Business Planning Sourcebook

Business Planning Sourcebook

February 2006

2

Important context

Status of this document

This document has been produced by the NHSFT Unit in the Department of Health to provide a framework, which Trusts can follow, to develop five year business plans in the context of System Reform

The Business Planning Sourcebook Sourcebook has been designed to complement those Sourcebooks already available from the NHSFT Unit in respect of Governance and HR arrangements, and complements the ‘Applying for NHS Foundation Trusts Status’, published jointly by DH & Monitor – the Independent Regulator of NHS Foundation Trusts (NHSFTs)

This document will be reviewed on a regular basis. If you have any comments that you would like to make, please feed them back to the NHS Foundation Trust Implementation Team, email: [email protected]

3

Foreword

Context

System Reform underpins significant change in the healthcare market, where increased choice and contestability will mean that Trusts can no longer rely on historic patient flow and activity patterns for their future stability

For Trusts to prosper in the new healthcare market they will need to become more outwardly facing in their business planning, to seek to exploit opportunities as they present themselves, and to adapt their operating environment to meet changing business needs and challenges. The new governance arrangements with NHSFTs will also provide an added impetus for directing feedback from the local population to the Trust about the strategic direction of the organisation. This will need to be underpinned by an effectively integrated and empowering culture of staff involvement and engagement if service improvements are to be realised for the benefit of patients.

Current policy is that by 2008 all NHS Trusts will be in a position to be eligible to apply for Secretary of State support to apply for NHSFT status.

Authorisation as an NHSFT is dependent upon Monitor – the Independent Regulator for NHS Foundation Trusts – being confident and able to provide assurance to Parliament and a wide range of stakeholders that NHSFTs will be legally constituted, financially sustainable, effectively governed and locally representative. These are essential requirements for NHSFTs to be able to operate with sufficient autonomy, to deliver national health priorities and to become increasingly responsive to local needs

This Business Plan Sourcebook is intended to enable NHS Trusts to begin the process of ‘business’ development that will make them fit for purpose as NHSFTs . This guide has been developed to help inform the NHS about commercially focused business planning, and builds on feedback and lessons learnt from those Trusts that have already been authorised. It is aimed at all individuals working within NHS Trusts, not only for the Chair, Chief Executive and the Trust Board, but also for clinicians and staff at the forefront of service delivery. These people have an active role to play in influencing and working with managers and Trust directorates to redesign and develop services to meet the needs of the local population. The organisational culture also needs to develop from being directing and controlling to being empowering and responsibility-led. Every stakeholder in the organisation has a vested interest in making this happen

This guide will also be a useful source of information for external stakeholders, as they work with Trusts to understand how an increased emphasis on ‘commerciality’, including identifying and managing risk – corporate, clinical and financial, will not undermine the working relations and partnerships that currently and will continue to exist.

Diagnostic – Application Guide p13.

4

Foreword

What is a Business Planning Sourcebook?

Your Business Plan document with supporting appendices is the key submission you need to make to DH during the development phase of your application to seek Secretary of State support to apply to become a NHS Foundation Trust. It should be seen as a road map to take your organisation forwards over the next five years. It is not a strategy for your local health economy; it is a plan that will set out the best course of action for your Trust given the dynamics of your external environment, the strengths and weaknesses of your organisation and the needs of your stakeholders. All organisations, regardless of their size, industry or whether they are in the public or private sector should consider these basic elements when setting a strategic direction

A robust Business Plan should be underpinned by evidence-based rationale, consensus with internal and external stakeholders, sound financial discipline and a thorough understanding of the short, medium and longer term risks that face your Trust. Many NHS trusts will have never gone through this rigorous long term planning process

Purpose of this document

The aim of this guide is principally to help NHS Foundation Trust applicants develop their Business Plan’s in conjunction with advice and support from the Department of Health Implementation Team. However, this guide can also be used for all NHS Trusts that are looking to develop their business planning capabilities to enable them to operate these effectively in the new NHS landscape

This document outlines the characteristics of good strategic planning that are universal to all organisations. It then links to, introduces and explains the key sections that each NHS Trust should bear in mind when developing a Business Plan for example strategy, market assessment, services, finance, risk, leadership and governance. For each fundamental this Business Plan suggests templates, frameworks and guidance notes to steer you through the process of pulling your Business Plan together

This is a guide, and not a prescriptive collection of templates and tables that you must populate. Neither has this document been designed as a complete and exhaustive collection of guidance notes to take your Trust through the authorisation stage of your NHS Foundation Trust application with Monitor, though the principles will be relevant

The process of developing a Business Plan will draw on a wide spectrum of skills including strategic analysis, financial modelling, finance, business planning, forecasting, workshop facilitation, communication, stakeholder management, commissioning and project management. A key requirement for any organisation going forward as a more commercially focused business will be to ensure that such capabilities and capacity are represented at the most appropriate levels within the Trust

Feedback from early applicants

Feedback from early NHS Foundation Trust applicants suggests that preparing a Business Plan involves many new and testing challenges, but that the effort is worthwhile; Business Plan’s that have the buy in of stakeholders (e.g. staff, patients, commissioners, SHAs, local authority's etc) are hugely powerful documents, and in puling together the document many new NHSFTs have engaged with internal and external stakeholders at a level much deeper than before. In summary, the feedback sends a clear message that most NHSFTs are now in much better shape to control their futures as financially viable healthcare businesses

The content in this Business Plan has been developed following an interview programme that covered 25 of the 30 NHS Foundation Trust applicants in wave 1 and wave 1a, and canvassed the opinions of both Monitor and the NHS Financing Facility. Where appropriate, direct feedback from these sources has been highlighted in this document

An overview of the NHS Foundation Trust policy and implementation programme is set out in Appendix 1 which is titled “What are NHS Foundation Trusts?” It provides key facts and fundamental principals of NHS Foundation Trusts and sets out the reasoning behind the policy

5

Contents

Chapter Page

1. Characteristics of good strategic planning 4

2. Getting started 10

3. Structuring and developing your Business Plan 15

Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk

Leadership & Workforce

Governance

4. Other working tools

5. Appendices

6

Characteristics of good strategic planning Introduction

Introduction

Strategic plans provide essential direction to organisations. They define what an organisation wants to achieve within its planning horizon, and articulate how that organisation will achieve it from its current position. Strategic planning documents provide comfort to stakeholders (e.g. lenders, management, employees, trading partners and other interested parties) that tangible and achievable plans exist and that key risks have been identified and addressed. By distilling the high level strategy into more meaningful objectives, a strategic plan provides a benchmark against which actual results can be compared and benefits can be proven. Strategic plans enable businesses to progress – by taking stock, looking ahead, and aligning internal resources in a way that ensures the business will continue to prosper in constantly changing environments

All strategic plans need to be robust, shared, and ‘do-able’ regardless of the size, the industry, or whether the organisation sits in the public or private sector

These three characteristics are explained below and expanded on the following pages

Robust

For your Business Plan to withstand internal and external challenge it needs to be evidently the best course of action for your Trust given the long term vision of where you want to be, the dynamics of the healthcare sector in which you will operate and the strengths and weaknesses of your organisation. Opportunities and threats to operations need to be identified, assessed and evaluated. Strong strategic plans are living documents that actively recognise risks, then demonstrate how comprehensive and effective governance and accountability arrangements at the corporate level will minimise the likelihood of loss

This objective forms the basis of a strategic development framework upon which this Business Plan is based

Shared

In mutual organisations everyone is responsible for implementing the Business Plan, not just senior management. Indeed it would be difficult for senior management to implement a Business Plan alone. Successful implementation will demand active buy in from across your organisation and from your external stakeholders

Those responsible for implementing your Business Plan need to know what the plan is and what their roles and responsibilities are. Individuals, managers, clinicians and directors alike need to be clear on what ‘accomplishing the plan’ looks like. They must also agree that the direction taken in the Business Plan is the best discernable course of action

This is best achieved by involving such personnel in the formulation of your strategy

Deliverable

A do-able Business Plan is one where the high level intents, desires and objectives of your Trust have been translated into specific and measurable actions and outcomes that are understood at organisational, directorate and personal levels. Every person that works in your Trust will then know what he/she should be doing to help your Trust achieve its strategic objectives. Their roles and responsibilities will be clearly articulated, and the extent of their decision making capabilities clarified

As the Business Plan is implemented you then need to monitor performance to ensure you know whether you are drifting ‘off-course’ and when you should start to take corrective action. This is achieved through the design of performance management systems with clear key performance indicators (KPIs) that are in line with the strategic objectives set out in your Business Plan.

The active education and empowerment of staff within the organisation will encourage ownership of the strategic objectives and indicators of achievement, whilst nurturing an increased awareness of risk and risk management

These three concepts are illustrated further on the following pages

7

Characteristics of good strategic planning Strategies must be based on robust, evidence-based rationale

A key characteristic of good strategic plans is that they are supported by evidence-based rationale

The strategic plan will be determined as a consequence of undertaking a staged process, as indicated above. Research and the resulting evidence will provide the rationale to shape the strategy

In the context of an NHSFT, this is important for the following reasons

Both DH and Monitor will expect to see evidence that your Business Plan is the best course of action for your Trust given your long term vision of where you want to be, the dynamics of the healthcare sector in which you will operate and the strengths and weaknesses of your organisation

Your Business Plan will need to withstand challenge throughout the consultation process, and will not be credible if you fail to clearly link these elements together

To help you achieve the necessary degree of ‘joined up thinking’ the guidance in this Business Planning Sourcebook Sourcebooks has been designed around the step by step approach set out above

Identify key opportunities and threats

What opportunities match our vision, our external environment and our strengths and weaknesses?

What could we do differently? What are the key threats to our

organisation? Refer to guidance around the

SWOT tool on page 36

Shortlist most attractive future initiatives

What actions or initiatives should we set out that will enable us to achieve our strategy. Initiatives should: build on our strengths address our weaknesses develop our opportunities manage our threats

Refer to guidance on page 39

Document key elements in your

Business Plan

What does our high level activity plan look like?

What level of detail do we need to include in the Business Plan for each supporting initiative?

Refer to guidance on page 40

Define your vision

“What are we trying to achieve in the long term as a NHS Foundation Trust?”

Refer to the first fundamental (Strategy) on page 22

Consider your strengths and weaknesses

Analyse the internal environment and ask, “What are we good or not so good at? What evidence do we have to prove this? And what are the implications for us?”

Refer to guidance around the SWOT tool on page 36

Analyse the external environment

“What is happening in our external environment and how will this affect us?” Refer to guidance around the PEST tool on page 31

THE STRATEGIC DEVELOPMENT FRAMEWORK

Feedback from early waves

“The real benefit is forcing us to look further than one year ahead…It has changed the mindset of the Trust from reacting to thinking further

ahead”


“It made us think in a more structured way and imposed

discipline.”

8

Characteristics of good strategic planning Strategies must be shared with stakeholders

In the context of an NHSFT, this is important for the following reasons A sense of stakeholder involvement, engagement and buy-in is an intrinsic component of good

strategic plans. Successful implementation demands buy in from the personnel that work within your organisation and from your external stakeholders; the key is to involve the principal individuals responsible for delivery in the formation of plans

The logic is simple: resistance is often driven by ignorance. Conversely, a co-designed approach will lead to greater ownership, commitment and chances of success

Define your stakeholders and the best means of engaging with them Involve directorate senior management (i.e. those responsible for implementation) Involve external stakeholders (e.g. commissioners, SHAs, Oversight and Scrutiny Committees,

Patients etc) who have a vested interest in the services of your organisation Involve staff; hold workshops and give presentations to get your workforce ‘on-side’ One pitfall to avoid is to try to consult with too many parties, of which many may not be central to

the future direction/needs of your Trust

Your goals in the consultation process should be to: Educate external stakeholders where necessary. Feedback from early waves of NHSFT applicants

suggests senior board executives are likely to need to invest time hosting ‘Q&A’ sessions to allay fears and communicate intentions. It is then possible to build consensus and enhance commitment to plans among key players

Reach broad consensus on activity levels over the next five years. This is a critical driver of impact on your financial modelling and future revenue.

Foster creative thinking and bring new objective perspectives to strategic challenges Test the robustness of your strategy; does it withstand challenge? Engage your directorates in broad issues of Trust direction, and discourage silo mentalities

TYPE OFAPPROACH

Analytic,Quantitative

Qualitative,experience-based

visionary

Broad

Narrow

PA

RTIC

IPA

TIO

N

OR

CO

NS

ULTA

NTIO

NTHE CORRECT APPROACH

Senior Management works with key stakeholders to provide strategic direction based on common

interpretation of facts

NOT RECOMMENDEDCEO sets vision in isolation

NOT RECOMMENDEDStrategic Planning Group or Consultants

crunch numbers in isolation and document proposed strategy in a report


“We made efforts to make sure we communicated with PCTs and our PCTs made

efforts to come to our events and to stay in the loop. Our SHA was very much up to

speed and we made sure that our SHA director was part of

the steering board. We had a PCT director involved too.”


It was very beneficial. It made us engage with customers, clinicians and PCTs. This

made us fit for purpose and brought extra rigour and

energy to planning.”

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“Do” Accountable individuals implement your strategy by following directorate

business plans

“Review”

Well designed monitoring and control procedures regularly track progress

against plan

“Plan” Annual directorate

business plans are aligned to your Business Plan

document

Characteristics of good strategic planning Strategies must be deliverable at directorate level

THE ”PLAN-DO-REVIEW” CYCLE In the context of an NHSFT, this is important for the following reasons

The previous page explained the importance of all individuals in your organisation feeling part of the scheme, and how communicating the results of the planning process throughout the organisation can help achieve this

Strategic plans that are known and understood have a far higher chance of being implemented successfully, however the planning process does not end there

As your external environment changes so your strategic plan should continuously evolve, otherwise its integrity will be compromised. Your Business Plan should not be a document that is written then forgotten. This ‘Plan-Do-Review’ cycle is illustrated opposite

Explicitly align your shorter term ‘functional’ business plans to the longer term Business Plan

your Business Plan should be a high level, clear, strategic document. Excessive detail will detract from the key messages and if too much effort is required to read and digest your document no-one will use it

however individuals still need to understand where their daily contributions fit and therefore it is important that lower-level functional plans are aligned to the Business Plan

Your governance procedures should include the regular monitoring of predetermined key performance indicators (KPIs) set out in your business plans. This ‘control process’ will inform when you are drifting ‘off-course’ and when corrective action is necessary

KPIs should be congruent with your long term strategic objectives that, in turn, will be aligned to your overall vision

This Business Planning Sourcebook Sourcebook provides guidance on setting long term strategic objectives (the first fundamental - ‘strategy’) and reiterates the need to set out the high level systems and controls that will enable your board to track progress as you go (the seventh fundamental - ‘governance’)


“The five year financial plans are now living documents and

tools.”


“Workshops involved many people and made people more outward and forward looking.

People can now align their actions with the hospital’s

strategy.”

10

Characteristics of good strategic planning Critical success factors and potential pitfalls

CRITICAL SUCCESS FACTORS

Agreeing the structure for the Business Plan early on, and populate it with accepted wisdom and existing knowledge where possible

Key stakeholder “buy in” (the Board, senior directorate management, staff and external stakeholders) – making sure they understand the nature of the process and what the results will be, both for them and for your Trust

Identifying underlying issues that are driving the need for the development of a strategic plan. This is more than just an application process

Identifying the key constraints to the execution of a new strategy (e.g. infrastructure or capabilities)

Developing performance goals and using the Business Plan as a standard for measuring success at the different levels of your organisation

By informing directorate business plans your Business Plan should form part of a continuous ‘plan-do-review’ cycle across all levels of the organisation

Your Business Plan should be developed to a strict timetable to minimise disruption to day-to-day business. However do not assume the Business Plan can be done easily alongside your everyday commitments. Demands on the time of senior planning and finance teams will be high

Base your Business Plan on activity forecasts that you believe in, and that have been discussed with commissioners. Highlight differences where they exist, and bottom them out

Base your plans on fact, and provide evidence that demonstrates the rationale behind your decisions and future course of action

Using appendices wherever possible to ensure a clear, concise structure is maintained

POTENTIAL PITFALLS

Writing the Business Plan “by committee” with not enough central co-ordination

Wasting time and effort by starting to perform detailed analyses before broad direction is agreed

Failure to maintain consistency of assumptions throughout your document

Failure to explicitly connect market developments to volumes and activity

Failure to connect volumes and activity to costs and capacity issues

Delays in engaging internal and external stakeholders in the planning process

Lack of challenge to assumptions

Lack of “out-of-the-box” thinking

No, or very limited, sensitivity analyses to test the robustness of your plans

Assuming the plan can be introduced without a critical appraisal of current ways of “doing business”

Lack of discipline in structuring and writing your document, leading to long and wordy passages that very few can or will read

Lack of ownership of the plan on the part of those who will be trusted with delivering it

This Sourcebook has been based on a series of interviews with early NHSFT applicants. Clearly the experience of developing Business Plans has varied between Trusts by virtue of the processes and people involved, however analysis of the experiences of early applicants has been summarised below

11

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

12

Getting started Introduction

If you have been made responsible for pulling together the Business Plan for your Trust you will need to plan your approach to the coming months. If you haven’t already, you will need to:

get up the learning curve so that you understand the extent to which strategic direction has already been established within your Trust

meet on an individual level with your board and senior management to flush out issues and concerns that will have an impact on your approach. This will also put you in a stronger position to facilitate future workshops involving these individuals

build a clear picture of exactly what you need to produce, by when

organise an effective project team around you and ensure that the Business Plan efforts are given suitable priority within your organisation

understand the respective roles and responsibilities of your Trust, the DH and Monitor in the application process

The task may seem daunting, however it is likely that a lot of the information you need already exists in some form. Pull together what you already have and slot this into whatever template or Business Plan ‘storyboard’ you have developed. This will get you moving and in a better position to address the task ahead

13

Getting started Initial steps

GETTING STARTEDYou are responsible for

pulling together the Business Plan for your Trust. Where do you

start? This page should ensure you set off on

the right foot

4. ORGANISE WHO WILL DO WHAT

The process of pulling together the Business Plan must be led by a central ‘project office’

The project manager needs to ensure a project management structure is in place to ensure consistency of assumptions across the document

The project manager is responsible for making sure the Business Plan ‘stacks up’

PAGE 13: A suggested project management structure

PAGE 14: High level timetable for the process

1. GET UP THE LEARNING CURVE

Depending on your personal background, building this understanding may or may not be necessary

It involves an initial data gathering exercise to understand what information already exists and to inform your ‘kick-off’ discussions with the Board and other key stakeholders

Section 4 : Tips for initial data gathering

3. GET A SENSE OF WHAT YOU ARE AIMING FOR

It will be easier to tailor your approach to pulling together your Business Plan if you start with the end in mind

Once you have had time to assimilate the findings from your initial discussions with key stakeholders you should be in a position to pencil an outline of your Business Plan document

With a structure, or “storyboard” in place you can start to think about what analysis you need to populate it

The first page of each “fundamental” section provides an illustrative storyboard for

your Business Plan document

2. KICK OFF DISCUSSIONS WITH THE BOARD

In advance of engaging with external stakeholders meet with your Board and executive level management on an individual basis to: promote a shared understanding of what

your Business Plan needs to achieve gather thoughts and reservations around

strategic direction and supporting rationale understand what they perceive to be the

benefits and concerns of NHSFT status These discussions will help you understand

the different perspectives within your Trust, and plan for forthcoming workshops and communications

Key: = Working tools

5. DOCUMENT WHAT YOU KNOW ALREADY

You will already have information to support many of the initiatives that need to be described in the Business Plan, so much of the work should be formalising the documentation of what you already know rather than looking for new information

Set out the rationale behind the main initiatives that are already underway (the ‘driver’ behind the initiative, key costs and benefits, timescales, key risks etc)

You will need to do the same for future initiativesPAGE 40: Documenting key initiatives in your

Business Plan

The following flow diagram presents a suggested approach for individuals who have the overall responsibility for developing the Business Plan. Whatever your position within the organisation, be it Chief Executive, Finance Director or Project Director, the following steps will mark the start of the business planning process

14

STEERING GROUP

Lead: Chief Executive

Members: Full board and non-executives

Ensure team remains on track Challenge the Project Director Resolve high level issues Sets strategic direction

Getting startedA suggested project management structure

PROJECT OFFICE

Project Director Project Manager

The Board level sponsor Responsible for ensuring the project is suitably prioritised and

resourced

Will agree high level activities, timescales and responsibilities Monitors and reviews work streams for consistency of

assumptions Manages the interface with external stakeholders Maintains the Corporate Risk Register Manages submission of documents to DH to timetable

STRATEGY DEVELOPMENT

Lead: A senior official with long term planning capabilities

Responsibilities Coordinate sub-work streams (setting the vision, internal

capability assessments, supporting rationale for existing initiatives, external benchmarking etc)

Facilitation of workshops Liaise with the Financial, Governance and HR work stream leads Will collate contributions, write and edit the Business Plan

document

Lead: Finance Director

Responsibilities To produce 5 year financial model that is

aligned to the Business Plan To ensure consistency between activity,

capacity, resource and financial plans To ensure the model sensitivities reflect the key

risks identified in the strategy

FINANCIAL AND BUSINESS MODELLING GOVERNANCE HR

Elements of your submission

EXTERNAL STAKEHOLDERS

MembershipAs appropriate (SHA, PCTs, local authority, patient groups, workforce representatives…

Lead: Chief Executive

Responsibilities To ensure the links are made between the

new governance arrangements, the active involvement of the membership and the business plans

To ensure appropriate corporate governance is in place to demonstrate fitness for purpose

To prepare draft constitution to satisfy organisational needs and comply with statute

Lead: HR Director

Responsibilities To ensure that the appropriate links are

made between workforce development, workforce requirements, recruitment and retention and delivering service plans

To provide evidence that organisational culture change is underway, with new ways of working embedding into operations to improve performance and productivity

Wave 1a Feedback"Good project management is key to avoid the process of

producing your Business Plan getting too time consuming. Get a clear project plan that everyone can follow, with clear lines of accountability. Ensure all meetings have clear agendas and minutes are taken. You need a project team that will run this iterative process - a project manager with admin support)"

This project management structure is merely a guide

The development of a business plan is not an easy task. As indicated earlier, a project team will need to be formed to manage the programme of activity. A suggested steering group structure is indicated below

You will need to design the most appropriate structure given the specific characteristics of your organisations. However ensure you take into account the skills, capabilities and capacity of your people

Whatever structure you choose, ensure the production of your Business Plan is given enough priority, resource and board-level support so that the iterative process of producing an Business Plan can be managed

15

Assess-ment stage

Authorisation (Monitor)

DH development phase (DH)

DH

Ent

ry P

oint

Sof

S S

uppo

rt

Purpose Provide developmental support for FTs in preparation for Monitor assessment

To authorise applicants for FT status

Endorse DH support for application

Scope

Legal compliance

Financial viability

– Short term (W/C opinion)

– Long term

Governance proposals

– Financial reporting (opinion)

– Election process

– Membership

– Board structure

Complete-ness check of authorisation requirements

Consideration of the diagnostic programme (Wave 3 only) and historical due diligence

APPLICATION PROCESS FOR WAVE 3

Timing9 months DH 3 months Monitor

Provide developmental/support (Integrated Business Plan, including Governance and HR)

Guidance for public consultation

3rd Party input Third party assistance/support with development of the Integrated Business Plan

Third party report by independent accounting firm commenting on preparedness of applicant and covering commentary on:

Key issues on the Integrated Business Plan

Historical performance

Normalised position

FRP report and action plan

Consideration of the diagnostic programme

Third party report by independent accounting firm covering:

Working Capital Review

Conclusion on Financial Reporting Procedures

2 or 3 star rating must be achieved to enter the process

16

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

17

Structuring and developing your Business Plan Introduction

This section of the Business Plan Sourcebook introduces and explains the nine focus areas that are central to every Business Plan:

Executive Summary: where you want to be, and how you will benefit from NHSFT status

Profile: a summary of your NHS trust and how it currently operates

Strategy Goals: the trusts vision and plans for the future, the rationale behind them and an indication of what success would look like

Market assessment: a high level analysis of the current health economy including private providers

Service development plans: how services will change and how this is aligned to the trusts SWOT analysis

Finances: how the money stacks up

Risk what could go wrong and how you will mitigate against this

Leadership & workforce: how the trust board operates and the attitude surrounding the workforce

Governance: how you will stay in control

Do not regard the focus areas as mutually exclusive; the Business Plan is a holistic record of your strategic plan and there should be some overlap between the sections. The existence of overlap between the fundamentals is part of what will make your Business Plan hang together as one coherent document

Against each fundamental this Business Plan starts with an example ‘storyboard’, or contents page, in order to provide you with a high level impression of how each section of your Business Plan document should flow

you can use these storyboards as a start point, but don’t mistake them for a prescriptive list of everything you need to do

they will not be used to “score” your application, and they are deliberately less detailed than the evidence required in the Business Plan. As an aide memoire, a self-assessment checklist has been developed and is included in appendix 2

Following each example storyboard, this Sourcebook sets out structured guidance around those areas of the Business Plan that early NHSFT applicants have found most challenging. In order to avoid confusing the key messages this document does not provide detailed guidance on the more straight forward areas

The process of developing your Business Plan will require input from across your organisation and from external stakeholders. Board level sponsorship will ensure this process is assigned suitable priority. To achieve this a project director, who is ideally a member of the executive board should support your project manager

Throughout this section you will see comments, links and tips from previous NHSFT applicants in wave 1 and wave 1a. Their experiences should provide some useful insights for your own process

18

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

19

EXAMPLE STORYBOARD

Executive SummaryStructuring your Business Plan

EXECUTIVE SUMMARY

1 Executive summary

1.1.1 Vision and strategic goals–Rationale for FT

1.1.2 Culture and environment to be created

1.1.3 Market assessment

1.1.4 Performance overview

(historical & future)

1.1.5 Summary SWOT

1.1.6 Key risks and mitigation

The Executive Summary section of your Business Plan

Your background section should include a brief history of how your Trust has developed to where it is today. This provides essential context to your Business Plan. You should be able to do this without detailed guidance. The challenge is often to keep this section brief and succinct

set out what characteristics (clinical, financial, cultural or otherwise) define your Trust from others

give the reader a high level view of the underlying performance of your Trust

When you set out your vision you need to articulate your high level ambitions as a NHS Foundation Trust

so clearly articulate how your Trust is going to gain from the freedoms afforded to NHS Foundation Trusts (i.e. the compelling case for change)

Make sure your vision statement, supporting strategic goals, and your definition of successful performance against these goals are brief and easily understood by patients, staff, the local population and your other stakeholders. Also, make sure that your organisation is aware of the risks that it may face and understand how your organisation will minimise these to operate within such an environment

Potential structure for your Business Plan

1. Executive Summary

2. Profile

3. Strategy

4. Market assessment

5. Services

6. Finance

7. Risk

8. Leadership & Workforce

9. Governance

Note: This example storyboard is not an attempt to order each of the Business Plan self assessment indicators within the framework of a document. Please refer to appendix 2 for the self assessment check list

20

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

21

EXAMPLE STORYBOARD

ProfileStructuring your Business Plan

PROFILE

2 Example Profile of your NHS Trust

2.1.1 Overview

2.1.2 Range of Services

2.1.3 Activity

2.1.4 Protected Assets

2.1.5 Finance

2.1.6 Target performance

2.1.7 Summary of contractual relationships

2.1.8 Overview of other procurement arrangements

2.1.9 JVs and partnership arrangements The Profile section of your Business Plan

This section will cover the basic details of who the Trust is and the type of services it provides to the local population. It should inform the reader of how these services are provided and an overview of the key achievements – clinical, performance and financial in recent years

The range of services sections should include a table listing the services provided and an indication of the relative size to the Trust and a table listing the protected and non protected assets

This section will include details of any current significant contracts or details of shared service agreements

The any partnership arrangement or joint ventures (including section 31 contracts) also need to be outlined in terms of roles and responsibilities, key financial terms, duration and governance arrangements



2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

Note: This example storyboard is not an attempt to order each of the Business Plan assessment criteria within the framework of a document.. Please refer to appendix 2 for the self assessment check list

22

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

23

EXAMPLE STORYBOARD

StrategyStructuring your Business Plan

STRATEGY

3 Strategic goals

3.1.1 Trust Vision

3.1.2 Strategic goals

3.1.3 Rationale for FT status

3.1.4 Summary of outcome of consultation process

The Strategy section of your Business Plan

This section will cover the vision of the Trust

It should explain the reasons behind the FT application ie what FT status will mean in terms of delivering the strategy and vision of the trust by explaining how the freedoms given under FT status will be realised for the benefit of patients, the community, the staff and the organisation. This will also describe how the cultural environment will need to develop and change to operate as an independent body as well as describing how the new governance arrangements and membership will be exploited to further develop and enhance service provision.

The strategic goals will describe the rationale and timeline of each strategic objective, with clear understanding and indicators of how success will be measured, the major risks to achievement and high level mitigation strategies.

The consultation section should include details of the consultation process, including th timeline and provide further information on:

the outcome of the consultation process,

the type of information provided, response received to date and how this has influenced the final strategy

any stakeholder analysis performed and how stakeholder relations are currently managed.

Use of external advisors during the consultation section, if applicable

Stakeholder analysis – summary of representation i.e. special interest groups (can be provided as an appendix to document)



2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

Note: This example storyboard is not an attempt to order each of the Business Plan assessment criteria within the framework of a document. Please refer to appendix 2 for the self assessment check list.

24

Strategy An introduction to vision statements

VISION: “Where you want to be and how you will benefit from NHSFT status”

Early applicants have not found writing the ‘Trust Background’ sections of their submissions enormously challenging, however there has often been confusion around what a “vision statement” is. In short, setting out your strategic direction requires a clear understanding of:

where you are now (background)

where you want to be (your vision)

what you need to do to get there

Vision statements typically comprise a concise, high level, inspirational summary of where an organisation wants to be at the end of its planning horizon. A vision should be regarded as a unifying idea that is core to your organisation and links together each functional area

Vision statements are commonly geared towards meeting the needs of stakeholders - internal and external groups (e.g. patients, staff, commissioners etc) that have a vested interest in your organisation

Since vision statements are typically pitched at a very high level, they need to be underpinned by a number of more specific strategic objectives to be actionable and measurable within a timeframe. These objectives can be grouped thematically and mapped to broad categories of your stakeholders’ requirements (e.g. patient access, quality of clinical care etc)

In the context of applying for NHSFT status, it is important you include consideration of how you will take advantage of the additional freedoms and flexibility that comes with being an NHSFT. The onus is on you to show that being an NHSFT is an essential element of your future strategic direction. For example, your strategic goals should consider how you and your stakeholders will benefit from some of the following:

greater access to capital

the ability to enter into commercial partnerships

the ability to enter into joint ventures

greater staff, patient and community involvement

In turn, your strategic objectives should be assigned corresponding key performance indicators (KPIs) to enable you to measure progress. In this sense, KPIs are essentially a description of what ‘success’ or ‘achieving the plan’ might look like

This section of the Business Plan gives examples of vision statements from other NHS organisations, many of which are Foundation Trusts, and proposes a step process to help you develop your own unique vision statement and set of strategic objectives


“Fantastically beneficial, it was a huge piece of work, but invaluable in terms of clarifying our vision and strategic direction for the

next five years, which is why we are keeping it as a live

document. We realised the full potential of the document

as time went on.”

25

Strategy Examples of high level vision statements

Below are examples of vision statements that have been developed by earlier waves of NHS Foundation Trusts. Not surprisingly a common theme to most is the focus on quality of care for the benefit of patients being served. Importantly the statements also include specifics that set their organisations apart from others

Strategic goals will flow from these vision statements and through into directorate-level business plans throughout the respective organisations

Source: Cambridge University Hospitals NHS Foundation Trust

“As a new NHS Foundation Trust, Cambridge University Hospitals NHS Foundation Trust will be an academic clinical centre of international stature

contributing to the wealth and well-being of the communities we serve through the provision of

care; The generation of new knowledge; and the education of health care staff”

Source: Liverpool Women’s NHS Foundation Trust

Source: Royal National Hospital for Rheumatic Diseases

Source: Sheffield Teaching Hospitals NHS Foundation Trust

“Sheffield Teaching Hospitals will maintain its position as one of the premier performing NHS, Academic and Teaching Centres in the UK and

will do so as a partner organisation in the highly successful health systems in South

Yorkshire”

Source: UCLH NHS Foundation Trust

“UCLH is committed to delivering top quality patient care, excellent education and world class

research”

“It is the vision of all at the Liverpool Women’s Hospital to remain committed to developing and

providing the best possible healthcare for women, babies and their families in Liverpool. In the case of our Specialist Services this extends to Cheshire and

Merseyside, the North West of England, the Isle of Man and beyond”

“We want to provide patient centred services, where each patient has the best support for their care and rehabilitation regardless of specialty or

organisational boundaries.”

26

StrategyDefining your vision and setting strategic goals

To refine your Trust’s vision statement, try using this methodology The steps outlined below would work well in a strategic planning workshop

you may wish to hold an internal workshop for senior executive and clinical management first, and then test the findings of that workshop with wider stakeholder groups both internal to your organisation (i.e. staff, consultants) and external to your organisation (e.g. patients, local authorities etc) to build consensus

Your organisation may already have developed something that fits the description of a vision statement or set of strategic objectives, though this material is unlikely to incorporate specifics around how you plan to benefit from the greater freedoms afforded to NHS Foundation Trusts

to avoid reinventing the wheel, this will still form a useful start point for the planning workshops or discussions participants

In forming your vision, you will probably need to make decisions around which stakeholder requirements should take priority. This will be Trust specific, but should still be an objective exercise

As you run through the process illustrated, the vision statements and strategic objectives of other trusts may help you check that you haven’t missed anything; however do bear in mind that the best vision statements are unique and set organisations apart from each other

The next section provides a framework for developing strategic objectives

Brainstorm to clarify key stakeholder groups

Brainstorm to clarify what each stakeholder group requires/needs from you

Develop strategic objectives and define “successful performance” against each stakeholder requirement

DEVELOP FINAL VISION STATEMENT

Categorise stakeholder requirements(e.g. patient access, quality of clinical care etc)

Test how your existing vision maps to the categories of stakeholder requirements (anything missing?)


“We found the consultation process really useful. It has

certainly given our organisation a clear vision, which we could then share

with our local health economy.”

27

Strategy A template to structure your thoughts

The output of the exercise to refine your strategic objectives could be summarised in the following framework

The strategic objectives developed should, in turn, be devolved into operational objectives for individuals working within the organisation. This will make the link between the high level vision for the Trust, directorate plans and the day-to-day activities of employees

Note: (a) These elements of the vision statement are indicative only to give you an idea of how a vision night be framed. You will need to draft your own statements based on the process you have been through and the particular circumstances of your Trust

Our key stakeholdersCategories of stakeholder requirements Strategic objectives Success as measured against KPIs

Patients

PCTs

GPs

Staff

Local population

Local authority

Private sector partners

Key suppliers

SHA

Universities

Others

NHSFT membership

Good quality and accessible clinical care

We want to deliver the highest quality of accessible clinical care that is convenient for patients, and based on the needs of the local population

Achievement of Healthcare Commission standards that, on average, exceeds that of our competitors

Patient experience We want patients requesting to be treated at our Trust

The provider of choice in our locality for selected specialties

Staff experience at work We want an excellent, motivated workforce that puts the patient first and is proud to work here

Doubling of rate that new staff are sourced from existing staff contacts; halving of staff turnover rates; average length of employment increased from three years to four years

Buildings and equipment We want suitable facilities, high-tech equipment and a clean hospital environment

15% improvement in all efficiency ratios; better care pathways, lower backlog of equipment requisitions; top national decile for infection rates

Cost effectiveness We want modern, high quality systems, processes, protocols and care pathways that support the efficient and effective delivery of our services

ALOS shortened from 4.5 days to 3.5 days; integrated clinical systems, full EPR compliance, management ‘dashboard’ information easily produced; CIPs fully achieved

Closer ‘cross-boundary’ working We want to work alongside our local partners to shape the delivery of healthcare in our locality

Representatives from all Boards regularly present at monthly ‘patch-wide’ planning meetings

Involvement We want the people we serve to feel involved in the decisions that shape our future

Positive response to survey canvassing whether governors and members feel their views are suitably represented

28

StrategyExamples of strategic goals: the Metropolitan Police

‘Towards the Safest City’ is the Met Police’s three year strategic framework document. It is consistent with the National Policing Plan that sets out Government priorities to policing

The framework sets out five clear goals that form the basis for selection of the priorities and objectives that are published in annual plans. In addition, the framework helps to prioritise the allocation of resources – both people and capital expenditure

‘Towards the Safest City’ goes on to set out for each strategic goal how the Met Police will achieve it, examples of key initiatives to drive forward its aims, and how the organisation will know if it has succeeded

Source: “Towards the Safest City, The Strategy, Delivering Policing for Londoners”, Metropolitan Police Authority, 2003-2005

THE FIVE STRATEGIC GOALS FOR THE METROPOLITAN POLICE

DEVELOPING SAFER COMMUNITIES

“We will make London a safer place for those who live in, work in and visit the capital”

SECURING THE CAPITAL AGAINST TERRORISM

We will prevent and disrupt terrorist activity, providing residents, workers and visitors with the reassurance that London is safe

REVITALISING THE CRIMINAL JUSTICE SYSTEM

“We will lead the drive to make the criminal justice system trusted and respected by victims, witnesses and offenders”

DEVELOPING SAFER COMMUNITIES

“We will seek to enhance the total number of police officers available for deployment, maximising the visible operational uniformed police family. We will provide effective leadership, train and deploy our inclusive workforce to meet the challenges and priorities facing us, and manage both the growth in numbers and the specialist requirements for employees with different skills and backgrounds”

REFORMING THE DELIVERY OF POLICING SERVICES

“We will deliver a programme of change in the way we deliver policing to London that reflects the principles of public sector reform - identifying and implementing first those elements we consider to be of greatest value to Londoners”

Clearly, examples of vision statements and strategic objectives can be seen in other non-NHS organisations. Below is an example of how the Metropolitan Police Authority has set itself five high level strategic objectives within its three year strategic framework document

29

StrategyExamples of strategic goals: Central Cornwall PCT

Some good examples of vision statements and strategic goals can be seen in other NHS organisations. Central Cornwall Primary Care Trust has produced a five year strategic document and though the terminology is slightly different the principles are exactly the same

CENTRAL CORNWALL PRIMARY CARE TRUST

“Core purpose” (or ‘vision statement’) Strategic goals

“To maximise the health and well-being of the people within Central Cornwall by delivering and securing healthcare services and through partnership working”

Characteristics of an achievable model of health and social care in five years time would include:

Extended primary care teams remaining the essential building block of a more accessible primary care service

Enhanced use made of existing community hospitals, integrated with the development of diagnostic and treatment centres and closely linked to specialist hospital provision

Development of Primary Care Resource centres in areas not served by a community hospital

The Truro Health Park providing health and social care services to local residents and serving as a reference model for other urban centres in central Cornwall

Active prevention programmes and extensive use of new technologies

NHS Direct serving as the single gateway to health and social care and as a means of tele-monitoring in patients own homes

Extensive training programmes to enable local practitioners to fulfil new roles and address changing morbidities

Partnership agreements with patients collectively and individually to enable greater self care

Patient and public involvement “We will actively engage local people in the way services are planned and delivered”

Staff “We will develop and empower staff who are the prime movers in bringing about continuous improvement”

Leadership and management “We will clarify and sustain its vision of the future, encouraging others to follow by example”

Financial stewardship “We will achieve and maintain financial balance to earn space and resources to be innovative”

Health “We will reduce health inequalities and achieve a greater emphasis on ‘health’ and prevention as opposed to ‘health services’”

Communication “We will develop and communicate a shared vision of the future and maintain an inclusive approach to its attainment”

Partnership “We will forge collaborative relationships with the Statutory, Voluntary and Independent sectors”

Planning “We will build on existing practices to maintain discipline and rigour in the Trust’s planning processes”

Capital investment “We will harness the LIFT programme to improve and modernise the community and primary care estate”

Information management and technology

“We will develop capacity to meet national performance requirements and local customisation”

30

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

31

EXAMPLE STORYBOARD

Market AssessmentStructuring your Business Plan

MARKET ASSESSMENT

4 Market Assessment

4.1.1 Description of local health economy

4.1.2 Illustrative map of local health economy

4.1.3 Key factors driving demand (e.g.. demographics,

population trends)

4.1.4 Objectives of LHE

4.1.5 Contribution of applicants strategy to the LHE

4.1.6 Major changes in external environment/competition

4.1.7 Summary PEST analysis

4.1.8 Competitive factors i.e. Impact of patient choice, ISTC & other

4.1.9 How the trust will address these factors

4.1.10 Summary of how the trust performs against

competitors

The Market assessment section of your Business Plan

All Trusts must be ‘market facing’. This section of the Business Sourcebook illustrates how market issues and trends need to drive your decisions around the future services you will provide

Ensure that the narrative, supporting graphics, charts and tables that you include in the market assessment section of your Business Plan collectively demonstrate a thorough understanding of your marketplace and your position in that marketplace, borne out by quality research

your services should be aligned with changing demand and commissioning patterns. You will need to demonstrate that you have analysed, anticipated and responded to those patterns

Neighbouring healthcare providers may provide similar services. You need to demonstrate that you have analysed, anticipated and responded to developments in the ‘supply base’

Specific guidance around the PEST analysis tool follows. PEST stands for Political, Economic, Social and Technological factors that may impact on your Trust



2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance


32

Market AssessmentAnalysing the external environment

The PEST analysis

The PEST analysis tool is designed to help you demonstrate a thorough understanding of the external environment in which you operate and to articulate how future initiatives and service delivery plans are in line with issues, trends and developments at both the local and national level

You will need to brainstorm the external factors that may impact on your Trust, now and over the course of your projections

Set out the national issues, for example under system reform, affecting all trusts as well as particular factors that you will need to address locally

You may also wish to do this for select directorates, and then aggregate the results at Trust level

ILLUSTRATIVE EXAMPLE OF PEST ANALYSIS

Factor Impact on us Potential actions and initiatives

Patient Choice Despite ISTC programme, the following suggests we are unlikely to lose significant levels of work: low waiting times moderate elective care base

However, acute parking shortages and patient transport/accessibility issues may be an issue

Ensure activity plans are based on conservative estimates

Increase activity in more specialist areas

Invest in multi-story car park on existing site

Establish network of satellite outpatient clinics

National tariffs and PbR

Roll out is uncertain, however initial estimates suggest we could gain by anything between £2 million and £6 million per annum

Ensure financial model is sensitised accordingly and develop contingent plans for each outcome

Invest in coding systems to ensure activity can be reclaimed from commissioners

Financial deficit in local health economy

Financial pressures will restrict ability of commissioners to fund activity

Commissioners may be unwilling to commit to realistic activity plans at the start of the year

Combination of initiatives including: local reconfiguration of services shift to higher daycase rates

(65/35 by 2010) joint procurement initiatives shared support services (clinical

and back office) Need to manage risk of

overperformance

Clinical staff shortages

Tight clinical labour market may undermine our recruitment plans and force us to rely on agency staff

Combination of workforce initiatives better forward planning of resource

requirements (linked to activity plans)

marketing drive to target bottlenecks (i.e. cardiologists, radiotherapists, ITU nurses and midwives)

agency framework contracts and tight authorisation controls

PO

LIT

ICA

L (

and

reg

ula

tory

)E

CO

NO

MIC


“The Business Plan process was useful in that it forces

the Trust employees to look more externally and

understand the outside environment better.”

33

Factor Impact on us Potential actions and initiatives

Unmet local NHS demand for key specialist services

Many of the growth areas coincide with current specialties that could be expanded (i.e. cardiac surgery, cardiology, oncology)

Influence the reconfiguration of local service delivery

Increase capacity in these specialties through combination of measures (see below)

High birth and infant mortality rates

Opportunity to expand maternity unit and increase number of specialist neo-natal cots

Invest in the maternity unit

Population expansion over next 10 years following local regeneration programme

May lead to capacity overload if not controlled

Close joint planning with PCTs to ensure workload projections are robust and capacity can be increased in advance

Developments in surgery are reducing time in hospital

Potential to significantly increase the proportion of procedures performed in daycase setting

Revise protocols and pathways to increase daycase rate/inpatient rate to 65/35 by 2010

Greater use of remote consultations and home monitoring for patients

Further potential to move the delivery of care out of hospital and closer to patients’ homes

Transfer of appropriate services from outpatients to remote setting

Flex capacity plans for projected reduction in activity

Explore potential for partnership with technology supplier

SO

CIA

L (

and

dem

og

rap

hic

)T

EC

HN

OL

OG

ICA

L

Market AssessmentAnalysing the external environment (continued)

The PEST analysis (continued)

Don’t worry about what point goes in what box; just concentrate on capturing all the issues and thinking about what each factor means for you

in other words, run the “So What?” test against each point

The example has been included to help steer your thoughts and develop the rationale behind your plans. When populated whoever is responsible for writing your Business Plan document can use it as a guide

the completed template needs to be included as an integral part of Business Plan

ILLUSTRATIVE EXAMPLE OF PEST ANALYSIS (CONTINUED)

34

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

35

EXAMPLE STORYBOARD

ServicesStructuring your Business Plan

SERVICES

5 Service Development Plans

5.1.1 Internal capability assessment / SWOT analysis

5.1.2 Commentary on SWOT analysis

- Building on strengths

- Addressing weaknesses

- Exploiting opportunities

5.1.3 Summary of future initiatives

5.1.4 Summary of activity projections

5.1.5 Resource implication of activity plans



2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

Note: This example storyboard is not an attempt to order each of the Business Plan assessment criteria within the framework of a document.. Please refer to appendix 2 for the self assessment check list.

The ‘Service Development Plans’ section of your Business Plan

This section of your Business Plan should set out how your services will develop over the next five years, in response to

your stakeholder needs (incorporated within your vision)

your analysis of the external environment (your PEST analyses)

your internal capability assessment (your key strengths and weaknesses)

the opportunities and threats you have identified (the rest of your SWOT analyses)

The analysis recommended in this section of the Sourcebook has been geared towards helping you set out a clear rationale to underpin your service plans. This is the section of your Business Plan where you document that rationale

Against the main initiatives you choose to include you should also summarise at a high level the associated costs and benefits (i.e. that your initiatives are viable), the timescales, the key risks and mitigating actions and other operational implications

You should demonstrate that adequate consultation has taken place and your key stakeholders are engaged and on board

specifically demonstrate that your plans are compatible with your commissioners

It is critical that any assumptions you make in this section are explicitly stated and consistent with the numbers and narrative throughout the rest of your Business Plan

What follows is specific guidance around how to derive the most benefit out of the SWOT analysis tool, and how you might document key strategic initiatives in your Business Plan

No specific guidance has been included in this Business Plan around the production of detailed activity, capacity and workforce plans, which are deemed to be core skills within NHS trusts

36

Services An introduction to development plans

SERVICES: “How these will change”

The aim of your Business Plan is to link your activity forecasts and service plans to your financial projections and for those plans to be driven by a thorough understanding of your external environment and internal capabilities

This key section therefore concerns the need for you:

to demonstrate a thorough understanding of the external environment in which you operate (market assessment)

to perform a robust internal assessment and to articulate what the combination of both means for your future services (service development plans)

You should then be able to demonstrate clearly in your Business Plan that your service development plans:

are in line with issues, trends and developments at both the local and national level

ideally leverage relative strengths or address relative weaknesses, and that they are deliverable

The exercises and templates which follow have been designed as a process to help you achieve this. For example the SWOT template will force you to explicitly state what a particular strength means for your trust’s future direction. Similarly, the PEST template will force you to consider how a particular issue, such as peculiar local demographics, might impact on your Trust. This is often referred to as the “So What?” test. The challenge is to justify each major initiative that your are proposing with sound, evidence-based strategic rationale

It is good practice, regardless of industry or geography, to design your future strategy with these basic rules in mind. Follow them properly and you will be better placed to defend your Business Plan when it is challenged by stakeholders. Ignore them, and your Business Plan may lack coherence

Consider these exercises as an integral part of the process of developing your Business Plan and not a bolt on. Just because the detail may end up in an appendix does not mean you should treat the exercises as an afterthought. Indeed, many of the Business Plans in the early waves were criticised for including SWOT and PEST analyses that did not seem to link into longer term plans

Throughout this process you will need to liaise with your commissioners and SHA. They should ultimately support the activity projections you determine. This may be a difficult exercise, as acknowledged by earlier NHSFT applicants, but it will ultimately produce fruitful dialogue

It is also important that you provide evidence for the key assertions that you make, for example by referencing to performance benchmarking analysis or third party reports


“Getting a handle on capacity and activity in the Trust and projecting this

forward five years was the most difficult part of our

Business Plan. We had not had to do this before”

37

EXTRACT FROM SWOT ANALYSIS (CONTINUED)

Key Supporting evidence Impact (So what?)Potential initiative (how we will build on this)

Key strength

Low reference costs in several specialties (Cardiac, Cardiology, Oncology, Neo-natal)

Published annual DH statistic Opportunity to leverage competitive advantage and increase volumes in more specialist areas

Initiatives to increase volumes in these specialties in future Local service reconfiguration Satellite outpatient clinics Marketing initiatives Investment required to increase

capacity

Shorter inpatient lengths of stay in target specialties

Benchmarked against national peer group

Good clinical outcomes in target specialties

Healthcare Commission ratings

Dedicated team of staff with strong clinical/financial/executive ties

Low vacancy rates Low sickness rates Low staff turnover

Staff are bought into ‘corporate objectives’ and open to new ways of working

Redesign patient care pathways to: facilitate move to higher daycase

rates free capacity address bottlenecks roll out satellite outpatient clinics

Key weakness

Land-locked sites and capacity constraints in following areas: ITU beds outpatient clinic diagnostics radiotherapy (linacs) in patient beds other other

Existing capacity and activity plans

Bed audits Recent consulting report

Critical growth blockage given we are not constrained by demand, and funds should be available

Principal driver of patient complaints

Detrimental to staff job satisfaction

Constraints addressed through combination of: transfer of appropriate services to

community setting through local LIFT initiative

shift to higher daycase rates internal redevelopment of existing

facilities investment in diagnostics

capacity network of satellite outpatient

clinics

Poor MIT systems in need of investment

Longstanding difficulties in securing desired management and operating information

Poor activity coding may undermine ability to secure reimbursement

Systems will not support future processes

Frustrating for staff

Joint procurement of new MIT system with neighbouring acute Trust

Outsourcing of IT implementation and support

Patient transport/ accessibility issues

Patient complaints Potential to impact volumes under patient choice

Network of satellite outpatient clinics

Severe staff and patient parking problem

Staff, patient, and local resident complaints

Invest in multi-story car park on existing site

ServicesAnalysing internal strengths and weaknesses

Internal strengths and weaknesses Brainstorming your trust’s relative strengths and

weaknesses is the first step in performing a SWOT analysis. But as with the PEST analysis, going that extra step and asking what each finding means for your Trust (i.e. the “So What?” test) is where this exercise will deliver benefits to your Business Plan

Performing a robust assessment of your internal capabilities will help you demonstrate how your future plans might leverage key strengths or address key weaknesses

In a competitive environment it is more informative to think of strengths and weaknesses in relation to other providers. This is where any benchmarking evidence you can collect from the public domain is best put to use

Try to support each point with evidence. This will not always be possible, however in general you will be better placed to defend your strategy if you have a sound base of evidence to support the conclusions upon which it is based

The example has been included to help steer your thoughts. When populated whoever is responsible for writing your Business Plan document can use it as a guide the completed template needs to be an integral

part of your Business Plan


“Thinking about the next step, “the so-what”, was a major

breakthrough in the organisation. The local business school

facilitated some sessions back in the hospital involving a wide tranche of employees. This

produced a very rich SWOT and got a critical mass of key people

involved in the application process.”

38

ServicesIdentifying key opportunities and threats

Opportunities and Threats

Once you have analysed the external environment and considered your key internal strengths and weaknesses, you will be in a position to develop a list of opportunities and threats and complete your SWOT

In many cases you will be able to validate each point by making reference to strengths, weaknesses or external factors you will have highlighted previously

In this template the “So What?” challenge is to align existing and future initiatives to opportunities and threats

ask yourself, “How can we exploit this opportunity?” or, “How should we manage this threat?”

Then summarise the high level benefits case of each initiative

when you are writing your document it will be informative to summarise the high level benefits case against each key initiative you describe

this would be a brief summary of the associated financial and non-financial costs and benefits

at this stage they may not yet be quantified, however you should still be in a position to point towards the source of those costs and benefits

KeyValidation (link to environmental factors, strengths or weaknesses)

Potential initiative (hove we can exploit this) Likely net benefits

Opportunity

Increase activity in more specialist areas (i.e. cardiac, cardiology, oncology, neo-natal services)

Growing unmet demand in NHS Strong track record in these

specialties

Influence the reconfiguration of local service delivery

Joint venture with private operator to establish a network of satellite outpatient clinics

Enhanced financial prospects (growth and profitability)

Better work experience for our staff

Virtuous circle; as reputation grows, easier to attract and retain staff

Potential to share clinical and back office support services with neighbouring acute NHS Trust

Existing facilities underutilised in both sites

Financial deficit in wider local health economy

Rationalise pharmacy and pathology facilities and staff to address duplication

Reduced clinical and back office support costs across the patch

A good vehicle to promote closer working in other areas

Save costs and release capacity by moving more activity to a daycase setting

National trend and one of the 10 high impact changes

Opportunity given current specialties

Would address capacity constraints and leverage flexible staff attitudes

Increase capacity of daycase unit, redesign pathways and move daycase rates to 65/35 by 2010

Lower cost of procedures Enhanced patient experience as

patients spend less time in hospital

Threat

Commitment to delivering Electronic Patient Records

Part of national agenda, made more complicated by weakness of existing systems

Joint procurement of new MIT system with neighbouring acute Trust

Outsourcing of IT implementation and support

Costs of substantial MIT implementation project minimised

Loss of volumes in new environment of patient choice

A failure to address our parking and patient access problems offsets our strong track record in waiting times and clinical outcomes, particularly in specialties where we have less of a competitive advantage

Ensure financial model is based on conservative estimates

Focus on development of more specialist work

Address parking problem Satellite clinics Performance improvement plans

for weaker directorates

Strengthen competitive advantage

Widen catchment area Reduce exposure to risk in

activity projections

Higher national decontamination standards

Existing facilities will not remain compliant without investment in the next 12 months

Outsource CSSD services and procure jointly with neighbouring acute Trust

Avoid high costs of investment Able to secure a better deal

EXTRACT FROM SWOT ANALYSIS (CONTINUED)


“SWOT is a robust analysis, you can’t go wrong with

that.”

39

ServicesSWOT: an alternative approach

Evaluating the effectiveness of internal directorates

You will probably have a shortlist of clinical specialties/directorates that you intend to develop over the next five years

A series of directorate-level assessments may enable you to consider market issues, your competitive position, strengths and weakness, operational issues and future opportunities at a more useful level

You could simply use the PEST and SWOT templates already provided. Alternatively you might like to try this framework and see if it is useful

it is essentially a series of questions that could be used to prompt discussion and help draw out the issues and initiatives to be included in your Business Plan

Competitive position

Who are our competitors?

What is the basis of competition?

How do we perform versus other healthcare providers?

How do our costs compare with tariff, and against our ‘competitors’?

Strengths and weaknesses

What are the internal strengths and weaknesses of the directorate?

How do they help or constrain its performance

What are we doing to exploit/change these?

Operational effectiveness

What are our major opportunities to improve operational effectiveness

What risks must we mitigate/manage?

Opportunities and strategy

Which services, patient segments, and markets offer the greatest opportunities?

What is the strategy to most profitably serve those patients and markets?

DIRECTORATE ASSESSMENT TOPICS

40

Your Activity plans should be supported by a shortlist of planned and ongoing initiatives

ServicesShort listing and documenting key initiatives in your Business Plan

Documenting key initiatives in your Business Plan

Following the results of your SWOT and PEST analyses, and in consultation with your commissioners you will need to agree your activity plans for the next five years, achieving consensus wherever possible

Your Business Plan should then set out a shortlist of the key initiatives that, taken together, will enable you to deliver this activity

do not include every initiative in your Business Plan, only those that have the most impact

determining which to leave out (so that your document remains of a manageable size) will be a subjective exercise

if you have PFI plans in the pipeline, do integrate these into your Business Plan as this gives the reader a greater understanding of your Trust’s profile and intentions

Some of these initiatives will already be underway and be supported by detailed business plans

do not include every detail of those plans

but do make sure that the headlines you do include are consistent and that the links to those plans are explicit

this way, the individuals responsible for delivering detailed plans can see where their actions fit within the wider strategic context of your Trust

MIT system (joint

procurement)

Satellite outpatient

clinics(Joint Venture)

Rationalisation of clinical

support services

New diagnostic unit

New car park

Remote patient monitoring

(Partnership with technology provider)

Joint working groups

(demand and capacity

management)

New cardiac floor

Revision of protocols and care pathways

Reconfiguration of local services

Workforce initiatives

Development of neo-natal unit

Transfer of services to community

settings

ACTIVITY PLAN

41

ServicesShort listing and documenting key initiatives in your Business Plan (continued)

Documenting key initiatives in your Business Plan

You should document key initiatives in such as way that you demonstrate you have analysed your market and your organisation, and that you know what factors (external and internal) will impact on your business over the next five years

By supporting your key initiatives with sound rationale, you will make your Business Plan appear far more ‘joined up’

As a guide, in addition to being aligned to your strategic objectives your initiatives should either:

build on proven strengths

address perceived weaknesses

exploit opportunities that have been validated

manage threats

This has been described as the ‘driver’ behind the initiative

You might also summarise

the high level benefits case as described above, but fleshed out to include specific associated costs and benefits

an indication of the timescales involved

the key risks associated with each initiative and how you propose to manage them

the high level operational, HR, governance and financial highlights from the more detailed plans

explicit links to those more detailed plans

This example takes one of the initiatives identified in the earlier illustrations and sets out a flavour of the key points that could be incorporated in your Business Plan

Ensure your narrative around the strategic initiatives you choose to include is consistent with your financial projections and activity, capacity and resource plans

The next step is to set out the financial projections that will test the validity and viability of future service provision

EXAMPLE INITIATIVE: RECONFIGURATION OF LOCAL SERVICE DELIVERY

Suggested content Example points to incorporate

The ‘driver’ (the link to environmental factors, strengths or weaknesses)

Central theme of LDP is the need to address duplication across local providers Studies have identified a shortfall in NHS supply of specialist oncology, cardiac

surgery, cardiology, and neo-natal services in region The Trust has strong track record in these specialties Proposed reconfiguration involves focusing above services on our site and

moving neurosurgery to neighbouring acute Trust Broad agreement reached with local stakeholders in principle

The high level benefits case

Preliminary business case approved by SHA Proposed savings of £20 million per annum across the patch in staff and

facilities costs Extra 23,000 daycase spells, 20,000 inpatient spells performed on-site by 2010 Enhanced specialist reputation

Timescales Construction and refurbishment commences early 2006 Relocation scheduled for early 2007 Fully operational by 2008

Key risks and how they will be managed

Public resistance: Communications managed centrally to control local authority and press reaction

Planning risk: Joint working groups established involving senior clinical teams Capacity: contingent on receipt of funds from SHA and NHSFF to develop

facilities and improve parking

High level operational, HR, governance and financial implications

300 additional staff on site 2 new operating theatres, 2 new cath labs, 2 new linacs, 10 new high

dependency cots, 10 ITU beds Outpatient clinics require expansion (see satellite clinic initiative) Pharmacy and pathology capacity increased, but pathology to be moved off-

site

Link to more detailed plans

Reconfiguration of local service delivery – May 2005 Clinical support rationalisation - July 2005

42

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

43

Finance Structuring your Business Plan

The “Financial Evaluation” section of your Business Plan The main purpose of financial evaluation is to establish and measure the viability of your

service development plan and the cash resources you will need to survive over the next five years

Your activity assumptions, capacity plans, staffing and resource requirements, and financial projections should all hang together. Performance will also need to be underpinned by a clear capital programme

Five year balance sheets and cash flow projections will demonstrate that your Trust will remain financially viable over the period

You will have made many assumptions along the way. It is critical that you realise where you have made assumptions, that you document them clearly, and that you ensure the projections and associated commentary are consistent

This section focuses on providing guidance to address areas where both Monitor and the NHS Financing Facility commented that standards were lacking in the Business Plan documents that they reviewed consequently the following slides focus on methods to support the clear

communication of complicated financial information and on high level advice to underpin the construction of your financial models

EXAMPLE STORYBOARD

6 FINANCIAL EVALUATION

6 Financial plans

6.1.1 Historical performance analysis

6.1.2 Income and expenditure 5 year projections (to reflect Service

Development Plans)

6.1.3 Cash flow 5 year projections, with commentary on key assumptions

6.1.4 Balance Sheet 5 year projections

6.1.5 PFI analysis (if applicable)




2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

44

Finance An introduction to the finance section

FINANCE: “How the money stacks up”

Your Business Plan document needs to be underpinned by an integrated financial model that incorporates detailed income and expenditure, balance sheet and cash flow projections. This model should dovetail neatly and explicitly with your activity, capacity and resource plans

Feedback from early waves suggests that this is usually the most challenging aspect of the application and that applicants would have appreciated earlier warning of the levels of rigour demanded by Monitor. In turn, Monitor has commented that levels of modelling rigour need to improve within applicants. In particular:

inconsistencies have often existed between different elements of the same application, leading to financial and operating projections that ‘don’t make sense’

many applicants have struggled to deal with the uncertainty surrounding what ‘inputs’ to use or assumptions to make

the underlying financial position (ignoring one-off and non-recurring items) has not always been transparent

the drivers of enhanced financial performance over the period of the projections are often unclear

too often, applicants failed to clearly link historic financial and operating performance to projected performance in their documents

Early NHS Foundation Trusts have commented that finance team resources are often the most stretched by the application process, particularly as applications progress and Monitor becomes involved. An honest and early assessment of the capabilities of your finance team is recommended


“The financial modelling and re-modelling were the most difficult part of producing our Business Plan. We spent hundreds of

hours on this.”


“The most difficult part of the Business Plan process was

balancing the different models. Such an enormous amount of

numbers go in. You can’t underestimate the number crunching needed to get

assurance that the plans were robust.”


“The financial modelling was technically complex. Our

finance team had no modelling experience. We had

management accountants and financial accountants but no-

one in the middle that could link operating and financial info and build a model that produced the outputs Monitor was requiring.”

45

FinanceLinking historical to projected financial performance

Underlying financial performance

Financial year

£millionsActual

2002/03Actual

2003/04Actual

2004/05

Surplus reported in annual accounts - - 0.2

Less: One-off, non-recurring items

VAT reclaim 0.4

Capital to revenue transfer - 0.4

Sale of land and buildings 1.1 0.8

Adjustment to accounting policies 0.5

Support package 0.5

Underlying deficit (1.5) (0.4) (1.6)

Ensure your Business Plan document clearly sets out your underlying financial track record, without any one-off or non-recurring items

Both DH and Monitor will want to see the ‘financial starting point’ for the development of your plans and associated projections as a NHS Foundation Trust

Experience of the early waves of applicants has shown that it is frequently difficult to establish this baseline position, particularly if historic financial performance has been distorted by one-off items such as capital to revenue transfers or asset disposals that are not separately analysed

Without a clear picture of underlying financial performance it will be difficult to clearly articulate the benefits of becoming a NHS Foundation Trust

Monitor Feedback“It would be helpful to get a

clearer understanding of what the underlying financial position is, after exceptional and one-off items have been stripped out. It is not always

easy to see this"

Feedback from the NHS Financing Facility

“A key area for us is getting under the skin of the

numbers. I’d like to see more clarity around

underlying performance (e.g. by stripping out the effect of non-recurring items). This is an area I have spent a lot of

time getting to grips with"

46

TRACK RECORD PROJECTIONS

Income and Expenditure surplus/(deficit)

(2.0)

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

£m

Underlying surplus/(deficit) Baseline projectionsAspiring NHS FT projections

FinanceLinking historical financial performance to projected performance (continued)

'Baseline' projections You need to set out what you feel would be achievable if you were to remain an NHS

Trust Establishing a robust baseline will enable you to articulate what becoming an NHS

Foundation Trust will mean for you Your 'vision' is likely to remain the same under each scenario

As an NHS Foundation Trust Your enhanced projections will illustrate the financial effect of what you will do differently

as an NHS Foundation Trust These projections will include any additional costs of your becoming a NHS Foundation

Trust (e.g. the cost of changes to internal systems and processes), in addition to any financial benefits

Compare your financial track record to projections as if you were to gain NHS Foundation Trust status but also as if you were to remain an NHS Trust

However this does not mean that you need to produce two sets of projections in your Business Plan document

The rationale behind this exercise is to enable you to articulate the financial benefit to your becoming an NHS Foundation Trust, in addition to less tangible benefits in other areas. You will need to supplement this with clear messages around what you will be doing differently in the future to deliver this enhanced performance

Overview of financial performance

47

FinanceLinking historical financial performance to projected performance (continued)

Linking operational and financial metrics will help illustrate that your strategy is deliverable

The same guidance applies to operating information. Tie historic operating performance and projected operating performance together in the same place

Additionally, if you set out how financial performance will develop alongside the key ‘drivers’ of that performance (e.g. average lengths of patient stay or staff ratios) your document will appear more ‘joined up’ and you will have greater comfort that your strategy is ‘do-able’

Feedback from the NHS

Financing Facility“There tends to be not

enough around the historic numbers. I would want to see

trends over the past three years and, as

importantly, a clearer link between historics

and projections”

48

FinanceThe use of performance ‘bridges’

The use of ‘bridges’ or ‘waterfall charts’, whether they are in graphical or tabular form, are a useful method of communicating changes in a key area over the course of your projections. When supplemented by narrative they communicate clearly to the users of your Business Plan document how you plan to get from “a” to “b”

This technique usually supplements the more classic presentation of Income and Expenditure accounts. We have set out above an example of how a potential NHS Foundation Trust might illustrate how it expects to generate an additional £27million of income in two years

If you take this approach, be sure to include the source of the data used in your illustrations

Monitor Feedback“Assumptions around the

base case are often unclear, as are the ‘sources’ of growth or increased

profitability through the period of the projections.

We are left asking, “Where is this enhanced performance

coming from?”

49

FinanceThe use of performance ‘bridges’ (continued)

The same approach can be used to illustrate cost pressures over the period

You may also wish to use a performance bridge to set out

how your results might differ between your ‘basecase’ projections (as a NHS Trust) and your ‘NHSFT’ projections

how profitability is projected to improve between the latest actual results and year five

50

FinanceFinancial modelling

The importance of sound activity plans

The diagram on the next page illustrates the approach to producing an integrated financial model (on the right) from the various low level assumptions (e.g. number of spells per period and tariffs, by HRG) on the left

Note how critical the activity assumptions are to the whole process. Activity plans drive your capacity plan (e.g. beds, facilities etc) and resource plan (e.g. headcount) which in turn determine the cost base of your organisation. Under PbR, activity is clearly also the prime driver of revenue, with productivity and innovation providing the scope to improve margins

Ensure your activity plans have been informed by the strategic direction that is set out in your Business Plan. The sooner you start the consultation process with commissioners, the sooner differences can be resolved and the sooner your Board can sign off the long term activity plan

Once this has happened the financial planning process can move forwards with far greater certainty. Without it, constantly changing activity projections will frustrate the financial planning team and complicate the process


“You need to be clear about the gritty issues that need to be tackled early. Drawing a

line underneath activity plans and getting them signed off

by the Board enables everything to move on"


“We had PCTs telling us they had not looked at what we had sent because it was too complicated…With the

benefit of hindsight we would engage with the PCTs much

earlier and probably be clearer as to what was going on in year one and be less specific as you got up to

year five."

51

FinanceFinancial modelling: a high level overview of the process

Activity planning

Cost of consumables

Revenue

Board view of Activity for the next

five years

Average historic consumption of drugs and other clinical supplies

Number of spells, by HRG, performed

each period

Historic activity trends in healthcare

community

New market factors (e.g. patients choice,

ISTCs)

Five year I&E, Balance Sheet and Cash Flow

Statements

Salaries

'Prices'

PCT contract configuration

National tariffs and PbR

Market Forces Factor

Existing capacity (beds, staff, average

ratios per patient)

Productivity, capacity and

resource plans

Staff numbers (by type/grade)

Buildings, wards, beds, equipment

People costs Fixed costs

Variable costs

Capex and funding plans

Consultation with commissioners

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52

Design your model to enable sensitivity analysis to reflect the potential impact on results of the most important risks identified in your Business Plan paper

If your model is built from the bottom up, and is driven by assumptions around the main business drivers (e.g. activity levels, staff numbers, salary levels, PbR roll out and tariffs, inflation etc) then it should be relatively easy to assess your exposure to the different risks you have identified

− for example, if revenues and consumables costs are properly based on expected activity levels then it should be possible to model the impact of a decrease in activity levels (under patient choice) on margins

− another example: if you have modelled cost inflation (drugs, other consumables, salaries) separately to projected uplifts in the national tariff, then it will be possible to demonstrate the impact on margin if the tariff is not updated

If you ‘lump’ your assumptions together (for example, by failing to model costs to an appropriate level of detail), it may undermine your ability to measure the financial impact of some key risks that you have identified

FinanceFinancial modelling: high level guidance

Coordinate the activity, capacity, resource and financial plans from one place

The financial projections are not an exercise for the Finance Department alone. They must inform, and be informed by, the issues being considered in the Business Plan paper otherwise your document will appear disjointed

Clearly articulate your assumptions and supporting rationale

The modelling diagram sets out many of the areas in which you will need to make working assumptions. Have a process for documenting these assumptions centrally, and for sharing them between your team

Furthermore, set out the rationale that supports your assumptions. As circumstances change and you update your assumptions, update your rationale too

High level guidance when modelling for your NHS Foundation Trust application


"Bring activity, capacity, costs and income all under one roof. This is difficult to

do but worth it"

Feedback from the NHS Financing Facility“You often get the

impression that HR has written a bit, and Finance

has written another bit. This approach can produce some

funny results"

Monitor Feedback“Applicants have to contend

with changing external factors (e.g. PbR roll out). I

would like to see more of them making some

assumptions, running a few different scenarios and

moving on”

53

FinanceFinancial modelling: high level guidance (continued) – this section is still under development

Sense checking the outputs of your financial model

If the process of pulling together your Business Plan is truly integrated, then market, operational, clinical and financial metrics will all be aligned

In its review of your Business Plan document and financial model, Monitor will use ratio analyses (amongst other methods) to establish whether the outputs of your model make sense

In the next draft of this Business Plan, Monitor will supply examples of the indicators that it uses when performing these tests. These examples will provide suggestions to future applicants as to how they might go about testing the outputs of their own models in advance of the Monitor phase of assessment

Monitor Feedback“They need to do more ratio analyses internally in order to sense check the outputs of their models. We have KPIs that we use to do this (e.g. around capacity, bed

numbers, length of stay etc). They need to be thinking like this before they get to

us"

Key Assumptions – Activity & Inflation Operational KPIs Cost KPIs excluding service development

Activity Elective Non-elective Outpatients A&E Other

Activity Growth Elective Non-elective Outpatient A&E other

Inflation-Base Case Tariff inflation Non-tariff inflation Non NHS clinical income inflation Education & Training Research & Development Other income Pay cost Drug cost Clinical Supplies & services Other Costs Unitary Charge Capex

Average length of stay (Elective)Average length of stay (exc Day Cases)Average length of stay (Non-Elective)Bed occupancyTheatre UtilisationDay case percentage (day cases/spells)New to follow up outpatient ratioNumber of consultant PA session per weekNumber of bedsLocal population

Non AgencyConsultant CostsJunior medical costsNursing, midwifery, health visitors costsDental costsScientific, therapeutic, technical costsOther clinical staff castsTotal

Agency - as aboveAverage number of staff – non agency (wte)

As aboveAverage number of staff – non agency (growth%) - as aboveAverage Salary – as aboveAgency cost proportion – as aboveTotal income/number of non agency staff – as aboveOther

Total pay costTotal agency cost as %of total pay cost

Staff cast per bed – as aboveNational Cost pressure

Consultant contractsEWTDAgenda for changePension SuperannuationOther national cost pressure

54

FinanceFinancial modelling: high level guidance (continued) – this section is still under development

Sense checking the outputs of your financial model

Monitor Feedback“They need to do more ratio analyses internally in order to sense check the outputs of their models. We have KPIs that we use to do this (e.g. around capacity, bed

numbers, length of stay etc). They need to be thinking like this before they get to

us"

Other KPIs High Level Marginal Cost Analysis for additional activity

Cost KPIs excluding service development

Clinical Income KPIs

High level efficiency levels Pay costs per spell Drug costs per spell Clinical supplies and

service costs per spell Other costs per spells Total costs per spell

Income growth (REAL) NHS clinical income Education & Training Research & development Other income Total income

Costs growth (REAL) Pay costs per spell Drug costs per spell Clinical supplies and

service costs per spell Other costs per spells Total costs per spell

Capex Maintaining Capex/dern

change Activity per (100) population

Elective Non-elective Outpatient A&E Other

High level Marginal Cost Analysis Income growth from additional Staff cost growthDrug cost growth from additional activityClinical supplies and service growth from additional activityOther costsImplied high level marginal cost

National Cost pressure – (cont.)Consultant Costs/consultant costs (non agency)A4C/total pay exc medical & AgencyEWTD/Jr Meds cost (non agency)Pension superannuation/total pay costsOther national cost pressure/total pay cost

Drug CostsDrug costsActivity growthDevelopmentNICE guidanceOther – (please specify)

Clinical supplies costsClinical supplies costsActivity growthOther – (please specify)Other – (please specify)

Clinical Income per bed

NB: for more detail please refer to O_KPI in the Monitor’s Integrated Financial Model

55

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

56

RiskStructuring your Business Plan

The “Risk” section of your Business Plan You will have made many assumptions along the way and identified key risks inherent

to your strategy. It is critical that you realise where you have made assumptions, that you document them clearly, and that you understand the potential for those assumptions to be ‘inaccurate’

Scenario analysis is the way to flex those assumptions and assess the resulting financial impact on your Trust. Ensure the scenarios you run are linked to the key risks that you have identified

Your scenarios could include a growth (best) case, a base (most likely) case, and a sensitised (downside) case. These will be ‘combined’ sensitivities that model the impact of several risks at once you may also wish to model the effect of individual risks to illustrate how sensitive

your model is to different inputs Where these sensitivities push your projections close to key thresholds, such as

borrowing limits, set out your contingency arrangements Doing this will enable you to demonstrate that you are in control of the key risks inherent

in your strategy

EXAMPLE STORYBOARD

7 RISK

7.1.1 Summary of key business risks

- strategic,

- operational,

- finance,

- IT,

- HR

7.1.2 Commentary on mitigation

7.1.3 Sensitivity analysis

Note: This example storyboard is not an attempt to order each of the Business Plan assessment criteria within the framework of a document. Please refer to appendix 2 for self assessment check list.



2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

57

RiskAn introduction to risk

RISK: “What could go wrong and how you will mitigate against this”

Throughout the development of your strategy and activity plans, you will have considered the key risks at each stage, and whether or not you can manage these risks

Best practice business planning involves a continuing assessment of the key risks that impact your organisation, and the development of ‘risk treatment’ plans to manage these risks

This section reaffirms the purpose of Corporate Risk Registers to help manage this process on an ongoing basis

The running of different sensitivities through your financial model, each of which should be aligned to the key risks that you have identified, is called “scenario analysis” or “stress testing”

The intention is to assess how sensitive your projected results are to changing circumstances, but also to establish where your ‘base case’ model sits in relation to the range of possible outcomes

The exercise is also designed to illustrate where “pinch points” might arise; in other words where key financial thresholds, such as borrowing limits, might be at risk of breach. In such circumstances you should set out contingency arrangements or corrective actions that you could take

To date, applicants have often successfully discussed key risks and how they will mitigate against them, however many have failed to go to the next step and estimate the potential financial impact of those risks

This last step is essential if you are to demonstrate to DH and Monitor that you are in control of the key risks inherent in your strategy


“With the benefit of hindsight we would be a lot harder on ourselves around financial

modelling. We would do the sort of sensitivity tests that

Monitor do and perform robust sensitivity analysis as

early as possible."


“The degree of forecasting and risk analysis was a

different way of looking at things than we had been

used to. We were not used to looking at the risks and downsides coldly and then

laying them out."

Feedback from early waves“

I would suggest running the modelling differently. I would

start the other way up and do all the risk analysis first and then the modelling to

meet the risks and then sort the text afterwards."

58

RiskThe corporate risk register

Demonstrating that you are in control of the key risks inherent in your strategy

Identify the key risks to the execution of your strategy

Both DH and Monitor will need to see that you have identified the key risks associated with your strategy

Each of the initiatives that you will have set out in your document will have associated project risks. In addition, your SWOT and PEST analyses may have thrown up additional risks that will need to be managed

Your Board will already maintain a corporate risk register. Your Business Plan project manager should ensure that the key risks associated with the achievement of your strategic objectives are reflected on that register

Clarify how ‘risk treatment plans’ will mitigate these key risks and understand the ‘residual risk’ that remains

Both DH and Monitor will need to see that you have identified plans to mitigate against the effect of key risks. These ‘risk treatment plans’ should also be documented on the corporate risk register

An example of a corporate risk register, that quantifies and prioritises key risks, sets out treatment plans and illustrates the extent to which ‘residual risk’ remains is illustrated on the next page

Also included are guidelines to help you assess both the potential impact of each risk on your Trust, and score the likelihood of the risk occurring. The product of the two (the likely impact on your Trust) enables risks to be prioritised. For example, an ‘extreme risk’ would require immediate action, whereas a ‘low risk’ might be managed by routine procedures

STEP1


STEP 2


STEP 5

Where your sensitised case approaches key thresholds, clearly set out your contingency arrangements

STEP 3

Develop a realistic set of scenarios to model the effect of those risks that have the greatest financial impact

STEP 4

Present a set of financial outcomes for growth, base, and sensitised cases and compare to key financial thresholds

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RiskThe corporate risk register (continued)

Illustrative example of a corporate risk register

Number

Summary description of risk (associated with strategy) Directorate

Likelihood(1 to 5)

Impact(1 to 5)

Risk score

( P x S )

Likely impact to

Trust Summary of ‘risk treatment’ plan

Who is responsible for implementing

plan?

Source of review(e.g. internal audit)

Date of re-evaluation

Residual risk rating (after treatment)

Trust Board acceptance of

rating

1 Unable to achieve the shift of confidence in the consultants to persuade them to shift to day surgery setting

Surgical 4 5 20 Extreme Workshop programme over June/July to understand resistance and design comms strategy

Medical Director MonthlyBoardmeetings

30 Sep High Accepted

2 Proposed reconfiguration of services may be delayed by press/public/staff resistance

Cardio,OncologyWomen & Children

3 5 15 Extreme Stakeholder communications strategy developed with local partners

Director of Corporate

Development

Bi-weekly report to planning committee

31 Aug Moderate Accepted

3 Case mix may prove unusual and unsuitable for day case work

Cardio,OncologyWomen & Children

2 4 8 High Joint working group established to review current and projected activity(preliminary findings favourable)

Medical Director Report due for June board meeting

4 Jun Low Accepted

STEP1

STEP 2

STEP 5

STEP 3

STEP 4

60

LIKELIHOOD OF RISK CYSTALLISING

Level Detail description examples

1 Rare – may occur only in exceptional circumstances

2 Unlikely – could occur at some time

3 Possible – might occur at some time

4 Likely – will probably occur in most circumstances

5 Almost certain – is expected to occur in most circumstances

RiskThe corporate risk register (continued)

IMPACT ON THE TRUST

Level Detail description examples

1 Negligible – no obvious harm/superficial injuries; no service disruption; low financial loss (less than £1000)

2 Low – first aid treatment; absent for work 1-3 days; minimal harm to patient; increased level of care 1-7 days; adverse publicity unlikely; financial loss less than £10,000

3 Moderate – medical intervention required; absent from work 4-14 days; increased level of care 8-15 days; local adverse publicity possible; financial loss £10,000 - £50,000

4 Severe – major injuries/major surgery/multiple minor surgeries/RIDDOR reportable; absent from work over 15 days; increased level of care over 15 days; national adverse publicity; temporary service closure; financial loss £50,000 - £250,000

5 Extreme – death; significant multiple injuries; permanent illness or disability; extended service closure; protracted national adverse publicity; financial loss over £250,000

Note: A number (1-5) indicating the impact of the risk occurring :

Note: A number (1-5) indicating the likelihood of the risk occurring

Impact

1 2 3 4 5

Likelihood 1 L L M H H

2 L L M H E

3 L M H E E

4 M M H E E

5 M H E E E

Key: Extreme risk – immediate action required

High risk – senior management attention needed

Moderate risk – management responsibility must be specified

Low risk – manage by routine procedures

Source: Appendix E (pp. 34-Standards) Australia. 1999. Risk Management AS/NZS 4360:1999. Standards Association of Australia. Stratified NSW

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H

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STEP1

STEP 2

STEP 5

STEP 3

STEP 4

61

STEP1


STEP 2


STEP 5


STEP 3

Develop a realistic set of scenarios to model the effect of those risks that have the greatest financial impact

STEP 4

Present a set of financial outcomes for growth, base, and sensitised cases and compare to key financial thresholds

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RiskScenario analyses

Demonstrating that you are in control of the key risks inherent in your strategy: Developing a realistic set of scenarios to model the effect of those risks that have the greatest financial impact

In building your financial model, you will have made a host of assumptions in many areas, for example:

Volumes (e.g. inpatient, daycase, outpatient etc)

Capacity (e.g. bed days available, theatre sessions available etc)

Efficiency/productivity (e.g staff/patient ratios, machine throughput etc)

Tariffs

Unit costs (e.g. salaries by staff type, drugs costs, consumables costs)

Inflation (e.g. tariff uplifts, wage inflation, drug costs inflation etc)

Balance sheet (e.g. accounting policies, creditors days, debtors days etc)

Obviously, you will be more confident about your assumptions in some areas than you are in others. This is the purpose of scenario analysis; to reflect the fact that the future is uncertain, that each assumption is no more than an informed opinion within a range of possible outcomes, and that the ‘range’ will be wider for some assumptions than others

For each assumption, log the best, worst and most likely outcomes. To do this you should formally consider how the residual risks identified in your service strategy and logged in your corporate risk register (i.e. the uncertainty that will remain after any mitigating actions that you are planning) might effect your assumptions

The example on the next page looks at how future day case volumes might vary given uncertainties around the degree of success and timing of planned strategic initiatives


“We were not used to projecting five years ahead and dealing with the level of uncertainty involved. In our world, assumptions go out of date pretty quickly. In short, we struggled to get a handle

on what assumptions we should use."


“Early on, everybody wanted answers from the DH on lots

of areas. By the end, everyone realised that they had to make assumptions.

This was a key learning point."

62


Illustration: Daycase activity projections (a) – ‘steady state’ volumes

Illustration: Daycase activity projections (b) – activity transferred to Trust following local service reconfiguration

Note how disaggregating your assumptions enables you to perform much more informative scenario analyses

in this example the effect of additional daycase volumes from the reconfiguration of services in the locality is separated from ‘steady state’ volumes in order to model the effect of a delay to the reconfiguration

Planning your modelling like this helps you to meet a key requirement; directly linking the risks in your strategy to your financial projections

Perform a similar exercise for each major assumption. Dry run the different inputs through your model and monitor how the key outputs change (e.g. cash or borrowing headroom, break even point, profitability ratios, the PBL)

This will help you build a sense of the different scenarios you should illustrate in your Business Plan

In summary, the scenarios you pick should be driven by those risks that have the greatest impact on the key outputs of your model

STEP1

STEP 2

STEP 5

STEP 3

STEP 4

Key risks determining this range

1. Unable to achieve the shift of confidence in the consultants to persuade them to shift to day surgery setting

2. Case mix may prove unusual and not appropriate for daycase work

3. Delays in securing funds to expand existing daycase unit

4. Uncertainty in population expansion

5. Impact of patient choice from 2006

Key risks determining range

1. Local reconfiguration of services has yet to be finalised in detail

2. Implementation timetable only in draft form

3. Threat of delays from public and press resistance

4. SHA and NHSFF funding yet to be authorised

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2003

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2004

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2005

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Illustration: Month end cash balances for growth, base and sensitised case financial model

Present a set of financial outcomes for growth, base, and sensitised cases and compare those outcomes to key financial thresholds

Your individual scenario analyses should culminate in a growth (best) case, a sensitised (downside) case, and a base (most likely) case. Presenting the outputs of each graphically clearly illustrates:

the range of possible outcomes

where the base/most likely case sits within that range

how the sensitised/downside case compares to critical thresholds (e.g. working capital facilities, break even point, the public borrowing limit etc) STEP1

STEP 2

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64


Illustration: Month end cash balances for growth, base and sensitised case financial model


Where your sensitised case approaches key thresholds, you will need to articulate contingency arrangements or corrective actions that you might take

for example, these might include how you might manage a worsening cash position

This final step enables you to meet your key requirement; proving that the major risks inherent in your strategy are under control

STEP1

STEP 2

STEP 5

STEP 3

STEP 4

contingency arrangements The Trust would need to take corrective action to

ensure its financial budget is achieved and the following actions have been identified by management: increasing CIPs allow creditors days to remain unchanged, rather

than decreasing them seeking additional activity to fill spare capacity reducing costs in the event of reduced activity

The Trust could also influence its short-term cash position by delaying its capital programme, as it has £6.4 million of uncommitted capital expenditure (over the life of the model)

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65

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

66

LeadershipStructuring your Business Plan

The Leadership section of your Business Plan This section is intended to cover an overview of the leadership, the management structure of the

trust and its employees. It should provide the reader with a high level understanding of how the trust board operates and its attitude towards its workforce

It is important that you set out why you believe your management team has the capacity and capability necessary to move the organisation forward with assurance and how HR issues are integrated within the organisations strategies

Outline plans for changes to high level systems, procedures, processes, and people if your self assessment has identified obvious gaps that need to be addressed

your objective is to make it clear in your Business Plan document that you are taking all the necessary steps to become ‘fit for purpose’ as a NHS Foundation Trust

what opportunity will be created for the workforce as a result of securing NHS Foundation Trust status

It should provide an overview of the board structure together with the Executive and Non Executive Director qualifications & experience

It needs to demonstrate how the organisation is maintaining & continuing to develop excellent HR practices, drawing from the NHS and beyond; demonstrating that the organisation will continue to meet legal requirements in HR and HR-related issues, and demonstrating local HR capacity/capability to fulfil this, and how this will be done through a duty of partnership.

It needs to show how the organisation developed it’s workforce/HR strategy, by involving and engaging staff (and other partners/stakeholders) and where this involvement informed and influenced the business plan, e.g. use of volunteers to assist in service delivery, or recruitment/re-training opportunities.

EXAMPLE STORYBOARD

8 LEADERSHIP & WORKFORCE

8.1.1 Management arrangements

8.1.2 Workforce KPIs

8.1.3 Agency and recruitment arrangements

8.1.4 Recruitment hotspots and actions to address

8.1.5 Workforce and Organizational development

8.1.5.1 Agenda for Change

8.1.5.2 EWTD

8.1.5.3 Consultants contract

8.1.5.4 Relationship with unions




2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

67

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

68

GovernanceStructuring your Business Plan

The “Governance” section of your Business Plan

Your Business Plan document will need to demonstrate that you have adequate governance arrangements in place to cope with the additional pressures that operating as an NHS Foundation Trust will bring

You should summarise only the key issues from the separate Governance paper that you will have prepared as part of your submission

The following pages set out specific guidance around how you could go about:

assessing your board against a competency framework

assessing your Trust against a governance framework

deciding what improvements you need to make to your board reporting

EXAMPLE STORYBOARD

9 GOVERNANCE ARRANGEMENTS

9.1.1 How stakeholder interests will be represented

9.1.2 Corporate governance & management

9.1.3 Risk management

9.1.4 Performance management reporting framework

9.1.5. Financial controls and reporting

9.1.6 Audit

9.1.7 Compliance Framework

9.1.8 IT systems




2. Profile

3. Strategy


5. Services

6. Finance

7. Risk


9. Governance

69

Governance An introduction to the governance arrangements section

GOVERNANCE: “How you will stay in control”

Not surprisingly, there is significant overlap between the governance, risk and finance fundamentals. Governance is about ‘staying in control’ of your business. The finance and risk fundamentals are concerned with ensuring you have a sound grip on your financial position and predicting and planning for ‘what could go wrong’

This Business Plan Sourcebook has already set out the importance of defining and debating the top risks to your organisation, and reflecting these in your five year financial plans

This section focuses on three additional steps that will help you put appropriate systems and processes in place, and ensure your people have the right mix of skills to operate effectively as a new NHS Foundation Trust. These steps are:

reassessing your Board competency framework then undertaking individual and Board assessments and implementing a development plan

self assessing against a governance framework

upgrading your board reporting

These activities will help you achieve greater clarity around where existing systems, processes and skills are appropriate, and more importantly where investment, redesign, training and potentially recruitment is required

Devolution and decentralisation means NHS Foundation Trusts have greater independence but are more exposed. Monitor has high expectations of NHSFT Boards which must be equipped to operate in a more complex and competitive environment where ‘modernisation’ is a central theme

Strong systems and processes, and the right people in your team, will be important as Monitor will assess you not only on what you say you will do, but also on how confident it is that you can achieve your plans

This section of the Sourcebook complements the more detailed DH guidance contained in ‘A guide to developing governance arrangements’. As part of your application to become an NHSFT you will be preparing a separate appendix in the Business Plan detailing the new constitution and membership structure you are implementing at your Trust. While you are required to provide commentary and analysis in your Business Plan in relation to this, your Business Plan should not repeat the detailed information you will provide separately.

70

Governance Setting a competency framework, assessing against it, and implementing a development plan

Clarity and agreement on what is the role of the Board

as an FT

1

Clarity and agreement on the competencies Board

members need to fulfil this role

2

Undertake structured interviews and assemble

portfolio of evidence against the competencies

3

Work with mentor to create initial Personal

Development Plan (PDP)

8

Establish mentor relationships

7

Identify skills gaps

5

Regular evaluation with mentor of progress against PDP and skill development

10

Undertake development activities

9

Feedback on how current competency set matches

the matrix

6

Revisit key stages as competencies

change and evolve

Assessment of interview outcomes and portfolio

4

The diagram illustrates the cycle of continually reassessing the competencies required of your Board, assessing your execs and non-execs against it, identifying skills gaps and coming up with plans to address those gaps

As a NHS Foundation Trust the competencies required of your board will change

both executive and non-executive boards will need to exhibit technical skills and experience in commercial areas such as strategy, marketing, contracting and partnership working

The following page sets out an example of how you might approach the assessment of your Board’s current skills and competencies

Monitor Feedback“They need to do an upfront

audit around their capabilities. In my view,

applicants have had strong boards but less strong Non- Executive Directors. They

need more hardened commercial people, whether in legal, contracting, HR or

marketing

71

Governance Skills and competencies assessment

Example assessment of Board technical competencies

Example competency areas:

Executive Directors Non Executive Directors

In depth knowledge (at least one)

Working knowledge (across the group i.e. most)

In depth knowledge (at least one)

Working Knowledge (across the group i.e. most)

High Strategic risk management Financial expertise Commercial focus Legal awareness Strategy & structure Partnership working Corporate Communication/ media Organisational Development Change management Performance management Human resources management

Low Clinical & health experience Key Blue – Area of sufficiency or strength

Green – Area requiring some development

Red – Area requiring development

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Each of these boxes are assigned a ‘traffic light’

indicating what the priority level is for

development


“Trusts need to understand the subtle difference in a Board of Directors in an

NHSFT. They have to be more challenging on

decisions and focus on delivery of the bottom line.

Non-executive directors need to challenge more.”

72

Governance Self assessing against a governance framework

Your Board needs to consider the systems and processes that it will use to provide effective oversight of your organisation

It can do so through self assessment against a framework, such as the Combined Code, covering:

Board operations

Strategy, change and decision making

Culture & integrity

Organisation and accountability

Information, measuring and monitoring

Stewardship

Risk management

Assurance

An initial Board discussion may highlight particular areas for review. A template on the following page sets out how you might approach such an exercise, however key questions to ask include:

Is our Board and Committee structure able to provide effective governance over, and challenge to, our business activities?

How do we set, adjust and communicate our strategy and vision?

Do our objectives align with the culture, behaviours and conduct of our people?

What organisational oversight do we have at the centre?

What criteria do we set to enable us to measure and monitor performance?

How do we govern key stakeholder relationships (public, partners, commissioners, suppliers) and communication with them?

What information do we need for effective decision making and how is this obtained?

How do our business operations put internal control into practice?

What risks do we face as a business and what framework do we have in place to manage them?

Where do we get assurance over key risks and controls and is Internal Audit effective?

73

Governance Self assessing against a governance framework - example

Governance Area Poor Okay Strong

Timely, concise, comprehensive and accurate information?

Board committee recommendations supported by sufficient information to allow the Board to make informed and reasoned decisions?

Board minutes accurately recorded?

Structured approach to decision-making, including pre-determined factors (e.g. strategic fit, financial implications, risk etc.)?

Monitoring of the implementation of decisions?

Induction and ongoing education procedures for Directors?

Adequate procedures to assess the performance of the Board and Sub-committees, collectively and individually?

Board-approved mission / vision statement and set of values for the organisation?

Board involvement in strategy development from the earliest stagest?

Board confidence in tools / methods used by management to set strategy?

Governance Area Poor Okay Strong

Alternative scenarios considered during strategy setting?

Key risks identified during strategy setting and monitored throughout the year?

Board has ensured organisational structure supports delivery of the strategy?

Board has ensured that KPI’s are aligned with strategic goals?

Board ensured that strategy implemented within Directorates through alignment of goals and objectives?

Board review and adjustment of strategy in light of changing environment?

Board ensures that the organisations values are embedded and being applied throughout the organisation?

Board has a clear perception of the ethical climate in the organisation?

Directors subject to the same code of conduct as the employees?

Regular financial reporting to the Board, covering all financial KPI’s including cash flow? Adequately challenged?

74

Governance Upgrading your Board reporting

Your Board will require easily obtainable, relevant, reliable and timely information to operate efficiently. If internal management information systems are not up to the task, this will have been highlighted by the governance self-assessment. However in addition to potential investment in systems consider whether your Board reports require upgrading

Monthly reports will need to focus on areas such as cash management to a much greater extent than in the past. Additionally, the best Board reports will synthesise and summarise the detail, draw preliminary conclusions, standardise templates, focus on key issues and direct Board attention to the most important issues that month

A suggested format for Board reports is presented below

FINANCIAL SUMMARY

COVENANTS

I&E, B/S, CF

Income and expenditure

Cashflow

Balance sheet

Covenants

Working capital requirements

Months to negative / positive deficit

Agency spend

This month; year-to-date; comparison with last year

12 month forecast

KPIs SUMMARY

UTILISATION INDICATORS

ACTIVITY INDICATORS

Activity

e.g. demand by HRG/ spell

Utilisation

Healthcare standards

As per monitor consultation doc

HR indicators

e.g. agency staff usage, staff sickness

Summary highlighting poor performing KPIs and good performing KPI

STATEGIC INITIATIVES

INITIATIVE 2

INITIATIVE 1

Strategic initiatives include, for example, cost reduction initiatives, capital investment initiatives, PFI initiatives.

Progress against each initiative and compared against original business case

Business cases will include detailed risks for each initiative

KEY RISKS

RISK FACTOR 2

RISK FACTOR 1

Summary of current key risks and the extent to which they are being successfully managed.

Accuracy of forecasts produced in financial plan

Main business risks relating to ongoing operations

Overall risk of each strategic initiative

Any further amendments of risks within a strategic initiative should be explored further under the ‘Strategic Initiatives’ heading

75

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

76

Other working tools Getting started – tips for the initial data gathering exercise

Gather together information that will help you understand the Trusts’ current status of strategy development and the market and operational issues that affect the trust’s position and performance

For example, collecting the following information should help you achieve this:

Current strategy/business plan and mission statement

Organisation charts

Recent studies and forecasts (e.g. clinical, demographic, epidemiological)

Recent surveys and reports on:

patient experience

the local health economy

employee attitudes

Recent performance reports by specialty

Technology plans/strategies

Clinical plans/strategies

HR plans/strategies

Recent audits

Recent Board packs and minutes

Local interest information (press releases etc)

authority plans/ regional developments

Business plans of local ‘competitors’

HCC cluster performance markings

Local Delivery Plans

Annual reports

77

Contents

Chapter Page




Executive Summary

Profile

Strategy

Market assessment

Services

Finance

Risk


Governance


5. Appendices

What are NHS Foundation Trusts?

Business Plan Templates

Business Plan Self-Assessment Checklist

Finding out more

78

Appendix 1 Placeholder – What are NHS Foundation Trusts?

A new type of NHS Trust

The NHS Plan (published in July 2000) set out a radical ten year reform programme for the NHS. Good progress has already been made. Waiting times are falling, death rates from major diseases are decreasing, there are more doctors and nurses and facilities are being updated across the NHS. However, more still needs to be done.

A service employing over a million people in hundreds of locations cannot be run from Whitehall. NHS foundation trusts are at the cutting edge of the Government’s commitment to devolution and decentralisation in the public services, and are at the heart of a patient-led NHS. In an NHS foundation trust local managers and staff working with local people have the freedom to innovate and develop services tailored to the particular needs of their patients and local communities.

NHS foundation trusts are firmly part of the NHS and subject to NHS standards, providing care paid for by the NHS, to NHS patients according to NHS quality standards and principles – free care based on need, not ability to pay.

The Government is committed to offering all NHS trusts the opportunity to become NHS foundation trusts by 2008. It is clear that this requires a different approach by NHS trusts in responding to the challenges of greater autonomy in a changing NHS landscape of unprecedented levels of funding with greater choice for NHS patients about how and where they receive services.

To achieve NHS foundation trust status it is a statutory requirement that applicant trusts are supported by the Secretary of State and authorised by Monitor. The Department of Health and Monitor have worked together to develop a single streamlined applications process that preserves the Secretary of State’s role in providing considered support to applicants while maintaining Monitor’s independence in its authorisation process. Applicant Trusts will need to ensure:

they are providing high quality services that meet or exceed national targets and standards;

they have a robust 5-year Business Plan to continually improve the services they deliver to patients in ways consistent with the direction of travel set out in Creating a Patient

they are financially sound, providing efficient services and a good return on taxpayers’ investment;

they have developed the constitutional arrangements that ensure statutory compliance and effective internal governance; and that

they are working collaboratively with local partners, such as PCTs, in the best interests of their local health communities.

79

Appendix 1 Placeholder – What are NHS Foundation Trusts? (cont.)

NHS Foundation Trust core principles

NHS Foundation Trusts will remain part of the NHS. They are required by law to:

maintain high national standards for NHS services;

deliver NHS services to NHS patients free at the point of use;

treat patients according to need, not ability to pay;

work in co-operation with other health and social care partners.

Governance arrangements

NHS Foundation Trusts will be allowed some local flexibility over the exact composition of their Board of Governors. However, every board must have:

a majority of governors elected by members of the public- that is members of the public constituency and the patients constituency if there is one;

at least three governors, who are staff, elected by staff members;

at least one governor representing local Primary Care Trusts;

at least one governor representing Local Authorities in the area;

a chair;

at least one governor appointed from the local university (if the Trust’s hospitals include a medical or dental school);

at least one governor representing each constituency or class within a constituency

Becoming an NHS Foundation Trust member

Each Trust must have at least one public constituency and a staff constituency. They may also have a patient constituency. It is possible to create sub-divisions or classes within a constituency. The details of constituencies and any classes within a constituency will be defined in the Trust’s constitution.

Eligibility for membership of an NHS Foundation Trust will be open to local residents, living within the boundaries of a constituency which include patients and carers where no patient constituency exists, or these may be a separate patient constituency which includes patients and careres. The staff constituency will be open to all staff and may include volunteers and contract staff. Details of those individuals entitled to become members of the staff constituency and further eligibility criteria will be contained in each Trust’s constitution.

A person who is eligible to become a member of one of the constituencies may do so on application to the Trust.

Individual Trusts may decide to adopt an opt-out system for membership of the staff constituency and patient (but not carer) membership of the patient constituency. Under this system staff or patients become members on invitation by the NHS Foundation Trust unless they inform the Trust that they do not wish to be a member

Individual NHS Foundation Trusts may provide for people who live outside the area but have been patients or carers at one of the Trust’s hospitals to be eligible for membership.

There will be no limit on the number of people who can register as members, providing they meet the eligibility criteria, but members can only belong to one constituency

80


Governance arrangements (cont.)

Local services, national standards

Monitor, the Independent Regulator of NHS Foundation Trusts, is an independent corporate body established under the Health and Social Care (Community Health and Standards) Act 2003. Monitor is accountable directly to Parliament and was established to authorise, monitor and regulate NHS Foundation Trusts.

Every NHS Foundation Trust has an authorisation – a ‘licence’ to operate - issued by Monitor. The terms of authorisation set out the conditions under which the NHS Foundation Trust will operate and will cover such things as:

a description of the health goods and services that the Trust is authorised to provide;

a list of goods and services that the Trust is required to provide to the NHS in England;

a requirement to operate to high standards, based on the Standards for Better Health against which the Healthcare Commission will inspect;

the circumstances in which major changes to services (for example, in response to a changing local population) need to be discussed locally and agreed by Monitor;

a list of assets such as buildings, land or equipment that are designated as ‘protected’ because they are needed to provide required NHS services;

limits on the amount of private work the NHS Foundation Trust can carry out. NHS Foundation Trusts are subject to strict limits on private patient work based on the amount of private work they currently do. If an NHS Foundation Trust wishes to treat more private patients, it needs to treat more NHS patients first. This will ensure that NHS Foundation Trusts continue to focus on NHS work;

the amount of money the NHS Foundation Trust is allowed to borrow;

the financial and statistical information the NHS Foundation Trust is required to provide.

Like all other NHS bodies, NHS Foundation Trusts are inspected against national standards by the Healthcare Commission. Monitor receives copies of inspection reports and decides what, if any, action is needed in the event of failings.

The Independent Regulator monitors each NHS Foundation Trust to ensure they do not breach the terms of their authorisation. The role of Monitor is designed to give NHS Foundation Trusts the freedom to deliver services to meet local needs while safeguarding the interests of NHS patients. In normal circumstances, Monitor will have no reason to intervene in the running of an NHS Foundation Trust.

81


Local services, national standards (cont.)

However, if an NHS Foundation Trust significantly breaches the terms of its authorisation, or finds itself in difficulty, Monitor has the power to step in to resolve the breach. Monitor has a range of intervention powers in the running of an NHS Foundation Trust in the event of failings in its healthcare standards or other aspects of its activities, which amount to a significant breach in the terms of its authorisation.

In the most serious cases, where intervention by Monitor could not resolve the breach, an NHS Foundation Trust could be dissolved. If this ever were to happen, the Health and Social Care (Community Health and Standards) Act 2003 provides mechanisms to ensure that NHS patients continue to receive high quality treatment.

Protecting NHS assets

NHS Foundation Trusts enter into legally binding agreements with local NHS Primary Care Trusts who buy locally relevant services for the population served by the Trusts. These contracts set out the number and type of services NHS Foundation Trusts will provide.

If an NHS Foundation Trust wants to change its services, it must consult the NHS primary care trusts that pay for those services. If the services it wishes to change are classified as essential NHS services which the Trust is required to provide under its terms of authorisation, then the NHS Foundation Trust must first obtain the agreement of Monitor. If the change in services amounts to a substantial change or development in the Trust’s services then there is a duty to promote public involvement and consultation and a duty to consult with the Local Authority Overview and Scrutiny Committees.

82


NHS staff – continuity of service when an NHSFT

Achieving NHS Foundation Trust status has not affect the continuity of service of staff. Staff employed by NHS Foundation Trusts continue to have full access to the NHS pension scheme, including the associated injury benefit scheme and retirement arrangements.

NHS Foundation Trusts, along with the NHS, implement Agenda for Change, offering staff the opportunity to transfer to new, more flexible terms and conditions.

NHS Foundation Trusts have opportunities to innovate in order to develop the workforce for the delivery of high quality patient care – using their ability to develop new ways of recognising, acknowledging, rewarding and retaining staff.

NHS Foundation Trusts – Ten Key Points

NHS Foundation Trusts are firmly part of the NHS and subject to NHS standards, performance ratings and systems of inspection. They treat NHS patients according to NHS quality standards and principles – free care based on need, not ability to pay.

NHS Foundation Trusts are established in law as independent Public Benefit Corporations. This means far greater local ownership and involvement of patients, the public and staff rather than control from the Department of Health. The principles behind NHS Foundation Trusts build on the sense of ownership many local people and staff feel for their hospital.

NHS Foundation Trusts are democratic. Local people and staff will directly elect representatives to serve on the Board of Governors. The Board of Governors works with the Board of Directors who are responsible for day-to-day running of the Trust - to ensure that the NHS Foundation Trust acts in a way that is consistent with its terms of authorisation. In this way, the Board of Governors play a role in helping to set the overall direction of the organisation.

NHS Foundation Trusts prevent privatisation of the NHS. They are required in law to use their assets - such as land and buildings - to promote their primary purpose of providing NHS services to NHS patients. A legal lock protects these organisations from the sort of ‘de-mutualisation’ we have seen in the Building Society sector and prevent any threat of future privatisation.

NHS Foundation Trusts operate within a clear accountability framework. They not be left to sink or swim, allowed to ‘cherry pick’ services or to pursue organisational goals at the expense of the needs of their local health community.

NHS Foundation Trusts are there to treat NHS patients, not to make profits or to distribute them. Most of their income comes through agreements reached with local NHS Primary Care Trusts to provide locally relevant services for NHS patients at the national tariff rate. Private work is strictly limited.

NHS Foundation Trusts are at the cutting edge of the Government’s commitment to devolution and decentralisation in the public services. They are not subjected to direction from Whitehall. Local managers and staff working with local people - rather than remote Civil Servants - have the freedom to innovate and develop services tailored to the particular needs of their local communities.

NHS Foundation Trusts are not about elitism. All NHS Trusts will get help and support so they too are in a position to apply for foundation status.

NHS Foundation Trusts work in partnership with other NHS organisations. They remain part of the NHS. They have a duty in law to co-operate with other local partners using their freedom in ways that fit with NHS principles and are consistent with the needs of other local NHS organisations. They are overseen by Monitor, accountable to Parliament, and inspected by the Healthcare Commission.

NHS Foundation Trusts are able to direct their services more closely to the communities they serve with freedom to develop new ways of working that reflect local needs and priorities. This is done within the NHS framework of standards and inspection that safeguards the quality of NHS care. Direct elections of Governors by local people and staff results in local hospitals better focused on meeting the needs of the communities they serve.

83

Appendix 2 Business Plan self assessment check list

Indicator What is itHow will Monitor / DH know this has been demonstrated? Document reference

Public / patient / staff reaction and local community involvement

Explanation of the benefits realised by involvement of different population sectors

the reaction that these sectors will have to the change in hospital status;

the impact that the local community will have on the services that the Trust will provide

the benefits to the organisation and the local community that will be derived

Access to capital Demonstration of benefits realised from access to capital

access to capital resulting in accelerated development or opportunity to pursue schemes that would not necessarily have attracted strategic capital or been appropriate for PFI

Commercial Partnerships Explanation of benefits realised from commercial opportunities

benefits from the creation of commercial partnerships;

diversification opportunities and/or the expansion of non-regulated services not previously possible

Joint ventures Explanation of benefits realised from joint ventures

how opportunities for joint ventures or investment with other local partners could address on-going capacity / performance issues (eg investment in primary care led services, capital freedoms to address delayed discharge problems, joint venture with housing association to provide low cost housing to address recruitment and retention issues)

84

Appendix 2 Business Plan self assessment check list (cont.)


SERVICES

Local and wider regional socio-economic trends

Activity projections take account of: population profiles and flow; health needs analysis; lifestyle changes

Demographic trends from: national statistics office – census social trends public surveys of local health needs discussions with local commissioners

Local economic developments

Forecasts informed by: local regeneration schemes; new housing developments; potential labour market

local environment issues; national initiatives; market movement; demographic trends from national statistics office; relations with local community

Medical and technological advances

Incorporate impact of: new drugs; new equipment; IT / telecoms medicine

Service plans will incorporate impact of: - NICE guidance; NSFs; enhanced training of equipment users (HITF); outputs from SWOT / PEST analyses

Performance Benchmarked against: neighbouring / similar Trusts; private sector services; national specialist providers; and

European providers

Health Care Commission performance ratings –comparison of Trust against all Trusts within HCC cluster; CHKS ratings; ‘other’ eg Good Hospital Guide, etc

85



SERVICES

Incorporating the impact of SR changes

Incorporating impact of SR changes: Choice; Patient focused care; Care pathways; TCs; IT; E-booking; Integration with primary care

discussions with key stakeholders (PCTs, voluntary, private, LA);

activity and resource (staff and capacity) forecasts; timetable for changes; detail of investment required to secure service

changes

Service Modernisation objectives

Achievement of objectives leads to changes in demand (greater use of day case / short stay beds, developing primary care)

progress against healthcare standards, - progress against national initiatives eg ‘going further faster’;

evidence of changes to services resulting from working in partnership with PCTs / other local providers;

bed occupancy rate and proximity to %age target; reduction in LOS

86



SERVICES

SWOT Trusts will have considered the organisation’s strengths, weaknesses, opportunities and threats, identification of the risks to the organisation and developed action plans to mitigate these

discussions internally with managers, staff, clinicians to identify strengths and weaknesses (internal resources and capabilities)

discussions both internally & externally (with key stakeholders) to identify opportunities and threats

key issues identified at local health economy events and subsequent action plans

identification potential risks, the underlying reasons and implications for the Trust

development of management strategies to mitigate risks and to ensure that all SWOT issues have been addressed

87

Appendix 2 Business Plan assessment criteria (cont.)


FINANCE

Assumptions Explanation of what assumptions have been applied, and why, to compile financial projections for the 5 year planning period

workforce plans (linked to HR strategy); impact of pay reforms, education and training; impact of choice; impact of PbR; size of customer base and changes; financial position of local economy and its ability to

invest in acute services; Delivery of Trusts PPF/LDP; changes to protected services and assets over

time resource and capacity constraints incl recruitment

and retention of key staff groups as well as theatre utilisation, site configuration

intentions for non-protected assets over lifetime of business plan

Cost Improvement Programmes

Outline the detail of CIPS for the next 5 years

Financial projections reflect: identified programmes, indicating how savings will

be made; evidence of progress against targets; risk to the business, and contingencies, if not

achieved

Modelling Financial Projections

A Trust will have modelled its financial position over the next 5 years making appropriate assumptions where required. building on activity projections, tariff prices and expected RCI levels. The Trust will include projections for its Balance Sheet, Income and Expenditure, Cash Flow, and position against tariff over the next 5 year planning horizon.

HR workforce projections activity projections strategic finance and capital plans impact of national initiatives eg A4C and other pay

pressures impact of PbR (including quality of coding and

impact of re-coding exercises if underway) impact of issues from SWOT and PEST analyses impact of internal internal cost / benefit analysis of

services impact of other non-pay pressures

88


Indicator What is itHow will Monitor / DH know this has been demonstrated? Has it been included?

FINANCE

Borrowing Borrowing levels required to finance capital investment comply with current prudential borrowing code

Financial projections reflect: level of borrowing required; calculation of free cash flow; application of ratios to demonstrate affordability

Capital expenditure Description of how capital expenditure will be financed. an allocation of strategic capital is anticipated, Trusts will provide confirmation of the SHA’s commitment to provide funding

Trusts wil also set out how the capital base will change over time and clearly identify the sum of the value of the protected assets

Capital projections, the values and sources of finance (incl interest rates and repayment terms) eg I&E surpluses, depreciation, asset disposals, cash balances, borrowing and anticipated allocations of strategic capital: evidence of discussions with SHA confirming

allocations of strategic capital evidence of changing asset base over time, incl

sum of value of protected assets, in asset schedule

Cost effectiveness Identification of which activities are cost effective and which are not

Results from internal efficiency reviews; plans to address high costs relating to

inefficient services; progress to correctly code services for PbR

Existing Financial Commitments

Details of any existing financial commitments that would have a material effect on the applicants finances (eg backlog maintenance, PFIs, etc)

Business plans reflect: evidence of existing capital programmes;

summaries of outline business cases for PFI s and associated management / build costs and timings

impact on financial projections risk management plans to mitigate financial risk

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FINANCE

Revenue streams Revenue streams predicated on implementation of PbR

Evidence of: good working relations with PCTs with SLAs in

place for activity commissioned to date PCT & stakeholder endorsement / agreement of

Trust’s strategic direction discussions with PCTs and others re levels of

activity commissioned via legally binding contracts Evidence of:

revenue impact assessment of each sensitivity / scenario analysis undertaken in terms of balance sheet, I&E, cash flow, ratios

upside and downside, as well as most likely, modelling undertaken

Education, Training and WDCs

Impact assessed of R&D and MPET levies, and the relationship with WDCs

Financial projections reflect: outcome of R&D and MPET levy reviews; impact of CPD, workplace learning and

development (linked to HR strategy)

Other income Level of income generated through Intellectual Property Rights, and / or engagement with Charitable Funds

Financial projections include evidence of: rights to, value and frequency of income from IPR conditions of value, frequency and spending

constraints with funds received from Charitable trusts

90



FINANCE

Private patient income Compliance with private patient income cap over the 5 year planning period

Financial projections reflect: percentage as at year ending 2002/03 analysis of PP income and how projected to

change over business period evidence that %age is not breached over 5 year

planning period contingency arrangements if insufficient NHS

activity generated

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RISKS

Risk management Identification of potential risks associated with the strategy, and development of action plans to mitigate these

Evidence that: appropriate controls and systems exist to reduce

likelihood of minimise risk; mitigation strategies take account of the

organisational and financial implications of the risk

Sensitivity analysis and scenario planning:

Demonstration that forecasts have been flexed to take account of unplanned developments, and that financial projections have modelled realistic scenarios resulting from the impact of several sensitivities (financial, activity, capacity, etc).

Revenue impact assessment of each sensitivity/scenario analysis undertaken in terms of balance sheet, I&E, cash flow, ratios; Upside and downside, as well as most likely, modelling undertaken

92




Current leadership and organisational support

Demonstrates that current leadership is capable of leading the trust into and following the change, and that team is supported by staff.

Trusts will provide details of their proposed management teams and will demonstrate how the team is supported by medical, nursing, and non-clinical staff

Robust skills audit and assessment of expertise required in the NHSFT;

Identification of skills gaps and how management teams will be developed/reviewed as necessary;

‘management’ structure that enables clinicians / staff to input to the service development agenda (linked directly to HR strategy and Governance strategy)

Skills audit and corporate development:

Demonstrate that the management team and staff have the skills and training to go forward as an NHSFT

Career development plans; Workplace learning and training opportunities; Performance appraisal systems; Recruitment and retention strategies; Corporate and strategic decisions making training

programmes; Financial awareness training;

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GOVERNANCE

Relations with suppliers and trading partners

Assessment of impact of NHSFT status on relations with trading partners and suppliers

new contracts or updated procurement policies sound financial (incl cash) controls payment procedures incl compliance with PSP

PCT relationship Clear understanding of the relationship with principal PCT(s) in the future

effective discussions re LDP, service changes and future commissioning intentions;

SLAs agreed and currently in place; negotiations underway to introduce legally binding

contracts

Strategic impact of new governance arrangements

The Trust will have assessed the impact financially and corporately of the new governance arrangements

plans to grow, maintain and develop membership base;

how to exploit wealth of patient / public opinion to further Trusts’ strategic direction;

understanding at BoG and BoD of strategic direction of organisation;

ability for BoG to challenge and advise Trust in decision making processes;

level of understanding of the corporate governance and liability associated with new roles and responsibilities within organisation;

skills development to equip for new structure

94

Appendix 3Finding out more

A Guide to NHS Foundation Trusts, published by the Department of Health, together with other supporting material is available at

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/SecondaryCare/NHSFoundationTrust/fs/en

Details on Choice can be found at

http://www.dh.gov.uk/PolicyAndGuidance/PatientChoice/Choice/fs/en

Details about Agenda for Change and all published documentation can be found at

http://www.dh.gov.uk/PolicyAndGuidance/HumanResourcesAndTraining/ModernisingPay/AgendaForChange/fs/en

Details on Payment by Results can be found at

http://www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/FinanceAndPlanning/NHSFinancialReforms/fs/en

Information on Monitor – Independent Regulator for NHS Foundation Trusts can be found at

http://www.monitor-nhsft.gov.uk/

Information on the NHS Foundation Trust Financing Facility is available from Nick Rose at

[email protected]

NHS Improvement Plan published by the Department of Health is available at

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4084476&chk=i6LSYm

National Standards, Local Action - Health and Social Care Standards and Planning Framework 2005/06 – 2006/07 published by the Department of Health can be found at

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4086057&chk=ypFWoL

Creating a Patient-Led NHS – Delivering the NHS Improvement Plan – published by the Department of Health is available at

http://www.dh.gov.uk/PolicyAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT-ID=4106506&chk=ftV6vA

Commissioning a Patient Lead NHS – published by the Department of Health is available at

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4123963&chk=l09Rca

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