Finance Update as at Month 6 Julia Pattison – Director of Finance

Overview Reminder – Annual Plan 2017/18 Current Position as at Month 6, 2017/18: Scale of challenge & why Review of history Actions Impacts

2017/18 Plan Reminder – summer CoG presentation of ‘two halves’ – good position in 16/17; challenges in 17/18 Annual Plan / ‘Control Total’ = £5.2m deficit / gap If no worse than this gap, receive ‘Sustainability & Transformation Funds (STF) of £4.2m Net ‘gap’ with STF = £0.9m deficit by end of year

Current Position at Month 6 Plan as at end of Month 6: Planned gap before STF income = £4,541k STF = £1,470k Expected gap after receipt of STF = £3,071k Actual as at end Month 6: Gap before STF income = £6,897k Worse than plan by £2,356k Therefore no receipt of STF ie loss of £1,470k Overall gap = £2,356k + £1,470k = £3,826k

Current Position at Month 6 Underlying Position by Month (without STF loss): Note: excludes impact of NHS Property Services income & costs @ £502k

Current Position at Month 6 Underlying Position by Month (with STF loss): Note: excludes impact of NHS Property Services income & costs @ £502k

Cashflow Likely scenario, i.e. non achievement of 2017/18 year end control total and therefore no access to STF of £4.2m means cash balances below £0 in June 2018 Actions: Continued discussion with commissioners e.g. CCGs and Local Authorities around early payment profiles Other Income opportunities Deferral of commitments (revisit phasing) Loan opportunities

Why? Set an ambitious CIP & efficiency target of +£18m CIP gap at month 6 = £1.2m Pay Pressures - £520k (exc shortfall on CIP): Medical – agency pressures Some offset by nursing vacancies Non Pay - £145k (exc shortfall on CIP): Pathology, appliances, drugs Income shortfalls – net £533k: Losses: Stroke income; under-performance/reduced activity Gains: new funding streams; Vanguard funding; drugs But…..this has been coming for some time

Assessment of History Income reducing faster than costs can be reduced Acute services lose money – c£13m loss in 16/17 (on £100m income base) Community offset loses but commissioners are reducing the income (or lose contracts) e.g. G’head contract ‘hit’ of £2.3m Since 2012/13 loss of £22m income Recruitment & agency pressures Reliance on vacancies Underlying gap £13m

Actions Actions considered to ‘close the gap’ include: Income from commissioners e.g. ST CCG Other income sources Cost control e.g. Acute Division – includes focus on agency spend; reducing cost to match reduced activity; utilising evidence from Carter / Model Hospital; PMO involvement; balance sheet e.g. stock counts, revaluations….. Outcome of actions discussed at Finance & Performance Committee in September Board discussion end September

Actions Board decided to declare year end forecast that it will not achieve the control total Met with NHS Improvement (NHSI) 11th October to discuss process and shared background information: Reasons for deficit – including a review of the history Assessment of NHSI Protocol requirements Actions taken to date and options dismissed Discussed approach for longer term financial recovery – 3/5 years: NHSI and NHSE supportive Notified NHSI 16th October – forecast gap

Impact Face to face discussion between CEO/DoF and counter parts within regional team at NHSI Expect heightened focus around actions taken and review of NHSI ‘check list’; potential ‘Board to Board’ or other escalation process Process to develop a 3-5 year system wide financial recovery plan: Both CCGs and both FTs – gap in 18/19 = +£70m Building on on-going work e.g. Clinical Service Reviews; Canterbury (ST CCG); Multispecialty Community Provider (MCP – S’land CCG); Local Health Economy ‘risk share’ approach

Summary Detailed work to understand reasons for the gap completed Options considered – to be tested by NHSI In-year risk & impact on cash into 18/19 Joint approach to system wide financial sustainability supported – NHSI, NHSE, CCGs Governing Bodies Urgent work to now develop options to manage within the financial envelope that the health system can afford!

Questions?