SCARBOROUGH and North East Yorkshire NHS Trust is set to axe 600 jobs - a third of its workforce - in a bid to save £10 million, shocked union leaders were told today. Managers gave the grim news to staff at lunchtime, triggering an angry reaction from health campaigners.

Union officials warned the cuts would have a "devastating" impact on patient care at the Trust's main hospital in Scarborough and a smaller site in Bridlington.

A press conference, giving further details of the cuts which could include ward closures, was due to be held at the hospital later this afternoon.

The trust has been battling against heavy debts - believed to be more around £20m for more than a year - and a critical report from the Audit Commission later resulted in the departure of Scarborough Hospital's Chief Executive Alison Guy.

SPECIAL TRUST UPDATE 18/07/07 TRUST UPDATE 40 OUR FINANCIAL STRATEGY:
PLANNING FOR THE FUTURE

Next week, a paper will be submitted to the Trust Board proposing how this Trust will bring its finances under control and ensure that it is appropriately configured to provide the right services to meet the current and future healthcare needs of local people.

The Trust Board have agreed that there are five key priorities in the next three years: Ensuring safe and sustainable clinical care is provided to patients Delivering a breakeven position in 2007/08 and putting in place plans to deliver a recurrent surplus from 2008/09 in order that historic debt of £20.7 million can be repaid Continuing to deliver the patient access targets including the new 18 week target Developing an estates strategy that ensures a good environment for the delivery of safe patient care.

Achieving Foundation Trust status by 2010 in accordance with government policy.

This paper focuses on the need to meet financial targets in the context of the other priorities. There are three phases to the financial strategy: delivering a breakeven position in 2007/08 repaying historic debt.

Ongoing surplus position as part of the Foundation Trust financial regime.

It is vital that the Trust achieves a breakeven position in 2007/08 as we must not add to our problems by increasing the level of debt to be repaid in future years. The Trust debt will not be removed from the Trust Balance Sheet or funded by central Government. The Trust must not be distracted by seeking to externalise these problems, it is a Trust responsibility to meet statutory financial duties which requires the Trust to return to living within its means and repay historic debt.

The Trust had a deficit in 2006/07 of £7.2 million and has a cumulative deficit of £20.7 million. Entering 2007/08 the Trust had planned income of £99 million and likely expenditure of £109.5 million. To deliver a breakeven position in 2007/08 the Trust must deliver £10.5 million of savings and therefore the Trust Board agreed in April 2007 that expenditure must be reduced to £99 million during the course of the year. To repay the historic debt of £20.7 million by 2009/10 the Trust must aim to deliver a recurrent surplus of £10 million in 2008/09 and maintain this in 2009/10. To achieve this requires additional savings of £15.3 million in 2008/09 and a further £3 million in 2009/10. This represents a total savings target of £28.8 million over a three year period. The Trust could achieve this through improved efficiency, cost reduction programmes or securing new income. Approximately 70% of the Trust expenditure is on workforce. To achieve this level of cost reduction will therefore mean a significant reduction in workforce.

£5 million of savings have been identified towards the £28.8 million target from existing initiatives leaving a balance of £23.8 million to be identified. The Trust will look to deliver £15 million through workforce reductions and £8.8 million through either new income or non pay expenditure reductions. To deliver £15 million of savings on workforce expenditure the Trust needs to reduce 600 staffing posts across the Trust from 1972 at 31 st March 2007 to circa 1372 by 1 st April 2008. This will need to be delivered by: Increasing productivity and reducing capacity e.g. ward closures.

Reductions in non clinical support services i.e. Trust Wide services Stopping the provision of some services Changes in the way that services are delivered requiring less staff.

The pace of change of financial recovery will be influenced by the level of turnover of staff and the availability of funding to support the cost of redundancies. The Trust has a natural turnover level of over 12% a year. In addition tight management controls are being introduced to reduce expenditure on overtime, agency and other temporary staffing expenditure. The Trust Commissioners also have very serious financial deficits and are looking to reduce payments to the Trust by reducing referrals. The Trust will work in partnership with these Commissioners to implement recovery schemes and ensure that patient safety is not compromised throughout this period of change. In 2007/08 North Yorkshire and York PCT reduced commissioning levels by £3.6 million with further anticipated reductions in 2008/09. If income drops further expenditure will need to reduce accordingly.

The Audit Commission have considered issuing a Section 19 report about the Trust in the context of the failure to address the financial deficit and the accumulation of £20.7 million of cumulative debt by 31 st March 2007. A Section 19 report is issued when there is serious concern about the ability of the Trust to meet statutory financial duties over a long period of time. The Trust has agreed with the Auditors that this matter will be revisited in 12 months time when the Trust must be able to demonstrate significant progress on financial recovery. A Section 19 report would be extremely damaging for the Trust and may damage its future independence and the viability of some local clinical services. Only a handful of such reports have been issued in the NHS.

Failure to restore financial health and meet statutory financial duties is likely to result in the Trust being merged with another NHS Body. Given the circumstances of the deficit and the size of the Trust this is likely to be an acquisition not a merger in reality and OUR FINANCIAL STRATEGY: PLANNING FOR THE FUTURE

Trust Update 40 18th July 2007 clinical services will be centralised away from Scarborough, Bridlington and the surrounding areas. It is therefore vital to resolve the current financial difficulties to ensure the continued provision of local health services Building a strong Organisation that is fit for purpose is the essence of the Trust financial strategy. A new Chairman, Chief Executive and Finance Director have recently been appointed. A Director of Operations and Director of Strategy, Planning and Partnerships are currently being recruited. Three new Non Executive Directors will take up post later in the year as previous Board members retire. These Board changes are to ensure good leadership to the Organisation. The Trust will be managed through three Divisions supported by ten Business Units managing Medicine, Surgery and Clinical Support services. Interim management arrangements have been put into place whilst implementation of the new structure takes place. The Trust is establishing a strong governance framework underpinned by effective business processes. The Trust Board will be supported by three sub committees, the Audit Committee, the Risk Management Committee and the Remuneration Committee. Standing Financial Instructions and Standing Orders are being revised to ensure that there are adequate controls across the Trust and the Audit Committee is strengthening the accountability framework in the Trust so that increased assurance can be provided to the Trust Board about internal control systems. The Trust will use a task and finish approach to financial recovery ensuring that all ideas are backed up by robust delivery plans. The Trust will scrutinise every aspect of expenditure and there are no sacred cows. The Trust will not only ensure that it matches the most efficient working practices but over time exceeds them given the scale of financial recovery that is required.

The Trust has high costs compared to other Providers using indicators such as the national reference costs and has a higher length of stay and lower day case rate. The Trust does perform relatively well in some areas on day case rates and has made good progress in recent years but they need to improve still further. The Trust has over 300 beds currently and could operate with lower numbers if productivity was increased. The planned reduction in referrals of up to 25% in some specialties from the North Yorkshire and York PCT is a financial risk (taken account of in the 2007/08 plan) that means the Trust will not need as much capacity in future to treat patients.

Following national benchmarks, local data and using sound planning assumptions, to deliver the commissioned levels of activity the Trust would need approximately 250 beds. This will require an increase in day case surgery rates, and continued closer working with the PCTs to ensure patients seen outside of normal hours are assessed by experienced clinical staff. A reduction in length of stay for patients admitted is achievable. Based on this modelling the Trust requires approximately 12 wards and units; plus three fully operational theatres for elective and non elective activity with a fourth theatre available for planned maintenance. In addition we will provide out patients services, some of which will be run as outreach services into community settings; an integrated emergency care service providing Accident and Emergency services alongside a GP Out of Hours service plus a full range diagnostics, provided over an extended day period with increased GP Direct access.

The financial strategy will seek to minimise expenditure and maximise income by: Ensuring good financial management across the Trust closing beds, theatres and outpatients capacity by increasing productivity and reflecting commissioned activity levels Reducing staffing levels by natural turnover and planned redundancies.

Reducing non-pay expenditure through good management controls and value for money programmes Ensuring management of patient activity to secure income associated with commissioned levels of patient care.

Identifying new income through partnership agreements and non patient treatment sources, the Trust will compete to provide an extended range of services including those previously provided by other bodies.

Not providing services to other NHS bodies that do not cover costs or distract from (1) to (6) Sale or lease of spare estate One off non-recurring benefits from balance sheet reviews etc.

Where formal consultation on proposed changes is required this will take place early in the recovery programme to minimise delays in releasing savings.

The ground rules for consultation are: Patient safety is paramount The Trust will listen to and acknowledge the different perspectives on issues The Trust has to make decisions about how to meet statutory financial duties.

The Trust will work with stakeholders to deliver the financial strategy. A communication plan has been developed to ensure appropriate engagement with stakeholders. An implementation plan will be agreed by the Trust Board in September 2007 including an Organisational Development and Risk Management plan.

Summary

In 2010 the Trust will have income of approximately £100 million and will employ over 1500 actual full and part time staff. The Trust will be a vibrant viable Organisation and is still likely to be the largest employer in the area. Through this strategy we are seeking to find the right future shape and size of the Organisation to ensure continued provision of local Acute Health Services for the community of North East Yorkshire. This is an ambitious strategy, but vital in order to secure a viable range of clinical services and take the Trust forward through to Foundation status. It is a major change programme that will result in a stronger local service for our patients.

A Question and Answers update will be circulated tomorrow, following today s staff briefings. If you have any specific questions that you would like to see answered, please e-mail Gilly Collinson gilly.collinson@acute.sney.nhs.uk