Service Line Management

Jane Batty

10 December 2008

APPENDIX I

2

WHERE THE TRUST WANTS TO BE

An organisation that is capable and confident to run with autonomous Strategic Business Units, building

with firm foundations of clinical quality and maximising operational effectiveness without compromising the

Trust’s financial position

3

SBU APPLICATION PROCESS

• Pre-submission reviewed by Executive Team

• Criteria set against overall Trust objectives and SBU implementation plan

• Assessment of leadership capabilities

Pre-submission Full application

• Vision & strategy

• Rationale for SBU status

• Historic performance overview

• Future plans

• Market assessment

• Risks

• Review of successful application, linking to decision rights, ongoing performance management processes, levels of earned autonomy

• Gather key data that summarises:

─ Why the service wants SBU status

─ How this will transform the existing service

─ Outline plan for producing application

• Executive Team evaluation of submission

• SBU management team presentation to Performance Committee

SBU Pre-submission

Pre-submission Review by Executive Team

Full Application SBU StatusApplication Assessment

Invitation to apply for SBU status

• Letter from Performance Committee inviting application

2 3 4 5 61

Outputs• Summary for

Executive Team Review

• Application acceptance and timetable – go to 4

• Application deferral – go to 2

• SBU Business Case that provides:

- clear strategy

- financial assurance

- governance arrangements

• Performance Committee decision

- approval – go to 6

- deferral – agree development path for reapplication – go to 4

• SBU specific decision rights matrix

• Balanced scorecard

• Timetable for performance management

• SBU invite pack

• SBU parameters

• Pathway• Application

pack with Trust Plan as appendix

4

VALUE PROPOSITION – WHAT ARE THE BENEFITS…?

Strategic Business Units

Proposed Benefits

1) Shaping the future of services through local clinical and managerial ownership of the Trusts 5 year Integrated Business Plan and service direction, utilising the framework of an annual planning process that is rooted in quality and patient care

2) Earning the ability to plan service investments through: – Payment by Results at a Strategic Business Unit level and, in the first

instance, the ability to access [ X ] % of any financial over-performance against plan [Percentage to be discussed and over-performance to be defined]

– Retention of cash generated from equipment depreciation to invest in future capital expenditure without recourse to the Trust’s Capital Bidding Group

3) Greater levels of autonomy and decision rights with the ability to more easily restructure and modernise to increase service capacity, efficiency and improve the patient journey without Executive Team input, and the opportunity to influence performance through clear internal trading arrangements.

4) An effective and robust performance management regime that recognises and rewards good performance, and that relies on exception reporting upwards rather than central control. In other words, the better the performance, the less involved the monitoring.

5

….AND THE CONSTRAINTS?

Strategic Business Units

Constraints1) The Trust will always be obliged to remain compliant with its terms of

authorisation as an NHS Foundation Trust

2) SBU actions must always be consistent with the wider objectives and obligations of the Trust as a whole

3) SBUs will continue to perform against national and local targets and standards and in line with the Trust’s overarching contractual requirements

4) SBUs must continue to ensure Trust wide financial sustainability, and as such internal transfer pricing policy (i.e. between Trust services) cannot destabilise the Trust’s core services

5) Service developments must be consulted upon across all service lines and SBUs that are affected, with arbitration being undertaken by the Trust Executive Team

6

KEY DEPENDENCIES

• Board and Executive Support • High Quality Data feeding into • High Quality - Timely Information• Patient Level Costing – immense detail• Trained Staff

7

HOW WILL IT WORK IN PRACTICE?

SBU Performance Management and Compliance

8

Monitor uses a compliance regime to performance manage FTs…

Finance• Achieve Plan

• Underlying performance

• Financial Efficiency

• Liquidity

Governance• Members report

• Board statement

Mandatory Services

• Update and Commentary

Apply weightings and assign performance related risk rating for each of the three areas

Monitors compliance regime has 3 components

5

4

3

2

1

Green

Red

Amber

Green

Red

Amber

Source: Monitor compliance framework

High Risk

Low Risk

Finance Governance

Mandatory services

9

…. and to determine the level of autonomy they should have

The degree of autonomy earned is dependent on performance related risk rating

Source: Monitor compliance framework

Incentives to perform well• Reduced frequency and detail of monitoring• Greater freedoms• Increased ability to borrow

Consequences of poor performance• Increase monitoring frequency and detail• Require FT to do /not do specific items• Require FT to seek external advise• Change all or any of the board• Remove powers / decision rights• Order dissolution of FT

Trusts are incentivised to perform well in order to minimise the level of intervention

Good performance Low RiskReduced monitoring

Poor PerformanceHigh RiskIncreased monitoring

10

WHHT will apply similar mechanisms to Monitor to set expectations of SBUs…

• Define Trust wide KPIs for each of the three areas

• Define the quantities for low, medium and high risk for each area, and for each KPI

• Define the interventions that will occur at each risk rating for each area

• Annually meet with the Services individually to agree KPIs –Trust wide and service specific - for each of the 3 areas

• Summarise expectations in a performance contract between the Exec Team and the Service

• Set a frequency for performance monitoring, and set the variations on frequency for low and high performing services

• Risk rate the services at the agreed frequency and hold performance discussions with the core team

Trusts can monitor performance using a scorecard

Finance

Operational Efficiency

Quality and Patient satisfaction

• Are they maintaining financial sustainability?

• Are they making sound investments?

• Are they using resources in the most efficient way?

• Are they making continual improvements in resource use?

• Are they providing the best quality of care for patients?

• Are they providing a clinically safe service?

Actions for Exec Team and individual services

11

..and use the SBU performance to determine the level of autonomy the SBU can have

The degree of autonomy earned should be set according to the risk rating on the three areas

Incentives to perform well• Reduced frequency and detail of monitoring• Greater freedoms for investment

Consequences of poor performance

• Increase monitoring frequency and detail

• Require service to /not do specific items

• Require service to work with exec team / seek external advise for specific issues

• Remove powers / decision rights

• Change all or any of the team

Trusts are incentivised to perform well in order to minimise the level of intervention

Good performance Low RiskReduced monitoring

Poor PerformanceHigh RiskIncreased monitoring

12

Meeting

Supporting materials

Performance Committee

Exec Team

SBU

Team

SBU scorecard & report

Trust scorecard & report

Feedback

Issues are identified and addressed at the team level

Timeline of the meetings will be informed by the dates of the Performance Committee and Scorecard/information availability.Frequency of meetings between exec team and SBU may be less when SBUs are performing well

SBU scorecards will be a critical reference point for any “compliance regime”

Trust wide Performance Committee

Performance Review with members of exec team

SBU management meeting

Feedback

Feedback

Scorecards & reports from each team

Interaction between each level ensures that everyone is working towards a consistent set of objectives

Local team meetings – e.g.,

• Ward round• Consultant

meeting • MDT• Management

meetings

13

Overall framework for a scorecard

Keeping our staff motivated and providing them with the support

needed

Providing the best quality of care to our patients

Operational efficiencyFinancial and growth

Patient Safety and Quality People / Workforce management

SBU performance scorecard

Ensuring we have the overhead we need to invest in our services

Using our resources in an efficient way by working smarter

and motivating our staff

14

Performance is driven by a number of factorsTotal resources

£ and WTEs

Activity based benchmark

£ / unit of activity * Key drivers

Income

Cost

Inpatient and day case HRGs, £

Outpatient activity, £

Pay

Non-pay

Medical**

£, WTE s

Other clinical

£, WTEs

Non-clinical

£, WTEs

Drugs

£

Clinical Supplies

£

Overheads

£

Nursing**

£, WTEsSurplus / Deficit

Medical pay costs / spell ***

Nursing pay costs** / spell

Drugs / spell

Clinical supplies / spell

Other costs per spell

Other operating income / spell

Non-clin. pay cost/spell

Other clin. pay costs / spell

Activity income / spell

Other income, £Other operating income / spell

Other

£Other costs per spell

Medical productivity (Spells/WTE)

Medical costs/ WTE by grade

Nursing productivity (Occupied Bed Days / Nursing WTE or Patients / Nursing WTE)

Nursing costs / Nursing WTE by grade

Admin staff WTEs / Medical WTEs

Day case rate

Theatre Utilisation

Nurse hours per patient bed by ward type

Drug costs/ spell

Supply costs/ spell

Diagnostic equipment utilisation

Consultant costs: Clinical vs non clinical PAs

Average length of stay (ALOS)

Theatre time / FCE

15

Using driver trees to help us see the bigger picture…

ALOS

Bed cost/day (£)

Prosthetics cost (£)

Other consumables cost (£)

Hours used

Theatre cost/hours used

Medical cost/spell (£)

Theatre cost/case (£)

Consumables cost/spell (£)

Bed cost/spell (£)

Diagnostic cost/spell (£)

Therapy cost/spell (£)

Drug cost/spell (£)

Indirect cost/spell (£)

Market Size (FCEs)

Market share (%)

Number

of FCEs

Spell/FCE conversion rate

Surplus (£k)

Volume (spells)

Income/spell (£)

Cost/spell (£)

Surplus/spell (£)

Major cost drivers

-

16

…and understand what metrics to track

Source: Discussions with surgeons and team analysis at a pilot trust; figures have been sanitised

ALOS

20 days

Bed cost/day (£)

100

Prosthetics cost (£)

3000

Other consumables cost (£)

600

Hours used

3

Theatre cost/hours used

100

Medical cost/spell (£)

600

Theatre cost/case (£)

300

Consumables cost/

spell (£) 3600

Bed cost/spell (£)

2000

Diagnostic cost/spell

(£) 200

Therapy cost/spell (£)

100

Drug cost/spell (£)

1000

Indirect cost/spell (£)

1200

Deficit (£k)

-100,000

Volume (spells)

100

Income/spell (£)

8000

Cost/spell (£)

9000

Surplus/spell (£)

-1000

Example of HRG cost driver tree for hip revision Major cost drivers

-

Long hospital stays and high drug costs make revision hips expensive

This analysis would drive a focus on the ALOS and Consumables as being the key cost elements to track and investigate.

17

Executive will transparently link performance to intervention

5

4

3

2

1

Finance

Is there significant under achievement of plan?

Are there Trust viability concerns? Monitoring

N

N

Y

Y

Y

N

N

N

Y

Y

N

Y

N

Actions

Quarterly / Six-monthly*

• None

Quarterly • Perform underperformance analysis

Quarterly • In addition to the above–Perform forward financial analysis

Quarterly • None

Monthly / Quarterly* • In addition to the above–Request/review recovery plan and GM/CD

partnership to formally commit**–Request for service line information–Monthly updates against recovery plan /

reforecast

Monthly / Quarterly* • In addition to the above–Request/review financial recovery plan–Possible intervention from Executive

Monthly • Detailed analysis of failure• Probable intervention and removal of autonomy

Weekly / Monthly* • In addition, likely weekly monitoring of financial position

*At Executives discretion**Assessment of immediate financial risks and suggested mitigating actions

Based on Monitor’s compliance regime

EXAMPLE OF PERFORMANCE MANAGEMENT FOR FINANCIALS

18

Next Steps

Paediatrics - The Test Case

•Children’s Services are acting as the Test case and have been formally asked to test the process as a first applicant.

• Completed Pre submission document expected end December 2008/ beginning January 2009

• Assuming assessment of the Pre submission document is positive a Full Application would be anticipated for consideration by the end of March 2009

19

The Trust Board is asked to

Accept

The concept of Earned Autonomy as applied to WHHT

Agree

• The Process and Journey for achieving SBU status

• The Pre - submission document

• The Full application requirements

Give Consideration to

• Benefits of Earned Autonomy and the Percentage of over performance SBU’ should retain

• The proposed Capital Management

• Governance and the Proposed Performance Management Process

A decision is required by March 2009 in order to support the Trusts FT application and Authorise the process moving forward