Purpose - Ministry of Health NZ



File number: AD62-14-2016Action required by: RoutineDistrict Health Board Sector Financial Performance for year to date 31 August 2016To:Hon Dr Jonathan Coleman, Minister of HealthPurposeTo advise the Minister:The year to date financial results of the District Health Board (DHB) sector as at 31 August 2016.The actions the Ministry of Health (Ministry) is undertaking to address financial issues with DHBs whose results are unfavourable.Key pointsThe DHBs’ financial results for the year to date 31 August 2016 show a sector wide unfavourable variance to budget of $5 million for the first two months of the new financial year. It is difficult to analyse DHB financial performance in the early months of the financial year as a number 2015/16 year-end adjustments affect the results and not all annual plan budgets are approved. More consistent trends appear after the first quarter of the financial year.Ten DHBs achieved a breakeven (under $0.1 million unfavourable to budget) or better result to budget as at 31 August 2016.In the previous year, as at 31 August 2015, ten DHBs had results that were unfavourable to budget and the sector result was $3 million unfavourable to budget.The sector’s unfavourable variance to budget of $5 million is made up of unfavourable variances for total personnel costs, outsourced services costs and clinical supplies costs offset by favourable variances for revenue and payments to other providers.DHBs start reporting year end result forecasts in September 2016.The Ministry continues to closely monitor DHBs with unfavourable financial results and/or unfavourable trends and is working with them to improve financial performance. During the past month, the Ministry has met the following DHBs to discuss their financial performance: Bay of Plenty, Lakes, Tairāwhiti, Taranaki, Capital & Coast, Hutt Valley, MidCentral and Southern.Overall YTD average accrued FTEs were 928 below budget.Capital expenditure for the year to date was $234 million below budgeted levels with actual expenditure of $63 million against budgeted expenditure of $297million. This was due to the one month delay in the transfer of Burwood Hospital from the Crown to Canterbury DHB. The transfer of ownership of the Burwood Hospital took place in August 2016; however the related financial transactions are expected to be completed in September 2016.RecommendationsThe Ministry recommends that you: a)Refer this report to the Minister of Finance for his informationYes / Nob)Note the Health Report and associated schedules are copied to the Treasury (State Sector Performance Branch), DHB Chairs and DHB Chief Executives c)Note the detailed schedules associated with this report are copied to DHB Chief Financial Officers who utilise the information to analyse their performance and benchmark their DHB against the sector.d)Note the Health Report and associated schedules are published on the Ministry of Health website.John HazeldineMinister’s signatureActing Director – DHB PerformanceService CommissioningDate:District Health Board Sector Financial Performance for year to date 31 August 2016Table 1?Year to DatePrevious?ActualBudgetVariance% VarianceYear to Date Actual?$M$M$M?$M?????TOTAL REVENUE2,5682,56710.0%2,470?Personnel Costs(961)(969)80.8%(922)Outsourced Personnel Costs(33)(20)(13)(64.5%)(29)Total Personnel Costs(994)(989)(5)(0.5%)(951)Outsourced Services(75)(74)(1)(1.4%)(69)Clinical Supplies(233)(225)(8)(3.4%)(231)Infrastructure/Other Supplies(240)(241)00.2%(228)Total Operating Costs(1,543)(1,530)(13)(0.9%)(1,478)????Personal Health(704)(708)30.5%(685)Mental Health(75)(78)33.6%(75)Public Health(5)(5)01.2%(4)Disability Support Services(252)(254)20.7%(242)Maori Health(8)(8)03.1%(7)Total Payments to Other Providers(1,044)(1,052)80.8%(1,013)?????TOTAL EXPENDITURE(2,587)(2,581)(5)(0.2%)(2,491)NET RESULT(19)(14)(5)(31.6%)(22)Average Accrued FTEs year to date61,93762,8659281.5%61,014Note:Not all 2016/17 Annual Plans have yet been agreed. Once this has occurred we will include budget plan information.Table 1 above shows that the sector’s unfavourable variance to budget of $5 million is made up of unfavourable variances for total personnel costs, outsourced services costs and clinical supplies costs offset by favourable variances for revenue and payments to other providers. Any unfavourable variances at a DHB level are not considered to be meaningful at this early point in the year, due to the flow on effects of year-end adjustments. While trends can begin to appear in the early months of the year they do not become meaningful until the end of the first quarter.Ten DHBs achieved a breakeven (under $0.1 million unfavourable to budget) or better result to budget as at 31 August 2016.Table 2Note:Auckland DHB – The DHB experienced a large swing in their variance to budget from a positive variance of $3 million in July 2016 to a negative variance of $1.8 million in August 2016 due to issues in the phasing of their 2016/17 Annual Plan. The DHB have now provided the correct phasing and we do not expect this to reoccur. The DHB expect that they will return to budget in the short term with no impact on their planned year end result.Not all 2016/17 Annual Plans have yet been agreed. Once this has occurred we will include this budget plan information.Monitoring Intervention Framework (MIF) activities with DHBsBay of Plenty DHB – The DHB is currently on budget but has for the past two consecutive financial years forecast to be on track to budget and provided assurances, before finishing the year unfavourable to budget due to issues in the final months. The Ministry is meeting with the DHB on 29 September 2016 to discuss their financial performance. The Ministry will be working with the DHB to ensure that they achieve their plan result this financial year.Lakes DHB - The DHB is currently $0.3 million favourable to budget. The Ministry is meetingwith the DHB on 29 September 2016 to discuss their financial performance and other performance-related matters.Tairawhiti DHB - The DHB is currently $0.6 million unfavourable to budget. The Ministry met with the DHB on 22 September 2016 and discussed their financial performance and the 2016/17 Annual Plan. The Annual Plan is with you to consider.Taranaki DHB - The DHB is currently $0.1 million favourable to budget. The Ministry met with the DHB on 20 September 2016 and discussed their financial performance. Waikato DHB –The DHB is currently $2.1 million unfavourable to budget mainly due to savings in nursing costs not being achieved and a revaluation of annual leave following the nursing pay award. The DHB is investigating the matter in order to define corrective action and the Ministry will be following up with the DHB. The DHB’s current unfavourable position is indicative only and it’s Annual Plan is still to be agreed. However, this Annual Plan is expected to be with you to consider shortly.Capital & Coast DHB - The DHB is currently on budget but does not yet have an approved Annual Plan. PwC are currently undertaking a financial review of the DHB. The Ministry met with the DHB on 23 September 2016 and discussed their financial performance and their 2016/17 Annual Plan. The Ministry is continuing to work with the DHB to reach an agreed Annual Plan position.Hutt Valley DHB - The 2016/17 Annual Plan is with Ministers to consider. The DHB is currently $0.2 million unfavourable to budget. The Ministry met with the DHB on 21 September 2016 and discussed their financial performance.MidCentral DHB - The DHB is currently $1 million unfavourable to budget. The Ministry met with the DHB via video-conference on 15 September 2016 and discussed their financial performance. The Ministry will be working with the DHB to ensure that they achieve their plan result this financial year.Canterbury DHB - The DHB is currently $1.9 million unfavourable to budget mainly due to Medical personnel costs being higher than budget as a result of back dated job sizing payments and mental health activity being higher than budget. The DHB’s 2016/17 Annual Plan is still to be agreed therefore their current unfavourable position is indicative only. The Annual Plan position will be agreed as part of the PwC financial review process.Southern DHB - The DHB is currently $2 million favourable to budget. The Ministry met with the Commissioner on 28 September 2016 to discuss the DHB’s financial performance and other performance-related matters.Year end result forecastDHBs start reporting year end result forecasts in September 2016.Full time equivalents (FTEs) - Overall year to date average accrued FTEs were 928 below budgetAll categories of personnel were favourable to budget as follows: Medical personnel (364 FTEs), Nursing personnel (119 FTEs), Allied Health personnel (240 FTEs), Support personnel (64 FTEs) and Management /Administration (141 FTEs).Capital expenditure for the year to date was $234 million below budgeted levels with actual expenditure of $63 million against budgeted expenditure of $297 millionThe variance was almost entirely due to Canterbury DHB budgeting $215 million of capital expenditure for the month of July 2016 for the planned transfer of ownership of Burwood Hospital from the Crown to the DHB. The transfer of ownership of the Burwood Hospital took place in August 2016; however the related financial transactions are expected to be completed in September 2016.END. ................
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