BHRUT annual report 2009 - Barking Havering and Redbridge ...

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Barking, Havering & Redbridge University Hospitals NHS Trust
Operating and Financial Review 2009/10
The requirement for NHS bodies to prepare an
Operating and Financial Review as part of the annual
report was introduced in 2005/6. The OFR seeks to
provide information on the developments, trends,
performance and business position of the Trust in
terms both of the year in question and future
development.
Review of 2009/10
The Trust agreed a Plan with NHS London for 2009/10
for an income and expenditure deficit of £8.0m,
excluding the technical impact of asset impairments
and of implementation of International Reporting
Standards (IFRS). The Plan compared with a deficit of
£29.1m in 2008/09 (IFRS re-stated and excluding
impairments) and an underlying deficit of £37.5m. The
planned improvement in 2009/10 was primarily driven
by a significant Cost Improvement Programme of
£33.3m.
As part of its contract agreement with the local
Primary Care Trusts for 2009/10, the Trust agreed to
jointly commission an independent review in to the
value of its non-PbR service agreements, which had
been subject to a long-standing dispute with the PCTs.
The outcome of this review was concluded in the last
quarter of the financial year and resulted in a £21m
adverse movement in the planned income position.
This was partially offset by £8m non-recurrent ‘risk
pool’ support from the PCTs, to mitigate the impact of
the review. The control total Plan deficit was adjusted
by NHS London for these factors, which together with
a favourable adjustment of £1.3m, gave a revised
target deficit for the Trust of £19.7m.
The Trust finished the year with a deficit of £22.3m,
excluding the technical impact of fixed asset
impairments (£31.9m) and IFRS (£2.1m). This was
£2.6m above the control total of £19.7m, with the
main reason being disputed income of £2.6m with
local PCTs at year end, which the Trust provided
against in the Accounts.
The Trust did not achieve its duty to break even over
the five year period ending 31 March 2010. The
relevant cumulative deficit was £116.9m. Accordingly,
the external auditor referred the Trust to the Secretary
of State under section 19 of the Audit Commission
Act 1998.
2010/11 Plans
The Trust has provisionally agreed a Plan deficit with
NHS London for 2009/10 of £19.4m (excluding
impairments and IFRS). Taking away the impact of the
PCT risk pool support and other non-recurrent
measures taken to meet the 09/10 control total, the
underlying position coming in to 2010/11 was a
£41.1m deficit. The Trust also has additional cost
pressures in 2010/11 of £19.2m and a reduced
income contribution of £10.5m arising from reduced
activity demand from PCTs. Against this, the Trust has
benefited from net pricing gains of around £13.0m
(including an increase in the Market Forces Factor
funding, removal of the out-patient scaling
adjustment, less £5m risk pool support to the PCTs)
and is planning for a Cost Improvement Programme of
£34.5m (8.5%) and £3.9m of other upside
adjustments. Excluding the £5m risk pool support, the
plan is therefore to improve the underlying deficit
position from £41.1m to £15.4m, a reduction of
£25.7m.
The cumulative deficit at the end of 2010/11 is
therefore planned to be £136.3m. As part of the
Medium Term Financial Strategy agreed in 2008/09,
NHS London, in conjunction with the Challenged Trust
Board of PCTs, earmarked £84m to eliminate the
accumulated deficit, based on the planned position as
at the beginning of 2009. The NHSLA and the CTB are
assessing the scope for use of further funds to
eliminate the planned deficit to the end of 2010/11.
The Trust’s role will be to deliver the control total for
2010/11
Operating and Financial Review