Establishment of Operated Healthcare Facility Financial Case www.cddft.nhs.uk
Background and Purpose The business case has been developed for Trust Board approval to establish an Operated Healthcare Facility (OHF) to provide Estates, Facilities and Procurement services to County Durham and Darlington NHS Foundation Trust (CDDFT). The OHF will be branded as County Durham and Darlington Services (CDD services) and trade as part of Synchronicity Care Limited (SCL). It describes and presents: the services to be transferred; the case to change the way these services are provided for the Trust; identifies different models of provision; evaluates these options; provides more information on the preferred option; and outlines the next steps in taking the proposal forward If the Business Case receives approval it is proposed that the OHF becomes operational with effect from 1 April 2017. www.cddft.nhs.uk
Background and Purpose A Project Team, including Ms McCree, Mr Dawson and Ms Smith, and their respective teams was established, to move the project along with the support of QE Facilities. The project team are responsible for Detailed planning and execution of the project Staff engagement Stakeholders engagement and communications Risk and issue management Progress reporting to CDDFT Board www.cddft.nhs.uk
Objectives Provide high quality support services Allow CDDFT to focus on its core business of delivering clinical services Allow the OHF to focus on providing Estates, Facilities and Procurement services to CDDFT Provide a cost effective service, supporting CDDFT in delivering sustainable and safe clinical services Offer opportunities and security to Estates, Facilities and Procurement staff Create more flexibility to address specific workforce pressures and risks www.cddft.nhs.uk
Objectives Create the opportunity to recruit staff on revised Terms and Conditions more akin to the local market Create the opportunity to change existing service models to meet the needs of the service Provide greater flexibility and freedoms to enable commercial opportunities to be seized and generate income Create the opportunity to pursue trading opportunities in support of the better value agenda; Meet the requirements of the Carter Report being driven by NHS Improvement to review and transform in-house services, to reduce back office costs, which includes Estates, Facilities and Procurement functions www.cddft.nhs.uk
Scope of the Proposal (Services to transfer) Admin and Clerical Staff aligned to Grounds Maintenance Health and Safety Manager (SCL the provision of Estates, Facilities and Procurement Services services only) Car Parking Linen Services Capital Management Management of Residential Catering Services Accommodation Central Equipment Loans Library Non Patient Transport (Courier Service Services) Clinical Engineering Procurement Department Domestic Services Property Management Estates - Operational Maintenance Portering Services PFI Contract Management Department Estates Helpdesk Sterile Services Energy Management Security Fire Officer Waste Manager www.cddft.nhs.uk
Case for Change There is a growing imperative to review and transform in-house services, driven by Carter and national requirements to drive down back office costs which includes Estates, Facilities and Procurement functions. It is recognised that staying the same is not a realistic long-term sustainable option. The quality of the support services being provided is very good but this provides an opportunity to consider if and how they could be further improved. There is a requirement for the Trust to make significant financial savings, part of which will need to be delivered by support services, so there is a case for considering how these services could be provided in different cost effective ways, such as Terms and Conditions more akin to the local market, helping to enable the Trust to continue to provide sustainable and safe clinical services. www.cddft.nhs.uk
Case for Change Carter Potential Savings Calculation Cost Efficiency Elements Unit Trust Metric Potential Savings 2015 - 16 Trust Type Potential Potential Median Saving Per Saving Unit Total Estates and Facilities £ / m2 372.22 384.06 0.00 0.00 running costs / area Energy Costs £ / unit 0.06 0.06 0.00 0.00 Building and Engineering £ / m2 16.37 26.30 0.00 0.00 Maintenance costs Portering £ / m2 20.16 16.17 4.00 690,670 Water and Sewage Costs £ / m2 3.13 3.73 0.00 0.00 Special and Clinical Waste Costs £ / tonnes 364.91 398.50 0.00 0.00 Laundry and Linen Costs £ / item 0.38 0.33 0.05 194,103 Food Costs £ / meal 3.59 3.84 0.00 0.00 Cleaning Costs £ / m2 31.99 40.87 0.00 0.00 www.cddft.nhs.uk
Option Appraisal Preferred Option - Operated Healthcare Facility To assist the Trust in delivering a more commercial, incentivised, leaner and quality focused service www.cddft.nhs.uk
Existing Costs - £33.206m Staff Non-Staff Total £m Budget £m Budget £m Budget Estates 1.511 2.254 3.765 Increase in E&F for compliance 0.319 0.319 Facilities 8.409 2.357 10.766 Non Clinical Risk Management 0.080 0.723 0.803 Clinical Engineering 0.936 0.353 1.289 Sterile Services 1.068 0.407 1.475 Procurement 1.333 0.263 1.596 Increase in Mat Man staffing 0.207 0.207 Care Group Consumables 11.544 11.544 Care Group cleaning, provisions and maintenece 0.531 0.531 contracts Overheads 0.161 0.017 0.178 CDDFT SLAs 0.683 0.683 Apprenticeship Levy 0.050 0.050 Total 13.755 19.451 33.206 www.cddft.nhs.uk
Forecast Costs This slide contained detailed forecast financial modelling for the Operated Healthcare Facility, which was both draft in nature (and may differ from actual operations post-implementation) and commercially sensitive, on the basis that, since it provides details of the intended operating and financial model of a commercial business, would be likely to be of interest to competitors Accordingly the information on this slide has been redacted under Section 43(2) of the FOIA – Information which, if disclosed would be likely to harm the commercial interests of the Trust or a third party. www.cddft.nhs.uk
Efficiency Savings - Pay Revised Terms and Conditions Sickness Annual leave Enhancements New pension arrangements new employees - “NEST” More flexibility to react more quickly to market conditions Person centred reward package Addressing workforce pressures www.cddft.nhs.uk
Efficiency Savings - Pay The terms and conditions for new employees have not yet been finalised for the subsidiary but we estimate: £126k reduction in overall pension cost in year 1 based on a turnover rate of 5%, with rising benefits to the company over time through normal staff turnover to £1.3m if all staff eventually move to the new SCL terms and conditions. There would be further savings achieved from a reduction in sickness absence costs. It is anticipated that sickness absence levels for new employees to be approximately 2% to 3% in comparison to the current Estates and Facilities Department rate of 5% giving a further estimated saving of £76k. (Please note that the above figures were estimates based on assumptions to illustrate potential to the Board and not firm plans) www.cddft.nhs.uk
Efficiency Savings – Non Pay Materials Management Creation of a standardised managed service to ensure clinical and operational teams have the products and services they need to operate, reducing waste and freeing up clinical time to care. This should drive out the efficiencies of circa £1m identified in the 17-18 cost improvement programme Standardisation and rationalisation of products and improved efficiency from managed spend categories Reduction in procurement leakage Improved efficiency from a managed service (Please note that the above figures were estimates based on assumptions to illustrate potential to the Board and not firm plans) www.cddft.nhs.uk
Efficiency Savings – VAT Consumables - managed service equipment - 1.9m (Estates – Utilities and consumables) - 500k In addition there will also be the ability to reclaim VAT over and above existing NHS VAT rules on past and future capital schemes (exact savings to be finalised). The main schemes being STEM DMH Energy & Infrastructure (Please note that the above figures were estimates based on assumptions to illustrate potential to the Board and not firm plans) www.cddft.nhs.uk
Funding Arrangements Assets valued at £43.425m will transfer to SCL as part of a freehold sale. These assets will then be leased back to the Trust as part of the OHF on a 25 year finance lease. The transfer of assets will be funded through a combination of a loan from the Trust and equity funding. The financial model is based on a 70:30 debt to equity ratio and in line with the leasehold term, the loan will be based on twenty five years with the flexibility for bullet repayments of capital. www.cddft.nhs.uk
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