UK – Our approach to

engaging and curbing costs

November 2017

Lee Outhwaite

Director of Finance and Contracting

Chesterfield Royal Hospital NHS Foundation Trust

UK HFMA Trustee

Taking the plunge, finance and

engaging directly with clinicians

HFMA identifierHFMA

Session plan

Me

Chesterfield Royal Hospital

Derby and Service Line Management

Current Chesterfield Performance

Improving Financial Performance and Model Hospital

Summary and Conclusions

2

HFMA identifierHFMA

Me

Lee joined Chesterfield in August 2017. His role covers Finance,

Procurement, Estates and Facilities, ICT and the Chesterfield Royal

Hospital Charity. Lee has worked in the NHS, since 1993, in a number of

finance roles, in Devon, Hampshire, Surrey, London and Derbyshire. He

is a member of the Chartered Institute of Public Finance and

Accountancy.

Prior to this role he worked at NHS Improvement, where he was the

Business Director for London. In addition to oversight of London Trusts,

he was involved in a number of national policy areas. Prior to moving to

the NHS Improvement, Lee was Director of Finance and Performance at

Derby Teaching Hospitals NHS Foundation Trust, for seven years.

Lee is a Trustee of the Healthcare Financial Management Association

(HFMA), and chair of HFMA’s committee on the NHS National Payment

System. He sits on HFMAs Policy and Research committee. Lee also is

a Trustee and Honorary Treasurer of Women’s Work, a Derbyshire based

charity. In addition, he is also currently pursuing a Professional

Doctorate at Keele University, in their Public Policy and Management

faculty.

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HFMA

Chesterfield Royal

Hospital

4

HFMA identifierHFMA

Chesterfield

Royal

Hospital -

What

5

HFMA identifierHFMA

Chesterfield

Royal

Hospital -

How

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HFMA

Derby and Service Line

Management

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HFMA identifier

Service Line ManagementWhat is SLM

The Vision for SLM in Derby

Required Improvement Conversations

Ingredients of SLM at Derby – Stock-take

• Where were we at?

• What did we need to do next?

Derby SLM

• Engagement

• Decision Rights and Earned Autonomy

Changed Executive Behaviours

The Key Next Steps in Project Plan

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Service Line Management Definition

“Service Line Management (SLM) is a

combination of trusted management and

business planning techniques that can

improve the way healthcare is delivered. It

was developed by Monitor for the NHS

Foundation Trusts, drawing on the evidence

from UK pilot sites and the experience of

healthcare providers worldwide.”

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Service Line

Management Reality 1

“They talked about the need for improved

theatre efficiency, then there was a skill mix

which meant I lost my best scrub nurses. I

am pretty sure as a result of this that our

theatre throughput efficiency has gone down

and I don’t really understand how these

decisions are made.”

Consultant Colorectal Surgeon – Christie

Hospital Manchester

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Service Line

Management Reality 2

“There was a huge debate in the organisation

about earned autonomy and moving

decision-making to the font-line. Then we

got short of cash and started struggling with

the A&E target and all of a sudden the

decision-making seemed to disappear from

the front-line pretty quickly. I haven’t heard a

conversation about SLM for a while.”

Labaratory Manager – University Hospitals of

North Staffordshire

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Service Line

Management Reality 3

“There are occasions where I am quite

amazed by the way in which we manage to

disempower clinicians and other front-line

staff from effecting legitimate and required

changes. There needs to be a control

environment otherwise there’d be bedlum,

but we need to get much better at ensuring

front-line staff feel, and are, more in control

of their work and how it is structured, and

how it could be different”

Former Director of Finance - Derby Hospitals

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SLM – In a nutshell

Competence in

Leadership and

Management

Performance

across

balanced

measures

Earned

autonomy of

decision rights+ =

Finance

Op

era

tio

ns

Quality

+ Safety

Wo

rkfo

rce McKinsey & Company 1|

Illustrative example of mapping what will be different under SLM

HR decisions

Category Service Line Division Trust ExecExample

Recruit staff to vacant post which is in the budget: Consultant

Recruit staff to vacant post which is in the budget: Nurse

Recruit staff to vacant post which is in the budget: Admin and Clerical

Create and recruit to a new post related to new agreed activity

Create and recruit to a new post for which there is no funding source

Agree pay level with candidate

Future

Today

Alignment*

Medium

High

High

High

Medium

Medium

Change roles or disestablish posts

Upgrade a post or revise the skill mix required

Use agency staff to cover short term shortages

Increase overtime of current staff to cover shifts/shortages/additional work

Temporary employment of staff (<6 months) - post is not in current budget

Temporary employment of staff (<6 months) - post is in current budget

(e.g., locum)

High

High

High

High

High

High

Clinical

and opera-

tional

decisions

Increase budget to support new service with identified income source

Purchase a new piece of medical equipment (e.g., CT simulator)

Adjust out of tariff price for a particular service (e.g., brachytherapy)

Vary budget between pay and non-pay

High

High

High

High

Financial

decisions

Decision to revise the protocol for elective inpatient admissions

Close a ward due to infection outbreak

Condemn a piece of equipment as non-serviceable

Open beds temporarily to cope with capacity issues

Medium

Medium

Medium

High

Strategic

decisions

Expand critical care unit for Level 3 admissions

Develop new specialist surgery service

Develop a cancer service against network view

Move 25% of inpatient procedures into ambulatory/day care

High

Medium

High

Medium

Level 3

Level 2

Level 1

Advanced

Enhanced

Competent

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The Vision for SLM in Derby

We need to equip ourselves as an organisation, and more

widely, to ensure we have the skills, processes and approach to

managing the organisation that will ensure we can improve and

sustain the delivery of healthcare for southern Derbyshire.

We need to define a future where we ensure that clinical staff

are better able to shape the delivery of their services and think

more broadly about changing the ways services are delivered.

We need a more empowering narrative about service

transformation over the next three years with improvements to

management, clinical engagement and leadership in the

southern Derbyshire.

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Required Improvement Conversations in Derby

How do we deliver better and more integrated care with the right incentives

Zero Tolerance to Outliers to reduce LoS

Readmissions as a harm event to improve care

Ambulatory Urgent Care Pathways to ease return of patients to their own homes or more suitable care environment

High cost frequent flyers – how to change and tailor care

Good GP referral pathways and appropriate intervention

Higher use of one-stop shops to improve patient experience

Appropriately foreshortening and reducing any low value clinical events from the patient pathway

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SLM - Ingredients Assessment

Continuously

improving

performance and

patient care

Core

processes

Strategic planningAnnual operational

planning/

budgeting

Performance

improvement system

3–5 years 1 year Monthly/real time

Enablers Organisation Information

management

OutputStrategy/

strategic

plan

BudgetAnnual

objectives

Balanced

scorecard

3

5

1

Culture and

capabilities

2

4

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Ingredients Assessment - Derby

Core

process

Strategic

planning

Annual

operational

planning/

budgeting

Performance

improvement

system

3–5 years 1 year Monthly/real-time

Enablers Organisation Information

management

3

5

1

Culture and

capabilities

5. Performance improvement system

Have performance agreements in place

with the 14 BUTs which begin to far more

clearly articulate the priorities objectives

and organisational gives and gets

between BUTs

Outputs

2

4. Strategic and annual planning

Need a much clearer picture of the future,

post move to new PFI and role of SLM in

the clinical strategy review we are about

to undertake needs further clarity.

4Continuously

improving

performance

and patient care

1. Organisation

Have restructured management and have

appointed new Business Unit Teams

(BUTs - Triumverates) in 14 delegated

business units owned by four clinical

Divisions.

3. Information management

Need to give speedier access

to information sources and

outreach from the finance

and information structure to

partner with BUTS.

2. Culture and capabilities

Beginning to further appraise

people’s beliefs about their

role, and give them

capabilities to carry out new

functions.

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SLM Workshops50 members of Divisional , Business Unit and Corporate teams attend SLM

workshops on a quarterly basis.

In June we reviewed

▪ Hope and Fears: Our implementation plan was reviewed in the light of this

feedback. All leads for different elements of the plan should considered the

output

▪ A Charter for Effective Performance Conversations

In August we reviewed;

▪ Business Unit focus (IPA’s (formal sign off); Information provision (what

else to do); Performance

▪ Organisation Strategy (Workbook Summaries; Sharing the message; Next

steps)

▪ Devolution (Accountability; Decision rights; Measures)

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Project Plan – Next Steps Organisational Model

– Leadership Development, Earned Autonomy process, IPA monitoring and

development and consequences

Culture and Capabilities – Board Development, Knowledge Gap Assessment, SLM Benefits briefing

with clear Communications Plan

Information Management– SLR approach, Recharges, Information Training, Balanced Scorecards

Annual and Strategic Planning– SLM and SLR links and required changes to clinical and corporate

strategy development

Incentivising and Managing Performance– Divisional, Business Unit (and personal) incentives

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SLM - Capability and

Improvement Trajectory

Impro

vem

ent

Impact

Time1

2

5

3

4

6Positive

Negative Data challenge – We can’t do

anything with this inaccurate

data

Status Quo, current

reporting and

engagement

We need to try and maximise

or increase income to improve

our financial performance

We need to try and influence

our costs to ensure we are

delivering the best value

We need to try and transform our

own services within our own

organisation to improve care

We need to transform our health

economy services to improve care

understanding how to align clinical and

financial value and the right

commissioning currency, with right

commissioner engagement

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Changed Executive

Behaviours

From To

Top down decision making Appropriate delegation of decision

making to appropriate risk level

Directing and Managing Role Mentoring, Coaching, Facilitating

and Training Role

Management of Whole Entity

interface with Commissioners

Revised approach to cope with

higher organisational engagement

with commissioners

EMT misalignment on emergent

thinking and pace of change

Appropriate combined view and

understanding of change and pace

Board level executive functional

responsibility for functional portfolio

Appropriate conversation on new

approach and transition

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Key Next Steps

Clarity around information provision improvements

Definition on role of SLM in strategy development

Address Executive Team behaviours

Ensuring we can foreshorten the approach to the right improvement

conversations and Step 5 and Step 6 on the SLM Improvement

Trajectory

Clearer description on next steps

Review current performance of the Business Units and then begin to

describe differential approaches across the organisation to “controls”,

“freedom” and “access”

HFMA

Current Chesterfield

Performance

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HFMA identifier

Area: Ref Indicator Target

17/18

Target YTD Actual YTD Month 6 Month 7 YTD RAG

Status

Prior

YTD RAG

Status

Current

Comments IPR

Graph

Ref1 Liquidity ratio (days) 40.7 37.3 40.4 40.7 40.4 Green Green

2 Capital Servicing Capacity (times) 2.90 2.62 1.96 2.13 1.96 Red Red

3 Agency spend (£000's) against NHSI Ceiling 11,599 7,578 7,469 1,041 1,221 Green Green 5g/h

4 I&E margin as a % of income 2.60% 0.87% (0.02%) 0.49% (0.02%) Green Amber

5 Variance in I&E Margin 0.00% 0.00% (0.90%) 0.00% (0.90%) Green Amber

Total Overall Use of Resources Metric Score 1 1 2 1 2 Green Amber

£'000

6 Contract - North Derbyshire CCG 134,354 78,574 79,257 11,343 11,744 Green Green Excludes impact of Commissioner disputes 5.4c/d

7 Contract - Hardwick CCG 45,323 26,502 26,323 3,362 4,223 Green Amber Excludes impact of Commissioner disputes 5.4c/d

8 Contract - Other Patient Care Income 34,381 19,257 17,961 2,591 1,890 Amber Amber Contains loss of £606k S&T income month 7 5.4c/d

9 Other Income 22,465 13,153 12,955 1,861 1,943 Green Green 5.4c/d

10 Pay - including bank and agency 149,682 88,457 89,710 12,426 13,323 Red Red Includes £925k undelivered CIP, month 6 includes £750k A/L accrual release5.4a/b

10a Agency spend as % of total pay bill 6.10% 6.30% 8.30% 8.40% 9.20% Red Red Upward trend in medical agency 5g/h

11 Other Operating Expenses 70,884 42,184 41,469 6,150 6,264 Green Green Contains £733k contingency release 5.4a/b

12 Financing Costs inc Depreciation 8,095 6,206 5,423 749 825 Green Green 5.4a/b

13 CIP Achieved- Cumulative achievement of CIP target (000's) 10,300 3,927 3,675 729 360 Green Amber Phasing increases in Q2 &Q3 5.5c

14 Control Total Surplus/(Deficit) including STF -26 -1,546 -2,141 7 -595 Green Amber YTD Variance £595k

15 STF Achievement 6,066 2,727 2,121 1,213 0 Green Amber Month 7 not achieved due to off plan position

16 Capital - Deliver the capital investment plan (85%-115% of

plan) (£000's)

14,155 9,600 4,397 1,033 321 Red Red Delayed start of some large schemes and

procurement of equipment. Expected outturn

is c£11.7m. The main changes are £1.6m

underspend is due to a delay in the start of 2

schemes these will now finish next financial

year, £1.4m replacement equipment lower

than planned offset by additional £750k GP

streaming scheme funded by the DH.

5.6

17 Cash balance (000's) 33,746 24,930 23,772 25,031 23,772 Red Amber Due to 2017 outturn lower than expected

(£3.7m) plus 2017/18 working capital timing

differences offset by £5.2m underspend on

capital programme and £400k unplanned

receipt of PDC for GP streaming received Oct

2017.

5.1

18 Trade Debtors 12,495 17,505 20,258 18,883 20,258 Red Red Mainly due to NHS Trade Debtors being higher

than plan.19 Trade Creditors 18,312 16,200 16,204 16,059 16,204 Green Amber

20 Better Payment Practice Code (by value) 95.00% 95.00% 95.00% 95.00% 95.00% Green Green

5. FINANCE & CONTRACTING - Key Financial Metrics M7Fi

nan

cial

per

form

ance

Liq

uid

ity

Use

of

Res

ou

rces

Met

rics

HFMA identifier

Income and Expenditure Divisional Summary - Month 7

Income Expenditure Net Position

Annual

Plan

£'000

Annual Plan

£'000

Annual Plan

£'000

Plan YTD Actual

YTD

Variance

(Fav)/Adv

Risk

Rating

Plan YTD Actual

YTD

Variance

(Fav)/Adv

Risk

Rating

Plan YTD Actual

YTD

Variance

(Fav)/Adv

Risk

Rating

Surgical Services Division

Integrated Surgery (29,608) 17,307 (12,301) (17,352) (16,687) 665 A 10,069 10,657 588 A (7,283) (6,030) 1,253 R

Orthopaedics & Specialist Surgery (24,284) 7,620 (16,664) (14,308) (13,586) 722 A 4,479 4,571 92 A (9,829) (9,015) 814 A

Surgical Support Services (10,539) 24,196 13,657 (6,076) (5,836) 240 A 14,140 13,950 (190) G 8,064 8,114 50 A

General Surgical Specialties 0 (745) (745) 0 0 0 394 794 400 R 394 794 400 R

Integrated Surgery Total (64,431) 48,378 (16,053) (37,736) (36,109) 1,627 A 29,082 29,972 890 A (8,654) (6,137) 2,517 R

Medicine & Emergency Care Division

Acute Medicine (14,150) 13,640 (510) (8,283) (8,316) (33) G 7,900 7,955 55 A (383) (361) 22 A

Specialty Medicine (10,418) 7,319 (3,099) (6,139) (6,046) 93 A 4,383 4,229 (154) G (1,756) (1,817) (61) G

General Medicine (45,227) 12,033 (33,194) (26,355) (28,210) (1,855) G 6,728 6,894 166 A (19,627) (21,316) (1,689) G

Medicine & EC Divisionwide 9,928 9,928 0 0 0 6,183 8,533 2,350 R 6,183 8,533 2,350 R

Medicine & Emergency Care Division Total (69,795) 42,920 (26,875) (40,777) (42,573) (1,796) G 25,194 27,611 2,417 A (15,583) (14,962) 621 A

Integrated Care Division

Maternity and Gynaecology (18,414) 8,444 (9,970) (10,759) (10,739) 20 A 4,950 5,231 281 A (5,809) (5,508) 301 A

Child Health & CAMHS (16,689) 12,040 (4,649) (9,719) (9,801) (82) G 7,030 6,885 (145) G (2,689) (2,916) (227) G

Pharmacy & Therapies (2,188) 8,407 6,219 (1,276) (1,229) 47 A 5,092 4,944 (148) G 3,816 3,715 (101) G

Imaging (5,167) 7,024 1,857 (3,066) (3,490) (423) G 4,280 4,837 557 R 1,214 1,347 134 R

Pathology (4,559) 8,391 3,832 (2,649) (2,562) 87 A 5,043 5,091 48 A 2,394 2,529 135 A

General Integrated Care 0 2,108 2,108 0 0 0 1,589 1,825 236 R 1,589 1,825 236 R

Integrated Care Division Total (47,016) 46,414 (602) (27,470) (27,820) (350) G 27,984 28,813 829 A 514 993 479 A

Royal Primary Care (5,231) 5,236 5 (3,052) (3,062) (10) G 3,055 3,504 449 R 3 442 439 R

High Cost Drugs/Chemo (13,198) 12,067 (1,131) (7,704) (7,508) 197 A 6,723 6,526 (197) G (981) (982) (0) G

CQUIN including reserve (3,461) 0 (3,461) (2,025) (2,024) 2 A 0 0 0 (2,025) (2,024) 2 A

Patient Transport (1,176) 1,083 (93) (686) (686) 0 A 632 637 5 A (54) (49) 5 A

Block & Other (2,687) 0 (2,687) (1,573) (1,052) 522 R 0 0 0 (1,573) (1,052) 522 R

STF (6,066) 0 (6,066) (2,728) (2,121) 607 R 0 0 0 (2,728) (2,121) 607 R

Total Clinical (213,061) 156,098 (56,963) (123,752) (122,953) 799 A 92,670 97,063 4,393 A (31,082) (25,890) 5,192 R

Corporate & Other

Facilities 0 12,080 12,080 0 0 0 7,228 7,308 80 A 7,228 7,308 80 A

Finance 0 2,271 2,271 0 0 0 1,356 1,371 15 A 1,356 1,371 15 A

IT 0 2,966 2,966 0 0 0 1,789 1,943 154 A 1,789 1,943 154 A

Workforce & OD 0 2,116 2,116 0 0 0 1,280 1,119 (161) G 1,280 1,119 (161) G

Chief Execs 0 755 755 0 0 0 458 624 166 R 458 624 166 R

Information & Central team (COO) 0 3,970 3,970 0 0 0 2,290 2,471 181 A 2,290 2,471 181 A

Medical Director 0 (526) (526) 0 0 0 (305) (426) (121) G (305) (426) (121) G

Clinical Standards & Governance 0 11,429 11,429 0 0 0 6,703 6,676 (27) G 6,703 6,676 (27) G

Capital Charges 0 9,916 9,916 0 0 0 7,397 4,686 (2,711) G 7,397 4,686 (2,711) G

Reserves 0 4,124 4,124 0 0 0 2,246 222 (2,024) G 2,246 222 (2,024) G

Total Corporate 0 49,101 49,101 0 0 0 30,442 25,994 (4,448) G 30,442 25,994 (4,448) G

Trust Position (213,061) 205,199 (7,862) (123,752) (122,953) 799 A 123,112 123,057 (55) G (640) 104 744 A

Less net donated income and depreciation 0 -51 -51 0 0 0 -103 -85 18 -103 -85 18

Less Impairments 1,873 1873 0 0 0 (440) 0 440 -440 0 440

Less Shortfall on S&T fund due to

Operational targets

6,066 0 6066 2,728 2,121 (607) 0 0 0 2,728 2,121 -607

NHS Improvement Control Total -206,995 207,021 26 -121,024 -120,832 192 A 122,569 122,972 403 A 1,545 2,140 595 A

Income Expenditure Net Position

HFMA

Improving Financial

Performance and Model

Hospital

26

HFMA identifier

HFMA identifier

Carter efficiency savings

(North Midlands trusts highlighted)

28

Derby

UHNM

Nottingham

Burton

Chesterfield SATH

Sherwood

Forest

HFMA identifier

Carter savings as a % of costs

29

Trust Savings £M Savings as a % of reference costs

Derby Teaching Hospital NHS Trust 24.80 5.5%

Burton Hospitals NHS Trust 10.20 5.8%

Chesterfield Royal Hospital NHS Trust 12.06 6.5%

Shrewsbury and Telford Hospitals 23.00 8.2%

Nottingham University Hospitals Trust 61.66 8.4%

Sherwood Forest Hospitals NHS FT 36.10 13.4%

University Hospitals North Midlands 89.95 14.3%

HFMA identifier 30

Improving NHS productivity: mapping providers’ cost per WAU against their

surplus/deficit as a percentage of operating expenditure

BETTER PRODUCTIVITY,

SUSTAINABLE FINANCES

BETTER PRODUCTIVITY,

UNSUSTAINABLE FINANCES

WEAKER

PRODUCTIVITY,

SUSTAINABLE

FINANCES

WEAKER

PRODUCTIVITY,

UNSUSTAINABLE

FINANCES

Trusts with a lower cost per WAU (more productive) tend to have a smaller deficit and more sustainable

finances

Inadequate trusts tend to have weaker productivity and unsustainable finances

Outstanding trusts have higher productivity and more sustainable finances

• Icons: 136 non-

specialist acute trusts

• Size of Icon:

Standardised clinical

output (WAU)

• Colour/shape of icon:

CQC rating

• Cost per WAU: is

from Reference Cost

15/16

• Surplus deficit: from

trusts accounts, figure

excludes impact of

impairments and

transfers by

absorption and

charities (15/16)

HFMA identifier 31

Improving NHS productivity: mapping providers’ cost per WAU against their

surplus/deficit as a percentage of operating expenditure

BETTER PRODUCTIVITY,

SUSTAINABLE FINANCES

BETTER PRODUCTIVITY,

UNSUSTAINABLE FINANCES

WEAKER

PRODUCTIVITY,

SUSTAINABLE

FINANCES

WEAKER

PRODUCTIVITY,

UNSUSTAINABLE

FINANCES

Trusts with a lower cost per WAU (more productive) tend to have a smaller deficit and more sustainable

finances

Inadequate trusts tend to have weaker productivity and unsustainable finances

Outstanding trusts have higher productivity and more sustainable finances

• Icons: 136 non-

specialist acute trusts

• Size of Icon:

Standardised clinical

output (WAU)

• Colour/shape of icon:

CQC rating

• Cost per WAU: is

from Reference Cost

15/16

• Surplus deficit: from

trusts accounts, figure

excludes impact of

impairments and

transfers by

absorption and

charities (15/16)

U.H.N.Mids

Chesterfield

Nott. Uni

Sherwood

Burton

DerbyShrews.

HFMA identifier32

Using the

Model Hospital

Where to changeIdentify unwarranted variation

What to changeFocus on savings opportunities &

efficiency - top 10 medicines

How to changeBest in class

Promote sharing and collaboration

HFMA

Summary and

Conclusions

33

HFMA identifierHFMA

Summary and Conclusions

Defining the broader role and purpose of the organisation is key for

clinical engagement

Having the right organisation, culture and capabilities, information,

approach to planning and performance improvement is key

If you are really trying to elicit a system response to improvement

you may not have the data to deliver that and may see a dip in

improvement approach

The slog of the day job and getting revenue and cost right won’t go

away

Having the comparative data to really understand where you can

improve is key – the Model Hospital data in the English NHS is

enabling some of this

34

About the HFMA

The Healthcare Financial Management Association (HFMA) is the UK representative body for finance professionals working in the NHS

and the wider healthcare sector. Our aim is to support the NHS finance function, to promote good practice in financial management and

to improve the general understanding of NHS finance issues.

Our work is informed by a number of committees and special interest groups made up of healthcare finance practitioners. We publish

numerous guides and briefings aimed at finance professionals, non-executive directors and non-finance staff. We also provide training

and development opportunities – including a suite of web based learning modules – across all of these groups.

www.hfma.org.uk

Thank you

About the HFMA

The Healthcare Financial Management Association (HFMA) is the UK representative body for finance professionals working in the NHS

and the wider healthcare sector. Our aim is to support the NHS finance function, to promote good practice in financial management and

to improve the general understanding of NHS finance issues.

Our work is informed by a number of committees and special interest groups made up of healthcare finance practitioners. We publish

numerous guides and briefings aimed at finance professionals, non-executive directors and non-finance staff. We also provide training

and development opportunities – including a suite of web based learning modules – across all of these groups.

www.hfma.org.uk35