1.1. Chief Executive S Summary of the Year

Provider Management Regime

Annual Plan 2009/10 Commentary

of 35 Trust details

Trust name Royal National Orthopaedic Hospital NHS Trust Key contact at trust (name, contact details) Ahmet Koray Director of Finance Royal National Orthopaedic Hospital NHS Trust (RNOH) Brockley Hill Stanmore Middlesex HA7 4LP Tel 0208 909 5867 Fax 0208 909 5504 e-mail: [email protected]

Annual plan date DRAFT v.4 – 19 March 2009

of 35 1. Past year performance

1.1. Chief executive’s summary of the year

1.2. Summary of financial performance

1.3. Other major performance issues

2. Future business plans

2.1. Strategic overview

2.2. Achievement of FT status

2.3. Service and workforce development plans

2.4. Other revenue

2.5 Operating resources required to deliver service development

2.6. Summary financial plans

2.7. Service Line Management

2.8. Investment and disposal strategy

2.9. Summary of key financial assumptions

3. Risk analysis

3.1. Financial risk

3.2. Governance risk

3.3. Risk to services provided

3.4. Quality and safety risk

3.5. Other risks

4. Declarations and self-certifications

4.1. Board statements

of 35 1. Past year performance

1.1. Chief executive’s summary of the year

Chief executive’s summary of the year The Royal National Orthopaedic Hospital NHS Trust (the RNOH) continues to be the largest orthopaedic hospital in the UK and provides a comprehensive range of neuro-musculoskeletal healthcare, ranging from acute spinal injuries, complex bone tumour to orthopaedic medicine and specialist rehabilitation for chronic back pain sufferers. This broad range of neuro-musculoskeletal services is unique within the NHS. 2008/9 was challenging year for the Trust but we have continued to treat more patients than ever before and saw an increase in the number of complex cases in which we specialise.

The Trust has maintained its significant role in the Specialist Orthopaedic Alliance which exists to ensure the viability of specialist NHS orthopaedic services and the exceptional contribution to patient care that they make. This support has been invaluable and led to our successful lobby to the DH in agreeing to tariff exclusions for HRGv4 in 2009/10.

We have begun the journey towards Foundation Trust status and completed our consultation last autumn. We believe that a sound governance structure supported by strong membership and a competent Board is central to the success of the organisation under Foundation Trust status. The RNOH has an excellent track record in delivering high-quality treatment and care for patients needing complex orthopaedic surgery. Our infection rates are low and our results for the National Patient Survey on patient experiences are above average. We have made significant improvements in management, administration and IT systems and have established a strong financial foundation to enable us to move forward with a successful NHS Foundation Trust application in 2009.

As always, our major difficulty continues to be that over 50% of the building stock is pre 1948 and in need of replacement. The RNOH has developed an exciting, affordable and deliverable solution to replace its old buildings in Stanmore which will ensure that future generations of NHS patients continue to get access to excellence for the treatment of complex musculoskeletal conditions. We are firmly committed to establishing a new hospital building at Stanmore and are currently in discussion with NHS London and the Department of Health in order to achieve an urgent decision on a viable option for the rebuild. In the meantime, the redevelopment of Bolsover Street, remains on target.

Whilst loans and brokerage have been cleared this year, operational financial performance continues to be challenging. At the time of this business plan being written, serious concerns remain over the Trust’s ability to deliver its target surplus for the year. The expectation is that recognition from NHS London in respect of the significant costs and fees incurred in preparing the Stanmore redevelopment business case, will be confirmed by the middle of March 2009 to allow the Trust to deliver its surplus target. If the surplus is not achieved, the likelihood is that the Trust will once again be scored ‘weak’ under the Audit Commission’s Use of Resources assessment. From a operational management perspective, the Trust has delivered the following key performance indicators:  There have been no breaches of the cancelled operation 28 day guarantee target since the implementation of the new policy to seek private treatment for patients who cannot be brought back within 28 days onto NHS lists;  18 week data completeness targets achieved on monthly figures with performance currently 87% admitted 85% non-admitted (February 2009). The major problem remains with spinal surgery, which when excluded along with breach-sharing from the measure, increases performance on both scores to 88%;  Total cancelled operations (for non-clinical reasons) have been 142 (1.6%) (April – February);  There have been 2 breaches of the 26 weeks inpatient stage of treatment target;  Ethnic Coding – April 2008 to December 2009, performance was 88% compared to an internal target of 90%;  The Trust ‘s excellent infection control track record has continued this year with zero MRSA and only 5 cases of C-Diff so far. The plan remains to preserve the number of C-Diff cases to below the target of 9 for the year.

of 35 1.2. Summary of financial performance

Summary of financial performance: commentary

The Trust will have repaid all historic loans and brokerage by the end of the financial year. These debts stood at over £13.5m at the beginning of 2007/08 and £2.1m at the start of 2008/09.

Income and Expenditure has fluctuated over the year and whilst the forecast remains to achieve a surplus for the second year running, this is very much dependent on the recognition of the costs and fees associated with delivering the Trust’s outline business case for redevelopment, which was approved by NHS London in July 2008.

The expectation is that with NHS London’s recognition, the Trust will deliver its surplus target. In the event that a surplus is not achieved, a ‘weak’ score will be reported by the Audit Commission for its ALE assessment.

The financial pressures this year have been a result of capacity and the need to deliver the 18-week access targets. The Trust has made significant process with this performance target, but this has come at the expense of the private patient service, which has not delivered the financial and activity targets planned at the beginning of the year. This has partly been due to work being diverted away form private patient to NHS activity. The impact of this is particularly acute as NHS activity does not make the same level of contribution towards the surplus as private patient activity.

Spinal surgery activity continues to be an area of concern where the lack of capacity continues to lead to pressures on the 18-week target as well as the financial position. The Trust’s plans were to expand the service to meet demand, but due to national shortages of these highly specialised individuals, the Trust has had great difficulty recruiting an additional consultant for the service. This has led to continued pressures in delivering activity as well as meeting financial expectations, which remain highly sensitive to changes in the levels of work due to the high price each procedure attracts.

Other pressures during the year have included significant increase in costs for patients transport, drugs and utilities. Although some can be directly attributable to the increases in patient activity, such as drugs expenditure, in the main the Trust has incurred cost increases that were not planned for at the beginning of the year because at the time, these price and volume pressures were not expected when the plans were set at the beginning of the year.

The combination of managing these factors as well as the possibility of PCTs imposing 18-week fines on the Trust if performance cannot be maintained going forward, has led to a very challenging end to the financial year.

Summary of financial performance: high-level comparison between historical plan performance and actual performance £m 2008/09 plan 2008/09 forecast* Variance Income Clinical income (Tariff & Non- 69.0 70.9 1.9 Tariff) PbR Clawback 0.0 0.0 0.0 Private Patients 8.1 5.3 -2.7 Other income 6.8 7.6 0.8 Total income 83.8 83.8 0.0 Expenses Pay costs -44.0 -44.9 -0.9 Non-pay costs -34.3 -33.5 0.8 Other costs 0.0 0.0 0.0 Total costs -78.3 -78.4 -0.1 EBITDA 5.5 5.4 -0.1 Depreciation and Amortisation -2.9 -3.0 -0.1

of 35 Interest Receivable 0.1 0.1 0.0 Interest Payable -0.2 -0.1 0.1 PDC Dividend -2.0 -2.0 0.0 Net surplus/(deficit) 0.5 0.5 0.0 Net surplus/(deficit) excluding 0.5 0.5 0.0 impairments *Based on month 8 or 9 actual plus 4 or 3 months forecast initially

1.3. Other major performance issues

Other major performance issues The principles underpinning the core standards relating to healthcare environment mean that an ‘excellent’ quality rating will not be possible until estate redevelopment has been delivered. This is because two of the Healthcare Commission core standards relate to healthcare environment standards that cannot be achieved at Stanmore until the capital redevelopment has been completed.

The Trust has been implementing action plans to address the weak ratings received last year for Use of Resources and Quality of Services. The high priority issues in this action plan are detailed below.

Use of Resources

1. The Trust will have repaid all historic loans and brokerage by the end of the year. These debts stood at over £13.5m at the beginning of 2007/08 and £2.1m at the start of 2008/09.

Income and Expenditure run rate surplus continues to be achieved and the Trust is on track to deliver a surplus for the second year running. This is in line with the financial plan and will ensure that the Use of Resources rating improves from a ‘weak’ to at least a score of ‘fair’. The Trust is forecasting achievement of this surplus with the key risks being reduced private patient income and 18 week fines in the last quarter of the year if performance cannot be maintained.

Quality 2. Total cancelled operations (for non-clinical reasons) stand 142 (1.6%) (April – February 2009) since the ratings were published. Based on last year’s benchmark the Trust would need to get within 1.5% to avoid a fail’ on this indicator. Action plans continue to be implemented to resolve communication, list overbooking and equipment issues. The monthly trajectory performance targets for cancelled operations were not met in the first 6 months of the year. The Trust is targeting a reduction to 1.5% by the end of the year through reducing monthly calculations to less than 5 per month for the remainder of the year. This is a major risk. However, going forward the Trust plans to achieve a monthly run rate of less than 12 per month, which if sustained over the whole year would bring in % cancelled operations within 1.5% next year. 3. There have been no breaches of the cancelled operation 28 day guarantee target since the implementation of the new policy to seek private treatment for patients who cannot be brought back within 28 days onto NHS lists. There was one breach of this target in October before this policy had been implemented. The total for the year so far is 11 cases April – February 2009 compared to 15 in the whole of 2007/08. The main current concern is the total number of cancelled operations, described above, rather than the proportion of these not readmitted within 28 days. 4. There has been 1 spinal surgery breaches this year of the 26 weeks inpatient stage of treatment target. There was 1 non-spinal surgery breach earlier this year. The total of 2 breaches remains within the forecast overall tolerance applied last year of 0.03%. 5. 18 weeks a. Data completeness targets being achieved on monthly figures; b. 18 week performance currently 87% admitted 85% non-admitted (February 09). Excluding spinal surgery, performance against both would be 88%; c. Forecast 18 week admitted performance i.e. 90% is expected to be achieved and maintained in all areas except spinal surgery before the end of March 2009. Non- Admitted expected to be 91%-92% for non-spinal surgery;

of 35 d. Improvement above this will be determined by progress on spinal surgery capacity initiatives or alternative solutions.

6. Ethnic Coding – April 2008 to December 2009, performance was 88% compared to an internal target of 90%. A figure below 80% would have under achieved against this target last year. Whilst the ratings milestones are not known for 2008/09, we are targeting a continued increase to 95% by March to ensure that improvements continue.

Other 2008/09 issues that need to continue be monitored:

- Cancer waiting times (low volumes mean that if breaches occur these are likely to exceed tolerance levels).

- Delayed transfers of care (not a major issue historically but spinal cord injury unit delayed transfers are being kept under review to minimise occurrence).

The Trust ‘s excellent infection control track record has continued this year with zero MRSA cases this year and zero C-Diff cases so far.

of 35 2. Future business plans

2.1. Strategic overview

Strategic overview, incorporating turnaround and reconfiguration The key strategic objective over the period covered by this plan is to establish a secure future for the RNOH clinical model of care and maintain the reputation of these clinical services as a national centre of excellence.

To support this there are 4 key business planning objectives:

1. Delivering high quality specialist care that is accessible within the prevailing waiting time standards requested by our commissioning PCTs on behalf of their patients.

2. Delivering underlying financial stability to allow the Trust to achieve a surplus which will prepare us for the financial implications of any capital redevelopment initiatives agreed for future years.

3. Agreement of an approved redevelopment plan including procurement solutions to address the capital infrastructure issues facing the Trust.

4. Implementation of the Foundation Trust action plan to ensure the Trust is in a position to submit a viable application for FT status during 2009/10 (revised Monitor authorisation target 1st December 2009).

These objectives are underpinned by a range of specific themes: 1. Build on our success in areas such as wound infection and MRSA bacteraemia rates, which are amongst the lowest in the country.

2. Ensure the Trust meets all of the Healthcare Commission core standards and makes progress towards meeting its developmental standard.

3. Learn from feedback we get from our patients and in particular improve the patient experience by reducing waiting times and improving communication.

4. Capitalise on patient choice and the musculoskeletal framework to encourage patients needing complex orthopaedic surgery to demand access to a specialist hospital such as RNOH.

5. Reinforce the organisational values, ensuring that when we interact with patients, visitors and each other, we are open, honest and supportive. Respect both staff and patients and demonstrate trust and equality in our dealings with each other. Have a patient focus and demonstrate integrity, compassion and dignity: we are committed to excellence and high performance.

6. Continue to develop our networking with the other specialist orthopaedic providers, other London specialist hospitals such as Great Ormond Street and UCLH, locally with acute and community providers and more widely where we are able to offer our expertise to other providers.

7. Improve our productivity by implementing the 10 high impact changes, notably in the area of reduced length of stay and increased theatre utilisation.

8. Further develop and improve the management of the hospital and ensure that it performs in the top quartile for all targets.

9. Continue to work with DH on tariff proposals that adequately reflect the cost of complex orthopaedic treatment undertaken within RNOH.

10. Take forward the Trust’s business case for the redevelopment of the hospital so that patient care is undertaken in modern premises, to match the modern practices and clinical excellence

of 35 already in place.

11. Develop the hospital’s infrastructure, in particular implementing new IT systems to improve the delivery of patient care.

12. Ensure that our services continue to support and reflect the Trust’s teaching and research commitments, taking into account the use of new technologies.

13. Disseminate best practice in relation to complex orthopaedic surgery via our extensive teaching programme.

14. Employ translational research teams to provide a continuum from 'bench-based' research and development to new clinical treatments which will be supported by high quality scientific evidence for their effectiveness.

These initiatives are monitored through the RNOH’s Performance Management Framework – overseen by the Performance Committee on behalf of the Trust Board and reviewed in detail in monthly Clinical Directorate performance review against key performance indicators. High-level financial and investment implications of the proposed strategy The financial implications of the proposed strategy are focused within this plan on the following key areas:

1. Activity, Payments by Results and Local Price Agreement impact on income The strategy to continue to focus a high proportion of specialist work exposes the Trust to ongoing risk that PbR tariffs and locally agreed prices are not sufficiently developed to properly reflect complexity and thus the true cost of delivering services.

The RNOH continues work alongside the Specialist Orthopaedic Alliance, a number of other Spinal Injuries provider Trusts in the PbR Development Site initiative led by the South East Coast Specialist Commissioning Group as well as the Department of Health’s Payment by Results team.

Activity for 2009/10 is anticipated to grow by 5% in order to achieve the capacity required to deliver performance and financial targets. This is in line with previous years underlying growth and consistent with modelling to sustain 18-week access under current demand levels.

2. Cost and productivity improvements The Trust’s Cost Improvement Programme continues to implement the objectives of the turnaround initiative introduced 2 years ago. This sought to deliver the necessary productivity improvements to develop underlying financial resilience and deal with PbR tariff and locally agreed price risks to allow a firm basis for Foundation Trust status to be established.

In delivering the cost and productivity improvements, the Trust has adopted the following general principles:

a. Continue to deliver cost improvement initiatives that have been implemented and reduce timing delays for schemes being introduced so slippage is minimised;

b. Continue to review activity case mix and curtail activity where costs exceed income – this is linked to the RNOH Service Line Reporting project and Specialist Orthopaedic Alliance benchmarking work;

c. Clinical Workforce Review – shifting from non-income generating activity to clinical income generating activity. This will include:

 Confirmation that all clinical activity is captured;  Shifting from academic, training, education & research activities to clinical activities where teaching or research funding is not supporting these activities;

d. Increase income generating areas that make a positive contribution – again this is linked to the Service Line Reporting project and Specialist Orthopaedic Alliance benchmarking projects

e. Continue implementation of contracting, coding and costing strategy to protect income – this is supported by detailed work taking place with the Specialist Orthopaedic Alliance and DoH PbR team around Spinal Costing.

of 35 f. Find new areas of savings through service reconfiguration to continue to deliver the 18-week RTT programme, allow investment in the estate and deliver value for money for the Trust.

3. Service developments The revenue implications of capital investment including IMT and equipment have been incorporated in the plan. For 2009/10, the assumption is that £3million will be spent on the estate from internally generated funds and approximately £2.5million through a specific donation. Additionally, the new Bolsover Street outpatient facility becomes operational towards the end of the financial year allowing a highly specialised service to be provided from a central London location.

4. Impact of changes to the R&D funding environment The continued changes in R&D funding have led to £1.4million of lost income over the last 3- years. This represents almost 2% of turnover for the Trust. A Joint Academic Plan has been agreed with UCL and the expectation is that this lost fundintg will be replaced by grant income for specific research and development projects. Any failure to deliver the grant income to cover the fixed overheads costs, will be a call on the productivity improvements being made by the Trust.

2.2. Achievement of FT status

Actions identified to achieve FT status A revised timetable has been agreed by the Trust Board, which reflects the performance issues facing the Trust and the need to resolve these before proceeding with the application process. Work streams are focussed on:

 Delivering improved scores for ALE and the ‘use of resources’ as well as the Healthcare Commission’s assessment of the ‘quality of services’;

 Developing an affordable procurement option for the Stanmore redevelopment;

 Fully understanding and mitigating the financial impact of HRG version 4;

 Continue with its efforts to improve operational performance targets such as the 18 week referral to treatment access.

The expectation is that by December 2009, these issues will have been resolved, thus allowing the Trust to proceed with its application.

Progress to date The Trust has developed the following revised timetable with key milestones for achieving authorisation on the 1st December 2009:

Date Work Stream Action Notes Early May Review SHA start process Completed Early May Governance Trust check consultation document with Completed 08 DH May Governance Formal start of consultation Completed – Sept 07 5 May 08 Governance Start membership recruitment campaign Started July 07 – run in parallel with consultation and beyond Early May Strategy/Finance Initial briefing on financial model Completed 08 End May 08 Strategy/Finance First full LTFM/IBP submission Completed Week end 6 Review Meeting to give feedback on LTFM/IBP Completed June 08 June 08 Governance Trust Board observation Completed – Nov 08 Aug 08 Governance Trust completes consultation Completed – Sept 07 Jan/Feb 09 Governance Interviews: DH/SHA team

of 35 Date Work Stream Action Notes  Historic finance & LTFM update includes:  Risk management Simon Tanner  Int or Ext audit (clinical governance)  Chair of audit DR, DM, EE,  Clinical governance Others tbc  Dir of HR To include feedback to trust  1 x clinical directorate meeting Feb 09 Strategy/Finance Second full LTFM/IBP submission To commissioners as well as DH & SHA Feb 09 Governance DH/SHA meet commissioners to confirm Commissioner support Early Mar Review Provider Agency Board To give SHA support 09 (subject to B2B & HDD) Apr 09 Review SHA/Trust shadow B2B Apr 09 Review Meeting to give feedback on LTFM/IBP May 09 Strategy/Finance Trust completes final LTFM/IBP June 09 Review Trust board notes final LTFM/IBP July 09 Governance Historic due diligence begins Aug 09 Review HDD complete; SHA final support Aug 09 Review DH Applications Committee and Secretary of State Support Sep 09 Monitor Start of Monitor assessment process Sep 09 Monitor Working capital review and complete financial reporting procedures review from HDD Sep 09 Monitor Monitor’s assessment of IBP, LTFM Sep 09 Monitor Further requests for information Sep 09 Monitor Monitor interviews commissioners Sep 09 Monitor Monitor interviews Trust staff Sep 09 Monitor Monitor application of downside scenarios Sep 09 Monitor Trust identification of mitigation Oct 09 Monitor Monitor B2B Oct 09 Monitor Post-B2B resolution of issues Nov 09 Monitor Trust Board memorandum prepared and signed by board to Monitor Nov 09 Monitor Election of Governors Nov 09 Monitor Monitor decision Board 1 Dec 09 Monitor Authorisation Key outstanding actions and milestones for coming year The following issues represent the challenges the Trust needs to overcome if its Foundation Trust application is to be successful:

1. Delivery of 18 weeks access target and the capacity constraints the Trust works within. Ensuring the action plan is delivered to address this;

1. Although quantification of impact of 2009/10 national tariff changes is now almost completely understood (HRG4 grouper not yet released and therefore full impact still remains a risk), many highly specialised services will be outside tariff and these will require separate price negotiations with PCTs. The Trust’s reference costs remain the 2nd highest in the country under the new tariff structure and the impact of establishing prices for non-PBR work remains a risk which will require managing;

2. Continue to maximise the surplus by March 2009 and achieve the medium-term financial recovery plan;

3. Redevelopment financing uncertainty and affordability risk including impact of accounting changes under IFRS. Report and addendum produced for NHS London (December 2008 and February 2009) outlining redevelopment procurement options. Awaiting response and

of 35 indication of next steps;

4. Private Patient income cap - statutory requirement to restrict income to 2002/3 levels has now been achieved from 2009/10 onwards;

5. Membership numbers – currently 2,523 non-staff members (February 2009) needs to be increased to 3,000 through an expansion of membership campaign;

6. Trust Board development programme for Foundation Trust status. Implement Board Development plan agreed at Foundation Trust Project Steering Group including Board to Board practice days to review business units. Utilise further development support available from SHA. 2.3. Service and workforce development plans

Service development plans The key service development issue remains to ensure sufficient capacity exists within the Trust to meet the 18 week access and the implications of significant demand increases following free choice in orthopaedics from April 2008. The Trust is continuously reviewing requirements for additional capacity on-site and is in discussion with other NHS Trusts and independent sector hospitals regarding off-site options.

Workforce development plans The Trust has developed a Workforce Strategy document which sets out the very challenging agenda that faces the Trust in terms of the on-going management and deployment of its workforce. It has been produced to set out an overview of the work required and should be read as a high level strategic framework or plan to provide the workforce context for the Trust’s objective setting, business planning and service development work. The detailed actions required to achieve the goals set out are produced as part of annual objectives of the HR department and in the Trust’s annual corporate objectives as set out in the Trust’s business plan. Detailed work, targets and timescales are set out in specific action plans which support various specific initiatives.

The Trust Board will have the opportunity to monitor progress against the aims set out in this strategy via the regular HR reports to the Board and through the performance reviews and monitoring of corporate objectives.

The HR High Impact Changes form the basis of more detailed plans and specific work streams within HR, which will be developed to support workforce plans for the Trust’s redevelopment, service redesign, clinical systems improvement plans and the achievement of the Trust’s destination statements.

The Trust is employing additional doctors to reduce hours to 48. London Deanery has approved an additional 9 post at CT3 level, 7 of which will be used to convert current Trust Grade Doctors. SpRs are to introduce half-days or days-off with colleagues cross covering.

Comparison between historical achievement and current plan Clinical revenue £m Plan Forecast Current plan 2008/09 2008/09 2009/10 2010/11 2011/12 NHS Elective 52.5 54.0 57.7 59.4 61.2 Same Day 0.0 0.0 0.0 Non-elective 1.8 1.8 1.9 2.0 2.0 Outpatients 14.7 15.1 16.1 16.6 17.1 A&E 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 Non-NHS 8.1 5.3 6.1 6.3 6.4 Total 77.0 76.1 81.8 84.2 86.7 Page 12 of 35 Page 13 of 35 Activity numbers (000s) Plan Forecast Current plan 2008/09 2008/09 2009/10 2010/11 2011/12 Elective 9492 9742 10215 10389 10566 Same Day 0 0 0 Non-elective 342 342 359 365 371 Outpatients 69022 69022 72377 73607 74858 A&E 0 0 0 0 0

Assessment of financial impact of the new 2009/10 tariff and Market Forces Factor Under the sense check tariff, the RNOH was potentially losing £7.8million income, which represented 20% of PbR income or 9% of turnover. This was mitigated by additional income streams as a result of unbundling transport services and diagnostic imaging, leaving a net loss of £3.5million.

The road test tariff improved the situation slightly, but the Trust was still facing a loss of approximately £3.5million. Generally the Trust was losing on all categories of HRGv3.5 when these were mapped into the HRG v4 tariff with the exception of one HRG (Arthroscopies), which showed a minor gain. The vast majority of the loss arose because local prices had been agreed for spinal surgery in HRG v3.5, which were significantly higher than the equivalent in the HRG v4 tariff.

This could not have been picked up in national modelling as no information on local prices for PbR exclusions has been shared nationally. As a result, a proposal was put forward by the Trust and the Specialist Orthopaedic Alliance to the Department of Health, to remove complex spinal deformity work from the tariff and continue to separately commission these at local prices, thereby allowing a more reflective pricing mechanism to be agreed. This was finally agreed by the Department of Health and the Trust is currently in the process of agreeing local prices with its commissioners.

Consequently, the Trust is not planning to make a significant loss as a result of the introduction of HRG v.4 including the recent changes to the outpatient tariff.

Similarly, an assessment of the 2009-10 MFF impact was that the Trust would lose 3% of its income as a result of the introduction of the MFF changes. In financial terms this represented approximately £0.5m and had been presented in the earlier plan drafts as such. However, the recent tariff modelling has demonstrated that overall a gap of £0.1million is expected, which includes MFF, and so is no longer considered a significant risk.

It is important to note that these are not mitigated by gains in other HRGs and overall the tariff is not expected to significantly affect the financial position of the Trust.

2.4. Other Revenue

Comparison between historical achievement and current plan £m Plan Forecast Current plan 2008/09 2008/09 2009/10 2010/11 2011/12 Research and Development 0.9 1.1 0.9 0.9 0.9 Education and Training 2.0 2.3 2.5 2.5 2.6 PFI Specific 0.0 0.0 0.0 0.0 0.0 Other 3.7 4.0 4.3 3.7 3.7 Total 6.6 7.4 7.7 7.1 7.2

Commentary on any issues arising Two specific issues require attention:

of 35 1. Redevelopment - The Trust’s plans going forward anticipate central funding to cover redevelopment fees and costs on the back of the business case receiving Department of Health FBC approval. If this approval is not given, then the Trust does not plan to spend any more than the allocations is has identified above.

2. Research and Development - Up until two years ago, RNOH received around £2million per annum in Culyer R&D funding, of which about half was spent on academic activities and the balance to support clinical work. This provided a relatively uncontested source of money for research projects in the Trust and the Institute of Orthopaedics (UCL). This funding was an automatic annual allocation and has been rapidly phased out with all funds now held at national level.

Although there is now considerably more R&D funding available in the NHS as a whole, it has to be competed for among all specialities, through the various funding streams of the National Institute for Health Research (NIHR), the Research Councils and the charities. Competition is fierce and only the best-designed studies get funding. Successful applications tend to come from established teams of researchers and funding is deliberately being concentrated in larger centres. Furthermore, musculoskeletal research is not near the top of the national priority list, though this is improving slowly.

To manage this situation going forward, the Trust has developed the Joint Academic Plan. This defines the collaboration with the Institute of Orthopaedics (UCL) and the strategic plans to ensure funding is secured for future research and development through the new system. In the meantime, the Trust will continue to support the infrastructure costs with the prospect that the joint academic arrangements will deliver sufficient funding to cover these in future as well as meet the research and development expectations of the RNOH.

2.5. Operating resources required to deliver service development

Resources required to deliver service development In addition to the Stanmore redevelopment proposals, the Trust is looking to deliver the following projects during the year to increase capacity and enhance the patient environment:

Project: Date: 1. Theatre Refurbishment & Storeroom August – October 2009 2. Relocation of limb fitting services and non-clinical August 2009 support services out of current outpatient building 3. New Outpatient Facility - Bolsover Street Opening December 2009 4. Stanmore Outpatients refurbishment Start January 2010

The total capital investment on these schemes is expected to be in the region of £3million next year.

Within this, the underlying plan is to increase capacity by at least 5% on the 2008/09 activity outturn. This increase in capacity will meet the underlying referral pattern, which has seen a year-on-year growth of a similar scale in previous years. Meeting these anticipated activity increases will only be achieved by growing capacity, which the planned refurbishment and commissioning of one of the Trust’s theatres and the reconfiguration of the Stanmore outpatient facility will deliver. The outpatient plans include an increase in the number of clinic rooms to allow a greater number of patients to be seen as well as an expansion and reorganisation of pre-operative assessments to ensure inpatient services benefit from a more effective system.

The plan is to fund the reconfiguration and building of a new theatre store through the Trust’s capital programme and internal cash resources for the year. This has been estimated to be in the region of £3million and it is therefore paramount the Trust ensures it delivers its cash targets for 2008/09 as well as going forward. At present it is very difficult to secure public capital investment, so without the

of 35 cash, these schemes cannot go ahead. This would have a significant and detrimental effect on both the Trust’s financial and operational plans.

Furthermore, the capacity plans also rely on the recruitment of appropriate staff. To this end, the Trust has endeavoured to seek new ways of recruiting and retaining staff. For example, a recruitment campaign was run in Portugal tor theatre staff, which proved both operationally and financially successful. Another example of where the Trust has sought to attract high calibre staff was with the recent recruitment of 2 new spinal consultant surgeons (one permanent and one locum). Due to their very high levels of specialism, these posts are normally very difficult to fill, so finding 2 will place the Trust in a strong position going forward, with capacity issues within this speciality.

Other areas of capacity expansion include the recruitment of a new shoulder consultant, continued partnership working with local private sector providers and exploring the possibility of using other organisations facilities with our consultants input, to meet activity demands. Discussions have begun with other Trusts and independent sector hospitals on this matter.

Comparison between historic achievement and current plan Operating expenses* £m Plan Forecast Current plan 2008/09 2008/09 2009/10 2010/11 2011/12 Pay costs 44.0 44.9 47.5 48.2 48.9 Drug costs 1.8 1.8 1.9 2.0 2.0 Clinical supplies and services 18.8 18.8 19.6 20.2 20.8 costs PFI specific costs 1.0 0.5 0.0 0.0 0.0 Other operating costs 12.3 12.4 13.5 13.9 14.0 Contingency reserve 0.4 0.5 0.5 0.5 Total Operating Expenses 78.3 78.4 83.0 84.6 86.2 * This section of the table for the analysis of operating expenses is based on the items relevant to an acute trust. Please use the appropriate items for analysis of operating expenses for your trust type, changing headings where needed Cost Improvement Plans Cost Consultancy fees 0.1 0.0 0.1 0.0 0.0 Reduction Procurement - 0.6 0.5 0.5 0.4 0.4 Plans prostheses Procurement - 0.4 0.4 0.0 0.4 0.4 medical supplies Procurement - 0.1 0.0 0.0 0.0 0.0 other non-pay Leasing 0.1 0.0 0.2 0.0 0.0 arrangements A&C/snr mgr 0.2 0.2 0.3 0.2 0.2 staffing savings Nursing savings - 0.2 0.0 0.0 0.0 0.0 revised rotas ST&T savings 0.2 0.0 0.0 0.0 0.0 Patient transport - 0.0 0.0 0.1 0.0 0.0 re-tendering Agency savings 0.2 0.0 0.6 0.0 0.0

Depreciation 0.0 0.0 0.0 0.5 0.0 reduction - West End land sale

of 35 Other pay and 0.2 1.7 0.0 0.7 1.2 non-pay savings - aggregate - Income Additional MPET 0.0 0.0 0.1 0.0 0.0 increases funding for junior (no cost doctors increase) - Neurophysiologists 0.0 0.0 0.1 0.0 0.0 Contributions - recharges to non- from NHS providers additional Repatriate out- 0.0 0.0 0.3 0.0 0.0 income(net sourced NHS in- of cost patient activity increases) Additional NHS 0.0 0.0 1.2 1.0 1.0 activity Additional Private 0.0 0.0 0.1 0.1 patient activity Total 2.3 2.8 3.5 3.3 3.3 Commentary on cost improvement plans The Trust’s Cost Improvement Programme continues to implement the objectives of the internal Turnaround project launched in 2006. The objectives remain to ensure the Trust delivered the necessary productivity improvements to restore underlying financial stability, deal with PbR tariff risks and establish a firm foundation for Foundation Trust status. The RNOH Turnaround initiative has 6 major themes supported by a detailed action plan with Executive Director leads and delivery timescales, which the Board agreed. These are:

1. Accelerate and deliver cost improvement initiatives that are already being implemented and minimise timing delays that cause slippage in achieving financial benefits;

2. Continue to review activity case mix and curtail activity where costs exceed income – this is linked to the RNOH Service Line Reporting project and Specialist Orthopaedic Alliance benchmarking work;

3. Clinical Workforce Review – shifting from non-income generating activity to clinical income generating activity. This will include a. Confirmation that all clinical activity is captured b. Shifting from academic, training, education & research activities to clinical activities where teaching or research funding is not supporting these activities

4. Increase income generating areas that make a positive contribution – again this is linked to the Service Line Reporting project and Specialist Orthopaedic Alliance benchmarking projects;

5. Continue implementation of contracting, coding and costing strategy to protect income – this is supported by detailed work taking place with the Specialist Orthopaedic Alliance and DoH PbR team which has already mitigated a significant proportion of potential losses facing the Trust in 2008/09;

6. Find new areas of savings through service reconfiguration (set in the context of all of the above and including the 18week access programme).

2.6. Summary Financial Plans

Comparison between historical achievement and current plan £m Plan Forecast Current plan 2008/09 2008/08 2009/10 2010/11 2011/12 Total Operating Revenue 83.8 83.8 89.8 91.6 94.2

of 35 Total Operating Expenses -78.3 -78.4 -83.0 -84.6 -86.2 EBITDA 5.5 5.5 6.9 7.0 8.0 Profit/(Loss) on asset disposal 0.0 0.0 0.0 0.0 0.0 Impairments 0.0 0.0 -0.5 -6.2 0.0 Depreciation and amortisation -2.9 -3.0 -3.3 -2.9 -2.8 Interest Receivable 0.1 0.1 0.0 0.1 0.2 Interest Payable -0.2 -0.1 0.0 0.0 0.0 PDC dividend -2.0 -2.0 -2.1 -2.1 -2.0 Other Non-operating Revenue 0.0 0.0 0.0 0.0 0.0 Other Non-operating Costs 0.0 0.0 0.0 0.0 0.0 Net Surplus (Deficit) 0.5 0.5 1.0 -4.2 3.4 Net Surplus (Deficit) excluding 0.5 0.5 1.1 2.0 3.4 impairments

Commentary on issues arising Although the Trust is planning to deliver a £1million net surplus, an EBITDA of 6.7%, and an overall risk rating score of 3 for next year, this is not without difficulty and risk. The main issues facing the Trust in 2009/10 are as follows:

1. Refurbishment and commissioning of theatre to increase capacity. An option appraisal was undertaken to decide between a new modular theatre and refurbishment of an existing non- compliant one. The financial appraisal demonstrated that the refurbishment option was a more cost effective solution, however there will be an impact on theatre activity due to health and safely regulations that will affect the number of operations that can be undertaken in the adjoining theatre during building work;

2. Redeveloping and reconfiguring elements of the Stanmore site to increase capacity. This is being achieved by building a new theatre store for prosthetics and supplies to allow the existing decommissioned theatre to be decanted (currently being used as the store), upgraded and brought back into use. The expectation is that the new spinal surgical consultant, who is due to start in June 2009, will have access to these theatre lists thus increasing activity and improving performance measures for this speciality. The plans also include the reconfiguration of outpatients to allow more clinics and a better pre-operative assessment facility to be provided. The costs of these proposals are planned to be met from internal cash resources and is dependent on meeting the financial duties for 2008/09 as well as delivering the expected activity growth in order to continue to service the capital programme;

3. The opening of the new Bolsover Street outpatient facility and the move from the old building. In addition to the operational risks of the move, the Trust will need to ensure that the new facilities deliver the efficient services required to meet the increased levels of capacity from a smaller building;

4. CNST premiums have increased by approximately £0.6million for the Trust. This has been challenged and confirmation of the discount is still to follow. Putting aside the discount, this level of increase is simply not affordable and places a great financial burden on the Trust;

5. The Trust has seen a significant increase in the cost of utilities during the year. At present, the budgetary pressure is running at approximately £0.5million over existing resources and the expectation is that this will not improve before year-end. Unless a significant price reduction is introduced in the immediate future, this cost pressure will require funding which will add further to the Trust’s financial difficulties;

6. Agenda for change assimilation for contracted out staff has not been agreed between the Trust and its supplier. There is growing pressure to come to an agreement, but the Trust is resisting on the basis that it cannot afford it. This is a risky strategy and will require some compromise, which will be an offer considerably less than the £0.7m the supplier is requesting;

of 35 7. The sensitivities of specialist orthopaedic work, particularly in spinal surgery where a lack of resilience not only affects how the service operates, but can have a hugely detrimental effect on the Trust’s finances when activity levels drop.

Assessment of the impact of IFRS The first formal submission in the transition to IFRS was of the restated balance sheet as at 31 March 2008 to NHS London and DH. This was scheduled for 31 December and the Trust submission was in good time on 29 December.

There are three areas where changes were made to the balance sheet prepared under UK GAAP principles. These are: bringing those leases reclassified as finance leases onto the balance sheet; accruing for the value of staff annual leave entitlements not taken at 31 March 2008; and changes to the disclosure of some assets and liabilities eg provisions. In the following areas, the Trust made no changes, although it had been thought probable or possible that changes would be required: segmental reporting; financial instruments,

Leases. The Trust’s lease advisors’ review of the lease portfolio determined that fifteen of the thirty- eight leases which were current at 31 March 2008 should be treated as finance leases under IFRS and brought onto the balance sheet. Calculations had then to be undertaken retrospectively on these to their inception date. The capitalised value of these finance leases was £2.8m, but as most of these leases were coming to the end of their terms, the net addition to property, plant and equipment (fixed assets under UK GAAP) is only £600k. This is offset by a finance lease liability, so that the net effect on total assets less liabilities is minimal. The depreciation of these finance leases reduced the value of the retained earnings reserve by £85k – this is the cumulative additional charge which would have been made to the I/E if these leases had been capitalised from inception.

Annual leave accrual. A sample of annual leave entitlements carried forward at 31 March 2008 by all staff groups was extrapolated and evaluated to calculate its cost. This resulted in a reduction of £289k to the Trust’s retained earnings reserve. It is not expected that the accrual for annual leave entitlements carried forward at 31 March 2009 will be greater than this figure and that there will be no accrual required at the end of 2009/10 as the discretion to carry leave forward has been withdrawn.

The other changes made to the balance sheet relate to the reclassification of current assets and liabilities to conform with the changes required by IFRS. In particular, provisions are now included with other current and non-current liabilities.

A schedule of the movements on the balance sheet between UK GAAP And IFRS is attached hereto as an appendix.

Planning 2009/10 and beyond under IFRS

The Trust’s 2008/09 accounts will be drawn up and audited under UK GAAP. These are to be restated under IFRS and the restated accounts audited in September 2009.

Financial plans for 2009/10 and beyond for submission to the NHSL Provider Agency and DH are required to be prepared in accordance with IFRS. The first submission to the NHSL Provider Agency is due on 19 January 2009.

From 1 April 2009, the Trust has to compile its accounts under IFRS principles. As reported at the Trust’s October 2009 Audit Committee, the Trust has a plan in place for the implementation of IFRS.

2.7. Service Line Management

Progress to date on implementation of service line management and key milestones for 2009/10 The Trust has had to develop a clear understanding of the impact of the payment by results funding system on its income relative to the cost of the services that are provided. Alongside the Specialist Orthopaedic Alliance, we have carried out independent reviews of our costing systems and the Department of Health has placed reliance on the information we have generated in agreeing changes to the national tariff structure – for example in agreeing to exclude key services such as bone tumour surgery (a nationally commissioned service through the London Specialised Commissioning Group), spinal surgery, soft tissue sarcoma, shoulder surgery and spinal injuries from the national tariff to allow the Trust to negotiate more representative “local” prices with PCTs. This work is, however, largely based on historical estimates and sample based costing. We recognise that we have not yet

of 35 fully embraced the concept of dividing our services into “business units” and our information systems are not robust enough to assign income and costs to individual patients on a regular “real time” basis.

Our current position on Service Line Reporting is as follows:

 We have agreed the Trust’s service lines (the clinical units or “sub specialties” that are used throughout this business plan to describe our services and are reflected in the Trust’s management structure)  We have robust systems to allocate income to each of these service lines  We can estimate direct, indirect and overhead cost allocations to each of these service lines  We can estimate patient level costs based on apportionment sample estimates  We have a patient level costing system and is in the process of being fully operational during 2009/10. Although we have some systems in place to allow us to develop more accurate cost allocation, we need to ensure these are producing accurate “real time” information to allow better patient level cost allocation for prostheses, drugs and theatre time. Based on our current finance and information systems, this work has highlighted our key issues, by service line:

 Revision hip and knee surgery – we have agreed additional funding in our contracts with PCTs for custom-made prostheses costs that exceed the national average and, as a result of this, can now demonstrate that growth in this service provides a positive financial contribution  Bone tumour surgery – we have agreed a specialist tariff with NSCAG (now devolved to the London Specialist Commissioning Group) for bone tumour services that will ensure growth provides a positive financial contribution  Soft tissue sarcoma surgery – this service used up c£1.5m of our historic transitional funding. For 2008/9 we have agreed local prices outside of tariff with PCTs to offset this loss. The impact of HRG v4 for 2009/10 is being evaluated.  Shoulder and elbow surgery has required a transitional funding subsidy of c£0.5m under the national tariff but DH have agreed to exclude HRG H07 to allow this to be reflected in local prices agreed with PCTs.  Foot and ankle surgery – further work is needed to ensure this highly specialist but relatively small service attracts appropriate specialist top-up funding to ensure this service makes a positive financial contribution as it grows  Spinal surgery – this is the Trust’s largest service in terms of income. Overall this service has made a small positive financial contribution. However this has been made up of a large contribution from one HRG (R10 – Scoliosis surgery) offset by a large loss on the other major procedure grouping (HRG R03) which made up £1.5m of our transitional funding. The DH have now agreed to exclude this HRG from tariff and the Trust is negotiating local prices with PCTs to offset these losses  Spinal injuries treatment – this service is excluded from tariff and the Trust is working with commissioners nationally in setting a tariff which reflects the complex long stay nature of the work that we provide. Whilst the current price structure adequately reflects costs, there is a longer term (3 year) risk that the Trust’s model of care is not reflected in new national price structures agreed by commissioners. However we are a key partner in the PbR development site work that is going on in this area.  Peripheral nerve injury treatment – further work is needed to ensure this highly specialist but relatively small service attracts appropriate specialist top-up funding to ensure this service makes a positive financial contribution as it grows  Medicine and rehabilitation, including active back programme and pain control – local tariffs excluded from the national tariff have been agreed for rehabilitation services that currently make a positive financial contribution and pain services are low cost compared to national tariff General issues  Where services are excluded from tariff, the Trust has been successful in negotiating prices that adequately reflect current costs and allowed the Trust to negotiate funding to sustain and develop these services  Outpatients - the Trust has a high ratio for follow-ups and a high level of imaging per attendance – this has contributed to outpatients requiring £1.3m transitional funding historically and hence

of 35 reduced follow-up rates is a key element of the Clinical Systems Improvement Plan  Critical care – the Trust has agreed a local daily rate tariff that adequately reflects cost – increasing occupancy levels would provide a positive contribution to the Trust’s financial position under this tariff.

2.8. Investment and disposal strategy

Plans for investment and disposal The Trust received approval of its outline business case for redevelopment of the main Stanmore site by NHS London’s Capital Investment Committee in July 2008. The Trust is now working with NHS London & the Department of Health to find a viable procurement solution for the business case as the finance options available to the Trust are very limited.

The plan still remains for the main hospital rebuild to begin in 2012. The proposal is that a significant proportion of the site (60%) will be sold and the funds from the sale contribute towards the redevelopment of the remaining 40%. The capital investment required to deliver the redevelopment after land sales is £143million. Whilst work on the disposal programme would begin following Full Business Case approval, it is unlikely these would be completed within the 3 years covered by this plan or that the price stays as it is currently forecast. The impact of the disposals and the investment in the Stanmore site are covered within the Trust’s Long Term Financial Model and OBC financial model, although these have recently been amended to take into account the additional financial modelling NHS London has requested as part of an addendum.

The Bolsover Street site development remains on target and will be ready in December 2009.

Other key elements of the Trust’s 2009/10 – 2011/12 capital programme include:

 Ronald McDonald Children Charity House Parent & Child Accommodation: Estimated start June 2009;

 Theatre Refurbishment & Storeroom : August – October 2009;

 Relocation of limb fitting services and non-clinical support services out of current outpatient building: August 2009;

 Out patients refurbishment: start January 2010;

 Remodelling of Institute of Orthopaedics to incorporate Biomedical Engineering currently located on proposed west end land sale.

These projects are supported by an Estates Strategy and equipment replacement programme. Investment in IM&T included in the plan is consistent with the Trust’s IM&T strategy.

Comparison between historic achievement and current plan Investment and disposal strategy £m Plan Forecast Current plan 2008/09 2008/09 2009/10 2010/11 2011/12 Investment in fixed assets 0.4 0.4 3.6* 0.4 0.4 (non-maintenance) Investment in fixed assets 1.2 1.2 0.7 1.2 1.2 (maintenance) Asset disposals 0.0 0.0 0.0 21.0 0.0 Donated investment -outpatients 0.0 0.0 0.7 2.5 0.0 refurbishment Bolsover & Stanmore *Decontamination investment of £1.2million in DoH assumptions. Trust to decide future TSSU model over coming months.

of 35 2.9. Summary of key financial assumptions

Key assumptions The Key financial assumptions within the plans that require further attention include:

1. Marginal impact of HRG version 4 and MFF. However, risk of local price negotiations for activity removed from PBR. This could still create a significant financial problem if the correct prices cannot be agreed with commissioners. Discussions have begun with the expectation that these will be concluded in time for contract sign-off by the revised dates in March 2009.

1. Private Patient income forecasts capped to meet Monitor thresholds – resulted in 10% plan reduction;

2. Planned increases to NHS income and activity (5%) through developed capacity proposals. For example, refurbishment of decommissioned theatre to make it compliant and useable. The PCTs have still to agree to the increased activity proposals which will not only impact on the deliverability of financial plans, but may impact on achievement of access targets;

3. FBC approval for business case and access to financial support with fees and costs in developing and finalising plans.

4. R&D income loss £0.7m 2009/10 leaving zero non-grant funded R&D in 2010/11;

5. Bolsover Street site development lease back commences August 2009.

of 35 3. Risk analysis

3.1Financial risk

3.1.1 Commentary on financial risk rating

Financial commentary 2009/10 is a particularly challenging year for delivering the income and expenditure target given the level of PbR changes. Furthermore, reductions in the contributions from Private Patient and R&D income, on top of the generic requirement for a significant efficiency gain, leaves the Trust with another year of challenging efficiency targets. Nevertheless, a net surplus has been indentified and although a larger surplus would have been preferable, any higher than the £1million indicated in the plan would not be deemed realistic to deliver.

The overall planned financial risk rating, as measured by the NHS London Provider Agency risk metrics indicators is planned at a 3. The main driver going forward remains the need to improve the liquidity ratio, which will only be achieved once the Trust generates surpluses to replenish working capital shortfalls incurred when the Trust reported deficits between 2004/05 and 2006/07.

The key financial risks can be summarised as follows:

1. Impact of PbR under HRG version 4 and local prices including plans to manage adverse case mix growth prior to resolving tariff issues; 2. Delivery of Cost Improvement Programme targets; 3. Delivery of expenditure reductions or grant generation to offset R&D Income losses; 4. Fines arising from non-delivery of 18 week access time targets.

3.1.2. Key risks and opportunities not included in financial plans

of 35 Financial commentary Key risks:  Resolving HRGv4 tariff grouper issues and negotiating local prices within 2009/10 contracts for all non-PBR activity. Final local price and contract agreement impacts not reflected in plans as negotiations still ongoing. Bases on prevous years modelling and experience, the assumption is that income and activity growth will be in the region of 5%.

 Private Patient income forecasts capped to meet Monitor thresholds, resulting in a 10% plan reduction. This will be mitigated through a pricing strategy supporting the proposed new Private Paediatric unit;

 Planned increases to NHS activity through developed capacity proposals. For example, refurbishment of an existing theatre, pre-operative assessments and new consultant posts. The expectation is that the capacity increases will allow delivery of the 18-week target to be achieved as well as promote choose and book initiatives;

 Procurement options for redevelopment remain unclear and the Trust continues to incur costs on professional fees, for which no corresponding funding has been identified. Although a solution is being agreed with NHS London for 2008/09;

 Plans to manage adverse case mix growth through identifying additional capacity to spread risk;

 Increased contribution from extra capacity initiatives e.g. theatre and outpatient expansion;

 Unavoidable cost pressures over and above generic funding, e.g. CNST premium increase, as well as risks around the delivery of 2009/10 – 2010/12 CIP strategy;

 New Bolsover Street Outpatient Department revenue implications;

 Delivery of expenditure reductions or grant generation to offset R&D Income losses;

 Fines arising from non-delivery of 18 week access time targets. 3.1.2 Contingency reserve 2009/10

Commentary justifying level of contingency A 1% contingency reserve exists within the baseline position. This equates to a value of almost £1million.

The expectation is that this reserve will be reviewed once a clearer idea of the financial position has been developed through confirmation of the HRG4 tariff and grouper and the local price agreements the Trust will need to negotiate before the start of the new financial year.

3.2Governance risk

3.2.1 Commentary on governance and associated risks

Governance commentary

Continued implementation of the Board development programme and especially in respect of preparing for Foundation Trust status. The programme includes:

 Supporting the Trust in preparing for the assessment by Monitor prior to being authorised to become an Foundation Trust;

 Ensure that the Board performs its functions effectively and is fit for purpose as a Foundation Trust; Page 24 of 35  Assist Board members in fully performing their corporate, individual roles and responsibilities as part of the Board of Directors;

 The programme will be delivered through a range of activities that build on the time allocated for development sessions. The sessions will focus on the following 3 themes:

a. Working effectively as a Board;

b. Fit for Foundation Trust status;

c. Knowledge and skills development.

3.3Risk to services provided

3.3.1 Commentary on services provided and associated risks

Commentary on services provided The Trust assigns service risks to a risk register and risk classification matrix – full details are held within the RNOH assurance framework.

The key themes within each risk register relate to:

1. Estates Lack of capital investment to improve:

a. The environment b. Health and safety c. Investment required to sustain business activity d. Energy measures e. Risk management f. Fire precautions.

2. Finance To achieve financial balance and maintain liquidity.

3. Operations The achievement of full compliance with the national waiting list targets.

4. IM&T Develop and implement a cohesive and integrated IM&T Strategy.

5. Re-Development Redevelopment of the RNOH Stanmore campus to provide a modern healthcare building.

6. Clinical Risk / Clinical Governance Relates to the maintenance and development of patient safety initiatives

Links Between The Assurance Framework And Risk Register These principle objectives link into the Corporate Risk Register, where the risks associated with achieving each of these objectives are detailed in more depth in the risk register.

Estates: Lack of capital investment is hindering the Trust in providing a safe and fully compliant environment.

Finance: Financial pressure has been caused by historic deficits and PbR. Financial procedures, policies and systems of work require reviewing, implementing and monitoring.

IM&T: IT systems and processes require reviewing and updating. As systems are implemented they must be Page 25 of 35 supported by appropriate monitoring and review mechanisms.

3.4Quality and safety risk

3.4.1 Commentary on quality and safety performance and associated risks

For all Acute Trusts:

Progress to date and key actions and milestones in 2009/10 to improve Healthcare Commission Annual Health Check rating (include prediction for 2008/09 and 2009/10)

2008/09 Quality of Services: Fair (with risk that cancelled operations and 18 week performance not delivered) 2009/10 Quality of Services prediction : Fair Key issues 7. Total cancelled operations (for non-clinical reasons) stand 142 (1.6%) (April – February 2009) since the ratings were published. Based on last year’s benchmark the Trust would need to get within 1.5% to avoid a fail’ on this indicator. Action plans continue to be implemented to resolve communication, list overbooking and equipment issues. The monthly trajectory performance targets for cancelled operations were not met in the first 6 months of the year. The Trust is targeting a reduction to 1.5% by the end of the year through reducing monthly calculations to less than 5 per month for the remainder of the year. This is a major risk. However, going forward the Trust plans to achieve a monthly run rate of less than 12 per month, which if sustained over the whole year would bring in % cancelled operations within 1.5% next year. 8. There have been no breaches of the cancelled operation 28 day guarantee target since the implementation of the new policy to seek private treatment for patients who cannot be brought back within 28 days onto NHS lists. There was one breach of this target in October before this policy had been implemented. The total for the year so far is 11 cases April – February 2009 compared to 15 in the whole of 2007/08. The main current concern is the total number of cancelled operations, described above, rather than the proportion of these not readmitted within 28 days. 9. There has been 1 spinal surgery breaches this year of the 26 weeks inpatient stage of treatment target. There was 1 non-spinal surgery breach earlier this year. The total of 2 breaches remains within the forecast overall tolerance applied last year of 0.03%. 10. 18 weeks e. Data completeness targets being achieved on monthly figures; f. 18 week performance currently 87% admitted 85% non-admitted (February 09). Excluding spinal surgery, performance against both would be 88%; g. Forecast 18 week admitted performance i.e. 90% is expected to be achieved and maintained in all areas except spinal surgery before the end of March 2009. Non- Admitted expected to be 91%-92% for non-spinal surgery; h. Improvement above this will be determined by progress on spinal surgery capacity initiatives or alternative solutions.

11. Ethnic Coding – April 2008 to February 2009 performance was 88% compared to an internal target of 90%. A figure below 80% would have under achieved against this target last year. Whilst the ratings milestones are not known for 2008/09, we are targeting a continued increase to 95% by March to ensure that improvements continue.

 Other 2008/09 issues that need to continue be monitored:

a. Cancer waiting times (low volumes mean that if breaches occur these are likely to exceed tolerance levels). b. Delayed transfers of care (not a major issue historically but spinal cord injury unit delayed transfers are being kept under review to minimise occurrence).

Progress to date and key actions and milestones in 2009/10 to sustain delivery of 18-week maximum wait RTT, including maximum wait of 13 weeks for outpatients 26 weeks for inpatients

of 35 Progress to date:

 In January 2009 the Trust achieved a performance level of 89% for admitted pathways, despite the known issues concerning capacity for spinal surgery. Whilst this may not be fully sustained across all clinical units, RNOH expects to deliver 90% performance aggregated across the other units.

 Non-admitted performance in January remained below the target of 95%, but the aggregated performance of all units except spinal surgery was 95%.

 Our aim has always been to achieve required performance across all units, key actions to do so outlined below

 Apart from spinal surgery, there are risks to delivery of the target in urology (for spinal cord injury patients) and shoulder surgery.

 During 2008/09 the independent sector was engaged to treat 200 patients for primary joint replacement and therapeutic arthroscopes. A small number of shoulder cases was also undertaken. This enabled clearance of 18 week backlog.

 Additional work outside job plan for varying rates has been in place for several months and this will continue. In particular to reduce the risk of 26 week breaches in spinal surgery.

 The following permanent roles have been established to support the delivery of 18 weeks: 1 x 18 week programme manager (senior management post); 2 x RTT pathway co-ordinators/data quality co-ordinators; 2 x 18 week data validation clerks; 1 x MDS co-ordinator; 1 x clinical pathway facilitator.

 In addition the Trust already has a well-established centralised booking function which deals with outpatient appointments and inpatient scheduling for almost all our patients. The Access, Booking and Choice Policy has been comprehensively revised in line with DH/IST guidance and relevant staff fully trained and supported in its implementation.

 Rigorous systems for chasing unknown clock starts have been implemented. This has successfully reduced unknown clock starts to the lowest level possible as referring secondary providers still do not currently forward the mandatory MDS when care is transferred to RNOH.

 An electronic 18 week PTL has been implemented to enable the management of the 18 week pathways. Rigorous data cleansing over several months has brought the data quality of the PTL to a good standard. There is a long established weekly meeting of relevant staff chaired by the Director of Operations to manage and monitor the PTL. This meeting now manages 18 week pathways, monitors stages of treatment and cancelled operations for all units each week. There is an additional weekly meeting to track spinal surgical referrals due to the extreme pressure on the waiting list and plan. Additional capacity is delivered whenever possible.

 A comprehensive demand and capacity analysis has been conducted for all units which has established that referrals for all major units has increased by at least 25% and up to 40% across the Trust.

 2 spinal surgeons (1 degenerative spine, 1 spinal deformity) have been appointed and start in February and July 2009 respectively.

 Referral criteria have been developed, agreed with host PCT and applied for spinal surgery and young adult hip service.

Establishing appropriate capacity in terms of both workforce and physical clinical space is therefore key to achieving and sustaining delivery of the 18 week wait and access targets.

The Trust will also build on and extend further the robust systems and processes required to manage patient pathways to 18 week maximum wait.

of 35 Key actions for 2009/10

 Additional theatre to be brought into use in late summer early autumn 2009.

 Expanded facility for pre-operative assessment from May 2009.

 Start of refurbishment project for outpatient department in Stanmore which will give improved and more efficient clinical adjacencies and much improved patient experience.

 Recruitment of shoulder surgeon and additional extended scope physiotherapist and possibly a fellow to extend and flex capacity. Due to complete June/July 2009.

 Business case for additional 0.5 consultant urologist (joint appointment with UCLH) due for approval February/March 2009 with appointment shortly after. Additional lists for minor cases in interim.

 Locum consultant and fellow for joint reconstruction to complete by end March 2009.

 Extended MDT (physiotherapists and clinical nurse specialists) for spinal surgery by June/July 2009.

 Fellow/consultant for young adult hip service within paediatric surgery unit.

 Robust management of patient pathway following first outpatient appointment via:

a. patient pathway protocols and direct booking of diagnostic and follow up appointments on first visit;

b. reduction of imaging waits to 1 week and reporting to 1 week by May 2009;

c. exception reporting and management of pathways by RTT pathway co-ordinators to monitor and manage 18 week pathways from first outpatient appointment to non- admitted treatment or listing for surgery.

Implementation of above has commenced and will become embedded and established processes. The independent sector will be used to sustain performance if necessary for primary hips and knees and for shoulder surgery if the price and quality of service meets the Trust’s expectations.

There may be scope to contract Independent sector for spinal surgery to help reduce the spinal backlog. The Trust is also exploring the use of locums and alternative NHS capacity (although this has not been successful in the past) and has opened discussions with centres in Europe. Progress to date and key actions and milestones in 2009/10 to sustain delivery of 4 hour maximum wait in A&E N/A Progress to date and key actions and milestones in 2009/10 to deliver maximum wait of 31 days from diagnosis to treatment and 62 days from urgent referral to treatment for all cancers and 2 weeks from urgent GP referral to first outpatient appointment for all urgent suspect cancer referrals (including recent changes to target as outlined in letter from Mike Richards)  From the 1st January 2009 the Trust has completed the weekly PTL; the existing manual monitoring system used by the MDT Coordinator has been expanded to include subsequent treatments and recurrence. Consultant upgrades are also included and monitored in the same way, weekly.

 From February, cancer patients have been included on the RNOH 18 week PTL.

 In March 2009 the existing manual monitoring system used by the MDT Coordinator will be replaced by Infoflex (an IT Database system), this will allow future reporting to be submitted electronically.

 From March 2009 the administrative team that support the MDT will be expanded to include an additional MDT Coordinator and an additional MDT Assistant. Job profiles have also been revised to include the chasing of MDS clock information to ensure waiting times can be Page 28 of 35 monitored effectively.

 Referral information has been available online via a website londonsarcoma.org.

 Clear responsibility and accountability is in place at each level and an escalation process is in place via the General Manager and Executive Lead to resolve waiting time issues.

 A joint RNOH/UCLH Sarcoma executive meeting takes place each month to discuss/resolve service issues and plan future service developments.

 Following the annual Sarcoma away-day in March 2009 a work programme for 2009/10 will be compiled to include:

a. Service Improvement & Development b. Patient Carer and Feedback c. Audit d. Research

 An Annual Report for 2008/9 will be available in May 2009 which will include waiting time information. Progress to date and key actions and milestones in 2009/10 to minimise delayed transfers of care N/A Progress to date and key actions and milestones in 2009/10 to deliver a reduction in cancelled operations Cancelled Operations: There has been significant work undertaken on reducing the number of cancelled operations. This work has been targeted at several aspects of the patient’s pathway and has resulted in the booking of the lists being tightened up, ensuring anaesthetic time is incorporated at the point of booking lists and ensuring teams are made aware of over-booked lists with time to change/ reduce as necessary.

The pathway from ward through theatres and back to the wards has been reviewed and key bottleneck areas are being acted upon to reduce problems. For example, additional portering has been put into times of highest demand.

Improving pre-operative assessment and screening has reduced the number of cancellations by ensuring patients have been appropriately pre-treated and understand their role in their care. Extending pre-operative assessment further will continue from May 2009 by expanding resources dedicated to this.

Ward availability, specifically ITU bed requirements on busiest days, is routinely reviewed and there is weekly communication between schedulers and the ITU manager to ensure flow after the operations is possible.

Improved communication with key Trust individuals (including clinicians) to improve understanding of what it means and why it is a target has enabled a better ownership of the booking and running of lists.

When there is a need to cancel a patient, the reasons for this cancellation is reviewed by a number of staff including clinical to ensure the most appropriate follow on care is undertaken and that the records are as accurate as possible. Daily and weekly reviews of any cancellations ensure patient care is not jeopardised.

The Trust has reduced non-clinical cancellations as a result of the procedures put in and the key activity now is to embed the revised processes and monitor to ensure the improvement is sustained.

28 Day Guarantee: Following the work undertaken to ensure cancelled operations are known within 24 hours and with the decision to ensure patients are offered all possible options of treatment (including private if necessary) the Trust does not anticipate 28 day breaches and none have occurred since October 2008. However, there does remain some risk because of consultant availability. ( Monthly Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar forecast Cancellations 5 5 5 5 5 5 5 5 5 5 5 5

of 35 28 day 0 0 1 0 0 1 0 0 1 0 0 1 breaches Progress to date and key actions and milestones in 2009/10 to deliver a reduction in HCAI The RNOH will continue to work towards a reduction in C-Diff cases in 2009/10 with a target of no more than 8 cases within the year. The target for MRSA bacteraemia will continue to be zero.

Key infection control actions / milestones in 2009/10 will be as follows:

1. Ensure every clinical area in the Trust is completing at least 1 ‘Saving Lives’ audit per month and utilising this data appropriately. This will include feedback of findings to staff, visitors and patients;

2. Review of antibiotic prescribing policy and continued audit of compliance;

3. Re-launching awareness of ‘Surgical Site Infection’ monitoring with clinical teams utilising data to change practice;

4. A full review of all infection control policies will be undertaken;

5. Ensure all patients are screened for MRSA at pre admission and that patients receive appropriate information on infection control before or on admission to hospital;

6. Ensure environmental issues related to 2008/09 HCC inspection are completed. Monthly Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar forecast MRSA 0 0 0 0 0 0 0 0 0 0 0 0 C.Difficile 1 0 1 1 0 1 1 1 0 1 1 0 Progress to date and key actions and milestones in 2009/10 to deliver access to GUM clinics within 48 hours N/A Progress to date and key actions and milestones in 2009/10 to support implementation of choice and booking Although the Trust has a published the ‘Directory of Services on Choose and Book’, each service is set up to reflect a consultant’s clinic leading to a replication of similar services on the system. This has made it difficult for GPs to use and has also limited the Trust’s ability to easily manage capacity across similar clinics.

All related services will therefore be combined under a single service heading and the service directory will be revised to enable ease of use. As the changes required may have an impact on the way the clinics are currently set up on PAS, an initial scoping exercise will be carried out to determine the extent of the modifications.

The services which are appropriate for GP referrals via Choose and Book are:

 Foot and ankle clinics  Hip and knee clinics  Rheumatology and metabolic bone disease clinics

Phase 2: Enable direct booking of services

1. Make hip and knee clinics available for electronic booking and increase numbers of slots for published services up to appropriate levels to achieve convenience of direct booking for patients;

2. Revise ‘Choose and Book’ settings to ensure that increased capacity is picked up electronically for current services;

3. Document and circulate list of services that will be available on ‘Choose and Book’ including go-live timeline.

All services currently published will have number of weeks available to view, extended. More slots

of 35 will also be made available for those services consistently experiencing slot issues.

Ongoing monitoring has been introduced to assess effectiveness of change.

Services will be directly bookable from April 2009. Progress to date and key actions and milestones in 2009/10 to deliver patients receiving thrombolysis within 60 minutes of call N/A Progress to date and key actions and milestones in 2009/10 to deliver maximum wait of 3 months for revascularisation N/A Progress to date and key actions and milestones in 2009/10 to deliver maximum wait of 2 weeks for rapid access chest pain clinics N/A Progress to date and key actions and milestones in 2009/10 to eliminate Mixed Sex Accommodation (including PCT agreed target) The RNOH will continue to aim that no patient shares mixed sex accommodation.

A revised ‘Privacy and Dignity’ policy will be developed encompassing mixed sex accommodation issues and additional safeguards will be put in place to ensure patients are communicated with appropriately prior to and during admission regarding accommodation in hospital.

Our user group representatives will join Trust staff in 2009/10 to audit the standard of our accommodation and report to Trust Board.

In 2009/10:

 8 wards will be fully compliant with guidance on mixed sex accommodation;

 1 ward will be partially compliant (patients will need to pass through bay of opposite sex to exit ward but not to visit wash and toilet facilities);

 Day surgery will be partially compliant (patients will need to pass through bay of opposite sex to exit ward and we are currently planning to provide additional toilet facilities to ensure patients do not pass through bay of opposite sex to use);

 ITU and Acute Spinal Injuries will remain non compliant due to clinical safety issues however we will look at additional screening to improve patient experience.

A bid of £100,000 bid was made against a national initiative to support the costs of introducing mixed sex accommodation, which the Trust is awaiting the outcome of. However, further progress will require a new hospital development.

Key actions and milestones in 2009/10 to improve winter resilience (including lessons learnt from 2008/9) Key actions being developed as part of a winter resilience plan include:

 Handover of patient care from acute NHS Trusts;

 Operational readiness (bed management, capacity, staffing, elective restart);

 Out of Hours arrangements;

 Trust/Social Care arrangements;

 Access to Critical Care services;

 Communications.

3.5 Other risks Page 31 of 35 3.5.1 Commentary on any other risks

Commentary on other risks The following risks and mitigating actions are also a key part of the Trust’ Corporate Strategic Risk register and Assurance Framework

1. Estates & Facilities

A large part of the RNOH estate and services are more than 60 years old and many of the buildings and services are past their useful life. Poor investment in backlog maintenance over the years has exacerbated this situation to a point where only a very few buildings remain serviceable and suitable for modern healthcare. The Trust in recent years has been subject to prosecution due to non- compliance. The current estate is not providing an inclusive environment i.e. one that can be used by everyone regardless of age, gender, ethnicity or disability as detailed in the six facet Estatecode surveys.

Overall the Performance Indicators (PI’s) highlight an estate, which is at the end of its designed life and is in need of modernisation and rationalisation to achieve a modern and fit for purpose estate (see 2008 Estates Strategy). Examples of this are recent improvement notices from the Health & Safety Executive (HSE) and the London Fire & Emergency Planning Authority (LFEPA). A thorough review of the opportunities and risks presented by the site has identified a preferred option for development of the Stanmore site that supports the Trusts vision and service strategy. The preferred option is for a new hospital facility to be built in the central zone of the site.

Under the Trust proposal a number of key buildings are retained and the Trust has ring fenced its annual capital allocation over the next three years to enable these buildings to be brought up to Estatecode condition B, which is an acceptable standard. The proposal will completely eliminate nightingale wards in the hospital, provide 50% single rooms and maximise the provision of ensuite facilities in wards. The quality of the environment will be improved and the new development will provide a modern flexible healthcare building. In addition, the proposed solution also addresses the weakness in the performance of the retained estate by addressing the investment need to meet statutory requirements and is predicted to reduce backlog maintenance to nil by 2015 as shown in the table below:

This will enable the Trust to be compliant with NHS guidance documents i.e. Health Building Notes (HBN’s) and Health Technical Memorandums (HTM’s). The Estate risk profile will be reduced and the majority of embedded risks will be eradicated. There will be improved clinical adjacencies and the provision of an inclusive environment. The Trust has an approved Outline Business Case (July 2008) and an Estate Strategy in place to deliver the redevelopments proposals.

Managing Estates Risks Pre-Redevelopment

 Board-approved Estate Strategy (November 2008) for the management of its buildings, land, plant and non-medical equipment that meets the requirements of its business plan and service strategy.

 Planning groups are held for new developments involving patients and staff.

 Annual capital allocation targeted at key estates risks – overseen by Capital Planning Group reporting to Performance Committee and Trust Board.

 Regular reports to Executive Team, Trust Board and Project Board along with regular

of 35 meetings and correspondence between Trust and NHS London.

 Retained buildings will refurbished to meet Encode targets and will be assessed using BREEAM Healthcare indicators.

 Energy Awareness Campaigns

 Access to up-to-date legislation and guidance relating to estates staff training and instruction on the safe operating and maintenance of estates and facilities commensurate with their roles and responsibilities.

 Regular risk assessments carried out by both in house staff and contractors.

2. Partnerships

If the RNOH fails to engage fully with external and NHS partners (e.g. PCTs, Specialist Commissioners, Specialist Orthopaedic Alliance and UCL IOMs) there is a risk that Foundation Trust and redevelopment plans will not be supported by the wider NHS.

Managing Partnerships Risks

 A Joint Academic Plan has been agreed with UCL;

 CEO and Medical Director Membership of National Payments by Results groups e.g. Orthopaedic Expert Working Group, DH PbR Technical Working Group;

 RNOH is an active member of the Specialist Orthopaedic Alliance and Federation of Specialist Hospitals;

 Lead Commissioner arrangements continue through Barnet PCT and the North Central London Commissioning hub;

 Active engagement in updating National Specialist Commissioning definition sets and specialist commissioning being promoted through the Specialist Orthopaedic Alliance and NHS Confederation.

3. Management Information

High quality management information supported by robust data quality has been a significant area of development at RNOH and needs to continue. This is being addressed through the implementation of the IM&T Strategy 2009-2011 (updated February 2009).

Key actions include:

 Implementation of a new data warehouse executive information system bringing together all clinical information systems in 2009;

 New Trust Intranet being implemented Spring 2009.

4. Organisational Values including improved clinical engagement and medical management to support achievement of Corporate Targets

The Chief Executive is implementing a clinical engagement and medical management strategy to strengthen clinical participation in order to meet delivery of corporate targets.

Key actions include:-

 Reviewing and strengthening the roles of Clinical Directors and Medical Directors;

 Increased Clinical Director involvement (and time commitment) to Directorate performance review;

 Medical Director succession planning (one joint medical director retires in May 2009);

 A strategy to embed policies, procedures and systems is being implemented to strengthen auditing, monitoring and investigation of procedure breaches. This is being supported by a Page 33 of 35 heightened awareness programme and roll out of publication and monitoring of policy updates via the Trust’s intranet.

of 35 4 Declarations and self-certifications

4.1 Board statements

Commentary Board declarations are to be discussed at the 26 March 2009 Trust Board meeting.

As at 19 March 2009, the following areas cannot be certified by the Trust:

 No PCT contracts have been signed so the Trust cannot certify that contracts are signed or that activity in the plan is consistent with these;

 Achieving and maintaining 18 week performance is a significant risk to the Trust;

 The Trust will not achieve cumulative breakeven duty (i.e. recovery of historic deficits) until 2010/11 – 2 years after the required statutory limit of 5 years;

 Mixed sex accommodation cannot be fully introduced without redevelopment of the site;

 Full compliance with patient choice under ‘Choose and Book’ is being explored if the Trust can deliver the capacity increases it has planned to during the year.