and reduce risks • Allows valuable decision making • Aids budget setting What information should budget managers provide? • Predicted changes in their services • Upcoming pressures • Up to date recruitment plans

9. 1. Suggest examples to be included in a forecast; Pay Non pay Income 2. What are the possible impacts of an incorrect forecast? Stop and Think

10. Interpreting Finance Report

11. Interpreting Nominal Roll

12. Interpreting Establishment Report

13. Interpreting a Group Report

14. Reading the budget reports, can you spot the issues and suggest possible reasons for the variances? Reading the establishment, can you spot the issues and suggest possible reasons for the variances? Reading the nominal roll, can you spot the issues and suggest any possible solutions or reasons? Discuss the Group Finance Summary. Why is the position getting worse in the latter part of the year? Stop and Think

15. Raising Purchase Orders The Trust’s Standing Financial Instructions (SFIs) state all goods and services require an official order • Orders can be raised (in order of preference) via: • Integra • NHS Supply Chain • Requisition form • Process: - Complete order prior to commencement of service • Obtain authorisation and forward to Supplies • An SFI waiver must be completed for orders more than £10,000 For further assistance, contact Supplies Department

16. Authorisation Limits Scheme of Reservation & Delegation All budget holders should be aware of their authorisation limits For further assistance please contact your finance team

17. Cost Improvement Programme (CIP) Demand for NHS services is rising and funding is not increasing at the same rate. NHS needs to save £20bn by 2015 UHCW’s target for 2014/15 is £33.5m. Groups are monitored on a weekly basis on: - Value of opportunities identified - Forecast delivery Group’s responsibilities are to: - Identify and deliver efficiency schemes such as reducing waste, increasing income and productivity - Regular meetings with your finance team to monitor progress

18. Stop and Think • Can you suggest a possible CIP for; • Pay? • Non Pay? • Increases in Non contract Income?

19. Audit Internal and External Audit are key elements in every NHS organisations Governance Framework. Internal Audit ‘provides independent assurance to an organisation that its risk management, internal control and governance are operating effectively and helping it in achieving its objectives’. External Audit ‘carry out annual check on organisation’s accounts and give an opinion on whether they give a true and fair view of the financial position’ .

20. Overview of Commissioning and Contracting Who’s involved? • Commissioners – Clinical Commissioning Groups (CCGs) & Specialist Commissioning Groups (SCGs) • Healthcare Providers – Trusts (e.g. UHCW) Roles & Responsibilities • Both parties agree ‘volumes’ and ‘budgets’ for patient care as part of an annual planning process. • Consider size and demographics of the population • Agree funding of new service developments. For further information contact the Commissioning Team

21. Overview of Payment by Results (PbR) • Money follows the patient • Hospital services are paid for by either a locally agreed price or the national tariff • Prices and payments are based on the type of procedure and appointment type (day case, outpatient, emergency) • Adjustments are made depending on the complexity of care e.g. length of stay. • Further incentives for meeting best practice and quality indicators • Commissioning for Quality and Innovation (CQUIN) – penalties if not met • Quality, Innovation, Productivity and Prevention (QIPP) – admission avoidance schemes For further information contact the Contracting and Commissioning Team

22. Overview of Service Line Reporting (SLR) “SLR is a measure of the profitability of a service.” • Measured at either; - Group - Specialty • Consultant • Healthcare Resource Groups (HRG) • Point of delivery • Patient level (PLICS) • Income generated less the costs of delivering the service including overheads. • UHCW reports this information using a system called ‘Qlikview’ For further information contact the Costing Team

23. Example of Qlikview / SLR

24. Example of Qlikview / SLR

25. Stop and Think • If we were to open an new ward, what do you think the impact will be on; • Pay? • Non Pay? • Contract Income? • When might a hospital service not be paid? • What do you think are the benefits of SLR? • Money follows the patient therefore, what would you expect to see in a patient level costing?

26. Questions / Feedback • Any questions? • Please complete all of the feedback form

27. Financial Management Contacts