I welcome the witnesses to the Audit Committee. This is our second evidence-taking session on financial stewardship in the NHS in Scotland, based on the Auditor General's 1999-2000 overview report.
I will make a start.
You said that we should take a long view, but what about immediate needs? Is the overall financial performance good or bad? How would you rank it right now?
The overall financial performance is pretty good, but there is always room for improvement; one can never be complacent or satisfied that everything is as efficient as it should be. In terms of systems and of people having a responsible approach to financial stewardship, the situation is pretty good.
You say that it is pretty good, yet there are continuing deficits.
That is a different issue. The deficits must be seen in context. In 1999-2000, the North Glasgow University Hospitals NHS Trust deficit was 2.3 per cent of its income, and the South Glasgow University Hospitals NHS Trust deficit was 1.3 per cent of its income. Considering the pattern of turbulence and difficulty that the trusts had experienced over a period of years in handling problems such as inflation, I think that the trusts turned out a pretty creditable performance.
We shall return to that later. Do you consider that NHS trusts face significant challenges in meeting their health care commitments within the funds that are available from the health board, while meeting the financial targets that are set for them by the Executive?
It is fair to say that maintaining the balance is a real challenge. The Auditor General's report clearly identified a number of pressures, particularly in acute services. We continue to strive to meet those challenges, with new financial pressures coming in against a background of a finite allocation of funds. At any time, we are required to do the best that we can to achieve that balance. I do not think that there is an easy answer. We must look at new drug pressures, new technologies, new services that are required and the increase in demand against a background of a specific allocation of money from the public purse for the service.
Can the financial targets ever be compatible with ever-changing health care commitments? You say that it is a real challenge maintaining the balance, but how possible is it?
The financial targets give us some measure of whether we are running the service within the parameters that the public expects of us. If we have no targets, how can people be assured that we are trying to do the best that we can with the money that is made available to us? I would not say that the targets are necessarily the most sophisticated mechanism for enabling us to do that, but it would be even more difficult for us to be prudent with public money in their absence.
Is it a finance-driven system, rather than a service-driven system?
I do not think that that is the case. There is a balance. The financial targets are there to give us some indication of whether we are achieving value for money and providing effective services. The counterbalance is that there are continual pressures in terms of new developments, new technologies, and the new drugs and treatments that patients require. Our job is to try and maintain the balance.
You said that the targets may not be the most sophisticated system, but that things would be worse without them. Can you think of a method that would be more sophisticated and better?
We have recently given that some thought. It is quite difficult to come up with a method that fits in with a public sector organisation. The difficulty with financial targets is that they were transposed into the health service at a time when there was an internal market, a market economy and a more commercial approach to running health care. We have moved significantly away from that during the past couple of years, but we have not adjusted the financial parameters. I have to be honest and say that, despite having had a number of conversations about that, we have not come up with something that could take the place of the current financial targets.
Paul Martin wants to explore why NHS trusts are experiencing difficulties in achieving their financial targets.
My question is for both Mr Calderwood and Ms Boyle. Paragraph 3.6 of the report tells us that eight of the trusts failed to break even in 1999-2000. Two of those trusts were North Glasgow University Hospitals NHS Trust and South Glasgow University Hospitals NHS Trust. When did you become aware of the problems?
In May 1999, the director of finance reported to the trust board in south Glasgow that the level of expenditure in the trust was exceeding the income projections for that fiscal year. The director of finance set about doing an audit of the opening balances of the trust, and identified that we were projecting a £5.8 million imbalance in funds. Those reports were made available to the board every month. We published our first recovery plan in September 1999.
That situation was almost exactly mirrored in north Glasgow, because of our programme of reporting. The position became apparent in May, and we followed the same process of taking that information to the trust board, talking to the health board and starting to work on a recovery plan to get us back into financial balance.
Was that also in May 1999?
That is correct.
What action did the trusts take to deal with those issues?
In 1999-2000, south Glasgow trust's first action was to discuss the income position with the west of Scotland health boards. That resulted in the trust's securing £1.486 million of additional income in the year to 31 March 2000. In addition, the trust identified £2 million of internal efficiencies that could be generated and which would minimise the deficit between income and expenditure in that year. That brought our end-of-year position down broadly to the £2.236 million that we reported.
The new trusts were set up in April 1999. Were you aware that the amalgamated trust that you now run had hidden deficits?
We were aware that one of the former trusts that makes up the new trust had an in-year difficulty in 1998-99 in achieving the cost improvement programme targets. However, we estimated that challenge to the new trust at about £650,000 and that proved to be something of an understatement.
How much of an understatement was it?
Eventually, the opening position in May 1999 suggested that, if no action had been taken, the gap between income and expenditure would have been £5.7 million.
What was the position in the north of Glasgow?
We were aware that some difficulties were likely. We thought that the Glasgow royal infirmary would probably be okay. We recognised that there were some difficulties—as there had been in the previous year—in the west of the city. We were aware that there were problems at Stobhill hospital. Therefore, we were aware of some of the deficit. However, some of the pressures in the first two or three months were greater than we expected.
Was Greater Glasgow Health Board aware of those issues? What action did the board take to ensure that the new trusts would start with a clean sheet?
We became aware of the issues pretty quickly, when each trust identified the scale of its problem. In the late spring of 1999, the trusts briefed us about their difficulties. We had already committed ourselves to getting as much as possible of the money that we received out to the trusts, to try to deal with inflation that they were due to experience in that year.
My question is for Mr Calderwood and Ms Boyle. We spoke about what steps were being taken. Can you take us through the process of reporting to your boards? Was an action plan put in place? You said that you were aware of problems, but you are not being specific about whether you arranged for a recovery plan to be identified. What decisions were taken at the respective boards to deal with what is effectively a serious deficit?
At South Glasgow University Hospitals NHS Trust, the director of finance conducted a retrospective review of the former trust's financial performance in 1997-98 and 1998-99, to track the areas where the level of income and expenditure had got out of balance to the extent that he was reporting in May. That resulted in his report to the board, where he identified a number of areas where renegotiation with west of Scotland health boards on the cost base was necessary. That generated £1.49 million of additional income, including, most notably, £1 million from Greater Glasgow Health Board.
We identified a number of schemes and that process went on to become the recovery plan for North Glasgow University Hospitals NHS Trust. In 50 or 60 different schemes, we looked at possible efficiencies from amalgamating four organisations. One of the drivers for having fewer trusts was that we would benefit from reducing bureaucracy, and therefore costs, within the trusts. We hoped to reduce the costs that are involved in running separate payroll departments, for example. There are 60 or 70 different elements to the schemes. We wanted to identify areas—as Mr Calderwood said—where we could run the service more efficiently and reduce costs. If it would be helpful, I will be happy to make that information available to the committee. There is a huge amount of detail.
Thank you. The information on the meetings would be helpful.
Witnesses from both trusts are saying that they were keen to identify efficiency saving. Do you feel that those efficiency savings could have been carried out prior to the deficits being accumulated?
Some of those savings came as a consequence of putting together four organisations and achieving benefits of scale, so I am not sure that all those savings would have been achievable within the individual organisations. The savings came through being able to provide one infrastructure for a service, rather than four. The answer to your question is therefore yes and no. We could have identified some efficiencies in the individual organisations, but other efficiencies were achievable only through putting the four organisations together.
I also wanted to ask about efficiency savings or cost-improvement programmes—whatever jargon is used. Other health boards have told me that they have gone beyond efficiency savings and have cut administration and bureaucracy to the bone. You said something different in your previous answer. What is the current position? You are being asked to make efficiency savings of around 2.5 per cent each year. Is it true to say that you have gone beyond that now and that you have almost reached the point where there is health service rationing that affects the service? Is that a fair question?
Every year since 1988, we have subjected support services, administration and the whole gamut of services that we regard as ancillary services to more scrutiny, as we have striven to take money out of those areas of expenditure to maintain or develop clinical services. In 2001, it is fair to say that only structural change will bring further opportunities—albeit limited—for savings in those areas. Since the recovery plans for the trusts were published, we have been considering the opportunities that the new clinical configurations will give us to deliver clinical services differently and within a different cost envelope. Future challenges of dealing with a finite income, but potentially infinite demand, will centre on changes in clinical services. I would not characterise all of those as cuts or restraints; some will allow us to provide a higher quality of service. In future, we will be looking to the restructuring of clinical services. We have not reached the end of that debate yet.
Following on from Mr Calderwood's point, I believe that there is sufficient money in the service for us to provide a better service than we do at present. It is the way that we do things that causes the problem. Running a number of services on a number of sites is a major difficulty.
You are saying that clinical configurations—you began to define that term, but I do not know what it means—and combined sites could deliver savings. Would they deliver substantial amounts? What do you have in mind exactly?
I will offer one example. We have been examining how we deliver laboratory medicine to all our front-line clinical services in Glasgow. We have concluded over the past two years that there are opportunities to enhance the quality of laboratory medicine and increase the proportion of front-line staff by restructuring the physical sites on which we base our laboratories. For example, under a business plan that is being considered by the Scottish Executive, South Glasgow University Hospitals NHS Trust would build new, higher-quality laboratory premises to deal with health and safety and other issues. Doing that would allow us to run the level of service that is needed and reduce by £640,000 the current cost of £7 million a year. Therefore, by structural change in laboratory medicine, we could make efficiency savings of about 10 per cent and invest in better quality infrastructure. There are a series of examples like that in clinical services in Glasgow.
So you are saying that capital expenditure will lead to revenue improvements.
It would in that example.
Where does the capital come from?
The capital comes from the national capital pool, which is controlled by our colleagues at the Scottish Executive. There is an annual process whereby £196 million a year is allocated for capital expenditure in the national health service. Trusts and health boards put forward to the Executive argued business cases for access to those capital funds. In this case, the bid is for £2.5 million.
The main issues are covered in paragraph 3.9 on page 16, which lists about 10 points. Is that list comprehensive? Which of the points are most significant for Glasgow? Perhaps Mr Best and Mr Davison would like to answer—they have been left out on the periphery.
No one need feel as if they are on the periphery. If witnesses wish to contribute, they should please do so.
It is heartening and positive that we are beginning to explain some of the difficult areas in the balance between clinical services and maintaining financial control, to which my colleagues alluded earlier. Certainly in my organisation, many of the points that are listed in paragraph 3.9 are familiar in the pressures that we deal with daily.
Which are the most significant for you?
We have addressed the use of bank and agency nurses, which was the subject of a value for money study by Audit Scotland, because it is sometimes difficult to attract at short notice staff who have the appropriate skills in paediatrics. The Audit Scotland report has been helpful. We have been working to resolve some of the issues and to reduce expenditure in that area.
The pressures that are listed are recognisable in the overall health system. However, the position of primary care trusts—such as mine—is different from that of acute trusts in a number of ways. Some of the points in paragraph 3.9 are not so significant for my organisation. For example, we are not the product of a merger of former trusts. We were formed from only one trust that had responsibility for family health services, so we do not have predecessor organisations or inherited problems.
What about increased drug costs?
We will perhaps address increased drug costs later. The real inflationary pressure on drug costs in primary care has largely been recognised, as there have been inflationary increases of about 10 per cent. Historically in Glasgow—until last year anyway—drug expenditure was contained within income. A lot of hard work goes into trying to improve prescribing practice in primary care. I may address that issue in answer to later questions. The pressure of increased drug costs has been recognised and dealt with in Glasgow, but it has not put us in risk of financial deficit.
I will follow that up before I ask questions of Mr Calderwood and Ms Boyle, who have particular pressures. Mr Spry gave evidence on problematic drug misusers to another committee of which I was a member.
There are very specific pressures.
That is why I gave that example—it is rather a good one.
It is a good example. Also, the increased costs of extending our methadone programme for intravenous drug users are a significant pressure. We are trying to plan a strategic response to such specific pressures, in concert with the health board and our local authority partners. Extending the methadone programme in Glasgow is likely to cost more than £1 million. That will have to be part of a strategic service response. However, the general prescribing pressure that I described earlier is less controllable—there are 626 general practitioners writing prescriptions as we speak—whereas a strategic response to intravenous drug misuse is a little more controllable.
The health board has consistently allocated more money each year for the methadone programme and for hepatitis C. Although the potential cost of hepatitis C treatment is very high, it is a difficult drug regime for the patient to comply with. Compliance is a key part of the treatment. Sadly, many of the patients have such turbulent existences that they cannot comply, so the actual cost is less than the potential cost. However, we must allocate money to hepatitis C treatment.
This is an important area of questioning. Do Ms Boyle and Mr Calderwood wish to respond on reasons for the deficit?
The main reasons are set out in paragraph 3.9. Most of the background to deficits could be explained under those headings. An issue that is not addressed is the impact of payroll inflation in the past two years. The national pay review bodies have set out improvements to terms and conditions of service that have had significant costs above the headline pay inflation. When a pay review body—[Interruption.]
We will adjourn until the fire alarm, or whatever it is that is ringing, stops.
Meeting adjourned.
On resuming—
You were stopped in mid flow, Mr Calderwood. Please continue.
There has been a significant inflationary impact on the wage bill over the past two years as a result of national pay settlements that the trusts have funded over and above the high level of inflation. That has created significant pressure on trusts, as the committee will appreciate. Almost 70 per cent of all trust expenditure is on staff salaries; therefore, when there is a movement on the national pay bill above the rate of inflation, an internal challenge is generated.
You have answered in part the question about increased activity generally. We are told that what are called "unfunded service developments"—new services—are
I will answer while Ms Boyle prepares a more considered answer.
Let us pass from the south to the north for a more considered answer.
My colleague did extremely well and I am not sure that I can add much to his answer.
It is worth adding that such developments are not a major problem in Glasgow. The communication between health boards and NHS trusts is sufficient for that to be a pretty unusual circumstance. It is certainly not the way the trusts usually do business.
That is true.
Paul, do you want to ask about time scales and possibilities?
Yes. I refer Mr Spry to paragraph 3.14 of the report, which touches on the trusts' financial difficulties and the fact that they have prepared recovery plans. Do you know the time scale over which the trusts' plans project financial recovery?
Yes. A date for the trusts to achieve recovery was agreed. The date was different for each trust. Except in the case of North Glasgow University Hospitals NHS Trust, for which the time scale is three years, the time scale is two years, which is acceptable to us and to the trusts. The time scales were agreed in discussion with the NHS management executive. However, we are always looking for opportunities to reduce that time scale, as it is in nobody's interest for a deficit to be extended unnecessarily.
That is quite a long time, is it not?
Yes, but doing anything in a shorter period of time would damage patient services and we did not want to contemplate such a situation.
So if all those issues affect patient care, there is no way of shortening that period. However, if you could reduce that three-year period, that would not affect patient care.
Did you say that that would not affect patient care?
Yes.
That is right. We have implemented recovery plan schemes that will not adversely impact on patient care. If we had been required to get back into balance in a much shorter space of time, we would have had either to reduce activity or to remove services. After discussion with the health board and the trust board, we decided that we did not want to do that. Again, we must find a way of getting back into recovery in a shorter time without compromising services. The recovery plan schemes were designed with that in mind, which means that things will take a bit longer.
Can any of you categorically state that there will be no effect on patient care as a result of the recovery plans? Ms Boyle used the word "adversely" which suggests that patient care might still be affected because of the plans.
Yes: if the recovery plans mean that a patient will be treated in place A instead of place B, or as a day case instead of as an in-patient, patient care will be affected, but it is a matter of judgment as to whether those would be adverse effects.
Am I right in suggesting that if we reduced those two-year and three-year periods, we could affect patient care more adversely?
It is more likely that if one tries to accelerate the recovery period without putting in more income—which is the other device that one can consider—one would have to resort to cruder methods of saving money. The point about making changes that do not have an adverse effect on patient care is that they need a fair bit of careful design and quite a lot of discussion. As a result, the lead time for redesigning services is often quite lengthy. However, as the health board's own income position has improved—which it has—we have invested additional income in the acute trusts to help reduce their deficits.
I am interested in your certainty that you will get rid of the deficits in two or three years. I hope that you do, but some of the components of your deficits, such as staff salaries, seem to be long term. You have accumulated deficits; a failure to meet targets; and, in one case, £9.8 million worth of "savings" to make. As miracles are in short supply, how can you pull yourself out of that morass without harming services or doing something that patients would not quite like?
With a great deal of difficulty. We must ensure that we discuss with clinical staff how we can best manage this change. There are certain situations in which decisions that we make are constantly under review. If we do not sufficiently review those decisions, there is always the possibility that the situation will continue for slightly longer than we would like, which will have an impact. The continual monitoring and reviewing of what we do is part of the process of managing the recovery.
We must always scan the horizon ahead. For example, in our conversations with both acute health trusts about whether they are delivering their agreed deficit recovery programme—and what that means as far as this year's and next year's outturns are concerned—we are already considering how much more difficult the situation will become in light of big new issues such as the cost of junior doctors' salaries as a result of the latest pay agreement. The financial effect of that is horrific and it will have quite a dramatic impact on the finances of health care this year and particularly next year. Just as we are beginning to see the light at the end of the tunnel of these deficits, we must start to think about how we handle junior doctors' hours, the magnitude of which dwarfs the deficits we have been dealing with so far.
It bothers me that most of the problems seem to be endemic and on-going. Is the situation cash driven and service poor? Mr Calderwood, how do you get out of mission impossible?
Well, I would like to think that we will.
The situation that you have just described makes the problem even more intractable, which is why I am interested in your suggestion that you will achieve a balance within two or three years.
We come back to Mr Martin's point about the perspective from which we can describe changes in clinical services. There is a view in the health care community that we can deal with some clinical challenges through restructuring. There is an issue as to whether restructuring proposals in particular communities will be acceptable, but it is fair to say that if nothing changes the known inflationary pressures over the next two years will take away from most health boards the opportunity of gaining material benefits in the range and volume of clinical services that they commission.
We are in danger of moving into policy areas, but I know how I feel as a consumer.
On the changes in clinical services, I get the feeling that you do not import anything from any other service providers. You seem to be implying that you will have your own solutions in your own trusts to the problem of redesigning clinical services, but many trusts in Scotland have won awards for their redesign of services and some of you have specialties in your trusts. Do you examine good practice in other trusts and try to sell that to your clinicians?
One of the most quoted examples of good clinical practice across Scotland is the cataract surgery project in Ayrshire, which has been highly commended. It is fair to say that, within the health service and the medical profession, there is a tendency for people to say that if something has not been invented in their area it is not necessarily the best practice. We have gone through a fairly significant period in that regard. For example, we have worked with the ophthalmologists in Glasgow to examine clinical practice elsewhere in the UK in an attempt to see how their clinical practice can be redesigned to take on board best practice. We are hopeful that recent changes that have been agreed between the clinicians and the trusts and have been funded by the health board will bring an improvement in ophthalmology services in Glasgow as the city piggy-backs on the ideas of colleagues elsewhere. We do not believe that if a practice has not been invented in Glasgow it is not the best, but we have still some way to go.
That is heartening.
I am afraid that I want to return to the financial difficulties. From the answers so far, it is clear that it is a recurring issue. Extra-contractual referrals provide another source of income for you. From speaking to people in Lanarkshire Health Board, I know that to help fund the new services the health board wants to provide, it intends to negotiate with Glasgow on a cost-per-case basis rather than have block contracts. I am sure that other health boards intend to reduce their outgoings in that respect as well. How much more difficult will conducting business that way be, given that it will mean that you have more unplanned income? Obviously, if you have a block contract, you know what money will be available and can include that in your financial plans.
We have put a lot of work into discussions with the west of Scotland health boards in the past year. It was clear that quite a bit of Glasgow trust income was at risk in terms of that sort of fluctuation and the perfectly reasonable desires of health boards to shift work into new facilities in their areas. We have got agreement that, for the services in Glasgow that are regional or tertiary, we should try to develop west of Scotland consortiums to allow the health boards to pool their resources for those services and spread out risk from one year to another to cope with the fact that the number of patients in some of the specialised areas varies from year to year.
A positive and practical example of that are the arrangements that have been developed during the consortium discussions for in-patient psychiatric services for children at Yorkhill. There is a good agreement with all health boards in the west of Scotland, whereby the health boards and their local communities are guaranteed a service and we are guaranteed a secure income flow on an annual basis. That arrangement allows both sides to experience some stability and allows us to monitor the system, which we do every four months, and plan developments for the future. The work that we are doing in Glasgow with other west of Scotland boards could prove to be as beneficial for other services.
Given that you will be working more on a cost-per-case basis with some health boards, do you think that you have sufficient mechanisms in place to ensure that you will be able to track that kind of financial flow?
I think that we will be working less on a cost-per-case basis. The use of consortiums reduces the use of cost-per-case financing, which will be replaced with block contracts, to use the old jargon.
But there will still be some cost-per-case work.
Yes, but much less. We have to address precisely what the reduction in the number of patients coming from Lanarkshire to north and south Glasgow will be, specialty by specialty. That will allow us to tell what impact there will be on the cost profile of individual specialties. That is a complicated job and we are not near to finding an answer, but we have been in discussion with Lanarkshire and I am sure that we will come to a fair agreement fairly soon.
Which trusts in the Glasgow area expect to achieve their break-even target by the end of the financial year?
South Glasgow University Hospitals NHS Trust does not expect to achieve its financial targets by the end of this financial year.
Similarly, North Glasgow University Hospitals NHS Trust does not predict that it will meet its financial targets by the end of this financial year.
Yorkhill NHS Trust predicts that it will meet all its financial targets.
Greater Glasgow Primary Care NHS Trust also predicts that it will meet its targets.
We have spent an hour on this section because we thought it important to do so, but we will now move on to examine why levels of clinical and medical negligence claims are rising and what the consequences of those rises are.
Mr Spry, how much has been set aside by health service bodies in the Glasgow area to deal with negligence claims?
At the end of the financial year 1999-2000, the health board had set aside £6.3 million as a provision for medical negligence claims. The trusts will be able to give you figures for how much has been set aside in their areas.
In the year 1999-2000, the South Glasgow University Hospitals NHS Trust had set aside £1.214 million for medical negligence. In that fiscal year, the trust made payments of £657,000 in settlements of medical negligence claims.
For that year, Yorkhill set aside £79,000 and paid out £9,000.
Greater Glasgow Primary Care NHS Trust set aside £50,000 and I think we paid out something between £10,000 and £20,000.
I am sorry, but I do not have that information with me. I will send it to the committee.
Why do you think the claims for clinical and medical negligence are rising? Does the fact that they are rising point to problems with the quality of health care that is provided by the national health service in Glasgow?
I am not sure that the number of claims is rising. I was interested to see the evidence that the committee had from Trevor Jones and his colleagues—that the number of claims appear to be pretty much the same over a period of time. That is similar to our experience, although we log the information in a different way because we look back to see how long the claims have been outstanding and how many we have from different years. I do not have to hand any data on the number of claims that are lodged each year.
Are you satisfied with the way in which the CLO undertakes that analysis?
Yes. However, one should remember that lawyers are always cautious.
The payments for negligence claims must be met from NHS resources, which must detract from health care. What action is the national health service in Glasgow taking to control what seems to be a rising tide of claims?
In Glasgow, in common with trusts elsewhere in Scotland, we are involved in the application of the clinical negligence and other risks indemnity scheme guidelines and regulations, which encourage the trusts to act collaboratively to deal with the financial consequences of claims. More important, the trusts are making a commitment to undertake significant work on risk management, both generally and clinically. The trusts are making a big commitment through the increasing importance of clinical audit and governance to ensure that patients' experience in hospitals or in general health care provision is as good as it can be.
Do you think that the sums of money that you are having to put aside might decrease in future because of the sharper delivery of quality clinical services?
I would like to think so. However, one must put that in context. The Scottish courts are still way behind the English courts, which in turn remain way behind the European and north American courts, in the financial value that they place on life and disability. Although Scotland could reduce the number of claims, it is highly possible that, over time, the Scottish courts will place a higher financial value on life or disability. At the moment, the settlements in Scottish courts are significantly lower on a case-by-case basis than are settlements in other legal systems.
The largest number of unresolved cases on the health board's books—this is going back to before trusts took over the responsibility—relates to obstetrics and gynaecology. The issue is heavily skewed towards the risks associated with childbirth. Those are cases where the potential cost of any settlement is high because of the impact on a child's life.
You say that the settlements are way behind those in the rest of the UK, Europe and north America, but what about lawyers' costs? Do lawyers' costs still have to catch up and how big a component are they of the whole cost?
Legal fees in Scotland have continued to rise annually in line with the legal profession's rate of inflation. The number of man hours for which we contract—the number of cases that we defend annually—is fairly static.
There is a paradox. Although the annual costs are relatively small, massive amounts of money that could otherwise be spent on services are set aside and the system seeks further cuts to support that. However, further cuts may affect quality, which leaves the service more vulnerable to being sued. That presents an on-going problem. How would you resolve that paradox?
To some extent, the provision that has to be made, which is for several years ahead, gets built into a deficit position. We have talked about trusts' deficits, which include their provision for clinical negligence requirements, and the same is true of health boards. Greater Glasgow Health Board is currently running a deficit because of clinical negligence. Our financial duty is to break even on cash. However, we are running a deficit on income and expenditure, which—before people start to panic—is somewhat less than our provision for clinical negligence. Nevertheless, one can get too beguiled by the intricacies of accounting convention. The conventions of accounting do not necessarily have a direct impact on clinical services.
Quality is the key to avoiding negligence claims. As chief executives now have a legal responsibility for quality, how are the trusts in the Glasgow area addressing their clinical governance responsibilities?
Although the statutory responsibility of chief executives for clinical governance is relatively new, the approach to improving quality and all the activities that are associated with clinical governance are not. We have for some time been pursuing clinical audit, risk management, research and development and better complaints handling.
I will ask the other witnesses about means and measurement. If there are performance indicators—[Interruption.]
Meeting adjourned.
On resuming—
I ask my colleagues to speed up the questions and answers. We have dwelt on the first section for a long time, with justification.
I will provide an example. Through the Clinical Standards Board for Scotland, not only have specific standards been developed for schizophrenia and chronic heart disease, for example, but generic standards are being developed, which will be reviewed in all the organisations across Scotland. As Tim Davison alluded to, a self-assessment process has been developed, which will be the subject of review by the Clinical Standards Board for Scotland, so there is uniformity in some of the generic standards in the service in Scotland. I hope that comparative data will flow from that, so that we can see how we are doing.
That applies to the primary care trusts. Does it also apply to the acute trusts?
Yes. We have clinical governance committees and we have set out on the track that both Jonathan Best and Tim Davison have described. Given the range and complexity of the services that we run, however, it will take us some years before we have data that will tell us whether the quality of service is all that it should be. The task is a daunting one; we have a lot of work to do, as we must go through each specialty, procedure and clinical condition to get the baseline and then decide what we are comparing it with. We have made a start, but a significant amount of work, time and effort must be put into the process.
A local authority parks department said that it used to cut the grass but that now, with performance indicators, all that it seems to do is measure it. Without getting into a morass, does the system work? What is the situation in the south Glasgow acute trust?
As colleagues have pointed out, all our clinical staff are now—because of the external bodies—going through continuing professional development, external accreditation and, for consultants, continuous accreditation and re-accreditation, potentially at intervals of five years. The fitness of an individual to perform their tasks is being examined in a much more systematic way than in the past—as well as the internal mechanisms, that will drive the clinical governance agenda.
I wish you all success in raising quality without getting lost in the paperwork.
It is relatively early days, but the scheme gives a fairly good framework to work within. It is a new approach, which introduces a more unified way of handling clinical negligence and other risks. We will not know for some years whether we are reducing clinical negligence or what the effect of risk management is, but the framework is useful. All the trusts have arrangements to deal with the matter, such as CNORIS committees and designated leads, which seems to be a coherent approach to the problem.
Is that a shared feeling?
Yes.
We will move on to consider whether existing financial targets serve a purpose.
Paragraph 3.10 on page 16 of the Auditor General's report indicates some areas where trusts were dependent on non-recurring income in 1999-2000 to try to break even. If non-recurring income was available in 1999-2000, what steps have been taken to replace that income or reduce costs in the current financial year? I specifically cite Yorkhill NHS Trust, as it gets a mention in the report for using non-recurring funding—it used capital expenditure to balance its books.
That is correct. The use of receipts from sales of assets is one of a number of methods for satisfying our recovery plan. Yorkhill, like other trusts, is in the middle of managing a recovery plan. We are coming to the end of year 2 of the plan and will be in balance by 31 March in the next financial year. One of the measures that we used to get there was the identification of the sale of surplus assets, which is prudent in any organisation. We requested the use of that money to bridge the gap to get us to financial balance. That is what has been happening, although we do not intend to prolong the use of that solution.
How do you compensate for that now? You will have to identify that funding for this year.
That is part of our continuing internal programme of efficiencies and redesign of services to ensure that we utilise income to match expenditure. Fortunately, the additional non-recurring moneys allowed us to bridge the gap to plan and manage properly.
My next question is for Robert Calderwood. I note that, in order to ensure that the South Glasgow University Hospitals NHS Trust's deficit was not greater than reported, the trust failed to pay other trusts in Glasgow, which caused problems for the North Glasgow University Hospitals NHS Trust. Is that a sensible way of using public funds? You are going to have to pay up sometime, Bob.
The situation in the south Glasgow trust is that a significant day-to-day challenge around cash was identified in 1999 and remains today. To stay within one of the three financial targets—the external financing limit—we had to make a series of payments in March, one of which was of about £4.4 million from the public dividend capital to the management executive. We discussed the trust's inability to make that payment, given its cash position—another difficulty that the trust inherited—with the management executive throughout the second half of 1999. However, the outcome sought by the trust—a forgiveness of PDC payment for 1999-2000—was not forthcoming and we were obliged to make the payment to the management executive on 14 March.
It would have made better reading if you had paid up on time and if Ms Boyle's figures had been represented as a deficit of £7.6 million, rather than as a deficit of £8.7 million.
My understanding of accounting treatment is that the arrangement would not have made any difference to Ms Boyle's deficit. Her income and expenditure position and her balance sheet would have been dealt with, but not her deficit.
My question is for Jonathan Best. Notwithstanding the non-recurring money and capital receipts that Yorkhill used to help the situation in 1999-2000, it is obvious that the trust relies to a great extent on charitable donations. How do those donations help your overall financial situation? I do not mean to suggest that you would not be financially prudent anyway, but are the charitable donations one of the reasons why you will meet your targets for the current financial year? How difficult would it be for you to survive without those donations?
It is fair to say that Yorkhill attracts a greater injection of charitable donations than many other institutions and that those donations have gone some way to helping our financial position.
However, you continue to rely fairly heavily on charitable donations to meet your targets.
We do not rely on donations to meet our targets, as we have changed the system. For example, we set up a scholarship scheme from endowments and undertook a significant clinical audit, which was paid for from legacies that were specifically willed for that purpose. We changed the system to avoid relying on charitable moneys.
Understanding comes from information and knowledge. Therefore, can we move on to gaining a more comprehensive picture of overall financial performance in the NHS?
Mr Spry, we are aware that the health boards and trusts present their accounts differently from other organisations. Sometimes, that makes it difficult for us to determine the overall financial position of the NHS in Glasgow. What is the true financial picture?
The trusts' deficit position is clear and known and their ability to meet their various financial targets is also known. The health board's position is known—it is running a small income and expenditure deficit, but it is delivering on its cash targets. If you were to ask about the overall state of financial health of the NHS in Glasgow, I would go back to my opening remarks. Its state of health is under control, but the position is extremely tight. Simply putting all the accounts together does not give the aspect of the trusts' income that is dependent on other sources. For example, in 1999-2000, the north Glasgow trust's main income was about £220 million from Greater Glasgow Health Board and about £78 million from other health boards. When we consider the overall health of the Glasgow NHS system, we must pay attention to the income that comes from other health boards, as that is a significant element.
My point is that the way in which the accounts are presented makes it difficult to clarify the picture. Is not that correct?
Yes. That is mainly due to the accounts of other health boards—we cannot determine their accounting arrangements or the way in which their accounts are presented. However, income from other health boards is a significant element for the Glasgow trusts and appears in their accounts.
So we do not know what the true and comprehensive financial picture is.
I think that we do. It depends on one's purpose in trying to understand the picture. When the health board talks to the trusts about how it can help them to manage their way out of their deficits, we must think through with them how much of their problem ought to be amenable to some support from neighbouring health boards. Not only do we consider that explicitly, but we discuss it with neighbouring health boards.
According to the national health plan, which was announced by the Minister for Health and Community Care in December, trusts will continue to be the major providers of health services. What arrangements will be made for the public reporting of the financial performance of individual trusts? What arrangements are in place now and will those arrangements change?
The trusts publish their annual reports, which contain extracts from the externally audited finance reports. We also make full copies available to the general public. Trust boards now hold all their meetings in public and, to the best of my knowledge, the finance debate is always held during the public part of board meetings. To that extent, there is an on-going understanding of the financial position of the trusts throughout the financial year. In the past year, trusts in Scotland have ensured that a member of the staff partnership forum is in attendance at those board meetings, which means that there is further staff scrutiny of our financial position and the challenges and choices that confront the trust board. Trusts' finances are very much in the public domain. We expect that openness and transparency to be maintained under the health plan.
It is easy to talk about public transparency, but transparency depends on whether information is presented in a form that is digestible to laymen such as me, who are not accountants and who are no good at reading balance sheets. How do you put the information truly in the public domain, so that anybody who is picked off the street can understand what you are up to? You do not even have to go out on the street—just pick me.
The way in which our data are presented is understandable to me, as a non-accountant. We focus on the main cost drivers and, on a monthly basis, we consider the issue at clinical directorate level; for example, the level of funding that is made available to run a service for the month and what the actual expenditure is.
If I take a bird's eye view of the financial system, it strikes me that there is a lot of movement within the year and from one year to another. Some things that may have been funded centrally in the past are devolved, so that money moves in the system from the centre to, for example, a health board. Sometimes there is a switch of responsibility. A health board might have administered a pot of money in the past, which it has agreed to transfer to a trust. Money can be allocated in-year; sometimes it comes right at the beginning and sometimes at the end. Sometimes the payments are non-recurrent and sometimes they are recurrent.
The problem of complexity has to be met to ensure clarity—that would help us all.
From a Glasgow perspective, the biggest element of cash-limited expenditure for which the delay in information is important is prescribing. The historical position in Glasgow on prescribing has been that, during the 1990s, we lived within our budget, with the exception of 1999-2000, when the prescribing budget was overspent by just over £1 million. Our analysis of that was that it was a peculiar year because of volatility, especially of generic prescribing costs. That has led to a more cautious financial planning system in our trust, because we are more reluctant to make early investment decisions that are based on limited information. In the past year and a half to two years, the delay has not been critical—it has not prevented us from doing anything. The delay is about three months. Prescribing expenditure is fairly non-recurring in nature, in surplus or deficit terms. Last year, for example, we overspent to the tune of more than £1 million. This year, we predict that we will underspend.
Prudence in forecasting is one thing, but is it necessary for trusts to challenge GPs to improve their prescribing? I point the witnesses in the direction of the 1999 Accounts Commission report, which recommended a range of improvements in prescribing that could benefit patients and generate savings in the region of £26 million—a large potential amount to be available in the system. Is it necessary to have that information, so that the trusts can challenge GPs to improve their prescribing?
We have that information; the issue is simply that we receive it three months' later than we would like. We have been challenging GPs about their prescribing decisions for years—that is not new. Our view is that changing prescribing practice is a long-term educational process. The limitation in the availability of the information at the moment—which is a timing issue rather than that the information is not available at all—does not in any way prevent us from challenging GP prescribing practice, and nor should it.
Do you expect fully reconciled information to be available for 2000-01 on a time scale that will allow the audits to be completed in accordance with the deadlines that the department notifies?
Our feeling is that the information will not be available within the time scales that we would like, by the end of the year. However, by the time that we must close our accounts, we should have about nine months of prescribing information, which should allow us to make a reasonable forecast of prescribing expenditure, which Audit Scotland will accept.
In a reply on the hepatitis C drugs, you drew a distinction between relatively stable prescribing and what you called strategic prescribing. Will you clarify that?
We have 626 GPs in Glasgow, who spend about £115 million a year in day-to-day prescribing of drugs for patients who present themselves at five or seven minute intervals at the GP's practice. That task is different from that of identifying a client group that has a condition that one drug—for example, methadone—will help to improve. The potential growth in use of that drug can be predicted and is determined by a health board's or trust's decision to expand the service, rather than by 626 individuals who have taken separate decisions for 100 patients a day in their general prescribing practice. That is what I meant. If we decided to extend the prescribing of methadone in Glasgow, we would predict how we would extend it, to what value, at what cost and whether we could afford it.
I will describe a less predictable scenario that does not involve a specific client group. New drugs are coming on stream all the time, sometimes with unpredictable costs. For example, Trizivir—a treatment for HIV—became available three weeks ago. The cost per year of that drug is probably £9,600 to £10,000. How much warning do you receive of when such new drugs will come on to the market, so that you can get them to patients without delay?
We are straying out of family health service prescribing into matters that corporate systems deal with in Glasgow. The licensing authorities make it clear when drugs will become available. We have an area drug and therapeutics committee, which makes judgments about drugs that are coming on to the Glasgow formulary. Some drugs, such as Viagra, are determined by Government policy or guidelines. One of the biggest issues in family health service prescribing is the new anti-smoking drug, Zyban. Its impact on our FHS prescribing budget is unknown. That will depend on prescribing practice and patient take-up and compliance.
We will move on to discussing the delay in implementing verification of primary care payments after they have been made.
Tim Davison said that it was within the hands of another organisation to say whether a significant amount of his budget—I think that it was 61 per cent—should be spent. Why was not a robust system in place from the start for verification checks after payments have been made?
The picture is a bit confusing. There were 15 fairly robust systems and three regional mechanisms for verification of payment before the system was centralised. It is a fallacy to pretend that nothing happened before the CSA took on overall responsibility. In fact, there was an extensive process of verification.
The work that your trust is undertaking is commendable, but surely if you are working contractually with the CSA, it should work to your directions. If there is a difficulty in verification of payments that have been made through the system, and your trust is over budget or cannot break even, your head is on the block.
That is right. However, the decision to centralise the payments system has been made. It would be folly to reverse that decision when we have started down that path. To my mind, the information services division of the CSA contains the best people to do the job. I have confidence that they will get it right.
The Auditor General makes it clear that practice visits are an important part of an effective post-payment verification system. Do you agree?
I am not sure that I do. There are 220 practices in Glasgow. We are trying to do a lot with them on a wide range of issues. Payment is just one small but important part of a practice's considerations.
Do you disagree on that particular point?
I think that the tenor of what I have said indicates the limited value.
Yes, but if we get right down to it, you disagree with that particular point.
To give a black-and-white answer would be to oversimplify what is a very complex issue. I think that the tenor of what I said describes my view.
How many practice visits have been carried out in the Greater Glasgow Health Board this financial year?
None has been carried out specifically in relation to post-payment verification. In relation to outlier information on prescribing, 56 visits were undertaken during 1999-2000. Audit Scotland's annual report containing an external audit of our accounts said that we should produce a protocol for practice visits. We will discuss that in our internal audit committee, probably next month. One of the issues the committee will consider is an approach to practice visits that would incorporate a number of issues during visits, and not just post-payment verification.
Are you not disappointed that no practice visits whatever have been carried out?
No, I am not disappointed. There have been 56 practice visits in relation to—
I am sorry—I meant no visits for post-payment verification.
In relation to post-payment verification, we have done no individual practice visits. We were asked by Audit Scotland to produce a protocol and we are in the process of doing that. In my view, in future we will do things in a way that is more measured and that will add value to the system. It will be less time consuming and resource intensive for those doing the visits, and less time consuming and resource intensive for the general practitioners who are being visited.
Do you believe that the system is open to abuse, because of the fact that no post-payment verification visits have been made in this financial year?
Human nature means that any payment system is open to abuse by someone who wants to abuse it. However, the absence of a visit does not mean the absence of post-payment verification. We are given post-payment verification data and the judgment on whether to visit a practice to discuss a particular issue would depend on the seriousness of the information that we were given. The approach that we have been asked to develop, and that we will develop, will, I hope, incorporate a number of issues when we visit a practice. I hope that that will strengthen the system.
But do you agree that the fact that there have been no visits means that there could be abuse of the system?
It is a possibility. However, my understanding is that where there have been post-payment verification visits elsewhere in Scotland, the level of resource recovered has not justified the level of resource involved in making the visits. Obviously, if it costs £1,000 to make some visits that net us £100, we are £900 poorer. That is why we have to give a lot of thought before spending a lot of money visiting practices to discuss just one issue. It would be better to take the time to discuss a number of issues. The exception to that, as I said, would be if something horrendous were brought to our attention, in which case we would react quickly.
I think that I have got the picture of what is happening now, so I want to ask about the future. You spoke about incorporating a number of things in the visits—prescribing, post-payment verification and so on. How long will those visits take? Will they be like school inspections and take a few days, or will they take just one day? What will be the cost of the new protocol that you spoke about?
We have not agreed the new protocol yet, or how it would operate. However, practice accreditation would take a day. That would happen every three years, so we would make a day-long visit to something like 70 practices a year in a three-year cycle. If we add other issues to those visits—issues that may be relatively small—it may still be possible for each visit to take just one day if we increase the number of people involved in each visit. It may be possible to include post-payment verification, staff issues and prescribing, for example, with particular issues being covered in only an hour or so. However, a day will be the minimum, and more time may be required.
How much will that cost?
We do not know yet. It will depend on who is involved in the visit. We talked earlier about our response to clinical governance. One of the costs of clinical governance is the cost of lots of clinical staff running around assessing other clinical staff. That has a cost. If clinical staff who would otherwise be treating patients are going off to assess the performance of other clinical staff, that has a cost. We are investigating what that cost is, but I do not have a feel for it at the moment.
Margaret Jamieson will ask about European Union working time regulations.
I am sure that some chief executives will not have forgotten that, in a previous life, I took great pleasure in talking about some of the regulations that came out of Europe. I recall the introduction—not in Glasgow but in another part of Scotland—of the working time regulations in October 1998. It was a considerable time before the NHS heard the wake-up call. Why did the NHS not accept that it was legally required to observe the regulations?
Trusts in Scotland first took reports on the European working time directive to their boards around October or November 1998. In south Glasgow, a paper went to the board meeting in November 1998. It set out the issues as they were understood at that time. The issues centred on ancillary staff, bank and agency nurses, and staff whose conditions at that time either did not recognise annual leave at all or did not recognise the minimum periods of annual leave. Subsequently, the management executive issued a letter on 14 January 1999. The letter set out the basis on which trusts should implement the working time regulations.
I shall not ask who won.
If you looked at the costs, you would conclude that the staff side's opinion was ultimately the view that was taken.
You were right again, Robert.
For the record, I am told that there is a potential liability of more than £15 million for the whole of Scotland, regarding annual leave payments that have been forgone since the EU regulations came into force. Can you tell us what the final cost will be for Glasgow and how much of it has been paid out so far? Is that figure available for each trust?
The corporate figure for Glasgow suggests that retrospective and current year costs will total some £5.589 million by 31 March.
That will be the cost through the Glasgow health care system. The cost for the trusts—returning to the point that was made earlier—will be nearer £7 million, not taking account of some outstanding issues. That is our current estimate, based on what we know about the application.
Thank you. This market day is wearing late. We have had a very good session, and I thank all our witnesses for coming to give evidence. I thank everyone for giving me a good excuse to return to my native city.
Meeting continued in private until 16:37.